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[GTSI Logo]
GOVERNMENT TECHNOLOGY SERVICES, INC.
3901 STONECROFT BOULEVARD
CHANTILLY, VIRGINIA 20151-0808
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders
(the "Annual Meeting") of Government Technology Services, Inc., a Delaware
corporation (the "Company"), will be held at 9:00 a.m. on Tuesday, May 18,
1999, at the Company's headquarters located at 3901 Stonecroft Boulevard in
Chantilly, Virginia, for the following purposes, each as more fully
described in the attached Proxy Statement:
1. To elect eight directors to serve for the ensuing year.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
Only record holders of common stock at the close of business on March
22, 1999 are entitled to notice of, and to vote at, the Annual Meeting and
at any adjournment(s) thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting in person,
to ensure your representation at the Annual Meeting, please mark, sign,
date and return the enclosed proxy card as promptly as possible. IF YOU
RECEIVED YOUR PROXY CARD FROM ADP, YOU MAY ALSO VOTE YOUR SHARES BY
TELEPHONE OR VIA THE INTERNET AT WWW.PROXYVOTE.COM. PLEASE SEE THE
INSTRUCTIONS APPEARING ON YOUR ADP PROXY CARD. Any stockholder attending
the Annual Meeting may vote in person even if such stockholder has returned
a proxy.
By Order of the Board of Directors
Judith B. Kassel
Corporate Secretary
Chantilly, Virginia
April 5, 1999
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1
[GTSI Logo]
GOVERNMENT TECHNOLOGY SERVICES, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors (the "Board") of Government Technology Services, Inc. ("GTSI" or
the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Tuesday, May 18, 1999 at 9:00 a.m., Eastern Time,
or at any adjournment(s) thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the Company's headquarters located at 3901
Stonecroft Boulevard in Chantilly, Virginia.
These proxy solicitation materials are being first mailed on or about
April 5, 1999 to all stockholders entitled to vote at the Annual Meeting.
Only stockholders of record at the close of business on March 22, 1999
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the Record Date, 9,806,084 shares of the Company's Common
Stock ("Common Stock") were issued and, after giving effect to 606,594
shares held in treasury, 9,199,490 shares were outstanding.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company's
Corporate Secretary a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Annual Meeting and voting in
person.
VOTING AND SOLICITATION
As to all matters to be voted upon at the Annual 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 shares
of Common Stock entitled to vote constitutes a quorum for the conduct of
business at the Annual Meeting. If a quorum is present at the Annual
Meeting, the nominees for director receiving the highest number of votes up
to the number of directors to be elected will be elected. Abstentions are
included in the determination of the number of shares present and entitled
to vote for purposes of determining the presence of a quorum. Broker non-
votes are counted as shares that are present and entitled to vote for
purposes of determining a quorum. If a broker indicates on the proxy that
it does not have discretionary authority to vote on a particular matter as
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2
to certain shares, those shares will be counted for purposes of determining
the presence of a quorum but will not be treated as present and entitled to
vote with respect to that matter.
IF A STOCKHOLDER RETURNS A PROXY AND NO INSTRUCTIONS ARE GIVEN, SUCH
SHARES WILL BE VOTED "FOR" EACH NOMINEE AS DIRECTOR.
The cost of this solicitation will be borne by the Company. The
Company has retained the services of Corporate Investor Communications,
Inc. to distribute proxy materials to brokerage houses, banks, custodians
and other nominee holders. The estimated cost of such services is
approximately $4,500 including out-of-pocket expenses. Pursuant to
Securities and Exchange Commission ("SEC") rules, the Company will
reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may be solicited personally or by telephone or
telegram by certain of the Company's directors, officers and regular
employees, without additional compensation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's annual meeting of
stockholders to be held in 2000, including the nomination of persons to
serve on the Board, must be received by the Company's Secretary not later
than December 7, 1999, for inclusion in the proxy statement for that
meeting. Stockholders who wish to present a proposal at the Company's
annual meeting to be held in 2000 which has not been included in the
Company's proxy materials must submit such proposal in writing to the
Company in care of the Secretary of the Company. Any such proposal
received by the Secretary of the Company on or after February 18, 2000
shall be considered untimely under the provisions of the Company's bylaws
governing nominations and the proposal of other business to be considered
by stock holders at the Company's annual meetings. In addition, the
Company's bylaws contain further requirements relating to timing and
content of the notice which stockholders must provide to the Secretary of
the Company for any nomination or other business to be properly presented
at an annual meeting. It is recommended that stockholders submitting
proposals direct them to the Company's Secretary via certified mail, return
receipt requested, to ensure timely delivery. No stockholder proposals
were received with respect to the Annual Meeting scheduled for May 18,
1999.
