TEKGRAF INC, DEF 14A, 2000-04-25

TEKGRAF INC
DEF 14A, 2000-04-25
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

TEKGRAF, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11

(1) Title of each class of securities to which transaction applies:

------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

------------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------
(3) Filing Party:

------------------------------------------------------------------------
(4) Date Filed:

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<PAGE>
[LOGO]

TEKGRAF, INC.

980 CORPORATE WOODS PARKWAY
VERNON HILLS, ILLINOIS 60061
(847) 913-5888

April 26, 2000

Dear Shareholder:

We cordially invite you to attend the Annual Meeting of Shareholders of
Tekgraf, Inc. to be held on Thursday, May 25, 2000 at 10:00 a.m. local time at
the Marriott Lincolnshire located at 10 Marriott Drive, Lincolnshire, Illinois
60069. At the Annual Meeting the Board of Directors will ask you to elect four
directors and to amend Tekgraf's employee stock option plan.

It is important that your shares are represented at the Annual Meeting,
whether or not you plan to attend. To be certain that you will be represented,
please sign, date and return the enclosed proxy card in the envelope provided as
soon as possible. If your bank or broker offers telephone or Internet voting and
you choose to use one of those forms of voting, it is not necessary for you to
return your proxy card. In any event, please vote as soon as possible.

We have enclosed a copy of Tekgraf's Annual Report on Form 10-K. We
encourage you to read the Annual Report. It includes Tekgraf's audited financial
statements for the year ended December 31, 1999 as well as information about
Tekgraf's operations, markets, products and services.

On behalf of the Board of Directors and management, I would like to
express our appreciation for your interest in the affairs of Tekgraf.

Sincerely,

/s/ William M. Rychel
-----------------------------
William M. Rychel
PRESIDENT AND CHIEF
EXECUTIVE OFFICER

<PAGE>

TEKGRAF, INC.

980 CORPORATE WOODS PARKWAY
VERNON HILLS, ILLINOIS 60061
(847) 913-5888

----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------

THURSDAY, MAY 25, 2000
10:00 A.M.
MARRIOTT LINCOLNSHIRE
10 MARRIOTT DRIVE
LINCOLNSHIRE, ILLINOIS 60069

The purpose of our Annual Meeting is to:

1. elect four directors for one-year terms; and

2. amend and restate our 1997 Stock Option Plan to increase the
number of shares that we may issue under the plan from 600,000 to
1,000,000 and to make certain technical amendments.

You can vote at the Annual Meeting in person or by proxy if you were a
shareholder of record on Friday, April 14, 2000. You may revoke your proxy at
any time prior to its exercise at the Annual Meeting.

Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999 is enclosed.

By Order of the Board of Directors

/s/ William M. Rychel
-------------------------------------
William M. Rychel
PRESIDENT AND CHIEF EXECUTIVE OFFICER

April 26, 2000

<PAGE>

TEKGRAF, INC.

----------------------------------------
PROXY STATEMENT
----------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers................................................. 1
Election of Directors................................................. 4
Meetings and Committees of the Board of Directors..................... 4
Director Compensation................................................. 5
Ownership of Tekgraf Common Stock..................................... 5
Section 16(a) Beneficial Ownership Reporting Compliance............... 7
Executive Compensation................................................ 7
Employment and Severance Agreements................................... 9
Certain Relationships and Related Transactions........................ 9
Compensation Committee Report on Executive Compensation............... 10
Company Performance................................................... 12
Amendment and Restatement of 1997 Stock Option Plan................... 13
Independent Public Accountants........................................ 16
Executive Officers.................................................... 16
</TABLE>

This Proxy Statement and Form of Proxy are first being mailed to
shareholders on or about April 26, 2000.

ANNUAL REPORT ON FORM 10-K

A copy of our Annual Report on Form 10-K, without exhibits, is enclosed
with this Proxy Statement. You may obtain a copy of the exhibits described in
the Form 10-K for a fee upon request. Please contact Thomas M. Mason, Chief
Financial Officer, Tekgraf, Inc., 980 Corporate Woods Parkway, Vernon Hills,
Illinois 60061.

EXPLANATORY NOTE

On January 21, 2000, we eliminated our dual class of stock and all
outstanding shares of Class B Common Stock were converted into shares of Class A
Common Stock on a one-for-one basis. References in this Proxy Statement to our
stock or common stock are references to Class A Common Stock.

<PAGE>

QUESTIONS AND ANSWERS

WHAT AM I VOTING ON?

The Board of Directors of Tekgraf is soliciting your vote on:

- the election of four directors for one-year terms; and

- the amendment and restatement of our 1997 Stock Option Plan.

WHO MAY VOTE?

Shareholders at the close of business on April 14, 2000 (the record
date) are entitled to vote. On that date, there were 6,328,331 shares of Tekgraf
common stock outstanding.

HOW MANY VOTES DO I HAVE?

Each share of Tekgraf common stock that you own entitles you to one
vote.

HOW DO I VOTE?

All shareholders may vote by mail. If you hold your shares through a
bank or broker, you also may be able to vote by telephone or over the Internet.
To vote by mail, please sign, date and mail your proxy in the postage paid
envelope provided. If your bank or broker does not offer telephone or Internet
voting, please complete and return your proxy by mail. If you attend the Annual
Meeting in person and would like to vote then, we will give you a ballot. If
your shares are held in the name of your broker, bank or other nominee, you need
to bring an account statement or letter from the nominee indicating that you
were the beneficial owner of the shares on April 14, 2000, the record date for
voting.

HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?

If you sign, date and return your proxy card, or vote by telephone or
over the Internet, your vote will be cast as you direct. If you do not indicate
how you want to vote, you give authority to William M. Rychel and Thomas M.
Mason to vote for the items discussed in these proxy materials and any other
matter that is properly raised at the Annual Meeting. In such a case, your vote
will be cast FOR the election of each director nominee, FOR the amendment and
restatement of the Stock Option Plan and FOR or AGAINST any other properly
raised matters at the discretion of Messrs. Rychel and Mason.

MAY I REVOKE MY PROXY?

You may revoke your proxy at any time before it is exercised in one of
four ways:

1. Notify our Chief Financial Officer in writing at the address
on the cover of this proxy statement before the Annual Meeting
that you are revoking your proxy.
2. Submit another proxy with a later date.
3. Vote by telephone or Internet after you have given your proxy.
4. Vote in person at the Annual Meeting.

WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?

Your shares are likely registered differently or are in more than one
account. You should sign and return all proxy cards to guarantee that all of
your shares are voted.

<PAGE>

WHAT CONSTITUTES A QUORUM?

The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Tekgraf stock issued, outstanding and entitled to
vote constitutes a quorum. You will be considered part of the quorum if you
return a signed and dated proxy card, if you vote by telephone or Internet, or
if you attend the Annual Meeting.

Abstentions and broker non-votes are counted as "shares present" at the
Annual Meeting for purposes of determining whether a quorum exists. A broker
non-vote occurs when a broker submits a proxy that does not indicate a vote for
a proposal because he or she does not have voting authority and has not received
voting instructions from you.

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?

ELECTION OF DIRECTORS: Directors are elected by a plurality of the
votes cast, which means that the four nominees who receive the highest number of
votes will be elected. If you do not want to vote your shares for a particular
nominee, you may indicate that in the space provided on the proxy card or
withhold authority as prompted during telephone or Internet voting. An
abstention will have the effect of a vote against the election of the directors
since it is one less vote for approval, but a broker non-vote will have no
effect.

AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN: Amendment and
restatement of our Stock Option Plan requires that a majority of the shares
present or represented by proxy and having the power to vote at the Annual
Meeting vote in its favor. An abstention will have the effect of a vote against
the amendment and restatement of the Plan, but a broker non-vote will have no
effect.

HOW DO I SUBMIT A SHAREHOLDER PROPOSAL?

You must submit a proposal to be included in our proxy statement for
the May 2001 annual meeting in writing no later than December 27, 2000. Your
proposal must be in writing and comply with the proxy rules of the Securities
and Exchange Commission. You may also submit a proposal that you do not want
included in the proxy statement but that you want to raise at the May 2001
annual meeting no later than December 27, 2000. If you submit a proposal after
the deadline, then Securities and Exchange Commission rules permit the
individuals named in the proxies solicited by Tekgraf's Board of Directors for
that meeting to exercise discretionary voting power as to that proposal.

