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UNITED STATES |
OMB APPROVAL |
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SECURITIES AND EXCHANGE COMMISSION |
OMB Number: 3235-0059 |
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Washington, D.C. 20549 |
Expires: January 31, 2008 |
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SCHEDULE 14A |
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Proxy
Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
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o | Preliminary Proxy Statement |
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x | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to Rule §240.14a-12 |
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NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
March 31, 2011
The Annual Meeting of the Stockholders of GTSI Corp., a Delaware corporation (GTSI or the Company), will be held at 11:00 a.m., local time, on Thursday, April 28, 2011, at the Companys headquarters located at 2553 Dulles View Drive, Suite 100, Herndon, Virginia to consider and act on the following matters (the Meeting):
1.
To elect three Class 2 directors to serve until our 2014 Annual Meeting of Stockholders and until their successors are elected and qualified; and
2.
To transact such other business as may properly come before the Meeting or any adjournment(s) thereof.
If you are a holder of record of the Companys common stock as of the close of business on March 14, 2011, you will be entitled to notice of, and vote at, the Meeting and at any adjournment(s) thereof. All stockholders are cordially invited to attend the Meeting in person.
You can vote your shares in one of four ways:
1.
Visit the web-site noted on your proxy card to vote via the internet;
2.
Use the toll-free telephone number on your proxy card to vote by telephone;
3.
Sign, date and return your proxy card in the enclosed envelope to vote by mail; or
4.
Attend the meeting in person to ensure your representation at the Meeting.
Please mark, sign, date and return your proxy card as promptly as possible.
Stockholders are invited to visit the Corporate Governance section of our web-site in the Investors section of GTSI.com.
By Order of the Board of Directors
Joseph Uglialoro
Vice President, General Counsel & Secretary
TABLE OF CONTENTS INFORMATION CONCERNING
SOLICITATION AND VOTING 1 General 1 Voting
and Solicitation 1 PROPOSAL 1 2 ELECTION
OF DIRECTORS 2 Introduction 2 Class 2
Nominees for a Three-Year Term Expiring in 2014 2 Other Information 3 Class 3
Directors Term Expiring in 2012 3 Class 1 Directors Term
Expiring in 2013 4 BOARD LEADERSHIP STRUCTURE, RISK
OVERSIGHT, EXECUTIVE SESSIONS OF NONEMPLOYEE DIRECTORS, AND COMMUNICATIONS BETWEEN STOCKHOLDERS AND THE BOARD 5 COMPENSATION OF DIRECTORS 11 EXECUTIVE COMPENSATON AND
RELATED INFORMATION 14 Compensation Discussion and
Analysis 15 SUMMARY COMPENSATION TABLE 25 EXECUTIVE OFFICERS 31 AUDIT FEES 39 IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING
TO BE HELD ON APRIL 28, 2011 The Notice of Annual Meeting of
Stockholders, Proxy Statement and Form of Proxy regarding the Annual Meeting
of GTSIs stockholders and GTSIs Annual Report on Form 10-K for the fiscal year ended December 31, 2010 are available at
www.GTSI.com and can be accessed
through the home page by clicking on Investors in the bottom left corner. Once on the Investor page, go to the right-hand
column and near the bottom click on SEC Filings. On this page,
you will find our Annual Report on Form 10-K, Notice of Annual Meeting of Stockholders, Form of Proxy and Proxy Statement pursuant to SEC
Schedule 14A (Proxy Statement). The Annual Meeting of Stockholders will
be held at 11:00 a.m., local time, on Thursday, April 28, 2011, at the
Companys headquarters located at 2553 Dulles View Drive, Suite 100, Herndon, Virginia. For directions on attending the meeting
and voting in person, please contact us at 703-502-2463 or via email at
investors@gtsi.com; alternatively please go to our website at
www.GTSI.com. On the upper left-hand corner of our homepage, roll
your mouse over About GTSI and click on Directions and follow the appropriate instructions. At the Annual Meeting, you
will be asked to vote (a) on the election of three Class 2 directors to serve
until our 2014 Annual Meeting of Stockholders and until their successors are elected and qualified and (b) on any other business as may
properly come before the Meeting or any adjournment(s) thereof. Details on voting are set out in the Notice of Annual
Meeting and Proxy Statement on the cover page, and additional details and
background on the matters to be considered are set out in the Proxy Statement. PROXY STATEMENT INFORMATION CONCERNING SOLICITATION AND VOTING
General The enclosed proxy is solicited by and on behalf of the Board of
Directors of GTSI Corp., a Delaware corporation (GTSI or the
Company), for use at the Annual Meeting of Stockholders to be held on April 28, 2011 at 11:00 a.m., local time, or at any
adjournment(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders (the Meeting). The Meeting will be held at the Companys principal executive
offices located at 2553 Dulles View Drive, Suite 100 in Herndon, Virginia 20171.
The Companys telephone number is (703) 502-2000. This Proxy Statement and the accompanying notice of the Meeting and form of proxy
are first being sent or given to stockholders entitled to notice of, and to vote
at, the Meeting on or about March 31, 2011. The Companys annual report for the fiscal year ended December
31, 2010, which contains consolidated financial statements and other information
of interest to stockholders, accompanies this Proxy Statement, but it is not part of the Companys proxy soliciting material. Only stockholders of record at the close of business on March 14,
2011 (the Record Date) are entitled to notice of, and to vote at, the
Meeting. At the Record Date, 10,057,098 shares of the Companys common stock, par value $0.005 per share (Common Stock),
were issued and, excluding 384,418 shares held in treasury, 9,672,680 shares
were outstanding for voting purposes. None of the Companys 680,850 shares of authorized preferred stock is outstanding. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Companys
Secretary a written notice of revocation or a duly executed proxy bearing a later date or by attending the Meeting and voting in person.
Voting and Solicitation As to all matters to be voted upon at the Meeting, each
stockholder is entitled to one vote for each share of Common Stock held. The presence in
person or by proxy of a majority of the outstanding Common Stock entitled to vote constitutes a quorum for the conduct of business at the
Meeting. With respect to Proposal 1, if a quorum is present at the
Meeting, the three nominees for Class 2 directors receiving the highest number of
affirmative votes of Common Stock present in person or by proxy and entitled to vote on the election of directors will be elected. In the
election of directors, votes may be cast in favor or withheld with respect
to any and all nominees; votes that are withheld may be excluded entirely from the vote and will have no effect on the outcome of the
vote. Broker non-votes (proxies that indicate that brokers or nominees have not
received instructions from the beneficial owner of shares) are counted as shares that are present and entitled to vote for purposes of
determining a quorum. If a broker indicates on a proxy that it does not have
discretionary authority to vote on a particular matter as to certain shares, those shares will be counted for purposes of determining the
presence of a quorum but will not be treated as present and entitled to vote
with respect to that matter. If a stockholder returns a proxy and no instructions are given,
the Common Stock represented thereby will be voted as recommended by the
Companys Board of Directors (the Board), including FOR the election of the three nominees for directors, as
listed below under Election of Directors. The cost of this solicitation of proxies will be borne by the
Company. Proxies will be solicited by certain of the Companys directors,
officers and regular employees, without additional compensation, personally or by telephone, email or fax. In addition, the Company may
reimburse brokerage firms and other persons representing beneficial owners
of Common Stock for their expenses in forwarding solicitation materials to such beneficial owners. PROPOSAL 1
ELECTION OF DIRECTORS Introduction The Company currently has a
classified Board consisting of four Class 1 directors, three Class 2 directors and three
Class 3 directors. The current terms of Class 1 and Class 3 directors continue until the annual meeting of stockholders to be held in
2013 and 2012, respectively, and until their respective successors are elected and
qualified. There are 10 Board members. At each annual stockholders meeting,
directors are elected for a full term of three years to succeed those directors
whose term expires at such annual stockholders meeting. At the Meeting, the holders of Common
Stock as of the Record Date will elect three Class 2 directors for three-year
terms. Unless otherwise instructed, proxy holders will vote the proxies received by them for the election of the Companys three
nominees named below for Class 2 directors, all of whom are currently directors of
the Company. If any Companys nominee is unable or declines to serve as a director at the time of the Meeting, the proxies will be
voted for a nominee who will be designated by the current Board to fill the
vacancy. It is not, however, expected that any of the nominees will be unable or will decline to serve as a director. There is no family
relationship between any director, nominee for election as a director or
executive officer of the Company and any other director, nominee for election as a director or executive officer of the Company. Class 2 Nominees for a
Three-Year Term Expiring in 2014 Following are summaries of the
background, business experience and descriptions of the principal occupations of the
three nominees for election as directors, as well as the specific qualifications, attributes or skills that led to the conclusion that
these individuals should serve as directors of the Company. Name Age Position(s) with the Company Lee Johnson 83 Director Thomas L. Hewitt 72 Director Sterling E. Phillips, Jr. 64 Director, Chief Executive Officer and President Lee Johnson, age 83, has served as a
director since 1996. Since 1984, Mr. Johnson has been the President of Federal
Airways Corporation, formerly a government contractor. From 1986 to 1994, Mr. Johnson served as Chairman of the Board of Directors of
Falcon Microsystems, Inc., a government microcomputer reseller that was acquired
by the Company in 1994. As a result of these and other professional experiences, Mr. Johnson possesses particular knowledge and
experience in the information technology market, and the Companys internal
operations, and governmental organization that strengthen the Boards collective qualifications, skills and experiences. Thomas L. Hewitt, age 72, has served as a director since May 2003,
and previously served as a director from March 1996 until May 1998. Since
January 2000, Mr. Hewitt has been the Chief Executive Officer of Global Governments, Inc., a strategic planning and marketing company. In
1984, Mr. Hewitt founded Federal Sources, Inc., a market research and
consulting firm, where he served as Chief Executive Officer and Chairman of the Board until 1999. Mr. Hewitt served as a director of
Halifax Corporation from 2002 to 2010, and as a director of Analex Corp. from
2004 to 2007. As a result of these and other professional experiences, Mr. Hewitt possesses particular knowledge and experience in
organizational structure, major corporation operations, as well as the technology
sector that strengthen the Boards collective qualifications, skills and experiences. Sterling E. Phillips, Jr., age 64,
has served as a director since January 2011 and since December 2010 has served as
GTSIs Chief Executive Officer and President. From January 2001 to April 2007, Mr. Phillips was Chairman and Chief Executive Officer
of Analex Corp., a government contractor. From May 2007 until November 2010, Mr.
Phillips was a venture partner at FirstMark Capital. Mr. Phillips served as a director of Analex Corp. from January 2001 to April 2007
and as a director of MTM Corp. from 2008 to 2010. As a result of these and other
professional experiences, Mr. Phillips possesses particular knowledge and experience in government contracting, organizational structure
and corporation operations that strengthen the Boards collective
qualifications, skills and experiences. The Board recommends a vote FOR the election of
the three nominees listed above. Other Information Securities and Exchange Commission (SEC) regulations
require the Company to describe material legal proceedings, including bankruptcy
and insolvency filings, involving nominees for election as directors for companies of which a nominee was an executive officer. The
Boards Nominating & Governance Committee is not aware of any nominee
involved in any of the foregoing types of legal proceedings during the past 10 years. Following are summaries of the background, business experience
and descriptions of the principal occupations of the directors not currently up for
election, as well as the specific qualifications, attributes or skills that led to the conclusion that these individuals should serve as
directors of the Company. Class 3 Directors Term Expiring in 2012 Steven Kelman, Ph.D., age 62, has served as a director since
1997. Since 1997, he has been the Weatherhead Professor of Public Management at Harvard
Universitys John F. Kennedy School of Government. From 1993 to 1997, Dr. Kelman served as Administrator of the Office of Federal
Procurement Policy at the Office of Management and Budget. From
1986 to 1993, he was Professor of Public Policy at Harvard Universitys John F.
Kennedy School of Government. As a result of these and other professional experiences, Mr. Kelman possesses particular knowledge and
experience in government operations and policy matters, as well as Federal regulatory
insight that strengthen the Boards collective qualifications, skills and experiences. Barry L. Reisig, age 65, has served as a director since May 2003.
Since July 2006, Mr. Reisig has been a business consultant. From 2002 until 2006,
Mr. Reisig was Vice President of Finance of System Planning Corporation, a developer of high technology systems, and President and Chief
Executive Officer of its subsidiary, SPC International. From 1980 to 2002, Mr.
Reisig was a partner of Arthur Andersen LLP, involved principally in tax matters. Mr. Reisig served as a director of Healthaxis, Inc.
from 2005 to 2008. As a result of these and other professional experiences,
Mr.Reisig possesses particular knowledge and experience in business operations and accounting, finance, and capital structure that
strengthen the Boards collective qualifications, skills and experiences. John M. Toups, age 85, has served as a director since 1997 and as
Chairman of the Board since May 2007. From 1978 until his retirement in 1987, Mr.
