10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2007

OR

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

For the transition period from                     to

Commission File Number:     0-19394

GTSI CORP.

(Exact name of registrant as specified in its charter)

Delaware	54-1248422
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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)

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o            Yes         x           No

The number of shares of common stock, $0.005 par value, outstanding as of April 30, 2007 was 9,619,231.

GTSI CORP.

Form 10—Q for the Quarter Ended March 31, 2007

INDEX

PART I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements —
	Condensed Consolidated Balance Sheets as of March 31, 2007 (Unaudited) and December 31, 2006	1
	Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three months Ended March 31, 2007 and 2006	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18
ITEM 4.	Controls and Procedures	18
PART II — OTHER INFORMATION
ITEM 6.	Exhibits	19
SIGNATURES		19

PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

GTSI CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	(Unaudited)
	March 31,			December 31,
	2007			2006
ASSETS
Current assets:
Cash	$	797		$	705
Accounts receivable, net	150,021			222,072
Inventory	26,040			35,691
Deferred costs	12,364			22,188
Other current assets	8,912			9,651
Total current assets	198,134			290,307
Depreciable assets, net	13,321			13,627
Long-term receivables and other assets	23,838			26,747
Total assets	$	235,293		$	330,681
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Borrowings under credit facility	$	752		$	30,912
Accounts payable	96,985			142,217
Financed lease debt, current portion	15,351			16,546
Accrued liabilities	17,378			23,194
Deferred revenue	5,275			7,241
Total current liablilites	135,741			220,110
Long-term debt	10,000			10,000
Long-term financed lease debt	14,224			18,758
Other liabilities	5,170			5,130
Total liabilities	165,135			253,998
Commitments and contingencies	—			—
Stockholders’ equity
Common stock - $0.005 par value, 20,000,000 shares authorized; 9,806,084 issued and 9,559,119 outstanding at March 31, 2007; 9,806,084 issued and 9,512,019 outstanding at December 31, 2006	49			49
Capital in excess of par value	45,359			45,110
Retained earnings	26,591			33,717
Treasury stock, 246,965 shares at March 31, 2007 and 294,065 shares at December 31, 2006, at cost	(1,841		)	(2,193		)
Total stockholders’ equity	70,158			76,683
Total liabilities and stockholders’ equity	$	235,293		$	330,681

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

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GTSI CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (in thousands, except share and per share data)

	Three months ended
	March 31,
	2007			2006
SALES	$	144,082		$	148,279
COST OF SALES, exclusive of depreciation and amortization	124,685			129,978
GROSS MARGIN	19,397			18,301
SELLING, GENERAL & ADMINISTRATIVE EXPENSES	27,142			29,606
LOSS FROM OPERATIONS	(7,745		)	(11,305		)
INTEREST AND OTHER INCOME
Lease-related income, net	1,719			2,378
Interest and other income, net	458			240
Interest expense	(1,380		)	(1,341		)
Interest and other income, net	797			1,277
LOSS BEFORE INCOME TAXES	(6,948		)	(10,028		)
INCOME TAX BENEFIT (PROVISION)	—			—
NET LOSS	$	(6,948	)	$	(10,028	)
LOSS PER SHARE
Basic	$	(0.73	)	$	(1.08	)
Diluted	$	(0.73	)	$	(1.08	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic	9,475			9,288
Diluted	9,475			9,288

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

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GTSI CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three months ended
	March 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,948	)	$	(10,028	)
Adjustments to reconcile net loss to net cash provided by operating activities	38,194			53,141
Net cash provided by operating activities	31,246			43,113
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of depreciable assets	(654		)	(639		)
Net cash used in investing activities	(654		)	(639		)
CASH FLOWS FROM FINANCING ACTIVITES:
Payments on credit facility	(30,161		)	(48,014		)
Payments of deferred financing costs	(570		)	(225		)
Proceeds from financed lease debt	—			8,110
Proceeds from equity transactions	231			131
Net cash used in financing activities	(30,500		)	(39,998		)
NET INCREASE IN CASH	92			2,476
CASH AT BEGINNING OF PERIOD	705			27
CASH AT END OF PERIOD	$	797		$	2,503

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

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GTSI CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of GTSI Corp. and its subsidiaries (“GTSI” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and, therefore, omit or condense certain note disclosures and other information required by U.S. generally accepted accounting principles for complete financial statements.  These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2006 included in GTSI’s Annual Report on Form 10-K.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature (except as disclosed herein) considered necessary to present fairly GTSI’s financial position as of March 31, 2007 and its results of operations and cash flows for the three months ended March 31, 2007.

The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the full year, or future periods.  GTSI has historically experienced significant seasonal fluctuations in operations as a result of government buying and funding patterns.  These patterns historically have had a negative effect on GTSI’s sales and net loss during the quarter ended March 31. Certain prior period amounts have been reclassified to conform to the current period presentation.

2. New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF No. 06-3, How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation) (EITF 06-3). The EITF reached a consensus that a company should disclose its accounting policy (i.e., gross or net presentation) regarding presentation of taxes within the scope of this issue. The EITF also concluded that once the new standard is effective (January 1, 2007), a company should disclose the amount of such taxes for periods in which these taxes included in gross revenues are considered material. The Company collects and remits sales and property taxes on products and services that it purchases and sells under its contracts with customers, and reports such amounts under the net method in its consolidated statements of operations. Accordingly, there are no sales and property taxes included in gross revenue and therefore disclosure will not be required.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement, (“FAS 157”), which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. FAS 157 is effective for interim periods beginning after November 15, 2007. The Company is in the process of evaluating the adoption of FAS 157.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”).  This statement gives entities the option to report most financial assets and liabilities at fair value, with changes in fair value recorded in earnings. This statement, which is effective for fiscal years beginning after November 15, 2007, is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

On January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. See Note 9 for further discussion.

3. Stock-Based Compensation

Stock Incentive Plans

The Company has two stockholder approved combination incentive and non-statutory stock incentive plans: the 1994 Stock Option Plan, as amended (“1994 Plan”), and the Amended and Restated 1996 Stock Incentive Plan (“1996 Plan”). The Company has another stockholder approved plan, the 1997 Non-Officer Stock Option Plan

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(“1997 Plan”), which provides for the granting of non-statutory stock options to employees (other than officers and directors). In addition, GTSI has utilized an incentive permitted under NASDAQ marketplace rules that allows a company without stockholder approval to offer stock options to prospective employees as an inducement to join GTSI.

Valuation Assumptions

The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of GTSI’s stock over the historical period of time equal to the expected term of the options. The Company uses historical data to estimate option exercises, employee terminations and award forfeitures within the valuation model. The expected term of options granted has been determined based on historical exercise behavior and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the U.S. Treasury rate at the time of grant. The expected dividend assumption is zero as the Company is currently restricted under its Credit Facility from issuing dividends on its common stock.

	For the three months ended March 31,
	2007		2006
Expected volatility	43.8	%	50.1	%
Expected dividends	—		—
Expected term (in years)	4.4		4.8
Risk free interest rate	4.7	%	4.6	%

Stock Options

A summary of option activity under the Company’s stock incentive plans as of March 31, 2007 and changes during the three-month period then ended is presented below:

					Weighted
					Average	Aggregate
			Weighted		Remaining	Intrinsic
	Shares		Average Exercise		Contractual	Value
	(in thousands)		Price		Term	(in thousands)
Outstanding at January 1, 2007	2,105		$	7.93
Granted	45		$	9.73
Exercised	(47	)	$	4.90
Forfeited	(59	)	$	7.29
Canceled	(13	)	$	10.72
Outstanding at March 31, 2007	2,031		$	8.04	4.59	$	6,004
Exercisable at March 31, 2007	1,223		$	8.64	3.39	$	2,888

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2007 and 2006 was $4.05 and $3.16, respectively.  The total intrinsic value of options exercised during the three months ended March 31, 2007 and 2006 was $0.3 million and $0.4 million, respectively.  During the three months ended March 31, 2007 and 2006, 47,100 shares and 122,500 shares, respectively, of stock options were exercised under the Company’s stock option plans. The Company has historically issued shares from treasury stock to satisfy option exercises. Due to the full valuation allowance on the Company’s deferred tax assets, no tax benefit for the exercise of stock options was recognized during the three months ended March 31, 2007 and 2006.

Restricted Shares

During the three months ended March 31, 2007, there were no restricted stock awards granted. During the three months ended March 31, 2006, approximately 1,667 restricted stock awards were granted. During the three months ended March 31, 2007 and 2006, $0.1 million was recorded as stock compensation expense for restricted stock.

The fair value of nonvested shares of restricted stock is determined based on the closing trading price of the

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Company’s shares on the grant date. A summary of the status of Company’s nonvested shares as of March 31, 2007, and changes during the three months ended March 31, 2007, is presented below:

		Weighted
	Shares	Average Grant-
	(in thousands)	Date Fair Value
Nonvested at January 1, 2007	68	$	7.47
Granted	—
Forfeited	—
Restricted lapse	—
Nonvested at March 31, 2007	68	$	7.47

Unrecognized Compensation

As of March 31, 2007, there was $3.3 million of total unrecognized compensation cost related to nonvested stock-based awards, which consisted of unrecognized compensation of $2.9 million related to stock options and $0.4 million related to restricted stock awards.  The cost for unrecognized compensation related to stock options and restricted stock awards is expected to be recognized over a weighted average period of 3.0 years and 3.2 years, respectively.

4. Lease and Other Receivables

The Company leases computer hardware, generally under sales-type leases, in accordance with FAS 13. In connection with those leases, the Company sometimes sells related services, software and maintenance to its customers. The terms of the receivables from the sale of these related services are often similar to the terms of the leases of computer hardware; that is, receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased computer hardware.

The Company’s investments in sales-type lease receivables were as follows as of (in thousands):

	March 31,			December 31,
	2007			2006
Future minimum lease payments receivable	$	27,909		$	26,307
Unguaranteed residual values	10,516			10,516
Unearned income	(5,581		)	(6,485		)
	$	32,844		$	30,338

The Company’s investment in other receivables was as follows as of (in thousands):

	March 31,			December 31,
	2007			2006
Future minimum payments receivable	$	7,643		$	14,464
Unearned income	(1,848		)	(2,415		)
	$	5,795		$	12,049

5. Transferred Receivables and Financed Lease Debt

For the three months ended March 31, 2007, the Company did not transfer any financing receivables to third parties that did not meet the sale criteria under FAS 140. For the three months ended March 31, 2006, the Company transferred financing receivables of $8.1 million to third parties in transactions that did not meet the sale criteria under FAS 140. These amounts are included in cash flows from financing activities in the condensed consolidated statement of cash flows.  Accordingly, as payments are made on these receivables directly to the third party financing company by our customers, the related reduction of these receivables and financed lease debt is a

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non-cash transaction and excluded from the statement of cash flows. As a result financed lease debt and the related receivables decreased by $5.7 million for the first three months of 2007.