Our by-laws require that your proposal provide: (1) your name and
address and the names and addresses of any person or entity acting in concert
with you; (2) the class and number of shares of Tekgraf stock that you and each
of those individuals or entities beneficially own; (3) a description of the
proposal and all material related information; and (4) any other information
that the Board of Directors reasonably determines is necessary or appropriate to
enable it and Tekgraf shareholders to consider the proposal. You should send
your proposal to our Secretary at our address on the cover of this proxy
statement.

HOW DO I NOMINATE A DIRECTOR?

The Board of Directors recently amended our by-laws to address
nominations of directors by our shareholders. Beginning with the May 2000 Annual
Meeting, if you wish to recommend a nominee to be elected a director at an
annual meeting, our Secretary must receive your written nomination at least 60
days but not more than 75 days before the date of the meeting. If we do not give
notice or publicly announce the date of our annual meeting at least 70 days
prior to the meeting, then we must receive your notice before the close of
business on the tenth day after which we have mailed the notice or announced the
meeting date, whichever occurs first.

You should submit your proposal to the Secretary at our address on the
cover of this proxy statement. Our by-laws require that you provide: (1) your
name and address; (2) a statement that you are a record holder

<PAGE>

of Tekgraf common stock entitled to vote at the meeting and that you plan to
appear in person or by proxy at the meeting to make the nomination; (3) the
class and number of shares of Tekgraf common stock that you and the nominee
each own of record, own beneficially and represent by proxy as of the date of
the proposal; (4) the nominee's name, age, business and residence addresses,
and principal occupation or employment; (5) a description of all arrangements
or understandings between you, the nominee or any other person under which
you are making the nominations; (6) any other information that the rules of
the Securities and Exchange Commission require to be included in a proxy
statement; and (7) the nominee's written consent to serve as a director if
elected. Tekgraf may require a proposed nominee to provide additional
information to determine the eligibility of the nominee to serve as a
director.

WHO PAYS TO PREPARE, MAIL AND SOLICIT THE PROXIES?

We will pay all of the costs of preparing, mailing and soliciting these
proxies. We will ask brokers, banks, voting trustees and other nominees and
fiduciaries to forward the proxy materials to the beneficial owners of Tekgraf
common stock and to obtain the authority to execute proxies. We will reimburse
them for their reasonable expenses upon request. In addition to mailing proxy
materials, our directors, officers and employees may solicit proxies in person,
by telephone or otherwise. These individuals will not be specially compensated.

<PAGE>

ELECTION OF DIRECTORS

Four directors currently serve on the Board of Directors. Each of our
existing directors is nominated for reelection at the Annual Meeting. A director
will serve until the next annual meeting, until a qualified successor director
has been elected, or until he resigns or is removed by the Board.

Your shares will be voted as you specify on the enclosed proxy card or
in telephone or Internet voting. If you do not specify how you want your shares
voted, we will vote them FOR the election of Messrs. Carnevale, Dalton, Rychel
and Sisto. If unforeseen circumstances (such as death or disability) make it
necessary for the Board of Directors to substitute another person for a nominee,
your shares will be voted FOR that other person. The Board does not anticipate
that any nominee will be unable to serve. The nominees have provided the
following information about themselves.

STEVEN J. CARNEVALE, 44, has been a General Partner and Director of
Private Equity Investing for Talkot Capital, LLC, a crossover hedge fund that
invests in both public and private equities, since 1996. From 1992 until that
time, he was in venture capital and investment banking with Endeavor Capital
Management. Mr. Carnevale is also a director of eFax.com, The EC Company and
Sawgrass Systems, Inc. Mr. Carnevale has been a director of Tekgraf since April
2000.

FRANK X. DALTON, JR., 43, has served as a Principal of Cordova
Ventures, a venture capital firm, since November 1996. From January 1996 to
November 1996, Mr. Dalton was an Executive Vice President of Ambassador Capital
Corporation, an investment banking firm. From November 1989 to January 1996, Mr.
Dalton was employed by BDO Seidman, LLP, a public accounting firm, with his last
position being Partner. Mr. Dalton has served as a director of Tekgraf since
November 1997.

WILLIAM M. RYCHEL, 49, was named President and Chief Executive Officer
of Tekgraf in February 2000. Prior to this nomination, he served as Interim
Chief Executive Officer since October 1998. Mr. Rychel became President of the
Graphics Division and a director of Tekgraf upon completion of our acquisition
of G&R Marketing, Inc. in June 1997. Beginning in 1986, he served as the
President of G&R Marketing, a company he co-founded. Mr. Rychel has served as a
director of Tekgraf since June 1997.

ALBERT E. SISTO, 50, has served as Chief Executive Officer and
President of Phoenix Technologies, Ltd. since June 1999 and as Chairman since
February 2000. Prior to that, from November 1997, he served as the Chief
Operating Officer of RSA Data Security, Inc., a Security Dynamics Company. From
1994 until that time, Mr. Sisto served as President, Chairman and Chief
Executive Officer of DocuMagix, Inc., a computer software company specializing
in personal content management. Mr. Sisto is also a director of Insignia
Solutions, plc., eFax.com and Hi/fn Inc. Mr. Sisto has been a director of
Tekgraf since November 1997.

MEETINGS AND COMMITTEES OF
THE BOARD OF DIRECTORS

The Board of Directors met five times during 1999. In addition to
meetings of the full Board, directors attended meetings of Board committees. The
Board of Directors has standing audit and compensation committees. Each director
attended all of the meetings of the Board and of the committees on which he
served.

The Audit Committee recommends the appointment of our independent
public accountants and reviews the scope of audit and non-audit assignments and
related facts. In April 2000, Steven J. Carnevale joined Frank X. Dalton, Jr.
and Albert E. Sisto as a member of the Audit Committee. The Audit Committee has
adopted a charter, which specifies the composition and responsibilities of the
Committee. The Committee met twice during 1999.

<PAGE>

The Compensation Committee makes recommendations to the Board
concerning salaries and incentive compensation for our officers and employees.
The Committee also administers our stock option plan. Frank X. Dalton, Jr. and
Albert E. Sisto are the members of the Compensation Committee. The Committee met
once during 1999.

We have agreed that for a period of five years, if requested by D.H.
Blair Investment Banking Corp., to nominate a designee of Blair for election to
our Board of Directors. Blair, the underwriter for our initial public offering,
has not exercised this right. The period began on November 10, 1997.

DIRECTOR COMPENSATION

Directors who are Tekgraf employees receive no fees for their services
as directors. Through March 1999, non-employee "outside" directors received
$1,000 and reimbursement of expenses for each Board and committee meeting they
attended. In March 1999, the Board voted to increase non-employee director
compensation to an annual retainer of $4,000, paid quarterly, plus $1,000 and
the reimbursement of expenses for each Board meeting attended. Committee members
received an additional $500 per year. For 2000, the annual retainer and
committee participation fees will be the same as they were in 1999. Meeting
attendance fees, however, will be $2,500 for each in person meeting and $500 for
each telephonic meeting. Directors are not precluded from receiving compensation
for serving Tekgraf in another capacity.

Directors are also entitled to receive options under our stock option
plan. Options granted under the plan have exercise prices equal to the fair
market value of our common stock on the grant date. In July 1999, we granted
each of Messrs. Dalton and Sisto options to purchase 20,000 shares of our common
stock. The options were exercisable as to 10,000 shares on the grant date and
become exercisable as to the remaining 10,000 shares on the first anniversary of
the grant. In February 2000, we granted each of Messrs. Dalton and Sisto options
to purchase 10,000 shares of our common stock, which vest equally over three
years on the anniversaries of the grant. In April 2000, we granted Mr. Carnevale
options to purchase 20,000 shares of our common stock contingent upon
shareholder approval of the amendment and restatement of our stock option plan.
Mr. Carnevale's options will also vest equally over three years. Beginning in
2001, each non-employee director will receive an annual grant of options to
purchase 6,666 shares of our common stock. In addition, upon joining the Board
non-employee directors will receive a grant of options to purchase 20,000
shares. These options will vest equally over three years.