Toups was President and Chief Executive Officer of PRC, Inc. Mr. Toups is also a director of NVR, Inc., a homebuilding and mortgage
banking company, and Wildan Group, a civil engineering services company. Mr. Toups served
as a director of Halifax Corporation from 1993 to 2010. Mr. Toups possesses particular knowledge and experience of board practices of
other major corporations, and finance, and capital structure that strengthen the
Boards collective qualifications, skills and experiences. Class 1 Directors Term Expiring in 2013 Daniel R. Young, age 77, has served
as a director since 2001. From 1977 until 2000, Mr. Young had been a senior executive
officer of Federal Data Corporation, a provider of information technology products and services to government agencies, including serving
since 1995 as President and Chief Executive Officer and since 1998 as Vice Chairman
of the Board of Directors of Federal Data Corporation. Mr. Young is also a director of NCI Corp., an information technology, systems
engineering and integration company. Mr. Young served as a director of Halifax Corporation
from 2002 to 2010, and as a director for Analex Corp. from 2004 to 2007. As a result of these and other professional experiences, Mr.
Young possesses particular knowledge and experience in strategic planning and leadership
of information technology based organizations that strengthen the Boards collective qualifications, skills and experiences. Joseph Keith Kellogg, Jr.,
age 62, has served as a director since April 2004 and previously was a director from
October 29, 2003 until he resigned on December 8, 2003 to provide temporary service to the Federal government. During this temporary
service, General Kellogg served as Chief Operating Officer of the Coalition Provisional
Authority in Baghdad, Iraq. General Kellogg was a member of the U.S. Army from 1971 to 2003, when he retired as a Lieutenant General and
a highly decorated war veteran. From September 2003 until January 2005, General
Kellogg served as Senior Vice President for Homeland Security Solutions for Oracle Corp. From January 2005 until July 2009, General
Kellogg was employed by CACI International Inc., as an Executive Vice President,
Research and Technology Systems. Since June 2009, General Kellogg has been employed by Cubic Defense Applications, Inc. as Senior Vice
President of Ground Operations. As a result of these and other professional
experiences, Mr. Kellogg possesses particular knowledge and experience in governmental organization, strategic planning and leadership
that strengthen the Boards collective qualifications, skills and experiences. Lloyd Griffiths, age 69, has served
as a director since April 2008. He is the current Dean of the Volgenau School of
IT & Engineering at George Mason University, Fairfax, Virginia since 1997. Prior to joining George Mason, Dr. Griffiths was Chair of
the Electrical and Computer Engineering Department at the University of Colorado
from 1994 to 1997; and Associate Dean for Research and Administration in the School of Engineering for nine years at the University of
Southern California. Dr. Griffiths is a director of Information Systems Laboratories,
Inc., a private engineering firm; and also serves as a member of the Advisory Board of Geographic Services, Inc., a provider of
geospatial systems; a member of the Advisory Board of Vangard Voice Systems, a provider of
voice technology for mobile enterprise; and a member of the Technical Advisory Board of The Centre Tecnològic de Telecomunicacions
de Catalunya (CTTC) in Barcelona, Spain. Dr. Griffiths holds M.S. and Ph.D. degrees
in Electrical Engineering from Stanford University. As a result of these and other professional experiences, Mr. Griffiths possesses
particular knowledge and experience in technology, engineering, and design, innovation
that strengthen the Boards collective qualifications, skills and experiences.
Linwood (Chip) Lacy, Jr., age 65 has served as a director since November 2009. Since 2008, Mr. Lacy has been an operating partner at
Council Ventures,
a private equity firm that makes investments in healthcare companies. Previously, he served as the President and Chief Executive Officer
of Micro Warehouse
Incorporated from October 1996 to October 1997. Mr. Lacy served as the Chief Executive Officer of Ingram Industries Inc., from June 1995
to April 1996 and
President from December 1993 to June 1995. He served as the Co-Chairman and Chief Executive Officer of Ingram Micro, Inc., from 1985 to
May 1996. He has held
executive positions with Best Products and Zale Corporation's Catalogue Showroom Division. He has been a Director of NETGEAR Inc. since
September 2002 and its
Lead Independent Director since April 2006. He has been Chairman of MailExpress, Inc. since September 2008. Mr. Lacy serves as a director
of Ingram Industries Inc.,
and Confidex OY. He is a director of New Day Pharmacy Corporation since May 2009. He served as a director of pcOrder.com, Inc. since
August 1998 and as
a director of Modus Media, Inc. (Formerly, Modus Media International Holdings, Inc.) since August 1998. He served as director of
EarthLink Network from June 1996 to
February 2000 and as a director of EarthLink Inc. from February 2000 to May 2008 when EarthLink Network merged with MindSpring. He
previously served as a director
for Evault, Inc., Marketworks Inc., Ingram Micro, Inc., CashConductor.com, ModusLink Corporation, SemEquip, Inc. and Auctionworks, Inc.
He was inducted into the
CRN Computer Museum Industry Hall of Fame in 1997. Mr. Lacy received a B.S. degree in Chemical Engineering from the University of
Virginia and an M.B.A. in
Business from the Darden Graduate School of Business Administration at the University of Virginia. As a result of these and other
professional experiences,
Mr. Lacy possesses particular knowledge experience in technology sales, operations and distribution that strengthen the Boards
collective qualifications, skills and experiences.
BOARD LEADERSHIP STRUCTURE, RISK OVERSIGHT, EXECUTIVE SESSIONS Board Leadership Structure There are 10 Board members. With the
exception of Mr. Johnson and Mr. Phillips, all of our directors are independent
as defined by the applicable rule of The Nasdaq Stock Market, Inc. (Nasdaq). We believe that the number of independent,
experienced directors that make up our Board, along with the independent oversight of the
Chairman of the Board, benefits GTSI and its stockholders. GTSIs Chief Executive Officer and President, Mr.
Phillips, who is a nominee for election as a director, is not and would not be an independent
director under the Nasdaq rule. The independent directors regularly have the opportunity to meet
without Mr. Johnson and Mr. Phillips in attendance, and, as discussed below, the
Board has had since 2004 the position of lead independent director (Lead Independent Director). In 2007, Mr. Toups, the
designated Lead Independent Director was elected as the Chairman of the Board, and
as a result, the Lead Independent Director role has been incorporated into the Chairman role for his tenure. During 2010, there were four
regular and 16 special Board meetings. During 2010 no director attended (in
person or by telephone) less than 75% of the aggregate of (a) all Board meetings and (b) all meetings of Board committees of which he was
a member. The Company does not have a specific policy regarding attendance of
directors at the annual stockholder meeting. All directors, however, are encouraged to attend if available, and the Company tries to
ensure that at least one independent director is present at the annual meeting and
available to answer any stockholder questions. Messrs. Toups, Griffiths, Hewitt, Johnson, Kelman, Kellogg, Lacy, Reisig and Young were
present at last years annual stockholders meeting (the 2010 Annual Meeting). Lead Independent Director The Lead Independent Director role was
created in 2004, to assist the Chairman of the Board and the other Board members
in assuring effective corporate governance. The Lead Independent Directors responsibilities also included assisting the Chairman in
reviewing the functions of Board committees and recommending the creation or
discontinuance of committees, considering questions of potential conflicts of interest, acting as a resource on corporate governance
matters, and acting as the spokesperson for the Company if the Chairman is absent.
Mr. Toups was appointed as Lead Independent Director in April 2004, and served in this role until his election to Chairman of the Board
in May 2007. At that time, the role of Lead Independent Director was incorporated
into the Chairman role for Mr. Toups tenure. Chairman of the Board In February 2006, the Board separated the
duties of the Chairman of the Board and the Companys Chief Executive Officer.
Mr. Toups, who is the current Chairman of the Board, has been Chairman since May 2007. GTSI recognizes that different board
leadership structures may be appropriate for companies in different situations and
believes that no one structure is suitable for all companies, and that the Companys current Board leadership structure of
separating the Chairman and the Companys Chief Executive Officer (CEO)
is optimal for the Company because it demonstrates to GTSIs employees, vendors, customers and other stakeholders that GTSI is under
balanced leadership, with these separate functions handled by separate individuals,
providing for appropriate prioritization and individual focus, while maintaining strong governance methods.
The Board and the CEO believe that GTSI, like many U.S. companies, has been
well-served by this leadership structure. Risk Oversight Our Board is responsible for overseeing
GTSIs risk management process. The Board considers GTSIs general risk
management strategy, the most significant risks facing GTSI, and works to ensure that appropriate risk mitigation strategies are
considered by management. The Board is also apprised by our senior management of particular
risk management matters in connection with the Boards general oversight and approval of corporate matters. The Board has delegated to the Audit
Committee oversight of GTSIs risk management process. Among its duties, the Audit
Committee reviews with management (a) GTSI policies with respect to certain risk areas that may be material to GTSI,
(b) GTSIs system of disclosure controls and system of internal controls over financial
reporting, and (c) GTSIs compliance with legal and regulatory requirements. Management primarily reports known or potential
risk to the Audit Committee, however other Board committees also consider and address
risks as they perform their respective committee responsibilities. All committees report to the full Board as appropriate, including when
a matter rises to the level of a material or enterprise level risk. GTSIs management is responsible for
day-to-day risk management. Our Treasury, Compliance and Internal Control areas serve
as the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the risk
management strategy for the ongoing business of GTSI. This oversight includes
identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and
compliance and reporting levels. We believe the division of risk management
responsibilities described above is an effective approach for addressing the
risks facing GTSI and that our Board leadership structure supports this approach. Executive Sessions of Nonemployee
Directors The Board holds executive sessions of its nonemployee directors
generally at each regularly scheduled meeting. The Chairman of the Board serves as
the chairperson for these executive sessions. Communications between Stockholders and the Board Interested parties, including stockholders, may communicate
directly with the Chairman of the Board or specific individual directors by direct mail to
the following address: GTSI Corp., 2553 Dulles View Drive, Suite 100, Herndon, Virginia 20171, attention: General Counsel. GTSI's General
Counsel will receive and review the communications and has been instructed by the
Board to promptly forward all such communications to the director or directors indicated on the communications, unless the communication
is clearly more appropriately addressed by other departments, such as customer
service or accounts payable, in which case the communication will be forwarded by the General Counsel to the appropriate department. When reporting a concern, interested parties are asked to supply
sufficient information so that the matter may be addressed properly, and encouraged to
identify themselves to assist GTSI in effectively addressing the concern. An interested party may choose to remain anonymous, and GTSI
will use its reasonable efforts to protect the partys identity to the extent
appropriate or permitted by law. COMMITTEES AND TRANSACTIONS WITH
RELATED PARTIES Committees The Board has an Audit Committee, a
Compensation Committee and a Nominating and Governance Committee. The current charters
of each of these committees, as well as the duties of the Lead Independent Director, are available on the Companys Internet
website, www.GTSI.com (located on
the About Us web page, under Investors/Corporate Governance). Also posted on such website is a description of the process for
stockholders to send communications to the Board or to one or more particular Board
members, as noted above. Audit Committee The primary purpose of the Audit Committee is to
oversee the Companys accounting and financial reporting processes and the audits of
its financial statements. The Audit Committee is directly responsible for, among other things, the appointment, compensation, retention
and oversight of the Companys independent auditor. Since the 2010 Annual Meeting, the
Audit Committee has been composed of Messrs. Reisig (Chairman), Hewitt, Kellogg and Kelman.