The Company recognized interest expense on financed lease debt in the amount of $0.6 million and $0.8 million for the three months ended March 31, 2007 and 2006, respectively.

6. Credit Facility and Term Loan

During 2006, the Company obtained a $135 million credit agreement with a group of lenders (the “Credit Facility”). This Credit Facility replaced GTSI’s former credit facility, which expired on May 31, 2006. The gross outstanding balance of the Credit Facility as of March 31, 2007 was $2.4 million and is included on the accompanying balance sheet, net of the Company’s lockbox cash accounts that are accessed by the lenders to pay down the Credit Facility outstanding balance, which was $1.6 million as of March 31, 2007.

The Credit Facility provides access to capital through June 2, 2010, with borrowings secured by substantially all of the assets of the Company. The Facility matures in full on June 2, 2010. Borrowing under the Credit Facility at any time is limited to the lesser of $135 million or a collateral-based borrowing base less outstanding obligations. The Credit Facility subjects GTSI to certain covenants limiting its ability to (i) incur debt; (ii) make guarantees; (iii) make restricted payments, purchases or investments; (iv) enter into certain transactions with affiliates; (v) acquire real estate and (vi) enter into sale and leaseback transactions. The Credit Facility carries an interest rate generally indexed to the Prime Rate plus 0.25% plus margin. As of March 31, 2007, GTSI had remaining available credit under the Credit Facility of $28.2 million.

The Credit Facility contains negative financial performance covenants, including a minimum EBITDA covenant for each period, information covenants and certain affirmative covenants. On March 30, 2007, the Company executed the third amendment to the Credit Facility, which removed the minimum EBITDA covenant at March 31, 2007 and revised the minimum EBITDA covenant for future measurement periods. The Company currently relies on its Credit Facility as its primary vehicle to finance its operations.

At March 31, 2007, the Company had a subordinated secured long-term loan of $10 million (the “Term Loan”). The debt covenants and maturity date on the Term Loan are the same as the Credit Facility and no payments of principal are due until June 2, 2010. The interest rate on the Term Loan is Prime plus 5.25% per annum and is due monthly. This agreement contains a prepayment penalty which is equal to the greater of (i) all interest payable on the Term Loan that would be payable from the Third Amendment Effective Date through the date which is twelve (12) months after the Third Amendment Effective Date, less interest paid through current or (ii) 1% of the amount prepaid.

The Company defers loan financing costs and recognizes these costs throughout the term of the loans. Deferred financing costs as of March 31, 2007 and December 31, 2006 were $4.7 million and $4.5 million, respectively.

7. Contract Termination Costs

In 2006, the Company implemented a reduction in workforce to eliminate duplication within the organization and move out of activities which have failed to yield adequate profitability. These actions resulted in excess office space for which the Company recorded a charge in 2006 of $0.2 million for the consolidation of facilities. These amounts are included in selling, general & administrative expenses on the accompanying Statement of Operations.

Contract termination cost reserve activities for the three months ended March 31, 2007 was as follows (in thousands):

Contract termination liability as of December 31, 2006	$	122
Less: cash payments	(15		)
Less: revision to estimate	(57		)
Contract termination liability as of March 31, 2007	$	50

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8. Loss Per Share

Basic loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period, which includes shares of restricted stock that are fully vested.  Diluted loss per share is computed similarly to basic loss per share, except that the weighted average number of shares outstanding are increased to include equivalents, when their effect is dilutive.

Anti-dilutive employee stock options totaling 274,774 and 229,428 shares respectively were excluded for the three months ended March 31, 2007 and 2006.  Unvested restricted stock units totaling 68,417 and 51,665 shares, respectively, have been excluded for the three months ended March 31, 2007 and 2006.

The following table sets forth the computation of basic and diluted loss per share (in thousands):

	Three months ended
	March 31,
	2007			2006
Basic loss per share:
Net loss	$	(6,948	)	$	(10,028	)
Weighted average number of shares outstanding	9,475			9,288
Basic loss per share	$	(0.73	)	$	(1.08	)
Diluted loss per share:
Net loss	$	(6,948	)	$	(10,028	)
Weighted average number of shares outstanding	9,475			9,288
Incremental shares attributable to the exercise of outstanding stock options	N/A			N/A
Weighted average number of shares and equivalents	9,475			9,288
Diluted loss per share	$	(0.73	)	$	(1.08	)

9. Income Taxes

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. As a result of the implementation of FIN 48, the Company recognized an increase to liabilities for uncertain tax positions totaling $0.2 million through an adjustment to the beginning balance of retained earnings on the Condensed Consolidated Balance Sheet. At the beginning of 2007, GTSI had approximately $0.6 million of total gross unrecognized tax benefits.  Of this total, approximately $0.1 million (net of indirect federal and state benefits) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

There were no increases to gross unrecognized tax benefits during the first quarter of 2007.

GTSI is subject to U.S. federal income tax as well as income tax of multiple states and local jurisdictions. The Company’s federal tax years that remain subject to examination are 2003 and forward.  Currently, the federal returns for tax years 2003, 2004 and 2005 are under examination.  It is reasonably possible that all unrecognized tax benefits as of December 31, 2006 will be eliminated during the next twelve months.  These uncertainties relate to anticipated federal income tax adjustments.

GTSI’s practice is to recognize interest and/or penalties related to uncertain tax positions in income tax expense. The Company had $0.2 million accrued for interest and less than $0.1 million accrued for penalties at the beginning of 2007. During the first quarter of 2007, the increase to accrued interest and penalties was immaterial.

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Interest will continue to accrue on certain issues for the remainder of 2007; however these amounts are not expected to be material.

Since Company management believes that it is not more likely than not that its deferred tax assets will be realized, the Company has recorded a full valuation allowance against its net deferred tax assets and is not anticipating the release of this valuation allowance during the current year, except to the extent that deferred tax assets are ultimately utilized within the current year. 

10. 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 (in thousands):

	Three months ended
	March 31,
	2007			2006
Accrued warranties at beginning of period	$	855		$	849
Charges made against warranty liabilities	(87		)	(115		)
Adjustments to warranty reserves	(216		)	170
Accruals for additional warranties sold	—			37
Accrued warranties at end of period	$	552		$	941

Revenue and cost of sales from extended warranty contracts is recorded as deferred revenue and deferred costs, respectively, and subsequently recognized over the term of the contract.  The following table summarizes the activity related to the deferred warranty revenue (in thousands):

	Three months ended
	March 31,
	2007			2006
Deferred warranty revenue at beginning of period	$	506		$	1,361
Deferred warranty revenue recognized	(140		)	(283		)
Revenue deferred for additional warranties sold	33			67
Deferred warranty revenue at end of period	$	399		$	1,145

Letters of Credit

GTSI was obligated under an operating lease to provide its landlord with a letter of credit in the amount of $0.2 million at March 31, 2007 and December 31, 2006, as a security deposit for all tenant improvements associated with the lease.

As of March 31, 2007, the Company had an outstanding letter of credit, scheduled to expire in June 2007, to a customer in the amount of $4.6 million to guarantee the performance by the Company of its obligations under the contract. GTSI provided one of its vendors a $3.0 million letter of credit as collateral for extending credit of $15.0 million.

Employment Agreements

On February 15, 2006 the Company entered into a transition agreement with its former CEO (the “Transition

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Agreement”). The Transition Agreement provides for a payment of $1.1 million to be paid out over the course of 18 months, as well as reimbursement for certain benefits and legal fees.  As a result, the Company recorded severance expense of $1.2 million in selling, general & administrative expenses during the quarter ended March 31, 2006. The balance of the severance liability related to these severance payments, which is included in accrued liabilities, is $0.3 million as of March 31, 2007.

In 2006, GTSI entered into an employment agreement with the Company’s current President and Chief Executive Officer. This agreement provides for payments of 12 months of base salary plus bonus equal to the previous year’s bonus payments upon termination of employment. In addition, GTSI has change in control agreements with 16 executives and key employees. These arrangements provide for payments of as much as 18 months of total target compensation and continuation of benefits upon the occurrence of specified events. As of March 31, 2007, no accruals have been recorded for these agreements.

Contingencies

Currently, and from time to time, GTSI is involved in litigation incidental to the conduct of its business.  As of March 31, 2007, GTSI is not a party to any lawsuit or proceeding that, in the opinion of management, is likely to have a material adverse effect on its financial position or results of operations.

11. Related Party Transactions

GTSI serves as the official mentor to Eyak Technology, LLC (“Eyak”), providing assistance and expertise in many key business areas. In 2002, GTSI made a $0.4 million investment in Eyak and assumed a 37% ownership of the company. GTSI also has a designee on Eyak’s Board of Directors. The investment in Eyak is accounted for under the equity method and adjusted for earnings or losses as reported in the financial statements of Eyak and dividends received from Eyak. At March 31, 2007 and December 31, 2006, the investment balance for Eyak was $1.4 million. For the quarters ended March 31, 2007 and 2006, equity in earnings (losses) was $0.1 million and less than $(0.1) million, respectively. GTSI also receives a fee from Eyak based on sales from products sold at cost by GTSI to Eyak. Fees recorded by the Company, which are recognized when Eyak sells to third party customers are $0.4 million and $0.3 million for the quarter ended March 31, 2007 and 2006, respectively, which are included in sales in the accompanying consolidated statements of operations. The following table summarizes Eyak’s unaudited financial information for the periods presented in the accompanying Balance Sheet and Statement of Operations (in thousands):

	For the Quarter ended
	March 31,
	2007		2006
Revenues	$	38,802	$	19,589
Gross margin	$	3,675	$	2,382
Net income (loss)	$	346	$	(104	)

	March 31,		December
	2007		31, 2006
Current assets	$	48,536	$	54,911
Noncurrent assets	$	279	$	423
Current liabilities	$	45,110	$	51,411
Noncurrent liabilities	$	—	$	114
Member’s equity	$	3,705	$	3,809

12. Subsequent Events

On April 4, 2007 the Company announced the retirement of M. Dendy Young as Chairman of the Board and as Director effective as of  the Annual Stockholder’s Meeting, which was held May 3, 2007.   On May 3, 2007, John Toups was named the Chairman of the Board, effective immediately.

At the May 3, 2007 Annual Meeting of Stockholders, the stockholders approved amendments to the Company’s 1996 Stock Incentive Plan, which has been renamed the Amended and Restated 2007 Stock Incentive Plan (“2007 Plan”), to increase the number of shares of Common Stock authorized for issuance by 1,000,000 and to authorize the award of stock appreciation rights (“SARs”).  In February 2007, the Board of Directors proposed a grant of 928,386

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SARs and 351,932 restricted stock awards to certain officers.  These grants were subject to Stockholder approval of the grant and the 2007 Plan, which occurred on May 3, 2007 Plan.  Based on the grant date fair value, the Company will recognize approximately $1.5 million in stock-based compensation related to these awards in 2007 beginning in the second quarter.