OWNERSHIP OF TEKGRAF COMMON STOCK

The following table shows how much Tekgraf common stock was
beneficially owned as of March 31, 2000 by:

- our Chief Executive Officer and other individuals named in the
Summary Compensation Table included in this proxy statement;

- each director;

- each shareholder known by us to own beneficially at least 5% of
Tekgraf common stock; and

- all directors and executive officers as a group.

Beneficial ownership is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. In general, beneficial ownership
includes any shares a director or executive officer can vote or transfer and
stock options and warrants that are exercisable currently or become exercisable
within 60 days. These shares are considered to be outstanding for the purpose of
calculating the percentage of outstanding Tekgraf common stock owned by a
particular shareholder, but are not considered to be outstanding for the

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<PAGE>

purpose of calculating the percentage ownership of any other person.
Percentage ownership is based on 6,328,331 shares outstanding as of March 31,
2000. Except as otherwise noted, the shareholders named in this table have
sole voting and dispositive power for all shares shown as beneficially owned
by them.

<TABLE>
<CAPTION>
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
SHARES OF OPTIONS AND
COMMON STOCK WARRANTS
BENEFICIALLY EXERCISABLE PERCENT
OWNED WITHIN 60 DAYS TOTAL OF CLASS
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
William M. Rychel 1,411,575 (1) 0 1,411,575 22.31
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Scott C. Barker 315,344 (2) 0 315,344 4.98
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Martyn L. Cooper 69,500 (3) 0 69,500 1.10
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Thomas J. Woolsey 132,167 (3) 15,000 (4) 147,167 2.32
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
W. Jeffrey Camp 0 45,000 45,000 *
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Steven J. Carnevale 0 0 0 *
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Frank X. Dalton, Jr. 0 20,000 20,000 *
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Albert E. Sisto 0 20,000 20,000 *
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
All directors and executive officers
as a group (10 persons) 2,026,919 (5) 175,000 (6) 2,201,919 33.86
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------

- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
OTHER 5% SHAREHOLDERS
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Anita, Ltd. (7) 1,191,333 75,000 (4) 1,266,333 19.78
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
Thomas A. Gust (8) 417,841 (3) 0 417,841 6.60
- ----------------------------------------- ------------------- ------------------- -------------------- --------------------
</TABLE>

* Less than 1%.

(1) (a) Includes 18,108 shares held in escrow as to which Mr. Rychel does not
have dispositive power while they are in escrow. (b) Includes 69,500
shares held by Martyn Cooper and 132,167 shares held by Thomas Woolsey, as
to which Mr. Rychel has irrevocable proxies to vote in accordance with the
recommendation of the Board of Directors on any action requiring
shareholder vote. Mr. Rychel has no dispositive power with respect to the
shares. These shares include an aggregate of 40,334 shares held in escrow,
and Messrs, Cooper and Woolsey do not have dispositive power as to the
shares while they are in escrow. These proxies terminate on December 1,
2000 or earlier if the parties agree. (c) Does not include an aggregate of
546,836 shares of common stock as to which Mr. Rychel was granted
irrevocable proxies to vote solely in connection with Tekgraf's January
2000 recapitalization to eliminate its dual class of common stock as
follows: 41,083 shares held by Beverly Nerenberg; 84,662 shares held by A.
Lowell Nerenberg; 4,250 shares held by Rosa Sabato; and 416,841 shares
held by Thomas Gust. These shares include an aggregate of 75,624 shares
held in escrow, and the owners of these shares do not have dispositive
power while they are in escrow. Mr. Rychel has no dispositive power with
respect to any of these shares. The proxies are no longer in effect to the
extent that actions taken with respect to the recapitalization are final.
(d) Mr. Rychel disclaims beneficial ownership of the shares described in
(b) and (c) above. (e) The address for Mr. Rychel is c/o Tekgraf, Inc.,
980 Corporate Woods Parkway, Vernon Hills, Illinois 60061.

(2) Includes 131,932 shares held in escrow as to which Mr. Barker does not
have dispositive power while they are in escrow.

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<PAGE>

(3) Mr. Rychel has certain voting power with respect to these shares, except
1,000 shares owned by Mr. Gust. See footnote 1. Includes shares held in
escrow as follows: Mr. Cooper, 13,900 shares; Mr. Woolsey, 26,434 shares
and Mr. Gust, 21,300 shares. Messrs. Cooper, Woolsey and Gust have no
dispositive power as to these shares while they are in escrow. These
shares will be released from escrow upon the satisfaction of certain
performance criteria by Tekgraf and will be forfeited if the criteria are
not satisfied by March 31, 2001.

(4) Consists of warrants issued by Tekgraf in its initial public offering as
part of Units issued. A Unit consisted of one share of common stock and
one warrant to purchase one share of common stock at an exercise price of
$8.40 exercisable through November 2002.

(5) See footnotes 1, 2 and 3. In addition, includes 120,000 shares in escrow
as to which the owner does not have dispositive power while they are in
escrow.

(6) Includes 90,000 warrants. See footnote 4.

(7) In November 1997, four shareholders of companies acquired by Tekgraf
pledged all of their shares (an aggregate of 559,333 shares) to Anita in
connection with personal loans and granted Anita proxies to vote these
shares. The pledged shares have been included in the number and percent of
shares beneficially owned by Anita. The holders of these shares have made
a demand pursuant to Georgia law exercising their dissenters' rights in
connection with the January 2000 special meeting of shareholders relating
to the elimination of our dual class of stock. The reported number of
shares of common stock beneficially owned is based on Dissenter's Payment
Demands received by Tekgraf on March 30, 2000. The reported number of
warrants is based on information provided by Anita in December 1999. The
address of Anita, Ltd. is P.O. Box 124, Mignot Plateau, Cornet Street St.
Peter Port, Guernsey, Channel Islands, GYI 4EG.

(8) Mr. Gust's address is 200 North Fairway Drive, Suite 202, Vernon Hills,
Illinois 60061.

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that
Tekgraf's executive officers, directors and 10% shareholders file reports of
securities ownership and changes in ownership with the Securities and Exchange
Commission and the NASDAQ SmallCap Market. Officers, directors and 10% owners
also are required to furnish us with copies of all Section 16(a) forms they
file. Based solely on review of the copies of these reports provided to us and
written representations that no other reports were required, we believe that,
during fiscal 1999, all filing requirements were met, except that Mr. Cooper was
delinquent in reporting two transactions on a Form 4 and Mr. Woolsey was
delinquent in reporting one transaction on a Form 4.

EXECUTIVE COMPENSATION

This table summarizes the before-tax compensation for the Chief
Executive Officer and the next four most highly compensated executive officers
of Tekgraf.

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<PAGE>

SUMMARY COMPENSATION

- ------------------------------------------------- ------------ ------------------------------------- -----------------
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION AWARDS
------------------------------------- -----------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- ------------------------------------------------- ------------ ------------------------------------- -----------------
<S> <C> <C> <C> <C>
William M. Rychel 1999 $125,000 $25,000 (1) -
President and Chief Executive Officer 1998 125,000 25,000 -
(since June 1997) 1997 72,900 - -
- ------------------------------------------------- ------------ ------------------------------------- -----------------
Scott C. Barker 1999 $234,027 (2) - -
Vice President, Sales and Marketing 1998 88,542 - -
(since April 1998) 1997 - - -
- ------------------------------------------------- ------------ ------------------------------------- -----------------
Martyn L. Cooper 1999 $125,000 - -
Chief Operating Officer 1998 125,000 $12,500 -
(since June 1997) 1997 72,900 - -
- ------------------------------------------------- ------------ ------------------------------------- -----------------
Thomas J. Woolsey 1999 $125,000 - -
Chief Information Officer 1998 125,000 $12,500 -
(since June 1997) 1997 72,900 - -
- ------------------------------------------------- ------------ ------------------------------------- -----------------
W. Jeffrey Camp 1999 $125,000 - -
Former Chief Financial Officer and Secretary 1998 104,167 $12,500 45,000
(since March 1998) 1997 - - -
- ------------------------------------------------- ------------ ------------------------------------- -----------------
</TABLE>

(1) Bonus amount for the year ended December 31, 1999 was approved by the
Compensation Committee on February 22, 2000 and paid in March 2000.