All of the Audit Committee members during the past year, and all of the members who will be appointed for the current year, are
independent in accordance with applicable rules of the SEC and Nasdaq. Each current member is
able to read and understand fundamental financial statements, including the Companys balance sheet, statement of operations and
statement of cash flow. The Board has determined that Mr. Reisig is an audit
committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC under the Securities Exchange
Act of 1934, as amended (the Exchange Act). During 2010, the Audit
Committee met five times. Compensation Committee The primary purpose of the Compensation
Committee is to provide assistance to the Board in fulfilling its responsibility with
respect to oversight of the establishment, administration and appropriate functioning of stock, compensation and related matters for the
Companys employees. The Committee reviews the salaries and bonuses to be paid to
the Companys Chief Executive Officer and President and the Companys other principal executive officers (Chief Financial
Officer), and makes recommendations to the Board regarding such salaries and bonuses. The
Compensation Committee reviews and approves the salaries and bonuses for the Companys other officers, reviews and approves the
compensation discussions and analysis, and administers the Companys stock option and
stock incentive plans. Since the 2010 Annual Meeting, the Compensation Committee has been composed of Messrs. Young (Chairman),
Griffiths, Lacy and Toups. Each of the committee members is independent in accordance with
applicable Nasdaq rules. During 2010, the Compensation Committee formally met five times. Nominating and Governance Committee
The primary purpose of the Nominating
and Governance Committee (Nominating Committee) is to provide assistance
to the Board in fulfilling its responsibility with respect to oversight of the appropriate and effective governance of the Company, as
well as identify and recommend individuals to be presented to the stockholders for
election or re-election as Board members. Since the 2010 Annual Meeting, the Nominating Committee has been composed of Messrs. Toups
(Chairman), Reisig and Young, all of whom are independent in accordance with applicable
Nasdaq rules. During 2010, the Nominating Committee formally met one time. Transactions with Related Persons
We may occasionally participate in
transactions with certain related persons. Related persons include our
executive officers, directors, director nominees, the beneficial owners of more than 5% of our common stock, immediate family members of
these persons, and entities in which one of these persons has a direct or indirect
material interest. In 2003, we adopted a written policy as part of our audit committee charter that provides for the review and, if
applicable, approval at each regularly scheduled meeting of any related party transaction
as required by Nasdaq. Under this policy, the Audit Committee is responsible for the review and approval of each related person
transaction exceeding $120,000. The Audit Committee, or the Chairman, considers all relevant
factors when determining whether to approve a related person transaction including whether
the proposed transaction is on terms and made under circumstances that are at least as
favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties. Among other
relevant factors, they consider the following: · the
size of the transaction and the amount of consideration payable to the related person(s); · the
nature of the interest of the applicable director, director nominee, executive officer or
5% stockholder, in the transaction; and · whether
we have developed an appropriate plan to monitor or otherwise manage the potential for
a conflict of interest. Based on all relevant facts and
circumstances, taking into consideration our contractual obligations, the Audit Committee
determines whether it is in our and our stockholders best interest to continue, modify or terminate the related person transaction.
In 2010, other than as discussed below under the caption Certain Relationships
and Related Transactions the Audit Committee did not identify any related person transactions.
DIRECTOR NOMINATIONS AND QUALIFICATIONS The Nominating Committee will consider
nominees for director recommended by stockholders with respect to elections to be
held at an annual stockholders meeting. In accordance with the Companys by-laws, to nominate an individual for election as a
director at an annual stockholders meeting, a stockholder must deliver written notice of
such nomination to the Companys Secretary not fewer than 60 days nor more than 90 days prior to the date of the annual meeting (or
if fewer than 60 days notice or prior public disclosure of the date of such annual
meeting is given or made to the stockholders, not later than the 10th day following the day on which notice of the date of the annual
meeting was mailed to stockholders or public disclosure was made). The notice of a
stockholders intention to nominate a director must include: · information
regarding the stockholder making the nomination, including name, address and number of
GTSI shares that are beneficially owned by the stockholder; · a representation
that the stockholder is entitled to vote at the meeting at which directors will be
elected, and that the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in
the notice; · the name and address
of the person or persons being nominated and such other information regarding each
nominated person that would be required in a proxy statement filed pursuant to the SECs proxy soliciting rules if the person had
been nominated for election as a director by the Board; · a description of any
arrangements or understandings between the stockholder and such nominee and any other
persons (including their names), pursuant to which the nomination is made; and · the consent of each
such nominee to serve as a director if elected. The Chairman of the Board, other directors and executive officers
may also recommend director nominees to the Nominating Committee. The committee will
evaluate nominees recommended by stockholders based on the same criteria that it uses to evaluate other nominees. These criteria include
the candidates experience, skills and personal accomplishments, including:
intelligence, integrity, strength of character, and commitment. Nominees should also have the sense of
timing required to assess and challenge the way things are done and recommend
alternative solutions to problems; the independence necessary to make an unbiased evaluation of management performance and effectively
carry out responsibilities of oversight; an awareness of both the business and
social environment in which todays corporation operates; and a sense of urgency and spirit of cooperation that will enable them to
interact with other Board members in directing GTSIs future financial
performance. Desired experience for director nominees include: at least 10 years of experience in a senior executive role with a major
business organization, preferably, as either chief executive officer or chairman
(equivalent relevant experience from other backgrounds such as academics or government may also be considered); a record of
accomplishment and line operating (or equivalent) experience; first-hand experience with
government contracting; a working knowledge of corporate governance issues and the changing role of boards of directors; and exposure to
corporate programs designed to create stockholder value, while balancing the
needs of all stakeholders. The foregoing is in addition to the other factors that are listed as an appendix to the Nominating Committee
charter that is posted on the Companys Internet website,
www.GTSI.com (located on the About Us web page,
under
Investors/Corporate Governance), as noted above. The committee has not in the past retained any third party to assist it in identifying
nominees. Director nominees should not be employed by or affiliated with any
organization that has competitive lines of business or that may otherwise present
a conflict of interest. The Boards composition, skills and needs change over time and will be considered in establishing the
profile of desirable nominees for any Board vacancies. While the Nominating Committee
does not have a formal policy with respect to diversity, the committee has determined that it is desirable for the Board to have a
variety of differences in viewpoints, professional experiences, educational background,
skills, race, gender, age and national origin, and considers issues of diversity and background in its selection process. The Nominating Committee utilizes a variety of methods for
identifying and evaluating nominees for director. The committee periodically assesses the
appropriate size of the Board, and whether any Board vacancies are expected due to retirement or otherwise. If vacancies are anticipated,
or otherwise arise, the Nominating Committee will consider various potential
candidates for director. These candidates are evaluated at regular or special meetings of the Nominating Committee, and may be considered
at any point during the year. As described above, the Nominating Committee will
consider properly submitted stockholder nominations for candidates for the Board. Following verification of the stockholder status of
persons proposing candidates, recommendations will be aggregated and considered by
the Nominating Committee at a meeting. If any materials are provided by a stockholder in connection with the nomination of a director
candidate, such materials will be forwarded to the Nominating Committee. Such committee
also will review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a
stockholder. In evaluating such nominations, the Nominating Committee seeks to achieve
a balance of knowledge, experience, and capability on the Board. DEADLINE FOR RECEIPT OF STOCKHOLDER
PROPOSALS Proposals of stockholders that are intended to be presented by such
stockholders at the annual meeting of stockholders to be held in 2012, including the
nomination of persons to serve on the Board, must be received by the Companys Secretary not later than December 1, 2011, for
inclusion in the proxy statement for that annual meeting. Stockholders who wish to present a
proposal at the annual meeting of stockholders to be held in 2012, which has not been included in the Companys proxy materials,
must submit such proposal in writing to the Company in care of the Companys Secretary.
Any such proposal received by the Companys Secretary after January 23, 2012, shall be considered untimely under the provisions of
the Companys by-laws governing nominations and the proposal of other business to be considered by the Companys stockholders at that annual
meeting. As discussed above, the Companys bylaws contain further requirements relating
to timing and content of the notice that stockholders must provide to the Companys Secretary for any nomination or other business
to be properly presented at an annual meeting of stockholders. It is recommended that
stockholders submitting proposals direct them to the Companys Secretary by certified mail, return receipt requested, to ensure
timely delivery. No stockholder proposals were received with respect to the Meeting. Stockholders submitting proposals must have continuously held at
least $2,000 in market value, or one percent, of the Companys securities entitled to
be voted on the proposal for at least one year prior to submitting the proposal. The stockholders proposal and accompanying
supporting statement cannot exceed 500 words. Stockholders may not submit more than one proposal
per year.
CODE OF ETHICS The Company has adopted a Code of
Ethics that applies to all of its directors, officers (including principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions) and employees. The Code
of Ethics was updated in 2009, and notice thereof was made in a Current Report on Form
8-K filed by GTSI with the SEC. The Code of Ethics is posted on the Companys Internet website,
www.GTSI.com (located on the Investor Relations web page). The Company
intends to satisfy the disclosure requirements under Item 5.05 of SEC Form 8-K regarding any amendment to or waiver of the Code of Ethics
with respect to the Companys principal executive officer, principal financial officer,
principal accounting officer or controller and persons performing similar functions, by posting such information on the Companys
Internet website. COMPENSATION OF DIRECTORS Each non-employee director of the
Company (other than Mr. Lacy, who, pursuant to his request, is not compensated) is compensated
by the payment of an annual retainer of $25,000 (without proration thereof in the event of a partial quarter of service). The Chairs of
the Compensation and Audit Committees receive a $3,500 annual retainer, and each member of
the Compensation and Audit Committees receives $1,500 per meeting attended in person or via telephone. In addition, each Board
member receives $1,500 for each Board meeting attended in person and $750 for each Board meeting
attended via telephone. Also, for participating in each meeting of a special Board committee regarding matters involving Eyak Technology,
LLC, a company in which GTSI has a 37% ownership interest (EyakTek), Messrs.
Reisig and Young each received $750. The other two members of the special committee, Messrs. Toups and Lacy, were not compensated for
serving on such special committee. The special committee met 16 times in 2010 since it was
appointed by the Board in August 2010. Each non-employee director also
receives compensation in the form of a long-term incentive award, which may be restricted stock
or stock options. In 2010, the non-employee directors received awards of restricted stock. Under GTSIs
Amended and Restated 2007 Stock Incentive Plan, each eligible
non-employee director is granted such restricted stock, restricted stock units, or other forms of long-term compensation available under
the Plan, as the Board shall determine based on Compensation Committee recommendations
using information provided by an independent executive compensation consultant. Grants of restricted stock or restricted stock units are
based on the closing price of Common Stock on Nasdaq on the date of grant. Non-employee
directors of the Company are not eligible to participate in the Companys other stock option plans or the Companys Employee
Stock Purchase Plan. In 2007, Mr. Toups, the designated Lead
Independent Director, was elected as the Chairman of the Board, and as a result, the Lead Independent
Director position he held has been incorporated into the Chairman position for his tenure.
During 2010, the non-employee Chairman of the Board received an annual fee of $40,000. Except as discussed above, directors of
the Company do not receive any other compensation for their service on the Board or any
committee thereof, but are reimbursed for their reasonable expenses incurred in association with the performance of their duties. In
addition, Mr. Johnson received compensation for his services as a consultant to the Company
(see section entitled Certain Relationships and Related Transactions below for information regarding this compensation). DIRECTOR COMPENSATION Name (a) Fees (b) Stock (c) Option (d) All (e) Total (f) Scott W. Friedlander (2) 0 0 0 0 0 Lloyd Griffiths 46,750 18,698 0 0 65,448 Thomas L. Hewitt 46,750 18,698 0 7,500(3) 72,948 Lee Johnson 39,250 18,698 0 160,100(4) 218,048 Joseph Keith Kellogg, Jr. 43,000 18,698 0 0 61,698 Steven Kelman, Ph.D. 46,750 18,698 0 0 65,448 Linwood Chip Lacy, Jr. (5) 0 0 0 0 0 James J. Leto (6) 0 0 0 0 0 Barry L. Reisig (7) 55,500 18,698 0 0 74,198 John M. Toups 82,250 18,698 0 0 100,948 Daniel R. Young (7) 65,250 18,698 0 0 83,948 (1) Amount reflects the grant
date fair value of the award computed in accordance with FASB ASC Topic 718. Each director
with an amount in this column received a restricted stock award of 3,333 shares of restricted stock. (2) Mr. Friedlanders
compensation as President and Chief Executive Officer is shown in the Summary Compensation Table. (3) Mr. Hewitts
compensation is for services on the Companys Professional Services Advisory Board. (4) Mr. Johnsons
compensation is shown in the section entitled Certain Relationships and Related Transactions. (5) As he requested, Mr. Lacy
does not receive any compensation or awards of options or stock as a director. (6) Mr. Letos compensation
as Chief Executive Officer is shown in the Summary Compensation Table and his
compensation as a consultant is shown in the section entitled Certain Relationships and Related Transactions. (7) The amount includes a total
of $12,000 paid to the named director for participating in 16 meetings of a special
committee appointed by the Board in August 2010 in respect of matters regarding EyakTek. As of December 31, 2010, each director had the following
amounts of options and restricted stock: DIRECTORS OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Name Option Shares Restricted Stock Scott W. Friedlander (1) 0 0 Lloyd Griffiths 0 3,333 Thomas L. Hewitt 20,000 3,333 Lee Johnson 60,100 3,333 Joseph Keith Kellogg, Jr. 10,000 3,333 Steven Kelman, Ph.D. 45,000 3,333 Linwood Chip Lacy, Jr. (2) 0 0 James J. Leto (3) 0 0 Barry L. Reisig 20,000 3,333 John M. Toups 47,000 3,333 Daniel R. Young 50,000 3,333 (1) Mr. Friedlanders equity awards as
President and Chief Executive Officer are shown in the Outstanding Equity
Awards at Fiscal Year-End Table. (2) As he requested, Mr. Lacy does not
receive any equity awards or other compensation as a director. (3) Mr. Letos equity awards as Chief
Executive Officer are shown in the Outstanding Equity Awards at Fiscal Year-End Table. Executive Compensation and Related
Information Background At GTSI we recognize and understand that
our people drive our success. GTSI operates in an innovative and progressive
segment of the systems integration industry. Our employees our human capital are central to the value that GTSI creates for
our customers and stockholders. We believe that our key investments in our
human capital management programs and practices have significantly improved our employees commitment, engagement, performance and
retention. We also believe this investment and improvement in employee engagement
will continue to improve our overall business performance. Why human capital is such an
important component GTSIs business involves several
different, but related, elements: the creation and delivery of customized solutions
that enable our clients to achieve their performance and business goals; and the management of complex services and solutions. Our success as a technology and strategic
consulting services / solutions company is highly dependent on our employees. We
believe we have developed a culture focused on embracing strategic human capital programs as well as our core values of Integrity, Trust,
Teamwork, Accountability, Customer Focus and Fun. We reinforce these key principles
regularly in our training, our talent acquisition process/programs, performance management systems and internal communications. Our compensation structure is designed to
provide the framework for rewarding our human capital our employees for
their contributions to our success. The essential nature of their role in value creation is reflected in the industrys compensation
policies and levels, which tend to be incentive-driven and reflect competitive levels
of compensation for many employees and, in particular, for key executives and producers. Just as we strive to deliver profitability and competitive returns
on our human capital, our compensation framework must also remain competitive to
attract, retain and develop talented employees to serve client and stockholder interests. Compensation Discussion and Analysis Executive Summary Key objectives of the Companys executive compensation
programs are as follows: · Attract, retain and motivate talented
individuals at all levels of the organization. · Ensure that executives act on behalf of
stockholders and are incentivized to maximize stockholder value. · Provide compensation levels, consistent with our
overall philosophy, that are intended to be fair and competitive with similar
companies in GTSIs industry. · Provide incentives and rewards for executives
commensurate with their roles and responsibilities based on corporate performance. This discussion describes and analyzes our compensation program for
GTSIs named executive officers during 2010 who consisted of (a) the five
individuals who served as the Companys principal executive officer (CEO) during 2010, (b) the one executive officer,
other than the CEOs, who was serving as an executive officer as of December 31, 2010
and (c) the two additional individuals who would have been referenced in clause (b) above but for the fact that they were not serving as
executive officers as of December 31, 2010 (collectively, the NEOs).