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ITEM 2.   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 unaudited condensed consolidated financial statements and notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2006.  We use the terms “GTSI,” “we,” “our,” and “us” to refer to GTSI Corp. and its subsidiaries.

Disclosure Regarding Forward-Looking Statements

Readers are cautioned that this Quarterly Report on Form 10-Q 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, relating to our operations that are based on our current expectations, estimates, forecasts and projections.  Words such as “expect,” “plan,” “believe,” “anticipate,”  “intend” and similar expressions are intended to identify these forward-looking statements.  These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict.  Therefore, actual results in future periods may differ materially from those expressed or projected in any forward-looking statements because of a number of risks and uncertainties, including:

·Previously disclosed material weaknesses in our internal control over financial reporting;

·The uncertainty surrounding our ability to meet the covenants under our Credit Agreement in future periods;

·Our exposure to inventory risks;

·Continuing net losses, if we fail to align costs with our sales levels;

·Our reliance on a small number of large transactions for significant portions of our sales and gross margins;

·Our ability to shift our business model from a reseller of products to a high-end solutions provider;

·Potential additional expenses to comply with the changing regulations of corporate governance and public disclosure;

·Our ability to attract and retain talented employees;

·Our quarterly sales and cash flows are volatile, which makes our future financial results difficult to forecast;

·Unsatisfactory performance by third parties with which we work could hurt our reputation, operating results and competitiveness;

·Any issue that compromises our relationship with agencies of the Federal government would cause serious harm to our business;

·Competition and loss of market share;

·Our qualifications as a small business for new contract awards; and

·Changes in Federal government fiscal spending.

For a detailed discussion of risk factors affecting GTSI’s business and operations, see Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2006. We undertake no obligation to revise or update any forward-looking statements for any reason.

Overview

GTSI has more than 20 years of experience in selling IT products and solutions primarily to U.S. Federal Government customers.  We believe our key differentiators to be our strong brand among government customers, extensive contract portfolio and wide variety of vendors.

The vast majority of the IT solutions we offer to our customers have a strong product component, and many are entirely product-based.  We connect IT’s leading vendors, products and services inside the core technology areas most critical to government success by partnering with global IT leaders such as Panasonic, HP, Cisco and Sun Microsystems.  In our traditional reseller capacity, we provide government with products for workgroup computing, such as workstations and desktops; mobility computing and communications, such as wireless-equipped notebooks and PDAs; core computing, such as servers, high-end computing, and storage systems; networking products; and a

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wide range of peripherals.

To help our customers acquire, manage and refresh this technology in a strategic and application-appropriate manner, GTSI has created a mix of financial services capable of managing the entire technology lifecycle.  We offer leasing arrangements to allow government agencies to acquire access to technology as an evenly distributed cost, rather than the much more budget-sensitive and discontinuous capital expenditures.  This model is in high demand from our customers, and we believe it represents a distinctive advantage.  We expect to continue to expand our sales from leasing arrangements for IT products and solutions in 2007.

As discussed in more detail throughout our MD&A for the three months ended March 31, 2007 compared to the three months ended March 31, 2006:

·Total sales decreased $4.2 million;

·Gross margin as a percentage of sales increased 1.1%;

·Loss before income taxes for the three months ended March 31, 2007 decreased $3.1 million.

We are looking forward to improvements in operational and financial performance through improved margin percentages.  We will work to improve execution of the current business and deliver high value solutions.  We believe there are significant opportunities to increase our relatively low market share within the government IT market as we pursue a distinctive business model combining the concepts of a value added provider of complex IT solutions with a traditional reseller.

Critical Accounting Estimates and Policies

Our unaudited condensed consolidated financial statements are based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make significant assumptions.  We believe that some of the more critical estimates and related assumptions that affect our financial condition and results of operations pertain to revenue recognition, financing receivables, valuation of inventory, capitalized internal use software, estimated payables and income taxes. For more information on critical accounting estimates and policies see the MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2006.  We have discussed the application of these critical accounting estimates and policies with the Audit Committee of our Board of Directors.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. As a result of the implementation of FIN 48, we recognized an increase to liabilities for uncertain tax positions totaling $0.2 million through an adjustment to the beginning balance of retained earnings on the Condensed Consolidated Balance Sheet. At the adoption date of January 1, 2007, GTSI had approximately $0.6 million of total gross unrecognized tax benefits.  Of this total, approximately $0.1 million (net of indirect federal and state benefits) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

Historical Results of Operations

The following table illustrates the unaudited percentage of sales represented by items in our condensed consolidated statements of operations for the periods presented.

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	Three months ended
	March 31,
	2007		2006
Sales	100.0	%	100.0	%
Cost of sales	86.5	%	87.7	%
Gross margin	13.5	%	12.3	%
Selling, general, and administrative expenses	18.9	%	19.9	%
(Loss) income from operations	(5.4	)%	(7.6	)%
Interest and other income, net	0.6	%	0.8	%
(Loss) income before taxes	(4.8	)%	(6.8	)%
Income tax benefit (provision)	—		—
Net (loss) income	(4.8	)%	(6.8	)%

The following tables indicate, for the periods indicated, the approximate sales by type and vendor along with related percentages of total sales (in millions).

	Three months ended
	March 31,
Sales by Type	2007				2006
Hardware	$	108.9	75.6	%	$	114.8	77.4	%
Software	12.1		8.4	%	12.9		8.7	%
Resold third-party service products	11.5		8.0	%	8.5		5.7	%
Services	11.6		8.0	%	12.1		8.2	%
Total	$	144.1	100.0	%	$	148.3	100	%

	Three months ended
	March 31,
Sales by Vendor	2007				2006
Panasonic	$	23.6	16.4	%	$	33.6	22.7	%
Cisco	17.2		11.9	%	24.7		16.7	%
Sun Microsystems	14.0		9.7	%	10.1		6.8	%
HP	32.6		22.6	%	16.2		10.9	%
Microsoft	11.6		8.0	%	2.9		2.0	%
Others, net of reserves	45.1		31.3	%	60.8		41.0	%
Total	$	144.1	100.0	%	$	148.3	100.0	%

Three Months Ended March 31, 2007 Compared With the Three Months Ended March 31, 2006

Sales

Sales consist of revenue from products delivered and services sold or rendered, net of allowances for customer returns. Sales for the first quarter of 2007 decreased $4.2 million, or 2.9%, compared to the same period in 2006. Reasons for the sales decline are consistent with the trends we experienced during 2006 where our continued focus on a smaller number of higher margin sales, largely related to our integrated solutions engagements, has led to a decline in total sales.

An analysis of sales by type shows that resold third-party service product sales increased for the three months ended March 31, 2007 to $11.5 million from $8.5 million for the three months ended March 31, 2006. All other categories decreased quarter over quarter, most predominantly the $5.9 million decline in hardware sales.

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Sales from Panasonic and Cisco, two of our top five vendors, declined $10.0 million and $7.5 million, respectively, for the three months ended March 31, 2007 as compared to the same period in 2006. These decreases were offset by increased sales from Sun Microsystems, HP, and Microsoft of $3.9 million, $16.4 million, and $8.7 million, respectively.  HP sales increased significantly due to a significant hardware sale in the first quarter of 2007. Overall, sales from our top five vendors increased $11.5 million quarter over quarter, despite our decrease in total sales for the period, which is consistent with our ongoing efforts to strengthen our partnerships with key vendors.

Gross Margin

Gross margin increased $1.1 million, or 5.7%, from $18.3 million for the three-month period ended March 31, 2006 to $19.4 million for the three months ended March 31, 2007.  Gross margin as a percentage of sales increased 1.1% for the first quarter of 2007, as compared to the first quarter of 2006.  This increase in gross margin percentage is consistent with our continued focus on higher margin sales, mostly related to large dollar orders and integrated solutions engagements.

Selling, General & Administrative Expenses

During the three months ended March 31, 2007, selling, general & administrative (“SG&A”) expenses decreased $2.5 million, or 9.1%, from the same period in 2006. Commission expense decreased $1.0 million due to decreased sales in the first quarter of 2007 and the implementation of a new commission plan for 2007.  Salaries and benefits decreased $0.4 million due to a lower headcount from the same period in 2006.

These decreases were offset by increases of $0.7 million in consulting and temporary expenses due to our ongoing remediation efforts surrounding our internal control processes and $0.4 million increase in accounting fees due to increased audit fees.

Interest and Other Income, Net

Interest and other income net of interest and other expense, decreased $0.5 million, during the three months ended March 31, 2007 compared to the same period in 2006.  This decrease was primarily due to the $0.7 million decrease in lease related income and $0.6 million increase in lease related expenses offset by a $0.6 million gain on lease dispositions.

Income Taxes

As a result of our full valuation allowance on our deferred tax assets, we did not report any income tax benefit during the three months ended March 31, 2007 and 2006, despite our $6.9 million and $10.0 million loss before income taxes, respectively. Since Company management believes that it is not more likely than not that its deferred tax assets will be realized, the Company has recorded a full valuation allowance against its net deferred tax assets and is not anticipating the release of this valuation allowance during the current year, except to the extent that deferred tax assets are ultimately utilized within the current year.

Seasonal Fluctuations

Historically in excess of 92% of our annual sales have been earned from departments and agencies of the U.S. Federal Government, either directly or indirectly through system integrators to which GTSI is a sub-contractor. 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, which also affect the buying patterns of GTSI’s prime contractor customers.  These buying and funding patterns historically have had a significant positive effect on our bookings in the third quarter ended September 30 each year (the Federal govern­ment’s fiscal year end), and consequently on sales and net income in the third and fourth quarters of each year. Conversely, sales during the first quarter of our fiscal year have traditionally been the weakest for GTSI, consisting of less than 20% of our annual sales. Our SG&A expenses are more level throughout the year, although our sales commissions programs generally result in marginally increased expenses in the fourth quarter of our fiscal year.  As a result, GTSI has historically shown a net loss for the period ended March 31.

Quarterly financial results are also affected by the timing of contract awards and the receipt of products by our customers.  The seasonality of our business, and the unpredictability of the factors affecting such seasonality, makes GTSI’s quarterly and annual financial results difficult to predict and subject to significant fluctuation.