(2) Includes $109,027 in sales commissions.

OPTION GRANTS IN 1999

No stock options were granted during 1999 to the executive officers
listed in the Summary Compensation Table.

OPTION EXERCISES IN 1999 AND
1999 YEAR-END OPTION VALUES

None of the executive officers listed in the Summary Compensation Table
exercised stock options during 1999. Of these individuals, only Mr. Camp held
any stock options at December 31, 1999. The value of unexercised in-the-money
options at year end 1999 is calculated using the difference between the option
exercise price and $1.50 (the last reported market price of Tekgraf common stock
on December 31, 1999) multiplied by the number of shares underlying the option.
An option is in-the-money if the market value of the common stock subject to the
option is greater than the exercise price.

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<PAGE>

--------------------------- --------------------------------- ----------------------------------
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT YEAR
YEAR END 1999 END 1999
--------------------------------- ----------------------------------

NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- --------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
William M. Rychel - - - -
--------------------------- --------------------------------- ----------------------------------
Scott C. Barker - - - -
--------------------------- --------------------------------- ----------------------------------
Martyn L. Cooper - - - -
--------------------------- --------------------------------- ----------------------------------
Thomas J. Woolsey - - - -
--------------------------- --------------------------------- ----------------------------------
W. Jeffrey Camp 30,000 15,000 $0 $0
--------------------------- --------------------------------- ----------------------------------
</TABLE>

EMPLOYMENT AND SEVERANCE AGREEMENTS

In June 1997, we entered into two-year employment agreements with each
of Messrs. Rychel, Cooper and Woolsey that provided for a base annual
compensation of $125,000. These employment agreements expired in June 1999 and
were not renewed; however, certain confidentiality and non-competition
provisions survive their expiration.

In February 1998, we entered into an employment agreement with Mr.
Camp, who served as our Chief Financial Officer until March 2, 2000. The
agreement provided for a base annual compensation of $125,000. At that time, Mr.
Camp was granted options to purchase 45,000 shares of common stock at an
exercise price of $3.00 per share, which vested as to one-third of the shares on
each of March 1, 1998, 1999 and 2000.

Mr. Camp's employment agreement was terminated effective March 2, 2000.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MR. RYCHEL

We have loaned Mr. Rychel a total of $1,775,000 to purchase from
certain shareholders a total of 806,983 shares of our common stock, 685,816 of
which were shares of Class B Common Stock. All outstanding shares of our Class B
Common Stock were converted into our common stock on a one-for-one basis on
January 21, 2000. The loan is due on December 1, 2000, with interest payable at
a rate that is 0.25% above the rate paid from time to time by Tekgraf under our
current bank loan agreement. All principal and interest are due at maturity. As
collateral for payment of the loan, Mr. Rychel has pledged the shares that he
purchased with the proceeds of the loan as well as 384,817 previously owned
shares. The stock pledge will terminate as to the previously owned shares when
Mr. Rychel has repaid $887,500 of the principal of the loan and all accrued
interest or when the trading price of our common stock has been above $2.50 for
10 consecutive trading days. Mr. Rychel has also collaterally assigned his
rights under his agreements with certain shareholders. The loan is prepayable at
any time without penalty, and Mr. Rychel has stated his intent to attempt to
sell blocks of his shares on a private basis in an effort to repay the loan.

If the trading price of our common stock is at least $3.00 per share
for 20 consecutive trading days, we can purchase any of the shares purchased by
Mr. Rychel at discounts to the then-current market price ranging from 10-15%,
depending on the market price, with a corresponding reduction of the loan
balance. In connection with the loan, Mr. Rychel has agreed to purchase a
$2,000,000 term insurance policy on his life, with Tekgraf as beneficiary. He
has agreed to keep the policy in effect until the loan is paid in full. We have

9
<PAGE>

agreed to indemnify Mr. Rychel against any actions brought against him
personally by any of our shareholders as a result of the loan or his use of the
loan to purchase shares as described above.

We borrowed the money lent to Mr. Rychel under our existing bank
facility. In doing so, we incurred a service charge of $10,000 imposed by the
Bank in order to obtain a waiver from the usual lending conditions prohibiting
loans by Tekgraf to its officers or directors.

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is composed of two
independent non-employee directors. The Committee makes recommendations to the
Board concerning salaries and incentive compensation for our officers and
employees. The primary objective in designing and implementing the compensation
program is to maximize shareholder value over time through alignment of employee
performance with business goals and strategies that serve shareholders'
interests. The overall goal of the Compensation Committee is to develop
executive compensation and equity-based programs that are consistent with and
linked to Tekgraf's strategic and annual business objectives. This report
describes the philosophy, objectives and components of Tekgraf's executive
compensation programs for 1999 and discusses the determination of compensation
for the Chief Executive Officer for 1999.

COMPENSATION PHILOSOPHY

The Compensation Committee adheres to a compensation policy that:

- will attract and retain key executives crucial to the long-term
success of Tekgraf;

- relates to the achievement of operational and strategic
objectives; and

- is commensurate with each executive's performance, experience and
responsibilities.

The Compensation Committee has adopted specific principles that are
applied in structuring the compensation opportunity for executive officers.

LONG-TERM AND AT-RISK FOCUS

A significant percentage of total compensation for executive officers
should be composed of long-term, at-risk rewards to focus senior management on
the long-term interests of shareholders. Equity-based plans should comprise a
major part of the long-term, at-risk portion of the total compensation to
encourage shareholder value-based management decisions and to link compensation
to Tekgraf's performance and shareholder interests.

SHORT-TERM AND AT-RISK FOCUS

A significant portion of cash compensation for executives is linked to
the achievement of annual bonus plans or performance objectives. This includes
cash bonuses that may be approved by the Compensation Committee. There is a real
risk in bonuses paid under this plan, recognizing variability in individual,
unit and overall company performance.

COMPETITIVENESS

Base pay and total compensation should be competitive with similar
companies based upon size, products and markets. Individual qualifications and
experience level are considered in establishing a salary level when a person is
appointed to a position. Salaries are generally reviewed annually. In many
instances, a primary factor in setting salary levels is the desire to provide
compensation sufficient to induce these

10
<PAGE>

individuals to join or remain in the employment of Tekgraf. In addition, we
periodically conduct a proxy survey of peer group companies.

STOCK OPTION AWARDS AND RESTRICTED STOCK GRANTS

Equity-based compensation comprises a significant portion of Tekgraf's
executive officer compensation programs. These plans are administered solely by
the Compensation Committee.

Stock options provide executive officers and certain other key
employees with the opportunity to achieve an equity interest in Tekgraf. Stock
options are granted with an exercise price equal to the market price on the
grant date. Vesting is determined by the Committee on a case-by-case basis.
Granting options as a portion of compensation emphasizes a long-term focus by
key employees in the acquisition and holding of common stock. The number of
stock options granted is based on the individual's potential to contribute to
the future growth of Tekgraf. The frequency and size of individual grants vary
with changes in the individual's potential to contribute to the future growth of
Tekgraf. The number of options required to achieve target grant values based on
the prevailing fair market value of the common stock serves in part to determine
the number of options granted annually.

TARGET STOCK OWNERSHIP

The Board of Directors and management believe that significant stock
ownership is a major incentive in building shareholder value and aligning the
interests of executives and shareholders. The Board has adopted guidelines for
minimum target ownership by senior executives. Guidelines are based upon a
multiple of base salary and range from .75 to 3 times annual salary amounts.

CHIEF EXECUTIVE OFFICER COMPENSATION

The compensation arrangements for Mr. Rychel were based on the
provisions of his two-year employment agreement, which expired in June 1999.
Pursuant to this agreement, Mr. Rychel received an annual salary of $125,000 in
1999. Therefore, the level of Mr. Rychel's compensation was not directly linked
to Tekgraf's performance during the last completed fiscal year. Following the
expiration of the employment agreement, compensation will be determined by the
Compensation Committee. In making this determination, the Committee intends to
review various measures of Tekgraf's performance.