The NEOs were (a) James Leto, who was CEO during 2010 until February 15, 2010, (b) Scott Friedlander, who was CEO from February 16, 2010
until October 26, 2010, (c) Peter Whitfield, Chief Financial Officer, who also was
Acting Co-CEO from October 27, 2010 until December 1, 2010, (d) Sandra Gillespie, Senior Vice President, who also was Acting Co-CEO from
October 27, 2010 until December 1, 2010, (e) Sterling Phillips, GTSIs current
CEO and President who assumed such positions on December 1, 2010, (f) Bridget Atkinson, Corporate Vice President of Human Resources, (g)
Charles DeLeon, who was a Senior Vice President and General Counsel during 2010 until
October 26, 2010 and (h) Todd Leto, who was a Senior Vice President during 2010 until June 14, 2010. In this section we first discuss
GTSIs compensation philosophy and objectives, the foundation of which is compensating for
performance. Next, we review the process the Compensation Committee follows in deciding how to compensate our NEOs and provide a brief
overview of the components of GTSIs compensation program. Finally, we engage in a
detailed discussion and analysis of the Compensation Committees specific decisions about the compensation of the NEOs for fiscal
2010. The Compensation Committees
charter can be found on GTSIs internet web-site under the corporate governance
section. During 2010, the Compensation Committee had five formal meetings. Compensation Philosophy and
Objectives GTSIs executive compensation program is overseen by the
Compensation Committee, the basic responsibility of which is to review the performance and
development of GTSIs management in achieving corporate goals/objectives and to assure that GTSIs executive officers are
compensated effectively in a manner consistent with GTSIs strategy, competitive
practice, sound corporate governance principles and stockholder interests. The Compensation Committee believes that the compensation
programs for our executives should be designed to attract, retain and motivate talented
executives responsible for the success of GTSI and should be determined within a framework that rewards performance. Within this overall philosophy, the Compensation Committees
key objectives are to: · Offer a total compensation program that is fair,
flexible and competitive and takes into consideration the compensation practices of
a group of peer companies identified based on an objective set of criteria (the Compensation Peer Group). · Offer performance based, quarterly and annual
variable short-term cash incentive awards based on GTSIs achievement of designated
quarterly and annual objectives. These incentive awards are designed to constitute a significant portion of an executives total
compensation. · Align the financial interests of our executives
with those of stockholders by providing appropriate long-term, equity-based incentives
and retention awards that encourage a culture of ownership and retention. · Provide differentiated pay based on an
executives skills, role in the organization and contribution to performance. The core of GTSIs executive
compensation philosophy is to pay for performance. The Compensation Committee reviews GTSIs
compensation philosophy each year. There are four major components of the compensation of our NEOs: 1) base salaries are reviewed annually
based on changes in the market and individual responsibilities and are targeted at the
50th percentile of the competitive market; 2) total cash compensation for each of the
NEOs is primarily contingent upon performance (i.e., is at risk); incentive bonus
payouts are intended to provide total cash compensation at between the 50th percentile and the 75th percentile of
the competitive market when the Company and executive achieve targeted (planned)
levels of performance against established corporate performance metrics specifically attainment of earnings before tax EBT; 3) long-term, equity-based incentive awards
to maximize stockholder value; and 4) insurance and other employee benefits,
including severance and change of control benefits that reflect industry practices. Benchmarking Compensation In its process for deciding how to compensate our NEOs, the
Compensation Committee begins by considering the competitive market data provided by its
independent compensation consultants (Longnecker and Mercer). The Compensation Committee engages independent compensation consultants to
provide advice and recommendations on competitive market practices and specific
compensation decisions. For purposes of evaluating competitive practices, the Compensation Committee, with assistance from its
independent compensation consultants, identified criteria to select a list of companies that
constitute GTSIs Compensation Peer Group. The Compensation Peer Group is reviewed annually and was last updated in June 2010. The
Compensation Peer Group consists of publicly traded companies of similar size that
provide services, solutions and/or product to the federal and state and local governments. With this in mind, we also research and retain
information about competitive pay levels through relevant and specific executive
salary surveys. The Compensation Peer Group data prepared by Longnecker and Mercer as well as key selected survey instruments are used
for year-end compensation benchmarking. The Compensation Peer Group was changed in
2010 to better align such group with the Companys current evolution to a systems integrator. The Compensation Peer Group members (as of
June 2010) are as follows: Companies CIBER Incorporated Agilysus Inc.* ePlus Incorporated ATS Corporation* Global Defense Technology* Dynamics Research Corporation* Nu Horizons Electronics* PC Connection, Inc.* PC Mall Inc. * Wide Point Communication* The companies used for peer comparisons are
reviewed annually and adjusted as necessary due to changes at the selected company
(i.e., acquisitions, etc.) or changes in the comparability of the selected company to GTSI. For fiscal year 2010 six companies were
removed: Scan Source, Stanley Inc., MAXIMUS Inc., SRA International, Enpoint Technologies
and Sapient Corporation. Eight additional companies (designated by * above) that have similar size and/or industry similarities were
added to maintain a broad range of peer companies. References to the Compensation Peer
Group below refer to the Compensation Peer Group in effect at the time of the
point of reference. The Company provides NEOs and other employees with base salary to
compensate them for services rendered during the fiscal year. Base salary usually
represents 50% of the executives total compensation and is intended to compensate the executive for the base market value of the
position. Base salary ranges and total target compensation (base salary plus annual
short-term incentive opportunity) for NEOs are determined for each executive based on his or her position and responsibility by using the
following weighted formula: 1. 50% = Comparison of the positions of the NEOs to
their counterpart positions in the Compensation Peer Group, plus 2. 50% = Comparison of the positions of the NEOs in
select executive compensation salary surveys. Specific surveys used including:
Mercer, Watson Wyatt, Radford and Culpepper. During its review of base salaries for
NEOs, the Compensation Committee primarily considers: · Market data provided by our outside independent
consultants; · Internal review of the NEOs compensation, both
individually and relative to other officers; and · Individual performance and contribution of the
NEO. The Compensation Committee retains
and does not delegate any of its exclusive authority to determine all matters of
executive compensation and benefits, although the Chief Executive Officer and the Human Resources Department present industry-specific
competitive market data, proposals and recommendations to the Compensation Committee
for their review and consideration. The Compensation Committee reports to the Board on the major items covered at each Compensation
Committee meeting. The independent compensation consultants work directly with the
Compensation Committee (and not on behalf of management) to assist the committee in satisfying its responsibilities and will undertake no
projects for management except at the request of the Compensation Committee chair
and in the capacity of the Compensation Committees agent. To date, Longnecker and Mercer have not undertaken any projects for
management. Compensation Components
The following section provides
details on each material element of the Companys executive compensation programs.
It demonstrates how each material element accomplishes the established objectives and how these elements, in total, are in alignment with
the Companys compensation philosophy. Base Salary Program
To attract and retain key executives, GTSI follows a best practices
pay model of providing total compensation to its NEOs consisting of base salaries,
short-term variable cash incentive awards and long-term, equity-based incentive awards. These target percentiles are subject to the Compensation
Committees discretion to pay below or above the stated percentiles based on recruiting
needs, retention requirements, individual or company performance, succession planning, etc. The Compensation Committee believes
that the Company pays base salaries to its executive officers that are set
conservatively and near the 50th percentile, compared with executive officers of the Compensation Peer Group and salary survey
pool. The Committee, among other things, reviews and recommends to the Board
the annual salaries of the Companys Chief Executive Officer, President, and Chief Financial Officer.
The Committee, with input from the Chief Executive Officer,
has authority delegated by the Board to set the annual base salaries of the other executives. Salary levels are typically
considered annually as part of the Companys performance review process as well as
upon a promotion or other significant change in job responsibility. Merit based increases to salaries of executive officers are based on
the Committees assessment of the individuals performance and
contributions in a given year. Reviews for all executives are usually made in February of each year. Any adjustments are made effective
as of the start of the then current year thereby giving the NEO a potential adjustment opportunity
each 12 months. Individual base salaries also reflect differences in individual
performance, scope of responsibilities, internal equity, and experience level. No changes were made to base salary
compensation of the NEOs for 2010, except for 1) a salary increase to $400,000
for Mr. Friedlander as a result of his promotion to President and CEO and 2) a 4% base salary increase for Ms. Gillespie as a result of
her promotion to Senior Vice President. Short-Term Variable Cash
Incentive Awards The Compensation Committee believes
that the primary portion of the annual cash compensation of each NEO should be in
the form of short-term variable cash incentive pay. By tying a significant portion of the executives compensation to short-term
variable cash awards, GTSI seeks to align the executives interests with both
short-term and long-term objectives, as well as individual and company goals that align with stockholder interests. GTSIs pay
philosophy is to target annual total compensation with reference to the 50th
percentile of the Compensation Peer Group/salary survey pool, with the opportunity to earn annual incentives in excess of that level
based on achieving performance superior to the objectives the Compensation Committee has
determined to reward. Annual cash incentives are paid to reward achievement of critical short-term operating, financial and strategic
goals that are expected to contribute to stockholder value creation over time. The annual short-term incentive awards for
NEOs for fiscal 2010 were determined under GTSIs Executive Incentive Plan
(EIP) and are intended to comply with the exception for performance-based compensation under Internal Revenue Code Section
162(m). Under the EIP, cash incentive awards are based on GTSIs achievement
of established financial performance goals (earnings before tax EBT). EBT is used as a performance measure because we believe that
it represents the best measurement of our operating earnings. The annual short-term
incentive is intended to be paid or not paid primarily based on actions and decisions taken for that fiscal year which directly affect
earnings. Taxes are excluded because tax payments are not related to annual decisions
on business operations. The Compensation Committee established the financial performance goals so that they are consistent with the goals
in GTSIs fiscal 2010 business plan established by the Board. The actual formula applied to each eligible executive officer is
based on the executives overall market compensation analysis and is tied to
overall Company performance, a result that is not within the individual executives control. Individual bonuses are calculated as a
percentage of base salary and range from 35% to 65% in the case of executive officers
generally, other than the Chief Executive Officer. Under his 2010 employment agreement, as approved by the Board, in 2010 Mr. Phillips
was entitled to a short-term incentive opportunity of $450,000 at 100% payout and $900,000
at 200%, payable periodically in accordance with the Companys then senior bonus plan. (The incentive opportunity is prorated
depending on start date with the Company. Mr. Phillips elected not to be eligible for 2010.)