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Liquidity and Capital Resources

Cash flows for the three months ended March 31,

(in millions)	2007			2006			Difference
Cash provided by operating activities	$	31.2		$	43.1		$	(11.9	)
Cash used in investing activities	$	(0.7	)	$	(0.6	)	$	(0.1	)
Cash used in financing activities	$	(30.5	)	$	(40.0	)	$	9.5

During the three months ended March 31, 2007, our cash balance increased $0.1 million from our December 31, 2006 balance. GTSI’s current assets decreased $92.2 million as of March 31, 2007 when compared to our December 31, 2006 balance. This decrease is due to decreased accounts receivable of $72.1 million, inventory of $9.7 million, and deferred costs of $9.8 million as of March 31, 2007.

Our capital expenditures remained consistent during the three months ended March 31, 2007 and 2006, primarily from the costs associated with future release of GEMS in 2008.

Cash used in financing activities decreased $9.5 million for the three months ended March 31, 2007, as compared with the same period in 2006, predominantly due to an $8.1 million decrease in proceeds from financed lease debt, offset by a $17.9 million decrease in net repayments under the Credit Facility.

Credit Facility and Term Loan

During 2006, we obtained a $135 million credit agreement with a group of lenders (the “Credit Facility”). This Credit Facility replaced GTSI’s former credit facility which expired on May 31, 2006.

The Credit Facility provides access to capital through June 2, 2010 with borrowings secured by substantially all of the assets of the Company. Borrowing under the Credit Facility at any time is limited to the lesser of $135 million or a collateral-based borrowing base less outstanding obligations. The Credit Facility subjects GTSI to certain covenants limiting its ability to (i) incur debt; (ii) make guarantees; (iii) make dividends and other restricted payments, purchases or investments; (iv) enter into certain transactions with affiliates; (v) acquire real estate and (vii) enter into sale and leaseback transactions. The Credit Facility carries an interest rate generally indexed to the prime rate plus 0.25% plus margin. As of March 31, 2007 we had available credit under the Credit Facility of $28.2 million.

The Credit Facility contains negative financial performance covenants, including a minimum EBITDA covenant for each period, information covenants and certain affirmative covenants. On March 30, 2007, the Company executed the third amendment to the Credit Facility, which removed the minimum EBITDA covenant at March 31, 2007 and revised the minimum EBITDA covenant for future measurement periods. The Company currently relies on its Credit Facility as its primary vehicle to finance its operations.

During 2006, we also obtained a subordinated secured long-term loan of $10 million (the “Term Loan”). The debt covenants and maturity date on the Term Loan are the same as the Credit Facility. The interest rate on the Term Loan is Prime plus 5.25% per annum and is due monthly. This agreement contains a prepayment penalty which is equal to the greater of (i) all interest payable on the Term Loan that would be payable from the Third Amendment Effective Date through the date which is twelve (12) months after the Third Amendment Effective Date, less interest paid through current or (ii) 1% of the amount prepaid.

Liquidity

Our working capital as of March 31, 2007 decreased approximately $7.8 million from our working capital at December 31, 2006. GTSI’s current assets decreased $92.2 million as of March 31, 2007 when compared to our December 31, 2006 balance. This decrease is due to decreased accounts receivable of $72.1 million, inventory of $9.7 million, and deferred costs of $9.8 million as of March 31, 2007. Current liabilities decreased $84.4 million from December 31, 2006 due to decreased borrowings

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under the Credit Facility of $30.2 million, accounts payable of $45.2 million, and accrued liabilities of $5.8 million offset by decreased financed lease debt of $1.2 million.

As the Company continues to improve its credit worthiness, we are not being required to extend letters of credit with our vendors as collateral for lines of credit.  As of April 30, 2007, we no longer had outstanding letters of credit extended to our vendors, which has increased our availability within our Credit Facility and Term Loan.

Our treasury stock is generally reissued upon exercise of employee stock options and for the employee stock purchase plan. No shares of common stock were purchased during the three months ended March 31, 2007 for treasury stock.  Although $5.1 million remains authorized by our Board of Directors for share repurchases, the terms of our Credit Agreement restrict us from purchasing our stock until 2010.

Capital 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. GTSI recorded a net loss of $6.9 million for the three months ended March 31, 2007. Despite this fact, we were able to maintain positive cash flow from operations due to our intense collection efforts during the quarter.

New Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF No. 06-3, How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation) (EITF 06-3). The EITF reached a consensus that a company should disclose its accounting policy (i.e., gross or net presentation) regarding presentation of taxes within the scope of this issue. The EITF also concluded that once the new standard is effective (January 1, 2007), a company should disclose the amount of such taxes for periods in which these taxes included in gross revenues are considered material. The Company collects and remits sales taxes on products and services that it purchases and sells under its contracts with customers, and reports such amounts under the net method in its consolidated statements of operations. The Company has determined that disclosure will not be required.

In September 2007, the FASB issued SFAS No. 157, Fair Value Measurement, (“FAS 157”), which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. FAS 157 is effective for interim periods beginning after November 15, 2007. We are in the process of evaluating the adoption of FAS 157.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” This statement gives entities the option to carry most financial assets and liabilities at fair value, with changes in fair value recorded in earnings. This statement, which will be effective as of the first fiscal year beginning after November 15, 2007, is not expected to have a material impact on our consolidated financial position or results of operations.

On January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.  See Note 9 for further discussion.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GTSI had a $135 million Credit Facility indexed at the Prime Rate plus 0.25% plus margin as of March 31, 2007. GTSI also had a Term Loan of $10 million indexed at Prime plus 5.25% as of March 31, 2007. The Credit Facility and Term Loan expose us to market risk from changes in interest rates. For purposes of specific risk analysis, we use sensitivity analysis to determine the effects that market risk exposures may have.

Our results of operations are affected by changes in interest rates due to the impact those changes have on borrowings under our credit facilities. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, which would require more cash to service our indebtedness. The effect of a 5% increase in interest rates would have resulted in additional interest expense during the three months ended March 31, 2007 of $0.4 million based on our average monthly balances. We have not used derivative instruments to alter the interest rate characteristics of our borrowings. At March 31, 2007 we had $12.4 million of variable rate debt subject to interest.

Included in our long-term debt are amounts related to lease transactions. We have reported these amounts as long-term financed lease debt. These amounts will amortize over the period of the lease instruments with no cash affect to the Company. The balances of these liabilities were $14.2 million and $18.8 million at March 31, 2007 and December 31, 2006, respectively. A change in interest rates would result in no additional interest expense related to financed lease debt.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of March 31, 2007. Our disclosure controls and procedures are designed to (i) ensure that information required to be disclosed by us in reports we file or submit 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 and (ii) is accumulated and communicated to GTSI’s management including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses previously disclosed in our 2005 Form 10-K/A, our disclosure controls and procedures were not effective as of March 31, 2007.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the three months ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  We continue to remediate material weaknesses previously disclosed in our 2005 Form 10-K/A and expect to complete these efforts by the end of the third quarter 2007.

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PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GTSI Corp.
Date	May 15, 2007	/s/ JAMES J. LETO
		James J. Leto
		President and Chief Executive Officer
Date	May 15, 2007	/s/ JOE RAGAN
		Joe Ragan
		Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
10.1	Credit Agreement dated as of June 2, 2006 between GTSI Corp., SunTrust Bank and Bank of America (1)
10.2	Credit Agreement dated as of June 2, 2006 between GTSI Corp., and Crystal Capital Fund, L.P. (1)
10.3	First Amendment to Credit Agreement dated as of July 13, 2006 between GTSI Corp., SunTrust Bank and Bank of America (2)
10.4	First Amendment to Credit Agreement dated as of July 13, 2006 between GTSI Corp. and Crystal Capital Fund, L.P. (2)
10.5	Second Amendment to Credit Agreement dated as of November 30, 2006 between GTSI Corp. the Lenders, the other Borrower Parties, and SunTrust Bank. (3)
10.6	Second Amendment to Credit Agreement dated as of November 30, 2006 between GTSI Corp.. the Lenders, the other Borrower Parties, and Crystal Capital Fund, L.P. (3)
10.7	Third Amendment to Credit Agreement dated as of March 30, 2007 between GTSI Corp. the Lenders, the other Borrower Parties, and SunTrust Bank. (4)
10.8	Third Amendment to Credit Agreement dated as of March 30, 2007 between GTSI Corp.. the Lenders, the other Borrower Parties, and Crystal Capital Fund, L.P. (4)
10.9	Amended and Restated 1996 Stock Incentive Plan (5)
10.10	Amended and Restated 2007 Stock Incentive Plan (filed herewith)
10.11	Change in Control Agreement with James Leto (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)

(1)	Incorporated by reference to the Registrant’s current report on Form 8-K dated June 2, 2006.
(2)	Incorporated by reference to the Registrant’s current report on Form 8-K dated July 13, 2006.
(3)	Incorporated by reference to the Registrant’s current report on Form 8-K dated December 5, 2006.
(4)	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.
(5)	Incorporated by reference to Appendix A of the Registrant’s 2005 Proxy Statement

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EX-10.10

Exhibit 10.10

GTSI CORP.

AMENDED AND RESTATED

2007 STOCK INCENTIVE PLAN

1.             Establishment and Purposes of the Plan.

GTSI Corp. established this Amended and Restated 2007 Stock Incentive Plan (the “Plan”) to promote the interests of the Company and its stockholders by (i) helping to attract and retain the services of non-employee directors and selected employees of the Company who are in a position to make a material contribution to the successful operation of the Company’s business, (ii) motivating such persons, by means of performance-related incentives, to achieve the Company’s business goals and (iii) enabling such persons to participate in the long-term growth and financial success of the Company by providing them with an opportunity to purchase and own stock of the Company.

2.             Definitions.

The following definitions shall apply throughout the Plan:

a.             “Affiliate” shall mean any entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Company.

b.             “Award” means a Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Performance Award granted under the Plan.

c.             “Award Agreement” means a written or electronic agreement executed on behalf of the Corporation by the Chief Executive Officer (or another officer designated by the Committee) and delivered to the Participant and containing terms and provisions of Awards, consistent with the Plan, as the Committee may approve. Such agreement may, but is not required to be, executed by the Participant.

d.             “Board of Directors” shall mean the Board of Directors of the Company.

e.             “Cause” means (W) termination of Participant’s employment for “cause” in accordance with the Company’s written policies or pursuant to the definition of “cause” as indicated in any agreement Participant may have with the Company; (X) dishonesty or conviction of a crime which brings the Participant into disrepute or is likely to have a material detrimental impact on the business operations of the Company; (Y) failure to perform his or her duties to the satisfaction of the Company after written notice; or (Z) engaging in conduct that could be materially damaging to the Company without a reasonable good faith belief that such conduct was in the best interest of the Company. The determination of “Cause” shall be made by the Committee and its determination shall be final and conclusive.