DEDUCTIBILITY OF COMPENSATION

Under Internal Revenue Code Section 162(m), a company generally may not
deduct compensation in excess of $1,000,000 paid to the CEO and each of the
other four most highly compensated officers. In light of 162(m) limitations, we
are proposing an individual annual award limit under the 1997 Stock Option Plan
as part of the technical amendments to the Plan being presented for shareholder
approval. The Committee believes that the current structure of Tekgraf's
executive compensation does not give rise to Section 162(m) concerns. The
Committee will continue to assess the impact of Section 162(m) on its
compensation practices.

Compensation Committee

Frank X. Dalton, Jr.
Albert E. Sisto

<PAGE>

COMPANY PERFORMANCE

This graph shows a comparison of cumulative total shareholder returns
for Tekgraf, the Russell 2000 and the Nasdaq Computer and Data Processing
Services Index from November 10, 1997 (the date Tekgraf common stock was first
offered to the public) through December 31, 1999. Given our recent transfer of
the listing of our common stock from the Nasdaq National Market to the Nasdaq
SmallCap Market, we will compare our performance with the Russell 2000 rather
than the Nasdaq National Market-U.S. For comparison purposes, the graph also
shows the cumulative total returns for the Nasdaq National Market-U.S. Index,
which we have used for comparisons in the past. The graph assumes an initial
investment of $100 and the reinvestment of dividends.

COMPARISION OF CUMULATIVE TOTAL SHAREHOLDERS RETURN

[GRAPH REPRESENTATION OF PLOTTING POINTS]

CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>

- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
11/10/97 12/31/97 12/31/98 12/31/99
- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Tekgraf, Inc. $100.00 $38.02 $26.04 $25.00
- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
Russell 2000 100.00 104.52 97.78 96.33
- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
Nasdaq Computer and Data Processing Services 100.00 96.89 172.97 365.59
- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
Nasdaq Stock Market-U.S. 100.00 99.09 139.63 252.25
- --------------------------------------------- ----------------- ---------------- ---------------- -----------------
</TABLE>

<PAGE>

AMENDMENT AND RESTATEMENT OF 1997 STOCK OPTION PLAN

The Board of Directors has approved an amendment and restatement of the
1997 Stock Option Plan effective March 26, 2000 to increase the number of shares
reserved for issuance under the Plan by 400,000 shares and to make certain
technical amendments to conform to securities and tax regulations that have
changed since the Plan's adoption. The Board recommends that you approve this
amendment and restatement of the Plan. The following summary describes the basic
features of the Plan, however, it is not complete and, therefore, you should not
rely solely on it for a detailed description of every aspect of the Plan.

THE STOCK OPTION PLAN GENERALLY

The Plan was originally adopted by the Board and approved by our
shareholders in August 1997 and was amended in May 1999. No option may be
granted under the Plan after August 2006. Awards under the Plan may be in the
form of incentive stock options or nonqualified stock options. Under the Plan,
the Compensation Committee may grant stock options to key individuals performing
services for Tekgraf, including employees, officers, directors, consultants and
advisors. Participation in the Plan is open to all Tekgraf employees; however,
eligibility for grants under the Plan is subjective and is determined by
management subject to approval by the Compensation Committee.

SHARES AVAILABLE FOR THE PLAN

We currently have 600,000 shares of common stock reserved for issuance
under the Plan. As of March 31, 1999, options to purchase 5,500 shares remained
available for grants under the Plan. The number of shares that can be issued and
the number of shares subject to outstanding options may be adjusted in the event
of a stock split, stock dividend, spin-off, recapitalization or other similar
event affecting the number of shares of Tekgraf's outstanding common stock.

The Board proposes to amend the Plan to increase the number of shares
that can be issued to 1,000,000. We believe that stock options are important to
attract and to encourage the continued employment and service of officers, key
employees and other key individuals by facilitating their purchase of an equity
interest in Tekgraf. In order to ensure that there are adequate shares available
for future grants to support broad-based participation, we believe that we need
to increase the number of shares issuable under the Plan.

In addition, the proposed amendment provides that the number of shares
underlying options awarded to any individual in any 12-month period may not
exceed 300,000 shares. This limit does not increase the aggregate number of
shares available under the Plan and is intended to ensure that compensation
related to nonqualified stock option exercises will be fully deductible by
Tekgraf.

PLAN ADMINISTRATION

The Compensation Committee administers the Plan. Subject to the
specific provisions of the Plan, the Committee determines award eligibility,
timing and the type, amount and terms of the awards. The Committee also
interprets the Plan, establishes rules and regulations under the Plan and makes
all other determinations necessary or advisable for the Plan's administration.

STOCK OPTIONS

Options under the Plan may be either incentive stock options, as
defined under the tax laws, or nonqualified stock options. Only nonqualified
options may be granted to individuals who are not Tekgraf employees. The number
of shares underlying options granted to any one individual in a 12-month period
may not exceed 300,000 shares. Depending on the terms of an individual's option
agreement, upon exercise, the holder may pay the exercise price in several ways.
He or she may pay: (1) in cash; (2) by delivering shares of

13
<PAGE>

Tekgraf common stock that he or she has held at least six months; (3) by any
other means that the Board of Directors or the Compensation Committee
determines; or (4) by a combination of these methods.

The per share exercise price of an incentive stock option may not be
less than the fair market value of Tekgraf common stock on the date the option
is granted. The Compensation Committee may specify any period of time following
the date of grant during which options are exercisable, so long as the exercise
period is not more than 10 years. The term of an incentive option granted under
the Plan to a shareholder owning more than 10% of the outstanding voting power
may not exceed five years and its exercise price may not be less than 110% of
the fair market value of the common stock on the date of the grant. Incentive
stock options are subject to additional limitations relating to such things as
employment status, minimum exercise price, length of exercise period, maximum
value of the stock underlying the options and a required holding period for
stock received upon exercise of the option. To the extent that the aggregate
fair market value, as of the date of grant, of the shares for which incentive
options become exercisable for the first time by the holder during the calendar
year exceeds $100,000, the portion of the option that exceeds the $100,000
limitation will be treated as a nonqualified option.

EXPIRATION OF OPTIONS

Generally, options granted under the Plan expire on the date determined
by the Committee at the time of the grant, subject to earlier expiration as
specified in the award agreement if the holder terminates employment with
Tekgraf prior to that date. Generally, options expire three months after the
termination of employment or other relationship with Tekgraf for any reason
other than death or disability, or one year after termination by reason of death
or disability, in either case subject to the normal expiration date of the
option. If termination is for cause or breach by the holder of an employment,
confidentiality or non-disclosure agreement, the option will expire immediately
upon termination. Incentive stock options may be subject to additional
restrictions. In no event may an option be exercised after its expiration date.
Unless the Committee determines otherwise, any unvested portion of an option
will expire immediately upon termination of employment or other relationship.

OUTSTANDING OPTIONS

We cannot determine the number of shares of our common stock that may
be acquired under stock options that may be awarded under the Plan to
participants. However, on April 7, 2000, Steven J. Carnevale, a director and a
director nominee, was granted an option to purchase 20,000 shares contingent
upon shareholder approval of the amendment and restatement of the Plan. On April
14, 2000, the last reported sale price of Tekgraf's common stock on the Nasdaq
SmallCap Market was $1.875 per share. As of March 31, 2000, the following
options had been granted since the adoption of the Plan:

- ---------------------------------------------------------------------------------------------- -----------------------
NAME NUMBER OF SHARES
- ---------------------------------------------------------------------------------------------- -----------------------
<S> <C>
William M. Rychel - President and Chief Executive Officer, Current Director and
Director Nominee 0
- ---------------------------------------------------------------------------------------------- -----------------------
Scott C. Barker - Vice President, Sales and Marketing 50,000
- ---------------------------------------------------------------------------------------------- -----------------------
Martyn L. Cooper - Chief Operating Officer 0
- ---------------------------------------------------------------------------------------------- -----------------------
Thomas L. Woolsey - Chief Information Officer 0
- ---------------------------------------------------------------------------------------------- -----------------------
W. Jeffrey Camp - Former Chief Financial Officer and Secretary 45,000
- ---------------------------------------------------------------------------------------------- -----------------------
Steven J. Carnevale - Current Director and Director Nominee 0
- ---------------------------------------------------------------------------------------------- -----------------------
Frank X. Dalton, Jr. - Current Director and Director Nominee 30,000
- ---------------------------------------------------------------------------------------------- -----------------------
Albert E. Sisto - Current Director and Director Nominee 30,000
- ---------------------------------------------------------------------------------------------- -----------------------
All current executive officers 150,000
- ---------------------------------------------------------------------------------------------- -----------------------
All current directors who are not executive officers 60,000
- ---------------------------------------------------------------------------------------------- -----------------------
All employees (other than current executive officers) 366,500
- ---------------------------------------------------------------------------------------------- -----------------------
</TABLE>
14

<PAGE>

TRANSFERABILITY

Generally, an option may not be sold, assigned or otherwise transferred
during its holder's lifetime, except by will, the laws of descent and
distribution, or a domestic relations order meeting certain IRS criteria.