The maximum payout on the incentive plan, on an annual basis, is 200% following the guidelines outlined below. The Short-Term Incentive Plan is an annual program established to
reward executives for attaining significant stretch profitability goals
for the calendar year. Bonus payments are payable in the ratio of the percentage of the goal achieved upon attainment of GTSI Operations
EBT (adjusted, if necessary, for Board-approved one-time charges). The program is
measured in four quarterly year-to-date segments except for the Chief Executive Officer and Chief Financial Officer who are measured only
on a full year basis. For those executives on a quarterly measurement program, the
incentive opportunity accumulates 25% of their incentive target each quarter. Year to date performance is measured against the
established interim profitability goals. The Short-Term Incentive Plan has a minimum threshold
(94% of prior year results for the comparable period as measured by GTSI Operations
EBT), that needs to be satisfied for a payout to be awarded and has a maximum payout
of 200% of the executives eligible incentive. No bonus is awarded for any performance below the minimum threshold amount. Any
quarterly award given is fixed at a maximum of 50% and the balance deferred to an annual
measurement so as to align incentives awarded with annual corporate performance. Goal Attainment Amount awarded (quarterly or annually) % Deferred to Year End 50% of goal 50% 0% 62.5% - 200% 0% 100% At the end of the year, the Company will release any and all
deferred variable incentive if the Company achieves its annual performance goal. In general, the following methodology was applied in setting the
profitability goals/executive incentive targets: · The probability of hitting the 100% profitability/incentive
goal is 75% of the time · The probability of hitting the 150% profitability/incentive
goal is 50% of the time · The probability of hitting the 200% profitability/incentive
goal is 25% of the time The Board establishes the GTSI operations EBT goals at the
beginning of each year. In 2010, due primarily to GTSIs temporary suspension from federal
government contracting by the Small Business Administration on October 1, 2010 and the resulting agreement that GTSI entered into with
the Small Business Administration on October 19, 2010, GTSI Operations EBT bonuses were not
earned by executive officers based on the application of the Short-Term Incentive Plans formula. The Board did elect to award
a special bonus program to offset such exceptional events and to reward key executives for
their significant performance during the first three fiscal quarters of 2010. The Board approved special performance bonus awards
in February 2011 to the following NEOs for their 2010 contributions: Peter Whitfield $155,000 (of which $51,300 was based on
EyakTeks performance) Sandra Gillespie $140,000 (of which $68,750 had been
guaranteed for 2010) Bridget Atkinson $50,000 Additionally, the Chief Executive Officer employs the occasional
use of spot bonuses in recognition of extraordinary performance. Long-Term, Equity-Based Incentive
Awards Similar to the market, GTSI has
shifted to restricted stock and stock settled appreciation rights (SSARs)
as the primary equity component of executive officer compensation through GTSIs long-term incentive plan (LTIP). These are GTSIs primary vehicles for offering long-term
incentives to its executives. GTSI believes these components provide our executives
with incentives to achieve long-term corporate performance, help to create a culture of ownership, and work to directly align interests
with those of our stockholders. GTSIs Long-Term, Equity-Based Incentive Awards
assist the Company in: enhancing the link between the creation of stockholder value and long-term executive
incentive compensation; maintaining and improving long-term retention of key personnel; ensuring the company provides a very competitive total compensation program for its key personnel; providing an opportunity for increased equity ownership by executives; and maintaining competitive levels of total compensation. The Compensation Committee relies on the benchmarking analysis
described earlier in this summary in connection with equity awards. The Compensation
Committee uses total direct compensation salary plus cash incentives plus long-term stock incentives assuming the Company achieves
targeted metrics as the foundation for determining the size of equity awards. Long-Term Incentive Plan In 2004, the Board and stockholders
approved the GTSI Long-Term Incentive Plan (the LTIP). The purpose of the
LTIP is to encourage behavior that creates superior financial performance and to strengthen the commonality of interests between LTIP
participants and the Companys owners in creating superior stockholder value. The
LTIP is designed and intended to comply, to the extent applicable, with Internal Revenue Code Section 162(m). The awards, in the form of cash
incentive compensation, may be granted to officers of the Company and its subsidiaries in
the Compensation Committees sole discretion, taking into account such factors as the committee deems relevant in connection with
accomplishing the purposes of the LTIP. Stock Option and Stock Incentive Programs
Stock Option Program In addition to the LTIP program,
options to purchase GTSIs common stock are a component of the Companys
executive long-term, equity based compensation programs. The Compensation Committee views the grant of stock options as an incentive that
serves to align the interests of executives with the Companys goal of
enhancing stockholder value. The Compensation Committee reviews
and acts upon recommendations by the Chief Executive Officer with regard to the
grant of stock options to executives (other than to himself ). Stock option award levels are determined based on market data, vary among
participants based on their positions, performance and contribution, and
responsibilities within the Company and previous stock option grants (if any) and are granted at the Compensation Committees
regularly scheduled April meeting. On occasion, options are awarded at other times
during the year for exceptional performance. Newly hired or promoted executives receive their award of stock options on either their
first day of regular employment or the day the award is approved by the Compensation
Committee. The Compensation Committee does not time grants. Options are awarded at the
Nasdaq exchanges closing price of GTSIs common stock on the date of
the grant and reflect fair market value. Options will only have value to an executive officer if the stock price increases over the
exercise price. The Compensation Committee has never granted options with an exercise
price that is less than the closing price of the stock on the grant date nor has it granted options that are priced on a date
other than the grant date. The majority of the options granted by the Compensation
Committee vest at a rate of 25% per year on each of the first four anniversaries of the date of grant, provided that the option holder is
a GTSI employee on the vesting date. The option term is typically seven years. Vesting
ceases upon termination of employment and vested options can be exercised within three months of termination. Prior to the exercise of an
option, the holder has no rights as a stockholder with respect to the stock subject to such option, including voting rights or dividends.
Stock Incentive Program
Given recent industry trends away from stock options as a key
component of an executive compensation program, in 2005 the Compensation Committee
conducted a review of other stock incentive programs with assistance from Longnecker. In 2005 stockholders approved the addition of a
stock incentive program to the Companys then existing 1996 Stock Option Plan
(which was changed to the title 1996 Stock Incentive Plan), that provides for options and alternative incentive programs to
encourage performance and improve retention of key executives. In February 2007, the Board approved an amendment to
the 1996 Stock Incentive Plan to provide for stock appreciation rights as a
component of the stock incentive program and of the 2007 LTIP program and stockholders approved the Boards action at the 2007
annual stockholders meeting. A full description of the current plan, as amended by
the 2007 Incentive Plan, was provided in GTSIs 2007 proxy soliciting material. Under the 2007 Incentive
Plan, the Company may, upon approval by the Compensation Committee (except for
awards made to the Chief Executive Officer that requires the Boards approval), make stock awards in the form of restricted stock,
restricted stock units or performance awards to select participants, including
the NEOs, whose annual non-equity incentive compensation represents a portion of their total annual compensation. Under the stock
incentive program, a participating executive may be awarded a number of shares
based on the executives performance or as part of the annual review of the executives compensation portfolio. For fiscal year 2010, the Compensation Committee and the Board
approved modifications to the Companys stock grant agreements with regard to
acceleration of vesting if a change of control of GTSI occurs. If a change of control occurs, an executives outstanding unvested
options will immediately vest. In addition, the Compensation Committee approved a
change to the Companys change of control agreements with executives that requires a double trigger under which the
affected executive receives a financial benefit only upon the occurrence of a change
in control and termination of the executives employment by the Company without cause or by the executive for good reason. The
double trigger applies to all of the Companys current change of control agreements. Insurance, Retirement and other employee benefits Our NEOs generally do not receive any
special benefits. GTSI offers broad based benefits to all its employees, including
executives, on substantially the same basis. The Company does not offer a retirement program. However the Company does provide certain
NEOs with perquisites and other personal benefits that the Board and the Compensation
Committee believe are reasonable and consistent with the Companys overall compensation program to better enable the Company to
attract and retain superior employees for key positions. The Compensation Committee
periodically reviews and benchmarks the levels of perquisites and other personal benefits provided to NEOs via its external executive
consultant. The NEOs are provided annual executive physicals (by a certified
third party), supplemental disability insurance and long-term care insurance. The Company has entered into employment agreements with two NEOs
(Mr. Phillips and Mr. Whitfield) to provide them with reasonable security and increase
the likelihood that they will remain in the Companys employment. In addition, the Company has a severance agreement with Ms.
Atkinson and one other executive officer. The Company believes that appropriate severance
arrangements are necessary to attract and retain those key executives. In addition, the Company has agreed to pay certain amounts to
these executives if their employment is terminated by the Company without cause or by the
executive for good reason within one year following a change of control of GTSI. This double trigger provision
was implemented to be consistent with market practices. Furthermore, this program is
intended to encourage retention in the face of an actual or potential transaction involving change of control of GTSI and to align
executive and stockholder interests. Furthermore, the programs seek to align executive and
stockholder interests by allowing top executives to review corporate transactions that are in the best interests of our stockholders
without concern over whether the transactions may adversely impact the executives
employment. Severance and Change of Control Provisions for NEOs See disclosure on page 32 titled: EMPLOYMENT AGREEMENTS AND TERMINATION OF
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS. Tax and Accounting Implications Deductibility of Executive Compensation As part of its role, the Compensation
Committee reviews and considers the deductibility of executive compensation under Internal
Revenue Code Section 162(m), which provides that a publicly held corporation such as the Company will not be allowed a federal income tax
deduction for compensation paid to the chief executive officer or one of the four most
highly compensated officers (other than the chief executive officer) to the extent that compensation (including stock-based compensation)
paid to each such officer exceeds $1 million in any year unless such compensation was
based on performance goals. The 2007 Incentive Plan is designed so that amounts realized on
the award of shares and the exercise of options granted thereunder may qualify as
performance-based compensation that is not subject to the deduction limitation of Section 162(m). The Compensation Committee
intends to evaluate other elements of compensation in view of Section 162(m) but may
enter into arrangements that do not satisfy exceptions to Section 162(m), as the committee determines to be appropriate. Accounting for Stock-Based
Compensation Beginning on January 1, 2006, the Company began accounting for
stock-based payments including its LTIP, stock option and stock incentive programs, in
accordance with the requirements of FASB ASC 718, Compensation Stock Compensation. COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the Executive
Compensation and Related Information above, which includes the Compensation Discussion
and Analysis, with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the
Executive Compensation and Related Information be included in this Proxy Statement. THE COMPENSATION COMMITTEE Daniel R. Young,
Chairman Lloyd Griffiths Linwood (Chip) Lacy, Jr. John Toups SUMMARY COMPENSATION TABLE The following table sets forth certain information for the year