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f.              “Code” shall mean the Internal Revenue Code of 1986, as amended.  References in the Plan to any section of the Code shall be deemed to include any amendment or successor provisions to such section and any regulations issued under such section.

g.             “Common Stock” shall mean the common stock, par value $0.005 per share, of the Company.

h.             “Company” shall mean GTSI Corp., a Delaware Corporation and any “subsidiary” corporation, whether now or hereafter existing, as defined in Sections 424(f) and (g) of the Code, or any entity in which GTSI owns at least a 51% interest.

i.              “Committee” shall mean the Committee appointed by the Board of Directors in accordance with Section 4(a) of the Plan or, if no Committee shall be appointed or in office, the Board of Directors.

j.              “Continuous Employment” shall mean the absence of any interruption or termination of employment by the Company.  Continuous Employment shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Committee or in the case of transfers between locations of the Company.

k.             “Covered Employee” means any individual who, on the last day of the taxable year, is the Chief Executive Officer of the Company or is acting in such capacity or among the four highest paid compensated officers (other than the Chief Executive Officer) within the meaning of Section 162(m) of the Code.

l.              “Disinterested Person” shall mean an administrator of the Plan who satisfies the requirements, if any, imposed on administrators of plans in order for the grant of Awards or Options to be exempt under any version of Rule 16b—3 under the Exchange Act that is relied on by the Company.

m.            “Employee” shall mean any employee of the Company, including officers and directors who are also employees.  In determining whether an employment relationship exists, the regulations of the United States Treasury Department relating to the determination of the employment relationship for the purpose of collection of income tax on wages at the source shall be applied.

n.             “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

o.             “Fair Market Value” shall mean, with respect to Shares, the fair market value per Share on the date an option is granted and, so long as the Shares are quoted on the National Association of Securities Dealers Automated Quotations (“Nasdaq”) System, the Fair Market Value per Share shall be the closing price on the Nasdaq Stock Market as of the date of grant of the Option, as reported in The Wall Street Journal or, if there are no sales on such date, on the immediately preceding day on which there were reported sales.

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p.             “Incentive Stock Option” shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

q.             “Non-Employee Director” shall mean any director of the Company who is not an Employee of the Company.

r.              “Non-Statutory Stock Option” shall mean an Option which is not an Incentive Stock Option.

s.             “Option” shall mean a stock option to purchase Common Stock granted to an Optionee pursuant to the Plan.

t.              “Option Agreement” means a written agreement substantially in such form or forms as the Committee (subject to the terms and conditions of the Plan) may from time to time approve, evidencing and reflecting the terms of an Option.

u.             “Optioned Stock” shall mean the Common Stock subject to an Option granted pursuant to the Plan.

v.             “Optionee” shall mean any Employee or Non-Employee Director who is granted an Option.

w.            “Participant” means an eligible person under the Plan who is selected by the Committee to receive an Award under the Plan.

x.             “Performance Award” means a contractual right awarded pursuant to the Plan to receive a share of Common Stock (or its value in cash) or a cash-denominated award which right will be forfeitable by the Participant until the achievement of pre-established performance objectives over a performance period.  After the right becomes nonforfeitable, any Common Stock or other consideration issued in respect of the Performance Award will itself be nonforfeitable upon issuance.

y.             “Plan” shall mean this Amended and Restated 2007 Incentive Stock Plan.

z.             “Restricted Stock” means an award of shares of Common Stock made pursuant to the Plan that is nontransferable and forfeitable by the Participant until the completion of a specified period of future service, the achievement of pre-established performance objectives or until otherwise determined by the Committee.

aa.           “Restricted Stock Unit” means a contractual right awarded pursuant to the Plan to receive a share of Common Stock (or its value in cash) which Common Stock (or its value in cash) will itself be forfeitable by the Participant until the completion of a specified period of future service, the achievement of pre-established performance objectives or until otherwise determined by the Committee.

bb.          “Securities Act” means the Securities Act of 1933, as in effect from time to time.

cc.           “Shares” shall mean shares of the Common Stock or any shares into which such Shares may be converted in accordance with Section 12 of the Plan

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dd.          “Stock Appreciation Right” means a contractual right awarded pursuant to the Plan to receive a number of shares of Common Stock with an aggregate value equal to the excess, if any, of (a) the Fair Market Value of the number of Shares, as specified in the Award; over (b) the exercise price for such number of Shares, as specified in the Award, at such time as the Stock Appreciation Right is exercised.

3.             Shares Reserved.

The maximum aggregate number of Shares reserved for issuance pursuant to the Plan shall be 4,500,000 Shares or the number of shares of stock to which such Shares shall be adjusted as provided in Section 12 of the Plan.  Such number of Shares may be set aside out of authorized but unissued Shares not reserved for any other purpose, or out of issued Shares acquired for and held in the treasury of the Company from time to time.

Shares subject to, but not sold or issued under, any Option or Award terminating, expiring or canceled for any reason prior to its exercise in full, shall again become available for Options or Awards thereafter granted under the Plan, and the same shall not be deemed an increase in the number of Shares reserved for issuance under the Plan.

Awards that can only be settled in cash shall not result in a charge against the aggregate number of Shares available for issuance. For purposes of determining the maximum number of shares available for issuance under the Plan, Awards that may be settled in Shares shall initially cause the available reserve to be reduced by the maximum number of Shares that may be issued in connection with the Award. Notwithstanding the foregoing, any Shares not actually issued at exercise or settlement shall again be available for issuance under the Plan.

4.             Administration of the Plan.

a.             The Plan shall be administered by a Committee designated by the Board of Directors to administer the Plan and comprised of not less than two directors, each of whom is a Disinterested Person.  In addition, each director designated by the Board of Directors to administer the Plan shall be an “outside director” as defined in the Treasury regulations issued pursuant to Section 162(m) of the Code.  Members of the Committee shall serve for such period of time as the Board of Directors may determine or until their resignation, retirement, removal or death, if sooner.  From time to time the Board of Directors may increase the size of the Committee and appoint additional members thereto, remove members (with or without cause) and appoint new members in substitution therefore or fill vacancies however caused.

b.             Subject to the provisions of the Plan, the Committee shall have the authority, in its discretion:  (i) to grant Awards, Incentive Stock Options in accordance with Section 422 of the Code, or Non-Statutory Stock Options; (ii) to determine, upon review of relevant information, the Fair Market Value per Share; (iii) to determine the exercise price of the Options to be granted in accordance with

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Section 7(c) of the Plan and the exercise price of the Stock Appreciation Rights to be granted in accordance with Section 9 of the Plan; (iv) to determine the Employees or Non-Employee Directors to whom, and the time or times at which, Awards or Options shall be granted, and the number of Shares subject to each Award or Option; (v) to prescribe, amend and rescind rules and regulations relating to the Plan subject to the limitations set forth in Section 13 of the Plan; (vi) to determine the terms and provisions of each Award or Option granted to Participants or Optionees under the Plan and each Award Agreement or Option Agreement (which need not be identical with the terms of other Awards, Options, Award Agreements and Option Agreements) and, with the consent of the Participant or Optionee, to modify or amend an outstanding Award, Option, Award Agreement or Option Agreement; (vii) to accelerate the exercise date of any Option or the vesting date of any Award; (viii) to determine whether any Participants or Optionee will be required to execute a stock repurchase agreement or other agreement as a condition to the exercise of an Option or Award, and to determine the terms and provisions of any such agreement (which need not be identical with the terms of any other such agreement) and, with the consent of the applicable Participant or Optionee, to amend any such agreement; (ix) to interpret the Plan or any agreement entered into with respect to the grant or exercise of Awards or Options; (x) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Award or Option previously granted or to take such other actions as may be necessary or appropriate with respect to the Company’s rights pursuant to Awards or Options or agreements relating to the grant or exercise thereof; and (xi) to make such other determinations and establish such other procedures as it deems necessary or advisable for the administration of the Plan.  Notwithstanding anything else herein, the Committee shall not have the authority to adjust or amend the exercise price of any Options previously awarded to any Optionee, whether through amendment, cancellation, replacement grant or other means.

c.             All decisions, determinations and interpretations of the Committee shall be final and binding on all Participants and Optionees and any other holders of any Awards or Options granted under the Plan.

d.             The Committee shall keep minutes of its meetings and of the actions taken by it without a meeting.  A majority of the Committee shall constitute a quorum, and the actions of a majority at a meeting, including a telephone meeting, at which a quorum is present, or acts approved in writing by a majority of the members of the Committee without a meeting, shall constitute acts of the Committee.

e.             The Company shall pay all original issue and transfer taxes with respect to the grant of Awards or Options and/or the issue and transfer of Shares pursuant to the exercise thereof, and all other fees and expenses necessarily incurred by the Company in connection therewith; provided, however, that

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the person exercising an Award or Option shall be responsible for all payroll, withholding, income and other taxes incurred by such person in respect of the exercise of an Award or Option or transfer of Shares.

5.             Eligibility.

a.             Non-Statutory Stock Options and Awards may be granted under the Plan to Employees and Non-Employee Directors; Incentive Stock Options may be granted under the Plan only to Employees.

b.             An Employee or Non-Employee Director who has been granted an Award or Option may, if he or she is otherwise eligible, be granted additional Awards or Options.

6.             Options for Non-Employee Directors.

Non-Employee Directors may be granted Options in accordance with this Section 6 or Awards in accordance with Exhibit 1 to the Plan, as determined by the Committee from time to time.

If an Optionee ceases to serve as a Non-Employee Director for any reason, he or she may thereafter exercise his or her Option, to the extent he or she was entitled to do so at the date of such cessation, at any time before the earlier of (a) the fifth anniversary of the cessation date and (b) the date on which the respective Option would have expired if the Optionee had not ceased to serve as a Non-Employee Director.

To the extent that an Optionee who is a former Non-Employee Director does not exercise his or her Options (which he or she was entitled to exercise) within the applicable time period specified herein, the Option shall terminate. The consideration to be paid for the Shares to be issued upon exercise of an option by a Non-Employee Director shall consist of (a) cash or check or (b) subject to approval by the Committee, cash, check, broker’s commitment to pay, or Common Stock held by the Optionee for at least six months, or some combination thereof.

7.             Terms and Conditions of Options.

Options granted pursuant to the Plan by the Committee shall be either Incentive Stock Options or Non-Statutory Stock Options and shall be evidenced by an Option Agreement providing, in addition to such other terms as the Committee may deem advisable, the following terms and conditions:

a.             Time of Granting Options.  The date of grant of an Option be the date on which the Committee makes the determination granting such Option.  Notice of the determination shall be given to each Optionee within a reasonable time after the date of such grant.

b.             Number of Shares.  Each Option Agreement shall state the number of Shares to which it pertains and whether such Option is intended to constitute an Incentive Stock Option or a Non-Statutory Stock Option, provided, however, that the maximum number of Shares to which Options may be granted during a single fiscal year of the Company to any one Employee or Non-Employee Director shall not exceed 100,000 Shares and the maximum number of Shares to which Options may be granted during a single fiscal year of the Company to all Employees and Non-Employee Directors shall not exceed

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500,000 Shares.  If an Option held by an Employee or Non-Employee Director is canceled, the canceled Option shall continue to be counted against the maximum number of Shares for which Options may be granted to such Employee or Non-Employee Director and any replacement Option granted to such Employee or Non-Employee Director shall also count against such limit.

c.             Exercise Price.  The exercise price per Share for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Committee; provided, however, that with respect to both Non-Statutory Stock Options and Incentive Stock Options such price shall in no event be less than 100% of the Fair Market Value per Share on the date of grant, except that the Committee may specifically provide that the exercise price of an Option may be higher or lower in the case of an Option granted to employees of a company acquired by the Company in assumption and substitution of options held by such employees at the time such company is acquired.