TAX CONSEQUENCES

The following is a summary, based on current law, of some significant
federal income tax consequences of awards under the Plan. Participants are
advised to consult with their own tax advisor regarding the federal, state and
local tax consequences of the grant and exercise of an option.

Participants in the Plan do not recognize taxable income by reason of
the grant or vesting of an option, and Tekgraf does not receive a tax deduction
by reason of either event. At exercise, the federal tax consequences vary
depending on whether the award is an incentive stock option or a nonqualified
stock option.

INCENTIVE STOCK OPTIONS

Upon exercise of an incentive stock option, its holder does not
recognize taxable income, and Tekgraf does not receive a tax deduction. However,
the excess of the fair market value of Tekgraf common stock on the date of
exercise over the exercise price is an adjustment that increases alternative
minimum taxable income, the base upon which alternative minimum tax is computed.

If the shares purchased upon the exercise of an incentive stock option
are sold at a gain within two years from the date of grant, or within one year
after the option is exercised, then the difference, with certain adjustments,
between the fair market value of the stock at the date of exercise and the
exercise price will be considered ordinary income. Any additional gain will be
treated as a capital gain. If the shares are sold at a gain after they have been
held at least one year and more than two years after the grant date, any gain
will be treated as a long-term capital gain. Any loss recognized upon a taxable
disposition of the shares generally would be characterized as a capital loss.

NONQUALIFIED STOCK OPTIONS

Upon exercise of a nonqualified stock option, its holder recognizes
ordinary income in an amount equal to the difference between the fair market
value of Tekgraf common stock at the time of exercise and the exercise price.
Generally, Tekgraf is entitled to a corresponding tax deduction for compensation
income recognized by the holder. Upon the subsequent sale of the shares acquired
in the exercise, the holder will recognize a short-term or long-term capital
gain or loss, depending on the length of time he or she has held the shares.

PLAN AMENDMENT AND TERMINATION

The Plan will terminate in August 2006. The Board of Directors may
amend or terminate the Plan at any time. No amendment may adversely affect the
rights of an option holder with respect to options under the Plan without his or
her consent.

- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE AMENDMENT AND RESTATEMENT OF THE 1997 STOCK OPTION PLAN.
- -------------------------------------------------------------------------------

<PAGE>

INDEPENDENT PUBLIC ACCOUNTANTS

PricewaterhouseCoopers LLP served as our independent public
accounting firm in 1999. Representatives of PricewaterhouseCoopers will be
present at the Annual Meeting. They will have the opportunity to make a
statement if they so desire and to respond to appropriate questions. The
Board of Directors will consider proposals from various accounting firms,
including PricewaterhouseCoopers, to serve as our auditor for 2000.

EXECUTIVE OFFICERS

Following is certain information about the executive officers of
Tekgraf, based on information furnished by them.

SCOTT C. BARKER, 46, became Vice President, Sales and Marketing in May
1998, after we acquired Computer Graphics Technology, Inc. (CGT) in April 1998.
He served as President of CGT, which he founded, from April 1988 through April
1998.

MARTYN L. COOPER, 51, has been our Chief Operating Officer since
October 1997. Mr. Cooper was a Regional Sales Director from June 1997 until that
time. He served as a director from June 1997 through October 1998. Prior to
joining Tekgraf, Mr. Cooper was the President of tekgraf, Inc., which he founded
in 1986 and which was acquired by Tekgraf in 1997.

MARK C. LEWIS, 39, became President of CalGraph Technology Services,
Inc., a wholly owned subsidiary of Tekgraf, on November 30, 1999. Mr. Lewis was
formerly the Director of Business Development for CalGraph. From September 1987
until joining CalGraph, Mr. Lewis was the founder, CEO and President of Martec,
Inc., which was acquired by Tekgraf in 1998.

THOMAS M. MASON, 45, joined Tekgraf in March 2000 as Vice President of
Finance and Chief Financial Officer. From July 1997 until joining Tekgraf, Mr.
Mason served as Chief Financial Officer of The Segerdahl Corporation, a
commercial printer. Prior to that, from February through July 1997, he served as
Senior Vice President and Chief Financial Officer of Telular Corporation. For
the preceding 13 years, Mr. Mason held various finance and general management
positions with Bell & Howell Company.

THOMAS J. WOOLSEY, 51, has been our Chief Information Officer since
January 1998. From June 1997 until that time, Mr. Woolsey was a Regional Sales
Director. He served as a director from June 1997 until October 1998. Mr. Woolsey
served as the President and General Manager of Microsouth, Inc. from 1989 until
Tekgraf acquired Microsouth in June 1997.

<PAGE>

[LOGO]
<PAGE>

APPENDIX A
TEKGRAF, INC.

1997 STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE MARCH 26, 2000)

1. PURPOSE.

The purpose of this plan (the "Plan") is to secure for TEKGRAF,
INC. (the "Company") and its stockholders the benefits arising from capital
stock ownership by employees, officers and directors of, and consultants or
advisors to, the Company who are expected to contribute to the Company's
future growth and success. Except where the context otherwise requires, the
term "Company" shall include all present and future subsidiaries of the
Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended or replaced from time to time (the "Code"). Those
provisions of the Plan which make express reference to Section 422 shall
apply only to Incentive Stock Options (as that term is defined in the Plan).

2. TYPE OF OPTIONS AND ADMINISTRATION.

(a) Types of Options. Options granted pursuant to the Plan may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or nonqualified stock options which
are not intended to meet the requirements of Section 422 of the Code, as
determined by the Committee (as defined below).

(b) Administration. The Plan will be administered by a committee
(the "Committee") appointed by the Board of Directors of the Company
("Board"), whose construction and interpretation of the terms and provisions
of the Plan shall be final and conclusive. To the extent determined necessary
or desirable by the Board, the Committee shall consist of two or more members
of the Board, each of whom shall constitute both a "non-employee director"
within the meaning of Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") and an "outside
director" within the meaning of Code Section 162(m). The Committee may in
its sole discretion grant options to purchase shares of the Company's Class A
Common Stock, $.001 par value per share ("Common Stock") and issue shares
upon exercise of such options as provided in the Plan. The Committee shall
have authority, subject to the express provisions of the Plan, to construe
the respective option agreements and the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms
and provisions of the respective option agreements, which need not be
identical, and to make all other determinations in the judgment of the
Committee necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be
the sole and final judge of such expediency. No director or person acting
pursuant to authority delegated by the Committee shall be liable for any
action or

<PAGE>

determination under the Plan made in good faith. If at any time the Board has
not appointed a Committee under the Plan, the Board shall act as the
Committee.

3. ELIGIBILITY

Options may be granted to persons who are, at the time of grant,
employees, officers or directors of, or consultants or advisors to, the
Company provided, that Incentive Stock Options may only be granted to
individuals who are employees of the Company (within the meaning of Section
3401(c) of the Code). A person who has been granted an option may, if he or
she is otherwise eligible, be granted additional options if the Committee
shall so determine.

4. STOCK SUBJECT TO PLAN.

The stock subject to options granted under the Plan shall be shares
of authorized but unissued or reacquired Common Stock. Subject to adjustment
as provided in Section 15 below, (i) the maximum number of shares of Common
Stock of the Company which may be issued and sold under the Plan is 1,000,000
shares, and (ii) in no event shall the number of shares of Common Stock
underlying options awarded to any individual in any 12-month period exceed
300,000 shares. If an option granted under the Plan shall expire, terminate
or is cancelled for any reason without having been exercised in full, the
unpurchased shares subject to such option shall again be available for
subsequent option grants under the Plan.