ended December 31, 2010 concerning compensation paid or accrued by the Company to or on
behalf of: (a) all individuals serving as the Companys principal executive officer (CEO) during the year ended December
31, 2010, (b) the one executive officer, other than the CEOs, who was serving as an
executive officer as of December 31, 2010 and whose compensation exceeded $100,000 and (c) the two additional individuals who would have
been referenced in clause (b) above but for the fact that they were not serving as
executive officers as of December 31, 2010 (collectively, the Named Executive Officers). Discussion about this table is set
out in the above Compensation Discussion and Analysis section. SUMMARY
COMPENSATION TABLE Name and Principal Position Year Salary Bonus Stock Awards (e) Option Awards ($) (4) Non-Equity Incentive Nonqualified All Other Compensation (i) Total ($) James Leto (6) CEO 2010 2009 207,564 525,000 0 0 0 0 0 54,144(8) 0 656,250 0 0 46,155(7) 126,067(9) 253,719 1,361,461 Scott Friedlander(10) President and CEO 2010 2009 327,917 340,000 0 0 0 0 239,720 81,216(12) 0 318,750 0 0 549,680(11) 8,225(13) 1,117,317 748,191 Peter Whitfield Acting Co-CEO, Senior Vice President and CFO 2010 2009 284,271 250,000 0 0 0 0 0 81,216(15) 155,000 159,456(16) 0 0 6,325(14) 8,225(17) 445,596 498,897 Sandra Gillespie(18) Acting Co-CEO and Senior Vice President 2010 2009 283,144 41,185 0 0 0 111,000 39,789 119,380 140,000 28,646 0 0 45,025(19) 37,500(20) 507,958 337,711 Sterling Phillips(21) CEO and President 2010 25,000 0 0 194,130 0 0 0 219,130 Bridget Atkinson Vice President 2010 2009 239,792 229,792 0 0 0 0 0 40,608(23) 50,000 143,750 0 0 7,506(22) 7,525(24) 297,298 421,675 Charles DeLeon(25) Senior Vice President and General Counsel 2010 2009 218,625 249,792 0 0 0 0 0 40,608(27) 0 156,250 0 0 193,642(26) 8,225(28) 412,267 454,875 Todd Leto (29) Senior Vice President 2010 2009 134,615 279,375 11,500(30) 0 0 0 0 135,360(32) 0 245,000 0 0 82,910(31) 13,927(33) 229,025 673,662 1 Includes amounts, if any, deferred by the Named Executive Officer pursuant to
the Companys 401(k) plan. 2 Bonuses and Incentives under any Executive Bonus Plan are based on corporate and
individual performance. See Compensation Discussion and Analysis. 3 For Year 2009, includes incentive earned in 2009, but paid in 2010; and for Year
2010, includes incentive earned in 2010, but paid in 2011. 4 Amount reflects the aggregate grant date fair value of the awards computed in
accordance with FASB ASC Topic 718. For a discussion of the assumptions used in the
calculations of these amounts see Note 10 to the Companys audited consolidated financial statements for the fiscal year ended
December 31, 2010, included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2010. 5 All other Compensation includes Company contribution to 401(k), if any, which in
each is less than $10,000 per person. 6 Mr. Leto resigned as CEO on February 15, 2010; he remained an employee until May
31, 2010. 7 Amount includes housing allowance ($8,333), car allowance ($2,500), car lease
pay off ($15,693), commuting allowance ($8,333) and relocation ($5,171). 8 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $71,424. 9 Amount includes housing allowance ($50,000), car allowance ($15,000), and
commuting allowance ($50,000). Other perquisites include club membership, physical exam, and supplemental disability insurance. 10 Mr. Friedlander resigned as an officer, employee, and Director of the Company,
effective October 26, 2010. 11 Amount includes perquisites of physical exam and supplemental disability
insurance, PTO payout and severance. 12 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $107,136. 13 Amount includes perquisites of physical exam, and supplemental disability
insurance. 14 Amount includes perquisite of supplemental disability insurance. 15 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $107,136. 16 Amount includes an MBO payment. 17 Amount includes perquisites of physical exam, and supplemental disability
insurance. 18 Ms. Gillespie became an employee of the Company, effective October 30, 2009 and
resigned as an officer and employee, effective March 3, 2011. 19 Amount includes sign-on bonus, perquisites of physical exam, and supplemental
disability insurance. 20 Amount includes sign-on bonus. 21 Mr. Phillips became an officer and employee of the Company, effective December
1, 2010. 22 Amount includes perquisites of physical exam, and supplemental disability
insurance. 23 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $53,568. 24 Amount includes perquisites of physical exam, and supplemental disability
insurance. 25 Mr. DeLeon resigned as an officer and employee of the Company, effective October
26, 2010. 26 Amount includes perquisites of physical exam and supplemental disability
insurance, PTO payout and severance. 27 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $53,568. 28 Amount includes perquisites of physical exam, and supplemental disability
insurance. 29 Mr. Todd Leto resigned as an employee and officer of the Company, effective June
14, 2010. 30 Amount reflects support surrounding a major contract. 31 Amount includes perquisites of physical exam, and supplemental disability
insurance and severance. 32 The grant date fair value of the performance-based stock option award based on
the probable outcome is $0 and based on the maximum outcome is $178,560. 33 Amount reflects perquisites of club membership, physical exam, and supplemental
disability insurance. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END OPTION AWARDS STOCK AWARDS Name (a) Number of Securities Underlying Unexercised Options (b) Number of Securities Underlying Unexercised Options (c) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (d) Option Exercise Price (e) Option Expiration Date (f) Number of Shares or Units of Stock That Have Not Vested (g) Market Value of Shares or Units of Stock That Have Not Vested (h) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (i) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested (j) James Leto 10,000 10,000 0 0 0 0 8.30 10.15 5/9/2013 5/10/2014 0 0 0 0 Scott Friedlander 80,000 40,000 49,509 10,000 0 0 0(1) 0(2) 0 0 0 0 8.09 6.75 9.60 6.40 7/21/2012 4/28/2013 2/2/2014 8/5/2016 0 0 0 0 0 0 0 0 Peter Whitfield 11,250 10,898 12,500 6,226 10,000 3,750 (3) 7,266(4) 12,500(6) 9,343(7) 20,000(9) 0 0 0 0 0 30,000(10) 11.00 9.60 5.55 9.60 6.40 6.40 3/22/2014 2/2/2014 10/29/2015 10/29/2015 8/5/2016 12/31/2018 2,755(5) 3,242(8) 12,976 15,270 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Sandra Gillespie 8,000 0 32,000(11) 15,000(13) 0 0 9.60 5.55 10/30/2016 3/31/2017 12,000(12) 56,520 0 0 0 0 0 0 Sterling Phillips 0 100,000(14) 0 4.77 11/23/2017 0 0 Bridget Atkinson 47,500 26,778 5,000 0 17,853(15) 10,000(17) 0 0 0 15,000(18) 6.75 9.60 6.40 6.40 4/28/2013 2/2/2014 8/5/2016 12/31/2018 6.768(16) 31,877 0 0 0 0 0 0 0 0 Charles DeLeon 5,000 10,000 15,000 20,000 28,647 5,000 0 0 0 0 0(19) 0(20) 0 0 0 0 0 0 12.10 11.34 8.09 6.75 9.60 6.40 3/19/2011 6/29/2011 7/21/2012 4/28/2013 2/2/2014 8/5/2016 0 0 0 0 0 0 0 0 0 0 0 0 Todd Leto(21) 0 0 0 0 0 0 0 0 0 1 Unvested SSARs of 33,007 were terminated on 10/26/2010. 2 Unvested shares of 20,000 were terminated on 10/26/2010. 3 Shares vest as follows: 3,750 on 3/22/2011. 4 SSARs vest as follows: 3,633 on 2/2/2011 and 3,633 on 2/2/2012. 5 Shares vest as follows: 1,377 on 2/2/2011 and 1,378 on 2/2/2012. 6 Shares vest as follows: 6,250 on 10/29/2011 and 6,250 on 10/29/2012. 7 SSARs vest as follows: 3,113 on 10/29/2011, 3,115 on 10/29/2012 and 3,115 on
10/29/2013. 8 Shares vest as follows: 1,080 on 10/29/2011, 1,081 on 10/29/2012 and 1,081 on
10/29/2013. 9 Shares vest as follows: 10,000 on 8/5/2011 and 10,000 on 8/5/2012. 10 Assuming the performance condition is met, the award will vest at a rate of 33
1/3% per year on each of the first three anniversaries of the date the
Compensation Committee determines that the performance condition has been met. 11 SSARs vest as follows: 8,000 on 10/30/2011, 8,000 on 10/30/2012, 8,000 on
10/30/2013 and 8,000 on 10/30/2014. 12 Shares vest as follows: 3,000 on 10/30/2011, 3,000 on 10/30/2012, 3,000 on
10/30/2013 and 3,000 on 10/30/2014. 13 Shares vest as follows: 3,000 on 3/31/2011, 3,000 on 3/31/2012, 3,000 on
3/31/2013, 3,000 on 3/31/2014 and 3,000 on 3/31/2015. 14 Shares vest as follows: 33,334 on 11/23/2011, 33,333 on 11/23/2012 and 33,333 on
11/23/2013. 15 SSARs vest as follows: 8,926 on 2/2/2011 and 8,927 on 2/2/2012. 16 Shares vest as follows: 3,384 on 2/2/2011 and 3,384 on 2/2/2012. 17 Shares vest as follows: 5,000 on 8/5/2011 and 5,000 on 8/5/2012. 18 Assuming the performance condition is met, the award will vest at a rate of 33
1/3% per year on each of the first three anniversaries of the date the
Compensation Committee determines that the performance condition has been met. 19 Unvested SSARS of 19,098 were terminated on 10/26/2010. 20 Unvested shares of 10,000 were terminated on 10/26/2010. 21 Todd Leto had no equity awards outstanding as of year-end. EQUITY COMPENSATION PLAN INFORMATION The following table sets forth certain information regarding GTSIs equity
compensation plans as of December 31, 2010. Plan Category Number of Shares to be Issued upon Exercise / Lapse of Outstanding Options / Restricted Stock
Awards (a) Weighted Average Exercise Price of Outstanding Options (b) Number of Shares Remaining Available for Future
Issuance Under Equity Compensation Plans (excluding shares reflected in column (a)) (c) Equity
compensation plans approved by stockholders
1,404,382
$8.22 1,134,164 Equity compensation plans
not approved by stockholders
0
0 0 Total 1,404,382 $8.22 1,134,164 COMMON STOCK OWNERSHIP OF The following table sets forth certain information regarding beneficial ownership
of Common Stock as of February 21, 2011 (except as noted otherwise) by: (a) each
person who is known by the Company to own beneficially more than 5% of the outstanding Common Stock; (b) each of the Companys
directors who owns Common Stock; (c) each of the executive officers named in the Summary
Compensation Table; and (d) all current directors and executive officers of the Company as a group. Shares Percent Name of Beneficial Owner
1 Beneficially Owned of Class Linwood A. (Chip) Lacy, Jr. 2 c/o Solomon, Ward, Seidenwurm & Smith 401 B Street Suite 1200 San Diego, CA 92101 1,419,600 14.7% T. Rowe Price 100 Light Street Baltimore, MD 21202 958,600 9.9% Dimensional Fund Advisors, Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 806,652 8.3% M. Dendy Young c/o Charles Schwab & Co. 7401 Wisconsin Avenue, Suite 100 ATTN: Thomas Farley Bethesda, MD 20814 773,284 8.0% Cannell Capital LLC P.O. Box 3459 Jackson, WY 83001 495,089 5.1% Lee Johnson3 197,598 2.0% John M. Toups4 121,998 1.3% Steven Kelman, Ph.D.5 102,513 1.1% Bridget Atkinson6 98,325 1.0% Daniel R. Young7 84,998 * James J. Leto8 76,891 * Peter Whitfield9 70,260 * Thomas L. Hewitt10 48,998 * Barry L. Reisig11 42,998 * Joseph Keith Kellogg, Jr.12 29,998 * Scott Friedlander13 16,368 * Todd Leto14 15,645 * Lloyd Griffiths15 9,999 * Sandra Gillespie16 8,000 * Charles DeLeon17 7,150 * Sterling Phillips18 0 * All Directors and Executive Officers as a group (17 persons)19 2,351,339 23.3% *Less than one percent. 1 Such persons have sole voting and investment power with respect to all Common
Stock shown as being beneficially owned by them, subject to community
property laws, where applicable, and the information contained in the footnotes to this table. 2 Excludes 329,714 shares owned by the Linwood A. Lacy, Jr. 2004 Charitable Lead
Annuity Trust; Mr. Lacy has no beneficial interest in such shares. 3 Includes 60,100 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 4 Includes 47,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 5 Includes 45,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 6 Includes 88,204 shares for which options/SSARs are exercisable or become
exercisable within 60 days after February 21, 2011. 7 Includes 45,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 8 No shares of options/SSARs are exercisable or become exercisable within 60 days
after February 21, 2011. 9 Includes 58,257 shares for which options/SSARs are exercisable or become
exercisable within 60 days after February 21, 2011. 10 Includes 20,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011, and 3,333 restricted shares. 11 Includes 20,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 12 Includes 10,000 shares for which options are exercisable or become exercisable
within 60 days after February 21, 2011 and 3,333 restricted shares. 13 No shares of options/SSARs are exercisable or become exercisable within 60 days
after February 21, 2011. 14 No shares of options/SSARs are exercisable or become exercisable within 60 days
after February 21, 2011. 15 Includes 3,333 restricted shares. 16 Includes 8,000 shares for which options/SSARs are exercisable or become
exercisable within 60 days after February 21, 2011. 17 No shares of options/SSARs are exercisable or become exercisable within 60 days
after February 21, 2011. 18 No shares of options/SSARs are exercisable or become exercisable within 60 days
after February 21, 2011. 19 Includes 401,561 shares, comprising of shares for which options/SSARs are
exercisable or become exercisable within 60 days after February 21, 2011 and restricted shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Exchange Act Section 16(a) requires the
Companys directors and officers, and persons who own more than 10% of the Common Stock,
to file with the SEC reports concerning their beneficial ownership of the Companys equity securities. Directors, officers and
greater than 10% beneficial owners are required by SEC regulations to furnish the Company
with copies of all such SEC reports they file. Pursuant to Item 405 of SEC Regulation S-K, the Company is required in this Proxy
Statement to provide disclosure of insiders who do not timely file such reports.