In the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns or is deemed to own (by reason of the attribution rules applicable under Sec­tion 424(d) of the Code) stock possessing more than 10% of the combined voting power of all classes of stock of the Company, the exercise price per Share shall be no less than 110% of the Fair Market Value per Share on the date of grant.

d.             Medium and Time of Payment.  Except in the case of Non-Employee Directors, which shall be governed by Section 6, the consideration to be paid for the Shares to be issued upon exercise of an Option and to be paid to satisfy any withholding tax obligation incident thereto, including the method of payment, shall be determined by the Committee and, subject to approval by the Committee, may consist entirely or in any combination of cash, check, a commitment to pay by a broker or Shares held by the Optionee or issuable upon exercise of the Option, or such other consideration and method of payment permitted under any laws to which the Company is subject.  In the case of an Incentive Stock Option, such provision shall be determined on the date of the grant.

e.             Term of Options.  The term of an Incentive Stock Option may be up to 10 years from the date of grant thereof; provided, however, that following stockholder approval of the amendments to this Plan at the 2007 annual meeting of stockholders, the maximum term for all subsequent grants shall be seven years from the date of grant, and provided further, that the term of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, shall be five years from the date of grant thereof or such shorter term as may be provided in the Option.

The term of a Non-Statutory Stock Option, in the case of an Employee, may be up to 10 years from the date such Employee first becomes vested in any portion of an Option award; and in the

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case of Non-Employee Director, may be up to 10 years from the date of grant thereof, provided that following stockholder approval of the amendments to this Plan at the 2007 annual meeting of stockholders, the maximum term for all subsequent grants to Employees shall be seven years from the date such Employee first becomes vested in any portion of an Option award and the maximum term for all subsequent grants to Non-Employee Directors shall be seven years from the date of grant.

The term of any Option may be less than the maximum term provided for herein as specified by the Committee upon grant of the Option and as set forth therein.

f.              Maximum Amount of Incentive Stock Options.  To the extent that the aggregate Fair Market Value (determined at the time an Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year under all incentive stock option plans of the Company exceeds $100,000, the Options in excess of such limit shall be treated as Non-Statutory Stock Options.

8.             Exercise of Option.

a.             In General.  Any Option granted hereunder to an Employee shall be exercisable at such times and under such conditions as may be determined by the Committee and as shall be permissible under the terms of the Plan, including any performance criteria with respect to the Company and/or the Optionee as may be determined by the Committee.  Any Option granted hereunder to a Non-Employee Director shall be exercisable at such times and under such conditions as set forth in Section 6 of the Plan.

An Option may be exercised in accordance with the provisions of the Plan as to all or any portion of the Shares then exercisable under an Option from time to time during the term of the Option.  However, an Option may not be exercised for a fraction of a Share.

b.             Procedure.  An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company at its principal business office in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company, accompanied by any other agreements required by the terms of the Plan and/or Option Agreement or as required by the Committee and payment by the Optionee of all payroll, withholding or income taxes incurred in connection with such Option exercise (or arrangements for the collection or payment of such tax satisfactory to the Committee are made).  Full payment may consist of such consideration and method of payment allowable under Section 7(d) of the Plan.

c.             Decrease in Available Shares.  Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

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d.             Exercise of Stockholder Rights.  Until the Option is properly exercised in accordance with the terms of this section, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock.  No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Option is exercised, except as provided in Section 12 of the Plan.

e.             Termination of Eligibility.  If an Optionee ceases to serve as an Employee or Non-Employee Director for any reason other than death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code) and thereby terminates his or her Continuous Employment, he or she may, but only within one month, or such other period of time not exceeding three months in the case of an Incentive Stock Option (or in the case of an Optionee subject to Rule 16b—3 of the Securities Exchange Act of 1934, as amended, the greater of six months from the date of the Option award or three months from the date of termination of employment) or six months in the case of a Non-Statutory Stock Option, in each case as is determined by the Committee, following the date he or she ceases his or her Continuous Employment (subject to any earlier termination of the Option as provided by its terms), exercise his or her Option to the extent that he or she was entitled to exercise it at the date of such termina­tion.  To the extent that he or she was not entitled to exercise the Option at the date of such termination, or if he or she does not exercise such Option (which he or she was entitled to exercise) within the time specified herein, the Option shall terminate.  Notwithstanding anything to the contrary herein, the Committee may at any time and from time to time prior to the termination of a Non-Statutory Stock Option, with the consent of the Optionee, extend the period of time during which the Optionee may exercise his or her Non-Statutory Stock Option following the date he or she ceases his or her Continuous Employment; provided, however, that the maximum period of time during which a Non-Statutory Stock Option shall be exercisable following the date on which an Optionee terminates his or her Continuous Employment shall not exceed an aggregate of six months, that the Non-Statutory Stock Option shall not be, or as a result of such extension become, exercisable after the expiration of the term of such Option as set forth in the Option Agreement and, notwithstanding any extension of time during which the Non-Statutory Stock Option may be exercised, that such Option, unless otherwise amended by the Committee, shall only be exercisable to the extent the Optionee was entitled to exercise it on the date he or she ceased his or her Continuous Employment.

f.              Death or Disability Of Optionee.  If an Optionee’s Continuous Employment ceases due to death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code) of the Optionee, the Option may be exercised within six months (or such other period of time not exceeding one year as is determined by the Committee) following the date of death or termination of Continuous Employment due to permanent or total disability (subject to any earlier termination of the Option as

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provided by its terms), by the Optionee in the case of permanent or total disability, or in the case of death by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but in any case (unless otherwise determined by the Committee) only to the extent the Optionee was entitled to exercise the Option at the date of his or her termination of employment by death or permanent and total disability.  To the extent that he or she was not entitled to exercise such Option at the date of his or her termination of employment by death or permanent and total disability, or if he or she does not exercise such Option (which he or she was entitled to exercise) within the time specified herein, the Option shall terminate.

g.             Expiration of Option.  Notwithstanding any provision in the Plan, including but not limited to the provisions set forth in Sections 8(e) and 8(f), an Option may not be exercised, under any cir­cumstances, after the expiration of its term.

h.             Conditions on Exercise and Issuance.  As soon as practicable after any proper exercise of an Option in accordance with the provisions of the Plan, the Company shall deliver to the Optionee at the principal executive office of the Company or such other place as shall be mutually agreed upon between the Company and the Optionee, a certificate or certificates representing the Shares for which the Option shall have been exercised.  The time of issuance and delivery of the certificate or certificates representing the Shares for which the Option shall have been exercised may be postponed by the Company for such period as may be required by the Company, with reasonable diligence, to comply with any law or regulation applicable to the issuance or delivery of such Shares.

Options granted under the Plan are conditioned upon the Company obtaining any required permit or order from appropriate governmental agencies, authorizing the Company to issue such Options and Shares issuable upon exercise thereof.  Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, applicable state law, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and may be further subject to the approval of counsel for the Company with respect to such compliance.

i.              Withholding or Deduction for Taxes.  The grant of Options hereunder and the issuance of Shares pursuant to the exercise thereof is conditioned upon the Company’s reservation of the right to withhold, in accordance with any applicable law, from any compensation or other amounts payable to the Optionee any taxes required to be withheld under Federal, state or local law as a result of the grant or exercise of such Option or the sale of the Shares issued upon exercise thereof.  To the extent that compensation and other amounts, if any, payable to the Optionee are insufficient to pay any taxes

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required to be so withheld, the Company may, in its sole discretion, require the Optionee, as a condition of the exercise of an Option, to pay in cash to the Company an amount sufficient to cover such tax liability or otherwise to make adequate provision for the delivery to the Company of cash necessary to satisfy the Company’s withholding obligations under Federal and state law.

9.             Awards.

a.             The Committee may issue Awards (consisting of Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Performance Awards) to Employees and Non-Employee Directors as set forth in Exhibit 1, which is incorporated in the Plan.

b.             The Committee may impose such restrictions on any Shares issued pursuant to the settlement of any Award granted hereunder as it may deem advisable, including without limitation restrictions under the Securities Act, under the requirements of the applicable stock exchange and under any Blue Sky or securities laws applicable to such shares. Notwithstanding any other Plan provision to the contrary, the Company shall not be obligated to issue, deliver or transfer Shares under the Plan, or take any other action, unless such issuance, delivery, transfer or other action is in compliance with all applicable laws, rules and regulations (including but not limited to the requirements of the Securities Act, the requirement with respect to a deferral of payment recognized under Section 409A of the Code, or withholding tax requirements). The Committee may cause a restrictive legend to be placed on any certificate issued pursuant to the vesting of Restricted Stock or the settlement of an Award granted hereunder in such form as may be prescribed from time to time by applicable laws and regulations or as may be advised by legal counsel.

c.             The Committee may postpone any grant, exercise, vesting or payment of any Award for such time as the Committee in its sole discretion may deem necessary (i) to effect, amend or maintain any necessary registration of the Plan or Shares issuable pursuant to Awards under the securities law; (ii) to permit any action to be taken in order to (A) list such Shares or other shares of stock of the Company on a stock exchange if Shares or other shares of stock of the Company are not then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its Shares or other shares of stock of the Company, including any rules and regulations of any stock exchange on which the Shares or other shares of stock of the Company are listed; (iii) to determine that such Shares are exempt from such registration or that no action of the kind referred to in (ii)(B) above needs to be taken; (iv) to comply with any other applicable law, including without limitation, securities law; (v) during any such time the Company is prohibited from doing any such acts under applicable law, including without limitation, during the course of any investigation or under any contract, loan agreement or covenant or other agreement to which the Company is a party; (vi) to otherwise comply with any prohibition on such acts or payments during any applicable blackout period; and the Company shall not be obligated by virtue

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of any Award Agreement or any other provision of the Plan to recognize the grant, exercise, vesting or payment of an Award or to grant, sell or issue Shares or make any other payments under such circumstances. Any such postponement shall not extend the term of the Award and neither the Company nor the Committee shall have any obligation or liability to any Participant or to any other person with respect to Shares or payments to which the Award shall lapse because of such postponement.

d.             The Plan, insofar as it provides for Awards, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of the Company or any person with respect to any Award under the Plan shall be based solely upon any contractual obligations that may be created thereto. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property or assets of the Company.

e.             Notwithstanding any other provision hereof, the Committee may grant Awards in substitution for performance shares, incentive awards, stock awards, stock appreciation rights or similar awards held by an individual who becomes an Employee or Non-Employee Director in connection with a transaction described in Section 424(a) of the Code (or which would be so described if the substitution or assumption under that Section had occurred) with the Company. Notwithstanding any other provisions of the Plan, the terms of such substitute Awards shall be as the Committee, in its discretion, determines is appropriate.