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3
FORWARD-LOOKING STATEMENTS
This Proxy Statement, including certain documents incorporated herein
by reference, contains "forward- looking" statements that involve certain
risks and uncertainties. Actual results may differ materially from results
express or implied by such forward-looking statements, based on numerous
factors. Such factors include, but are not limited to, competition in the
government markets, buying patterns of the Company's customers, general
economic and political conditions, results of negotiations with lenders
concerning the Company's credit facilities, changes in laws and government
procurement regulations, and other risks described in this Proxy Statement
and in the Company's other SEC filings. For these statements, the Company
claims the protection of the safe harbor for forward-looking statements
under the Private Securities Litigation Reform Act of 1995.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
Eight directors will be elected at the Annual Meeting by the holders
of Common Stock as of the Record Date. Unless otherwise instructed, proxy
holders will vote the proxies received by them for the Company's eight
nominees named below, all of whom are currently directors of the Company.
If any nominee of the Company is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for any
nominee who will be designated by the present Board to fill the vacancy.
It is not expected that any nominee will be unable or will decline to serve
as a director. The term of office of each person elected as a director
will continue until the next annual meeting of stockholders and such time
as his or her successor is duly elected and qualified, or until his or her
earlier resignation, removal or death.
The names of the nominees, and certain information about them, are set
forth below:
NAME AGE POSITION(S) WITH THE COMPANY
- ----------------------- --- ----------------------------
Tania Amochaev 49 Director
Gerald W. Ebker 60 Director
Lee Johnson 71 Director
Steven Kelman, Ph.D. 50 Director
James J. Leto 55 Director
Lawrence J. Schoenberg 66 Director and Chairman Emeritus
John M. Toups 73 Director
Dendy Young 51 Chairman of the Board and
Chief Executive Officer
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4
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
There is no family relationship between any director or executive
officer of the Company and any other director or executive officer of the
Company.
Ms. Amochaev has been a director since October 1994. Since February
1997, she has been the Chair of the Executive Committee of QuickResponse
Services, Inc., the leading provider of demand chain management services
for the retail industry, where she served as President from May 1992 until
February 1997, and additionally as Chief Executive Officer from May 1993
until February 1997. From May 1988 to March 1992, she was Chief Executive
Officer of Natural Language, Inc., a client server database tool software
company. Ms. Amochaev is also a director of QuickResponse Services, Inc.;
Symantec Corporation; and Walker Interactive Systems, Inc.
Mr. Ebker has been a director since April 1994 and served as Chief
Executive Officer from November 1 to December 18, 1995. From March 1963
until his retirement in December 1993, he held a number of executive
management positions with various subsidiaries of IBM Corporation, retiring
as IBM Vice President and Chairman and Chief Executive Officer of IBM
Federal Systems Company, a government systems integrator.
Mr. Johnson has been a director since March 1996. Since March 1984,
he has been the President of Federal Airways Corporation, a provider of
highly modified, special mission high altitude aircraft to civilian and
defense agencies. From February 1986 to August 1994, Mr. Johnson served as
Chairman of the Board of Falcon Microsystems, Inc., a government
microcomputer reseller founded by Mr. Young and acquired by the Company in
August 1994 ("Falcon").
Dr. Kelman has been a director since October 1997. Since September
1997, he has been the Weather head Professor of Public Management at
Harvard University's John F. Kennedy School of Government. From November
1993 to September 1997, Dr. Kelman served as Administrator of the Office of
Federal Procurement Policy at the Office of Management and Budget. From
1986 to 1993, he was Professor of Public Policy at Harvard. Dr. Kelman is
also a director of Federal Sources, Inc.