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to the Company during 2010, we believe that all of our
directors, officers and stockholders subject to the reporting requirements of Exchange Act
Section 16(a) filed their reports with the SEC on a timely basis during 2010. EXECUTIVE OFFICERS The Companys current executive officers, and
certain information about each of them, are as follows:
Name Age Title Sterling Phillips 64 Chief Executive Officer and President Peter Whitfield 52 Senior Vice President and Chief Financial Officer Joseph Uglialoro 40 Vice President, General Counsel and Secretary Bridget Atkinson 49 Vice President, Human Resources Officers are appointed by and serve at the
Boards discretion, except that officers at the Vice President level are appointed
by and serve at the CEOs discretion. Mr. Phillips joined the Company in December 2010 as
Chief Executive Officer and President. In January 2011 the Board appointed Mr.
Phillips as a director of GTSI. From January 2001 to April 2007, he served as Chairman and Chief Executive Officer for Analex Corp., a
government contractor. And from May 2007 to November 2010, he served as a venture
partner for FirstMark Capital, a venture capital company. Mr. Phillips served as a director of Analex Corp. from January 2001 to April
2007 and as a director of MTM Corp. from 2008 to 2010. Mr. Whitfield joined the Company in March 2007 as
Division Vice President, Internal Audit and Process. He was promoted to Vice President,
Financial Planning, Analysis and Internal Audit in June 2008. In September 2008, he was appointed Vice President and Interim Chief
Financial Officer and in October 2008, he was promoted to Senior Vice President and Chief
Financial Officer. From October 27, 2010 until December 1, 2010, Mr. Whitfield also served as Acting Co-CEO. From October 2003 to June
2004, he served as a consultant for Worldcom, Inc. From June to September 2004, he served
as Sr. Director of Procurement for Inphonic, Inc., then from September 2004 until May 2005, he served as Vice President of Fulfillment
and from May 2005 until July 2006, he served as Sr. Vice President of Operations. From August
2006 until March 2007, he served as a financial consultant for GTSI Corp. Mr. Uglialoro joined the Company in July 2004 as
Senior Corporate Counsel. He was appointed Deputy General Counsel in April 2008 and Secretary
of GTSI in October 2010. Mr. Uglialoro was appointed Acting General Counsel and Secretary in November 2010 and Vice President, General
Counsel and Secretary in February 2011. From October 2002 to August 2004, he served as
Corporate Counsel for France Telecom North America. Ms. Atkinson joined the Company in 1998 as Senior
Director of Human Resources. She has served as Vice President, Human Resources since 2001. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during the 2010 fiscal
year were: Daniel Young (Chairperson), Lloyd Griffiths, and John Toups, for all of
fiscal 2010; and Linwood (Chip) Lacy, Jr. from April 2010 through December 2010. No member of this committee was at any time during the
2010 fiscal year or at any other time an officer or employee of the Company and no
member of this committee had any relationship with GTSI requiring disclosure under Item 404 of SEC Regulation S-K. No executive officer of GTSI has served on the board of directors or
compensation committee of any other entity that has or has had one of more
executive officers who served as a member of the Board or its Compensation Committee during the 2010 fiscal year. EMPLOYMENT AGREEMENTS AND
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS The following is a description of
GTSIs employment agreements, severance agreements and change-of-control arrangements
with each current executive officer. Employment Agreements On January 24, 2011, the Company entered into an employment
agreement, effective as of December 1, 2010, with Sterling Phillips, pursuant to which
Mr. Phillips is employed by GTSI as CEO and President. The agreement provides that Mr. Phillips will receive (a) a base salary of
$400,000 per annum, with a targeted incentive of up to $450,000 in the form of cash
and restricted stock subject to 100% attainment for specific performance goals established by the Board. For 2011, the Company has
guaranteed 50% of Mr. Phillips incentive opportunity (at 100% attainment), an
amount equal to $225,000. Annual base salary and targeted incentives will be reviewed annually by the Board. In addition, Mr. Phillips
was granted an option to purchase up to 200,000 shares under the Companys
Stock Incentive Plan, with a grant date of November 23, 2010, vesting in one-third equal increments on each of the first three
anniversaries of the grant date, subject to Mr. Phillips continued employment as
of each vesting date. The option has an exercise period of up to seven years and an exercise price of $4.77 per share, which was based on
the $4.77 per share closing price of GTSIs common stock on November 23,
2010. Because the above-referenced option grant was inadvertently in excess of the Stock Incentive Plans limit on grants in excess
of 100,000 option shares to any one employee during a single fiscal year, only
100,000 stock options were effectively granted. On February 22, 2011, the Company, as authorized by the Board and the Compensation
Committee, granted Mr. Phillips an option to purchase up to 100,000 shares under the
Stock Incentive Plan, vesting in one-third equal increments on each of the first three anniversaries of the grant date, subject to Mr.
Phillips continued employment as of each vesting date. The option has an
exercise period of up to seven years and an exercise price of $4.73 per share,
which was based on the $4.73 per share closing price of GTSIs common stock on the grant date. Mr. Phillips employment agreement also provides that, subject
to applicable laws, the Board will nominate Mr. Phillips for election as a Board member
by the Companys stockholders while he is employed under the agreement. If the Company terminates Mr. Phillips employment without
cause, as defined in his agreement, prior to his 65th birthday, he will be
entitled to, among other benefits normally provided to other GTSI executives, severance equal to 12 months of his annual base salary at
the time of termination payable during the first 12 months after the termination date
in accordance with the Companys standard payroll schedule. If a change of control of GTSI, as defined in the agreement, occurs
and Mr. Phillips employment is terminated by the Company without cause or by Mr.
Phillips for good reason, as defined in the agreement, Mr. Phillips will be entitled to, among other benefits normally provided to other
GTSI executives, severance equal to 12 months of his annual base salary at the time of
termination, accelerated vesting of stock awards (whether restricted stock, stock options or other awards), as well as other benefits
that will have accrued as of the termination date. The severance amounts
would be paid during the 12 months following the termination date in accordance with
Companys standard payroll schedule. The Company and Peter Whitfield entered into an employment
agreement pursuant to which Mr. Whitfield is employed as GTSIs chief financial officer
effective October 29, 2008. Pursuant to the agreement, the Company currently pays Mr. Whitfield a salary at the annual rate of $285,000
and Mr. Whitfield has a targeted annual incentive of up to $171,000 at 100% achievement,
or $342,000 at 200% achievement, subject to the Companys then existing incentive plan attainment level. The Company also agreed to provide Mr. Whitfield with a severance
payment equal to six months of his then base salary for a termination without cause, as
defined in his agreement, and in the case of termination without cause after a change of control as defined in the agreement, a severance
payment equal to 15 months of his total targeted compensation. In addition, the Company
provides Mr. Whitfield with the employee benefits accorded other senior executive officers of the Company. In October 2008, Mr. Whitfield received, pursuant to his employment
agreement, an option to purchase up to 25,000 shares of the Companys common stock
under the Companys Amended and Restated 2007 Stock Incentive Plan and 5,402 restricted shares and 15,569 stock settled appreciation
rights under the Companys Long-Term Incentive Plan. Such awards are subject to the
Companys standard vesting periods. Severance Agreements and Change of Control Agreements The Company has entered into severance agreements and change of
control agreements with certain key employees, including Joseph Uglialoro and Bridget
Atkinson. Such agreements are designed to promote stability and continuity of senior management. As discussed above, Mr. Phillips
and Mr. Whitfields employment agreements have severance provisions. The severance agreements with Mr. Uglialoro and Ms. Atkinson
entitles the executive officer to a severance package if his or her employment is terminated
by GTSI without cause, or he or she is notified of one of the following conditions, and as a result, resign from GTSI within
30 days of such notice (resignation): Ø the executives annual base salary is
reduced by more than 20% from its then current amount; Ø the executives duties, responsibilities,
authority, reporting structure, title (excluding any minor or inadvertent action that
is remedied by the Company immediately after notice by the executive) are significantly or meaningfully, as reasonably determined by the
Company, reduced by the Company; or Ø the Company asks the executive to relocate
permanently to a different GTSI work site that would increase the executives one-way
commute distance by more than 35 miles from his or her then principal residence. In the event of the termination of Ms. Atkinsons employment
by the Company without cause or her resignation, the Company will pay her a lump sum
severance payment equal to six months of her then current annual base salary, subject to standard withholdings and deductions. In the
event of the termination of Mr. Uglialoros employment by the Company without cause
or his resignation, the Company will pay him a lump sum severance payment equal to four months of his then current annual base salary,
subject to standard withholdings and deductions. The Companys obligation to pay
this severance compensation is subject to receipt of a release from the executive. In the case of a change of control, as defined below,
the change of control agreement will supersede the terms of an executives
severance agreement. The Company has entered into change of
control agreements with Mr. Uglialoro and Ms. Atkinson and with six other current
officers. These agreements provide that if, within six months prior to or 24 months following a change of control, such officer is
terminated as an employee of the Company other than for cause, or the officer resigns
because his or her compensation is reduced, his or her responsibilities are substantively diminished, or he or she is required to
relocate, he or she will receive specific payments based on his or her then current
annual base salary and targeted annual bonus. The change of control agreements provide, without changing the
nature of the at-will employment relationship, that in connection with a change of
control, the officer will be entitled to the cash benefits, health insurance benefits, gross-up benefits as well as immediate vesting of
any outstanding stock options, restricted stock or SSARs. If during or following a change of control, the officer is
terminated for cause, the Company will have no obligations to such officer other than
reimbursement of expenses incurred prior to such termination. If an officer resigns (other than for good reason), he or she will not be
entitled to further compensation except as may be provided by the terms of any
benefit plans of the Company in which the officer participates and for salary accrued but unpaid through the date of resignation and
reimbursement of expenses incurred prior to such date. If an officers employment with the Company is terminated
without cause, or the officer resigns for good reason during the change of
control period, or events leading to officer's resignation for good reason are effected in anticipation of a change of control,
including an attempt to avoid the Companys or its successor's obligations
under the change of control agreement, the following will occur: (a) As of December 31, 2010, the Company was obligated to provide
to the officer a severance payment equal to a specified amount of the officer's
then annual total target compensation. In the case of Mr. Whitfield and Ms. Atkinson, the amount is based on 15 months, and for Mr.
Uglialoro the amount is based on three months. This amount is payable in a lump sum
within 30 days after the termination date. In addition, the Company will provide the officer, at the Companys expense, with
continued group health insurance benefits (medical, dental and vision) for the officer
and his or her eligible dependents under COBRA for a period of up to six months following the effective date of the termination of the
officers employment with the Company without cause or the officers
resignation for good reason; or the officer is gainfully employed at another place of work, whichever is sooner. (b) Any unvested stock awards issued to officer will have their
vesting accelerated in full so as to become fully vested and immediately exercisable
as of the date of such termination. (c) Payment is contingent on the Companys receipt of a
release from the officer. "cause" means the officer'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 Chief Executive Officer, as reasonably determined by the
Chief Executive Officer (other than any such failure resulting from 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 officer by the Chief Executive Officer,
which demand specifically identifies the manner in which the
Chief Executive Officer believes that the officer 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" includes: (i) the acquisition by any individual or entity
resulting in the control of 50% or more of GTSIs outstanding common stock; (ii) a change in a majority of the Board (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 Companys stockholders or by a
majority of the directors who were in office at the beginning of the 12 months; or (iii) the Companys stockholders 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 months prior to the date the change of control is effected and ending 24 months
following such change of control. "good reason" means any one of the following events (so
long as the officer tenders his or her resignation to the Company within 60 days after
the occurrence of the event which forms the basis for any termination for good reason and such basis is clearly related to the change of
control event): (i) any reduction of the officer'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 officer (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 officer's participation
or reduce the officer'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 officers of the Company and/or its successor or assign; (iii) any diminution of the officer'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 officer; (iv) request that the officer relocate to a work
site that would increase the officer's one-way commute distance by more than 35
miles from his or her then principal residence, unless the officer accepts such relocation opportunity; (v) any material breach by the Company of its
obligations under the agreement; or (vi) any failure by the Company to obtain the
assumption of the agreement by any successor or assign of the Company. If it is determined that any payment or distribution by the Company
to or for the benefit of the officer in connection with a change of control would be
subject to the excise tax imposed by Internal Revenue Code Section 4999, the officer will be entitled to receive an additional payment (a
"Gross-up Payment") in an amount such that, after payment by the officer of
the excise tax imposed by Code Section 4999 on the Gross-up Payment, the officer retains an amount of the Gross-up Payment equal to the
excise tax imposed upon the change of control payments. CEO Resignations James J. Leto resigned as CEO effective
February 15, 2010. In connection with his retirement, Mr. Letos employment agreement
and change-of-control agreement terminated and he and the Company entered into a transition agreement dated as of January 20, 2010 under
which Mr. Leto received (a) a base salary at his then current rate of $525,000 per annum
through March 31, 2010, and (b) a base salary at the rate per annum of $393,750 from April 1, 2010 to May 31, 2010, his last day as an
employee. As an employee, Mr. Leto was eligible to receive all applicable Company employee
benefits through May 31, 2010, including the rights to any vesting of options to purchase GTSI common stock and awards of GTSI common
stock then held by Mr. Leto under GTSIs Stock Incentive Plan. The Company paid Mr. Leto a total of
$131,250 for providing consulting services to the Company during the period from June 1, 2010
until December 31, 2010. Effective as of August 4, 2010, the
Company entered into an employment agreement with Scott Friedlander pursuant to which he would
be employed by GTSI as President and CEO. The agreement provided for Mr. Friedlander to receive (a) a base salary of $400,000 per annum,
with a targeted incentive of up to $450,000 in the form of cash and restricted stock subject
to 100% attainment for specific performance goals established by the Board, or alternatively as the Board may determine, up to $900,000
in the form of cash and restricted stock for 200% attainment of specific performance. In
addition, Mr. Friedlander was granted an option to purchase up to100,000 shares under the Companys Stock Incentive Plan, with a
grant date of August 4, 2010, vesting in one-fifth equal increments on each of the first five
anniversaries of the grant date, subject to Mr. Friedlanders continued employment as of each vesting date. The options had an
exercise period of up to seven years and an exercise price of $5.16 per share, which was based
on the $5.16 per share closing price of GTSIs common stock on August 4, 2010. Mr. Friedlander voluntarily resigned as
President and CEO effective October 26, 2010. On October 26, 2010, Mr. Friedlander and GTSI
entered into a separation agreement providing for his resignation as President, CEO and a director of GTSI and
the termination of his employment agreement. Pursuant to the separation agreement (a) GTSI will pay Mr. Friedlander
severance equal to his ending salary of $400,000 per year for a period of 12 months, subject to acceleration upon a change of control,
(b) GTSI paid Mr. Friedlander a one-time severance payment of $450,000, (c) for a period of
up to 18 months, GTSI will reimburse Mr. Friedlander for COBRA expenses, (d) for a period of up to 12 months, GTSI will continue to
provide Mr. Friedlander with continued participation in GTSIs long-term care plan, and
(e) the exercise period of Mr. Friedlanders unexercised options to purchase GTSI common stock was extended to the maximum exercise
period permitted by GTSIs applicable equity compensation plan(s). CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS The Company and Federal Airways Corporation, a company of which Mr. Johnson is
the owner and president, are parties to a consulting agreement, which began in 1997.