10.           Non-transferability of Options.

Options granted under the Plan may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner, either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution or, if permitted of Options granted under Rule 16b—3, transfers between spouses incident to a divorce.

11.           Holding Period.

In the case of officers and directors of the Company, at least six months must elapse from the date of grant of the Option to the date of disposition of the underlying Shares.

12.           Adjustment Upon Change in Corporate Structure.

a.             Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award or Option, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards or Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award or Option, as well as the exercise or purchase price per Share covered by each such outstanding Award or Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split or combination or the payment of a stock dividend (but only on the Common Stock) or any other increase or

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decrease in the number of issued Shares effected without receipt of consideration by the Company (other than stock awards to Employees or directors); provided, however, that the conversion of any convertible securities of the Company shall not be deemed to have been effected without the receipt of consideration.  Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to the Plan, an Award or an Option.

b.             In the event of the proposed dissolution or liquidation of the Company, or in the event of a proposed sale of all or substantially all of the assets of the Company (other than in the ordinary course of business), or the merger or consolidation of the Company with or into another corporation, as a result of which the Company is not the surviving and controlling corporation, the Board of Directors shall (A) make provision for the assumption of all outstanding options and Awards by the successor corporation or (B) declare that any Option or Award shall terminate as of a date fixed by the Board of Directors which is at least 30 days after the notice thereof to the Optionee or Participant and (i) the Board of Directors shall give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable provided such exercise does not violate Section 8(e) of the Plan and (ii) the Awards shall immediately become full vested (at target for Performance Awards) and, if applicable, exercisable and payable.

c.             No fractional shares of Common Stock shall be issuable on account of any action aforesaid, and the aggregate number of shares into which Shares then covered by the Award or Option, when changed as the result of such action, shall be reduced to the largest number of whole shares resulting from such action, unless the Board of Directors, in its sole discretion, shall determine to issue scrip certificates in respect to any fractional shares, which scrip certificates, in such event shall be in a form and have such terms and conditions as the Board of Directors in its discretion shall prescribe.

13.           Stockholder Approval.

Effectiveness of the Plan shall be subject to approval by the stockholders of the Company within 12 months before or after the date the Plan is adopted; provided, however, that Awards and Options may be granted pursuant to the Plan subject to subsequent approval of the Plan by such stockholders.  Stockholder approval shall be obtained by the affirmative votes of the holders of a majority of voting Shares present or represented and entitled to vote at a meeting of stockholders duly held in accordance with the laws of the State of Delaware.

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14.           Amendment and Termination of the Plan.

a.             Amendment and Termination.  Except as provided in Section 14(b) of the Plan, the Committee may amend or terminate the Plan from time to time in such respects as the Committee may deem advisable and shall make any amendments which may be required so that Options intended to be Incentive Stock Options shall at all times continue to be Incentive Stock Options for the purpose of Section 422 of the Code; provided, however, that without approval of the holders of a majority of the voting Shares present or represented and entitled to vote at a valid meeting of stockholders, no such revision or amendment shall be made that affects the ability of Options or Awards thereafter granted under the Plan to satisfy Rule 16b—3.

b.             Effect of Amendment or Termination.  Except as otherwise provided in Section 12 of the Plan, any amendment or termination of the Plan shall not affect Awards or Options already granted and such Awards or Options shall remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise between the Participant or Optionee and the Company, which agreement must be in writing and signed by the Participant or Optionee and the Company.  Notwithstanding anything to the contrary herein, the Plan shall not adversely affect, unless mutually agreed in writing by the Company and a Participant or an Optionee, the terms and provisions of any Award or Option granted prior to the date the Plan was approved by stockholders as provided in Section 13 of the Plan.

15.           Indemnification.

No member of the Committee or of the Board of Directors shall be liable for any act or action taken, whether of commission or omission, except in circumstances involving willful misconduct, or for any act or action taken, whether of commission or omission, by any other member or by any officer, agent, or Employee.  In addition to such other rights of indemnifica­tion they may have as members of the Board of Directors, or as members of the Committee, the Committee shall be indemnified by the Company against reasonable expenses, including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken, by commission or omission, in connection with the Plan or any Award or Option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for willful misconduct in the performance of his or her duties; provided that within 60 days after institution of any such action, suit or proceeding, a Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

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16.           General Provisions.

a.             Other Plans.  Nothing contained in the Plan shall prohibit the Company from establishing additional incentive compensation arrangements.

b.             No Enlargement of Rights.  Neither the Plan, nor the granting of Shares, nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain an Employee or a Non-Employee Director for any period of time, or at any particular rate of compensation.  Nothing in the Plan shall be deemed to limit or affect the right of the Company or any such corporations to discharge any Employee thereof at any time for any reason or no reason.  Nothing in the Plan shall in any way limit or affect the right of the Board of Directors or the stockholders of the Company to remove any Non-Employee Director or otherwise terminate his or her service as a director of the Company.

No Employee or Non-Employee Director shall have any right to or interest in Awards or Options authorized hereunder prior to the grant thereof to such eligible person, and upon such grant he or she shall have only such rights and interests as are expressly provided herein and in the related Award Agreement or Option Agreement, subject, however, to all applicable provisions of the Company’s Certificate of Incorporation, as the same may be amended from time to time.

c.             Notice.  Any notice to be given to the Company pursuant to the provisions of the Plan shall be addressed to the Company in care of its Secretary (or such other person as the Company may designate from time to time) at its principal office, and any notice to be given to a Participant or an Optionee to whom an Award or Option is granted hereunder shall be delivered personally or addressed to him or her at the address given beneath his or her signature on his or her Award Agreement or Option Agree­ment, or at such other address as such Optionee or his or her transferee (upon the transfer of the Optioned Stock) may hereafter designate in writing to the Company.  Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified, and actually received by the Company.  It shall be the obligation of each Participant or Optionee holding Shares purchased upon exercise of an Option or grant of an Award to provide the Secretary of the Company, by letter mailed as provided hereinabove, with written notice of his or her direct mailing address.

d.             Applicable Law.  To the extent that Federal laws do not otherwise control, the Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws rules thereof.

e.             Incentive Stock Options.  The Company shall not be liable to an Optionee or other person if it is determined for any reason by the Internal Revenue Service or any court having jurisdiction that any Incentive Stock Options are not incentive stock options as defined in Section 422 of the Code.

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f.              Information to Participants and Optionees.  The Company shall provide without charge to each Participant and Optionee copies of such annual and periodic reports as are provided by the Company to its stockholders generally.

g.             Availability of Plan.  A copy of the Plan shall be delivered to the Secretary of the Company and shall be shown by him or her to any eligible person making reasonable inquiry concerning it.

h.             Severability.  In the event that any provision of the Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability shall not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.

i.              Nothing in the Plan shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant Options or Awards for proper corporate purposes other than under the Plan to any Employee or to any other person, firm, corporation, association or other entity, or to grant Awards or Options, or assume such options or awards of any person, in connection with any acquisition, purchase, lease, merger, consolidation, reorganization, or otherwise, of all or part of the business or assets of any person, firm, corporation, association or other entity.

17.           Effective Date and Term of Plan.

The Amended and Restated Plan shall become effective upon stockholder approval as provided in Section 13 of the Plan.  The Plan shall continue in effect for a term of expiring on April 21, 2015, unless sooner terminated under Section 14 of the Plan.

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Certificate of Corporate Secretary

The Secretary of GTSI Corp. (the “Company”) hereby certifies that the foregoing is a true and correct copy of the Company’s Amended and Restated 2007 Stock Incentive Plan, as approved by the Company’s stockholders on April 21, 2005, and as further amended and restated on May 3, 2007.

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EXHIBIT 1

A1.          Restricted Stock, Restricted Stock Unit and Stock Appreciation Right Grants to Employees.

Subject to the limitations of the Plan, the Committee may in its sole and absolute discretion grant Restricted Stock, Restricted Stock Units and Stock Appreciation Rights to such Employees, in such numbers, upon such terms and conditions and at such times as the Committee shall determine and set forth in an Award Agreement, provided, however, that the maximum number of Shares with respect to which Restricted Stock, Restricted Stock Units and Stock Appreciation Rights may be granted during a fiscal year of the Company to any one Employee or Non-Employee Director shall not exceed 250,000 Shares and the maximum number of Shares with respect to which Restricted Stock, Restricted Stock Units and Stock Appreciation Rights may be granted during a fiscal year of the Company to all Employees and Non-Employee Directors shall not exceed 500,000 Shares.

(a)  Each grant shall specify the number of Shares to which it pertains, subject to the limitations set forth in Section 9 of the Plan.

(b)  Each grant shall specify the required period or periods (if any) of continuous service by the Participant with the Company and/or any performance or other conditions to be satisfied before the restrictions on the Restricted Stock, Restricted Stock Units or Stock Appreciation Rights (or installments thereof) shall lapse. Any grant may provide for vesting in the event of a termination of employment or a change in control of the Company or any other similar transaction or event. To the extent the Participant’s rights in Restricted Stock, Restricted Stock Units or Stock Appreciation Rights are forfeitable and nontransferable for a period of time, the Committee on the date of grant shall determine the maximum period over which the rights may become nonforfeitable and transferable, except that such period shall not exceed 10 years, provided that following stockholder approval of the amendments to this Plan at the 2007 annual meeting of stockholders, the maximum period for all subsequent grants shall be seven years.

(c)  Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. The Committee shall require that any stock certificates evidencing any Restricted Stock be held in the custody of the Company and/or bear a legend until the restrictions lapse, and that, as a condition of any Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such Award. As a condition to grant, if required by applicable law or otherwise determined by the Committee, Participants may be required to pay a minimum purchase price. Restricted Stock is nontransferable and subject to forfeiture until the restrictions lapse.

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(d)  Restricted Stock Units represent a contractual right to receive the economic equivalent of an award of Restricted Stock. At the discretion of the Committee as set forth in the Award Agreement, Restricted Stock Units may be settled in Shares, the cash value of Shares, or a combination. No Shares will be issued at the time an award of Restricted Stock Units is made.  Stock Appreciation Rights represent a contractual right to receive Shares equivalent in value to the increase, if any, in the value of a designated number of Shares over the value of such number of Shares as is designated in the Stock Appreciation Right Award (which shall in no event be less than the value of such number of Shares on the effective date of the Stock Appreciation Right Award).  Stock Appreciation Rights may only be settled in the form of Shares.