5. FORMS OF OPTION AGREEMENTS.

As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Committee. Such option
agreements may differ among recipients.

6. PURCHASE PRICE.

(a) General. The purchase price per share of stock deliverable
upon the exercise of an option shall be determined by the Committee at the
time of grant of such option; provided, however, that in the case of an
Incentive Stock Option, the exercise price shall not be less than 100% of the
Fair Market Value (as hereinafter defined) of such stock, at the time of
grant of such option, or less than 110% of such Fair Market Value in the case
of options described in Section 11(b). "Fair Market Value" of a share of
Common Stock of the Company as of a specified date for the purposes of the
Plan shall mean the closing price of a share of the Common Stock on the
principal securities exchange on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if
no shares were traded on such immediately preceding day, or if the shares are
not traded on a securities exchange, Fair Market Value shall be deemed to be
the average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not
publicly traded, Fair Market Value of a share of

<PAGE>

Common Stock (including, in the case of any repurchase of shares, any
distributions with respect thereto which would be repurchased with the
shares) shall be determined in good faith by the Committee.

(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check
to the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i)
by delivery to the Company of shares of Common Stock of the Company that have
been held by the optionee at least six months having a Fair Market Value on
the date of exercise equal in amount to the exercise price of the options
being exercised, (ii) by any other means which the Committee determines are
consistent with the purpose of the Plan and with applicable laws and
regulations (including, without limitation, the provisions of Rule 16b-3 and
Regulation T promulgated by the Federal Reserve Board) or (iii) by any
combination of such methods of payment. Payment of the exercise price by
delivery of Common Stock then owned by the optionee may be made, if permitted
by the Committee, only if such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee.

7. OPTION PERIOD.

Subject to earlier termination as provided in the Plan, each option
and all rights thereunder shall expire on such date as determined by the
Board of Directors and set forth in the applicable option agreement,
provided, that such date shall not be later than (10) ten years after the
date on which the option is granted.

8. EXERCISE OF OPTIONS.

Each option granted under the Plan shall be exercisable either in
full or in installments at such time or times and during such period as shall
be set forth in the option agreement evidencing such option, subject to the
provisions of the Plan. If an option is not at the time of grant immediately
exercisable, the Committee may (i) in the agreement evidencing such option,
provide for the acceleration of the exercise date or dates of the subject
option upon the occurrence of specified events, and/or (ii) at any time prior
to the complete termination of an option, accelerate the exercise date or
dates of such option.

9. NONTRANSFERABILITY OF OPTIONS.

No option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution or pursuant to a domestic relations order that would satisfy the
applicable requirements of a qualified domestic relations order within the
meaning of Section 414(p) of the Code and the rules thereunder, if those
provisions were applicable to the Plan. An option may be exercised during the
lifetime of the optionee only by the optionee. In the event an optionee dies
during his employment by the Company or any of its subsidiaries, or during
the three-month period following the date of termination of such employment,
his option shall thereafter be exercisable, during the period specified in
the option agreement, by his

<PAGE>

executors or administrators to the full extent to which such option was
exercisable by the optionee at the time of his death during the periods set
forth in Section 10 or 11(d).

10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.

Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, an optionee may exercise
an option at any time within three (3) months following the termination of
the optionee's employment or other relationship with the Company or within
one (1) year if such termination was due to the death or disability (as
determined by the Committee) of the optionee, to the extent that such option
was exercisable at the optionee's termination of employment or other
relationship, but in no event later than the expiration date of the option.
If the termination of the optionee's employment or relationship with the
Company is for cause or is otherwise attributable to a breach by the optionee
of an employment or confidentiality or non-disclosure agreement, the option
shall expire immediately upon such termination. The Committee shall have the
power to determine what constitutes a termination for cause or a breach of
an employment or confidentiality or non-disclosure agreement, whether an
optionee has been terminated for cause or has breached such an agreement, and
the date upon which such termination for cause or breach occurs. Any such
determinations shall be final and conclusive and binding upon the optionee.
Unless the Committee determines otherwise, any portion of an option that is
not exercisable on the optionee's termination of employment or other
relationship with the Company will be forfeited on such termination date.

11. INCENTIVE STOCK OPTIONS.

Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and
conditions:

(a) Express Designation. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in
the option agreement covering such Incentive Stock Options.

(b) 10% Stockholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (after taking into
account the attribution of stock ownership rules of Section 424(d) of the
Code), then the following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:

(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the
Fair Market Value of one share of Common Stock at the time of grant;
and

(ii) the option exercise period shall not exceed five years
from the date of grant.

<PAGE>

(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not, in the aggregate, become exercisable for the first time in
any one calendar year for shares of Common Stock with an aggregate Fair
Market Value, as of the respective date or dates of grant, of more than
$100,000.

(d) Termination of Employees, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that:

(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an
employee of the Company (or within such lesser period as may be
specified in the applicable option agreement), provided, that the
agreement with respect to such option may designate a longer
exercise period and that the exercise after such three-month period
shall be treated as the exercise of a non-statutory option under the
Plan;

(ii) if the optionee dies while in the employ of the Company,
or within three months after the optionee ceases to be such an
employee, the Incentive Stock Option may be exercised by the person
to whom it is transferred by will or the laws of descent and
distribution within the period of one year after the date of death
(or within such lesser period as may be specified in the applicable
option agreement); and

(iii) if the optionee becomes disabled (within the meaning of
Section 22(e) (3) of the Code or any successor provisions thereto)
while in the employ of the Company, the Incentive Stock Option may
be exercised within the period of one year after the date the
optionee ceases to be such an employee because of such disability
(or within such lesser period as may be specified in the applicable
option agreement).

For all purposes of the Plan and any option granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no Incentive Stock Option may be
exercised after its expiration date. Unless determined otherwise by the
Committee, any portion of an Incentive Stock Option which is not exercisable
on the optionee's termination of employment with the Company shall be
forfeited. To the extent that an option which is intended to be an Incentive
Stock Option does not satisfy the requirements of Code Section 422, it shall
be treated as a nonqualified option.

12. ADDITIONAL PROVISIONS.

(a) Additional Option Provisions. The Committee may, in its sole
discretion, include additional provisions in option agreements covering
options granted under the

<PAGE>

Plan, including without limitation restrictions on transfer, repurchase
rights, rights of first refusal, commitments to pay cash bonuses, to make,
arrange for or guaranty loans or to transfer other property to optionees upon
exercise of options, or such other provisions as shall be determined by the
Committee; provided, that such additional provisions shall not be
inconsistent with any other term or condition of the Plan.

(b) Acceleration, Extension, Etc. The Committee may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under
the Plan may be exercised.

13. GENERAL RESTRICTIONS.

(a) Investment Representations. The Company may require any person
to whom an option is granted, as a condition of exercising such option, to
give written assurances in substance and form satisfactory to the Company to
the effect that such person is acquiring the Common Stock subject to the
option for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Common Stock.

(b) Compliance With Securities Laws. Each option shall be subject
to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares
subject to such option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory
body, or that the disclosure of non-public information or the satisfaction of
any other condition is necessary as a condition of, or in connection with the
issuance or purchase of shares thereunder, such option may not be exercised,
in whole or in part, unless such listing, registration, qualification,
consent, or approval, or satisfaction of such condition shall have been
effected or obtained on conditions acceptable to the Committee. Nothing
herein shall be deemed to require the Company to apply for or to obtain such
listing, registration or qualification, or to satisfy such condition.

14. RIGHTS AS A STOCKHOLDER.

The holder of an option shall have no rights as a stockholder with
respect to any shares covered by the option (including, without limitation,
any rights to receive dividends or non-cash distributions with respect to
such shares) until the date of issue of a stock certificate to him or her for
such shares. No adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.

<PAGE>

15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS, REORGANIZATIONS AND
RELATED TRANSACTIONS.