In January of 2009, a new consulting agreement was executed and will continue until Mr. Johnson ceases to be a director of the Company or
either party terminates the agreement. Under the agreement, if the Company
calls upon Mr. Johnson to provide services in respect of Company matters, the Company pays Mr. Johnson a fee of $2,000 per day for his
services and reimburses his related out-of-pocket expenses. During 2010, the Company
paid Federal Airways Corporation $160,100, plus reimbursement of related out-of-pocket expenses of $6,189, for a total of $166,289 for
services performed by Mr. Johnson during the year. The Company and James J. Leto were parties to a transition agreement dated
January 20, 2010, whereby Mr. Leto would be a consultant to the Company from June 1, 2010
until December 31, 2010. During 2010, the Company paid Mr. Leto $131,250 for his services, and $4,765.91 for other expenses consisting
primarily of COBRA. Former CEO James J. Letos son, Todd Leto, served as Senior Vice President,
Sales and Marketing, a division of the Company until June 14, 2010. For 2010, refer
to the Summary Compensation Table on page 25. During 2010, Mr. Todd Leto received a salary of $134,615. By agreement between the Company
and James J. Leto, Mr. James Leto did not participate in any decision making at GTSI
with respect to Mr. Todd Letos performance or compensation. REPORT OF THE AUDIT COMMITTEE OF THE BOARD The following Report of the Audit Committee of the Board (the Audit
Committee) does not constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company
specifically incorporates this Report by reference in any of those filings. The Board adopted a written Audit Committee Charter, a copy of which is posted on
the Companys Internet website,
www.GTSI.com (located on the Investor Relations web page). The Board and the
Audit Committee believe that the Audit Committee members are and were at the time of the
actions described in this report independent as independence is defined in Nasdaq Rule 4200(a)(15). In overseeing the preparation of the Companys financial statements, the
Audit Committee met with both management and the Companys independent registered
public accounting firm, PricewaterhouseCoopers LLP to review and discuss significant accounting issues. The Audit Committee members have reviewed and discussed with the Companys
management the Companys audited consolidated financial statements as of and for
the year ended December 31, 2010. Management advised the Audit Committee that all of the Companys
consolidated financial statements as of and for the fiscal year ended December 31, 2010 were
prepared in accordance
with U.S. generally accepted accounting principles and the Audit Committee discussed such financial statements with both management and
PricewaterhouseCoopers (PwC). Prior to the commencement of the audit, the Audit Committee
discussed with Companys management and PwC the overall scope and plans for the audit.
Subsequent to the audit and each of the quarterly reviews, the Audit Committee discussed with PwC, with and without management present,
the results of their examinations or reviews, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of specific judgments and the clarity of disclosures in the
consolidated financial statements. The Audit Committee members review included discussion with PwC of matters
required to be discussed pursuant to Statement on Auditing Standards No. 61, as
amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule
3200T. With respect to the Companys independent registered public
accounting firm, members of the Audit Committee, among other things, discussed with
PwC matters relating to its independence, including the written disclosures and letter received by the Audit Committee as required by
applicable requirements of the Public Company Accounting Oversight Board regarding the
independent accountants communications with the audit committee concerning independence. The Audit Committee reviewed and
pre-approved the non-audit services described below provided by PwC during 2010. The Audit
Committee has considered whether the provision by PwC of non-audit services to the Company is compatible with maintaining PwCs
independence and concluded it was compatible with maintaining the requisite independence. The Audit Committee also works with the internal auditor that reports directly to
the Audit Committee and the Chief Financial Officer. Management determined that the Company was a non-accelerated filer
for its 2010 fiscal year since its float fell below the required threshold of $50
million for non-affiliates as of the last business day of its most recently completed second fiscal quarter. During the course of closing
the fiscal year ended December 31, 2010, management completed the documentation,
testing and evaluation of the Companys system of internal control over financial reporting in response to the requirements set
forth in Section 404 of the Sarbanes-Oxley Act and related regulations. The Audit
Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. The
Audit Committee reviewed the report of management contained in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the SEC. On the basis of the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the Board approve the inclusion of the
Companys audited consolidated financial statements referred to above in the Companys Annual Report on Form 10-K for the year
ended December 31, 2010, for filing with the SEC. Audit Committee members for the year ended December 31, 2010: Barry L. Reisig, Chairman Thomas Hewitt Joseph Keith Kellogg, Jr. Steven Kelman AUDIT FEES The following table shows the fees paid
or incurred by the Company for the audit and other services provided by
PricewaterhouseCoopers LLP for 2010 and 2009.
For the Annual Meeting of Stockholders
to be held April 28, 2011
1
2
_______________________________________
3
4
OF NONEMPLOYEE DIRECTORS, AND COMMUNICATIONS BETWEEN
STOCKHOLDERS
AND THE BOARD
5
6
7
8
9
10
11
Earned or
Paid in
Cash
($)
Awards
($) (1)
Awards
($)
Other
Compensation
($)
($)
12
13
(#)
Shares
(#)
14
15
16
17
18
19
20
21
22
23
24
(a)
(b)
($)(1)
(c)
($)(2)
(d)
($) (4)
(f)
Plan Compensation
($)(2)(3)
(g)
Deferred
Compensation
Earnings ($)
(h)
($)(5)
(j)
25
26
(#)
Exercisable
(#)
Unexercisable
(#)
($)
(#)
($)
(#)
(#)
27
28
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
29
30
31
32
33
34
35
36
37
38
2010 | 2009 | |||||||||
Audit
Fees |
$ | 1,152,098 | $ | 1,119,103 | ||||||
Audit Related
Fees |
$ | 0 | $ | 0 | ||||||
Tax
Fees |
$ | 0 | $ | 55,000 | ||||||
All
Other |
$ | 6,500 | $ | 6,500 | ||||||
Total |
$ | 1,158,598 | $ | 1,180,603 |
Effective May 6, 2003, GTSI was required to obtain pre-approval by our Audit Committee for all audit and permissible non-audit related fees incurred with our independent registered public accounting firm. The Audit Committee has adopted additional pre-approval policies and procedures. All audit and tax fees were approved in advance by the Audit Committee. When it is efficient to do so, we use third parties other than our auditors to perform non-audit work, such as tax work, on behalf of the Company.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Due to timing reasons, the Board has not yet selected the independent registered public accounting firm for the Companys year ending December 31, 2011, but is expected to select the independent registered public accounting firm at the next Board Meeting. The Company, through the Audit Committee and Board confirmation engaged PricewaterhouseCoopers LLP as its independent registered public accounting firm since June 6, 2007, and the Firm has continued as its independent registered public accounting firm through December 31, 2010. It is expected that the Board will select PricewaterhouseCoopers, LLP to continue as the Companys independent registered public accounting firm for the year ended December 31, 2011.
A representative of PricewaterhouseCoopers LLP, who is expected to be present at the Meeting, will have an opportunity to make a statement if he or she so desires, and is expected to be available to respond to appropriate questions.
39
ANNUAL REPORT A copy of the Companys 2010
Annual Report to Stockholders is being delivered to each stockholder as of the
Record Date. The Companys Annual Report on Form 10K for the year ended December 31, 2010, as filed with the SEC, is
also available free of charge to all stockholders of record as of the Record
Date by writing to the Company at 2553 Dulles View Drive, Suite 100, Herndon, Virginia, 20171-5219, Attention: Investor Relations.
HOUSEHOLDING Approved by the SEC, Householding allows
companies and intermediaries (e.g., brokers) to satisfy the delivery requirements
for proxy statements and annual reports by delivering only one package of stockholder proxy materials to any household at which two or
more stockholders reside. If you and other residents at your mailing address own
shares of our common stock in street name, your broker or bank may have notified you that your household will receive only one copy of
our proxy materials. Once you have received notice from your broker that they will
be householding materials to your address, householding will continue until you are notified otherwise or until
you revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy
statement and wish to receive only one, please notify your broker if your shares
are held in a brokerage account. If you hold shares of our common stock in your own name as a holder of record, householding
will not apply to your shares. We will deliver promptly upon written or oral request
a separate copy of our annual report and/or proxy statement to a stockholder
at a shared address to which a single copy of either document was delivered. For copies of either or both documents, stockholders should
write to the Company at 2553 Dulles View Drive, Suite 100, Herndon, Virginia
20171-5219, Attention: Investor Relations, or call (703) 502-2463. OTHER MATTERS The Company currently knows of no matters to be
submitted at the Meeting other than those described herein. If any other matters properly
come before the Meeting, the proxies will vote the Common Stock they represent as they deem advisable. The persons named as
attorneys-in-fact in the proxies are officers of the Company. By Order of the Board of Directors Joseph Uglialoro Secretary Herndon, Virginia March 31, 2011 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GTSI CORP. 2011 Annual Meeting of Stockholders The undersigned stockholder(s) of GTSI Corp., a Delaware corporation (the Company),
hereby acknowledges receipt of the Companys Notice of Annual Meeting of Stockholders and Proxy Statement, each dated March 31, 2011, and Annual Report for the fiscal year ended December 31, 2010, and
hereby appoints Sterling Phillips and Joseph Uglialoro, and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at 11:00 A.M., local time, on April 28, 2011, at the Companys headquarters located at 2553 Dulles View Drive, Suite 100, Herndon,
Virginia, and at any adjournment(s) thereof, and to vote all Common Stock to which the undersigned would be entitled, if then and there personally present, on the matters set forth below and as more particularly
described in the Company’s above-mentioned Proxy Statement: 1. Election of Directors. o For All Nominees Listed Below o Withhold Authority to Vote (Instruction: To withhold the authority to vote for any individual nominee, mark the box next to that nominee’s name below.) Name of Nominees for election as Class 2 directors of the Company: o Lee Johnson o Thomas L. Hewitt o Sterling E. Phillips, Jr. 2. Other Business. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof. Any one of such attorneys-in-fact or substitutes as shall be present and shall act at said Annual Meeting or any adjournment(s)
thereof shall have and may exercise all powers of said attorneys-in-fact hereunder. THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION AS
DIRECTORS OF THE NOMINEES LISTED IN PROPOSAL 1 ABOVE AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. Dated: __________________, 2011 _____________________________ _____________________________ This Proxy should be marked, dated and signed by each stockholder exactly as his or her name appears hereon, and returned
promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both parties should sign. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
40
(except as marked to the contrary below)
For All Nominees Listed
Signature
Signature