(e)  Unless otherwise determined by the Committee and except as provided in (f) below, Participants holding Restricted Stock may exercise full voting rights and other rights as a shareholder with respect to those Shares prior to the lapse of restrictions, except that the Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of Shares granted pursuant to Restricted Stock. The transfer limitations set forth in the preceding sentence shall not apply after the Restricted Stock becomes transferable and no longer forfeitable. However, Participants holding Restricted Stock Units (as opposed to Restricted Stock) and Participants holding Stock Appreciation Rights shall not have any rights as a shareholder prior to the actual issuance of Shares.

(f)  Unless otherwise determined by the Committee, Participants holding Restricted Stock or Restricted Stock Units shall be entitled to receive all dividends (or dividend equivalents) and other distributions paid with respect to the Shares underlying the Awards; provided that such dividends (or dividend equivalents) shall not be paid currently, but rather be credited to an account established for the Participant and invested in additional Restricted Stock or Restricted Stock Units on the distribution date of the applicable dividend. The restrictions on any additional Shares or units credited in respect of dividends (or dividend equivalents) shall become vested and nonforfeitable, if at all, on the same terms and conditions as are applicable in respect of the Restricted Stock or Restricted Stock Units with respect to which such dividends (or dividend equivalents) were payable.  The provisions of this Paragraph (f) shall not apply to Stock Appreciation Rights.

(g)  To the extent the Restricted Stock or Restricted Stock Units are designated as “performance-based” compensation under Section 162(m) of the Code, they shall be subject to the restrictions set forth in Section A3, below.

(h)  Unless an individual Award Agreement provides otherwise, if the employment of a Participant is terminated for Cause, his or her Restricted Stock, Restricted Stock Units and Stock

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Appreciation Rights shall terminate and can no longer become vested or payable as of the Participant’s termination date.

A2.          Performance Awards to Employees.

Subject to the limitations of the Plan, the Committee may in its sole and absolute discretion grant Performance Awards to such Employees, in such numbers, upon such terms and conditions and at such times as the Committee shall determine. Performance Awards may be denominated in cash (e.g. units valued at $100) or Shares. Performance Awards may be settled in cash or Shares, at the discretion of the Committee, as set forth in the Award Agreement.

(a)  Each grant shall specify the number of Shares or units to which it pertains, subject to the limitations set forth in Section 9 of the Plan. No Shares will be issued at the time a Performance Award is made.

(b)  Each grant shall specify the performance conditions and required period or periods (if any) of continuous service by the Participant with the Company to earn the Performance Awards. The Committee may provide that if performance relative to the performance goals exceeds targeted levels, then the number of Performance Awards earned shall be a multiple, not in excess of 200%, of those that would be earned for target performance. Any grant may provide for the settlement of Performance Awards in the event of a termination of employment or a Change in Control of the Company or any other similar transaction or event.  The Committee, on the date of grant, shall determine the maximum period over which Performance Awards may be earned, except that such period shall not exceed 10 years, provided that following stockholder approval of the amendments to this Plan at the 2007 annual meeting of stockholders, the maximum period for all subsequent grants shall be seven years.

(c)  Unless otherwise determined by the Committee, Participants holding Performance Awards shall not have any rights as a shareholder prior to the actual issuance of Shares, if applicable.

(d)  To the extent the Performance Awards are designated as “performance-based” compensation under Section 162(m) of the Code, they shall be subject to the restrictions set forth in Section A3, below.

(e) Unless an Award Agreement provides otherwise, if the employment of a Participant is terminated for Cause, his or her Performance Awards shall terminate and no longer be payable or settled as of the Participant’s termination date.

A3.          Qualified Performance-Based Awards.

The Committee may designate whether any Award granted to a Covered Employee is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.

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(a)  Any Award designated as intended to be performance-based compensation shall be, to the extent required by Section 162(m) of the Code, either (1) conditioned upon the achievement of one or more of the following performance measures or (2) granted based upon the achievement of one or more of the following performance measures: total shareholder return, stock price, operating earnings, net earnings, return on equity or capital, income, level of expenses or growth in revenue.  Performance goals may be established on a Company-wide basis or with respect to one or more business units or divisions or subsidiaries. The targeted level or levels of performance (which may include minimum, maximum and target levels of performance) with respect to such performance measures may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. When establishing performance goals for a performance period, the Committee may exclude any or all “extraordinary items” as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company, discontinued operations, other unusual or non recurring items, and the cumulative effects of accounting changes. Only in the case of employees who are not Covered Employees, the Committee may also adjust the performance goals for any performance period as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine; including, without limitation, any adjustments that would result in the Company paying non-deductible compensation to a Participant.

(b)  Any Award that is intended to qualify as “performance-based compensation” shall also, to the extent required by Section 162(m) of the Code,  be subject to the following:

(i) No later than 90 days following the commencement of each performance period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (1) grant a target number of Shares or units, (2) select the performance goal or goals applicable to the performance period and (3) specify the relationship between performance goals and the number of Shares or units that may be earned by a Participant for such performance period.

(ii) Following the completion of each performance period, the Committee shall certify in writing whether the applicable performance targets have been achieved and the number of units or Shares, if any, earned by a Participant for such performance period.

(iii) In determining the number of units or Shares earned by a Participant for a given performance period, subject to any applicable Award Agreement, the Committee shall have the right to reduce (but not increase) the amount earned at a given level of performance to take into account additional factors

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that the Committee may deem relevant to the assessment of individual or corporate performance for the performance period.

A4.          Awards to Non-Employee Directors.

(a) Annual Grant. Following the close of business of the Company on the date of the annual meeting of shareholders of the Company held each year during the term of the Plan, commencing after the 2005 annual meeting of shareholders, each Non-Employee Director who is eligible to receive an Award under the Plan shall be granted such number of Shares of Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, or other forms of long-term compensation available under the Plan, as the Board of Directors, in its sole discretion, shall determine.

(b) Additional Grants Upon Other Election or Appointment to the Board. In addition, the Committee shall have discretion to grant Awards to any Non-Employee Director who is appointed or elected to the Board of Directors at any time other than at the annual meeting of shareholders of the Company.

(c) Awards granted to Non-Employee Directors may or may not have similar terms as Awards to Employees.

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EX-10.11

Exhibit 10.11

GTSI CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (“Agreement”) is entered into as of  April 2, 2007 (the “Effective Date”), by and between Jim Leto  (“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.

This Agreement is in addition to, and not in lieu of, the Executive’s Employment Agreement with GTSI Corp. dated February 16,  2006 (the “Employment Agreement”) and provides for the granting of automatic vesting of the Executives 400,000 stock options awarded in the Employment Agreement, and for the granting of automatic vesting of any Stock Awards (to include options, restricted stock awards, stock settled appreciation rights, stock appreciation rights, or other stock-based awards) that may be subsequently awarded to the Executive by GTSI Corp.

1.  Terms and Termination Of Employment.

1. 1          Definition. The capitalized terms used in this Agreement will have the meaning set out in Exhibit  A — Definitions.

1.2           Change 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) Any unvested options or Stock Award in Company stock issued to Executive pursuant to the Company’s 1996 Stock Incentive  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.

(b) 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) 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 acceleration, if any, of Executive’s options or Stock Awards as provided in this Agreement will not apply and Executive’s Options or Stock Awards 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 incentive plan and stock option or stock award 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 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. Subject to the terms of this Agreement and the Employment Agreement, 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 Board Consent. This Agreement has been approved by the written consent of the GTSI Board of Directors subject to review by the Board at the April 26, 2007 Board of Directors Meeting.

2.2 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).

2.3  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.

2.4 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.

2.5  Entire Agreement; Survival. This Agreement, together with the Employment Agreement contains the complete and exclusive statement of Executive’s employment with the Company. 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.

2.6  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.

2.7  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.

2.8  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.
		James Leto	Date
By:
	Daniel Young
	Chairman, GTSI Compensation Committee

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 historical annual 12 month 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” — a change of control will be deemed to have occurred upon the happening of any of the following events, except for Linwood A. Lacy, Jr. and his affiliates, (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.

“Stock Award” includes any stock options, restricted stock award, stock settled appreciation right, stock appreciation right, stock performance award, or any other stock-related award made to the Executive under the Company’s stock incentive plan.

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 a period of 6 months after my employment with GTSI ends that I will not in any way, for or on behalf of a Competitive Business (which is defined below), Directly or indirectly, own, operate or manage, or be an employee, consultant, director, officer, agent, or serve in any other position, in any business activity that is a “Competitive Business”; or solicit or make any statement or do any act for or on behalf of a Competitive Business, intended to cause GTSI’s customers or potential GTSI customers that GTSI actively solicited during the term of my employment, to make use of or obtain from any person or business, services or goods which are the same or substantially similar to those offered by GTSI. 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 sale of information technology products and/or services to any U.S. federal, state or local government entity, and its annuals 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) mile 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 businesses of the following companies will be considered Competitive Businesses: Dell Corporation Public Sector, Northrop Grumman IT, APPTIS, GovConnection, iGov, DLT Solutions, Lockheed Martin IT, Government Micro Resources, World Wide Technology, Insight Enterprises, Inc., Vion Corporation, and CDW-G.

GTSI represents that the foregoing restrictive covenant will not prevent me from (i) performing services for a Competitive Business if such Competitive Business is also engaged in other lines of business and if my services are restricted to employment in such other lines of business or  (ii) acquiring the securities of or an interest in any Competitive Business, provided such interest, to include any previously held interest, is less than two percent (2%) of any class or type of securities of, or interest in, such Competitive Business.

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:	[Name]

EX-31.1

Exhibit 31.1

Written Certification of Chief Executive Officer

I, James J. Leto, certify that:

1.  I have reviewed this quarterly report on Form 10-Q 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 13a-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 reasonably 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:       May 15, 2007

/s/ JAMES J. LETO
	James J. Leto
	President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

Written Certification of Chief Financial Officer

I, Joe Ragan, certify that:

1.  I have reviewed this quarterly report on Form 10-Q 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 13a-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 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 reasonably 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:       May 15, 2007

/s/ JOE RAGAN
	Joe Ragan
	Senior Vice President and Chief Financial Officer

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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, James J. Leto, President and Chief Executive Officer of GTSI Corp. (“the Company”) and Joe Ragan, Senior Vice President and Chief Financial Officer of the Company, certify that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 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:       May 15, 2007

/s/ JAMES J. LETO
	James J. Leto
	President and Chief Executive Officer
/s/ JOE RAGAN
		Joe Ragan
		Senior Vice President and Chief Financial Officer

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