(a) Recapitalizations and Related Transactions. If, through or as a
result of any recapitalization, reclassification, stock dividend, stock
split, reverse stock split, spinoff or other similar transaction, (i) the
outstanding shares of Common Stock are increased, decreased or exchanged for
a different number or kind of shares or other securities of the Company, or
(ii) additional shares or new or different shares or other non-cash assets
are distributed with respect to such shares of Common Stock or other
securities, the Committee, in its sole discretion, shall make an appropriate
and proportionate adjustment in (x) the maximum number and kind of shares
reserved for issuance under the Plan, (y) the number and kind of shares or
other securities subject to any then outstanding options under the Plan, and
(z) the price for each share subject to any then outstanding options under
the Plan, without changing the aggregate purchase price as to which such
options remain exercisable.

(b) Reorganization, Merger and Related Transactions. If the Company
shall be the surviving corporation in any reorganization, merger or
consolidation of the Company with one or more other corporations, any then
outstanding option granted pursuant to the Plan shall pertain to and apply to
the securities to which a holder of the number of shares of Common Stock
subject to such options would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the purchase price as to which such options may be exercised so
that the aggregate purchase price as to which such options may be exercised
shall be the same as the aggregate purchase price as to which such options
may be exercised for the shares remaining subject to the options
immediately prior to such reorganization, merger, or consolidation. For
purposes of this Section 15 and Section 16, the Company will be treated as
the "surviving corporation" in a merger, consolidation or similar transaction
if substantially all of the individuals and entities who were the beneficial
owners of the voting securities of the Company immediately prior to the
transaction continue to own, directly or indirectly, immediately after the
transaction at least 60% of the outstanding shares of voting securities of
the corporation resulting from the transaction.

(c) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.

16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.

(a) General. In the event of a consolidation or merger in which the
Company is not the surviving corporation, or sale of all or substantially all
of the assets of the Company in which outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of the Company
(collectively, a "Corporate Transaction"), the Committee, or the board of
directors of any corporation assuming the obligations of the Company, may,

<PAGE>

in its discretion, take any one or more of the following actions, as to
outstanding options: (i) provide that such options shall be assumed, or
equivalent options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), provided that any such options
substituted for Incentive Stock Options shall meet the requirements of
Section 424(a) of the Code, (ii) upon written notice to the optionees,
provide that all unexercised options will terminate immediately prior to the
consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice, (iii) in the event of a
Corporate Transaction under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each
share surrendered in the Corporate Transaction (the "Transaction Price"),
make or provide for a cash payment to the optionees equal to the difference
between (A) the Transaction Price times the number of shares of Common Stock
subject to such outstanding options (to the extent then exercisable at prices
not in excess of the Transaction Price) and (B) the aggregate exercise price
of all such outstanding options in exchange for the termination of such
options, and (iv) provide that all or any outstanding options shall become
exercisable in full immediately prior to such event.

(b) Substitute Options. The Company may grant options under the
Plan in substitution for options held by employees of another corporation who
become employees of the Company, or a subsidiary of the Company, as the
result of a merger or consolidation of the employing corporation with the
Company or a subsidiary of the Company, or as a result of the acquisition by
the Company, or one of its subsidiaries, of property or stock of the
employing corporation. The Company may direct that substitute options be
granted on such terms and conditions as the Committee considers appropriate
in the circumstances.

17. NO SPECIAL EMPLOYMENT RIGHTS.

Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment
by the Company or interfere in any way with the right of the Company at any
time to terminate such employment or to increase or decrease the compensation
of the optionee.

18. OTHER EMPLOYEE BENEFITS.

Except as to plans which by their terms expressly include such
amounts as compensation, the amount of any compensation deemed to be received
by an employee as a result of the exercise of an option or the sale of shares
received upon such exercise will not constitute compensation with respect to
which any other employee benefits of such employee are determined, including,
without limitation, benefits under any bonus, pension, profit-sharing, life
insurance or salary continuation plan, except as otherwise specifically
determined by the Board of Directors.

19. AMENDMENT OF THE PLAN.

The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect; provided, however, subject to
Sections 15 and 16 (relating to

<PAGE>

adjustments to shares), no such modification or amendment shall, without the
optionee's consent, adversely affect the rights of such optionee with respect
to options previously granted to him or her under the Plan.

20. WITHHOLDING.

(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon
exercise of options under the Plan. Subject to the prior approval of the
Committee, which may be withheld by the Committee in its sole discretion, the
optionee may elect to satisfy the minimum tax withholding obligations
required by law, in whole or in part, (i) by causing the Company to withhold
shares of Common Stock otherwise issuable pursuant to the exercise of an
option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a Fair
Market Value equal to such withholding obligation as of the date that the
amount of tax to be withheld is to be determined. An optionee who has made an
election pursuant to this Section 20(a) may only satisfy his or her
withholding obligation with shares of Common Stock which are not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

(b) The acceptance of shares of Common Stock upon exercise of an
Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Company if any or all of such shares are disposed of by the
optionee within two years from the date the option was granted or within one
year from the date the shares were issued to the optionee pursuant to the
exercise of the option, and (ii) if required by law, to remit to the Company,
at the time of and in the case of any such disposition, an amount sufficient
to satisfy the Company's federal, state and local withholding tax obligations
with respect to such disposition, whether or not, as to both (i) and (ii),
the optionee is in the employ of the Company at the time of such disposition.

21. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.

The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant
in substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise
price per share which may be lower or higher than the exercise price per
share of the cancelled options or (ii) the amendment of the terms of any and
all outstanding options under the Plan to provide an option exercise price
per share which is higher or lower than the then-current exercise price per
share of such outstanding options.

22. EFFECTIVE DATE AND DURATION OF THE PLAN.

(a) Effective Date. This amendment and restatement of the Plan
shall become effective when adopted by the Board of Directors, subject to the
approval of the Company's stockholders to the extent so provided by the Board.

<PAGE>

(b) Termination. Unless sooner terminated in accordance with
Section 16, the Plan shall terminate upon the earlier of (i) the close of
business on the day next preceding the tenth anniversary of the date of its
initial adoption by the Board, or (ii) the date on which all shares available
for issuance under the Plan shall have been issued pursuant to the exercise
or cancellation of options granted under the Plan. If the date of termination
is determined under (i) above, then options outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.

23. PROVISION FOR FOREIGN PARTICIPANTS.

The Committee may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities,
currency, employee benefit or other matters.

24. GOVERNING LAW.

The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.

Adopted by the Board of Directors on August 7, 1996, amended on
May 26, 1999, amended and restated on March 26, 2000.

<PAGE>

TEKGRAF, INC.

980 Corporate Woods Parkway, Vernon Hills, Illinois 60061

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints William M. Rychel and Thomas M. Mason as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated on the reverse side, all shares of
Class A Common Stock of Tekgraf, Inc. held of record by the undersigned on
April 14, 2000 at the Annual Meeting of Shareholders to be held on May 25,
2000 or any adjournment thereof.

(To be signed on reverse side)

<PAGE>

Please date, sign and mail your
proxy card back as soon as possible!

Annual Meeting of Shareholders
TEKGRAF, INC.

May 25, 2000

( Please Detach and Mail in the Envelope Provided )

/x/ Please mark your
vote as in this
example.

WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION OF // // Nominees: Steven J. Carnevale 2. PROPOSAL to amend and // // //
DIRECTORS: Frank X. Dalton, Jr. restate the Tekgraf, Inc.
William M. Rychel 1997 Stock Option Plan.
Albert E. Sisto
3. IN THEIR DISCRETION, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.

FOR: except vote withheld from the following nominees:

This Proxy when properly executed will be voted in the
- -------------------------------------------------------- manner directed herein by the undersigned shareholder.
If no direction is made, this Proxy will be voted FOR the
election of all listed Directors and FOR Proposal 2.

Please Mark, Date and Return the Proxy Card promptly using
the enclosed envelope.

Signature _________________________________ Date: ________, 2000 Signature ________________________________ Date:________,2000

</TABLE>

NOTE: Please sign exactly as name or names appear hereon. Where more than
one owner is shown on a stock certificate, each owner should sign.
Persons signing in a fiduciary or representative capacity shall give
full title. If a corporation, please sign in full corporate name by
authorized officer. If a partnership, please sign in partnership name
by authorized person. PLEASE MARK, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.