Mr. Leto has been a director since March 1996. Since June 1996, he
has been the Chairman, President and Chief Executive Officer of Treev, Inc.
(formerly known as Network Imaging Corporation), a developer and marketer
of software used to manage client/server, object-oriented, and
enterprise-wide information. From January 1992 until February 1996, he was
Chairman and Chief Executive Officer of PRC, Inc. ("PRC"), a provider of
scientific and technology-based systems, products and services to
government and commercial clients around the world. Mr. Leto is also a
director of Federal Sources, Inc.
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5
Mr. Schoenberg has been a director since December 1991 and served as
Chairman of the Board from February 1995 until his election as Chairman
Emeritus in May 1998. He also previously served as a director of the
Company from March 1990 to December 1990, and as Chairman of the Board from
May 1990 to December 1990. Mr. Schoenberg served as Chief Executive
Officer and Chairman of the Board of Directors of AGS Computers, Inc. from
January 1967 until his retirement in December 1990, and as Chairman of its
Executive Committee from January 1991 to December 1991. Mr. Schoenberg is
also a director of Sungard Data Services, Inc.; Merisel, Inc.; and Cellular
Technical Services Company, Inc.
Mr. Toups has been a director since October 1997. From January 1978
until his retirement in February 1987, Mr. Toups was President and CEO of
PRC. Mr. Toups is also a director of NVR, Inc.; CACI, Inc.; Halifax
Corporation; TelePad Corporation; and Thermatrix, Inc.
Mr. Young has served as Chairman of the Board since May 1998 and has
been Chief Executive Officer and a director since December 1995. From
December 1995 to May 1998, he also served as President. From August 1994
until joining the Company, Mr. Young was Principal and Consultant of The
Exeter Group, a management consulting firm he founded. From January 1989
until August 1994, he served as President, Chief Executive Officer and a
director of Falcon.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1998, the Board held a total of five meetings, and each
director of the Company attended at least 75% of the meetings of the Board
held during the period that he or she was a director and at least 75% of
all meetings held by all committees of the Board on which he or she served.
The Board has standing audit, compensation and nominating committees, as
discussed below.
The Audit Committee is currently comprised of Ms. Amochaev, Mr.
Johnson (who also serves as Chairperson) and Mr. Schoenberg, and did not
meet formally during 1998; however, committee business was conducted
through committee member discussions concerning audit and other Company
financial matters during meetings of the entire Board as well as telephone
conferences among the Committee members, the Company's financial personnel
and the Company's independent accountants. The Audit Committee selects the
Company's independent accountants; reviews reports from accountants and
from the Company's financial officers; reviews transactions relating to
officers and directors; assesses the Company's quality of financial
reporting and accounting principles as it relates to the financial
condition of the Company; monitors compliance with applicable laws and
regulations that may significantly impact the Company, including Federal
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6
procurement and employment laws; monitors compliance with the Company's
code of ethical conduct; and generally performs functions related to the
financial condition and policies of the Company.
The Compensation Committee is currently comprised of Messrs. Ebker,
Leto (who also serves as Chair person) and Toups, and did not meet formally
during 1998; however, committee business was conducted through committee
member discussions concerning compensation matters during meetings of the
entire Board as well as through telephone conferences, and formalized using
forms of unanimous written consent. See "Executive Compensation and Other
Information -- Compensation Committee Interlocks and Insider Participation"
and "Compensation Committee Report on Executive Compensation." The
Compensation Committee's responsibilities include administering the
Company's stock option plans (including determining the persons to whom
options are granted and the terms of such options), the Company's Employee
Stock Purchase Plan ("ESPP"), and the Company's 401(k) Plan; advising the
Board on employee compensation matters, including executive bonus plans;
and performing such other duties regarding compensation matters as may be
delegated to it by the Board from time to time.
The Nominating Committee is currently comprised of Messrs. Kelman and
Young, and did not meet formally during 1998; however, committee business
was conducted through committee member discussions concerning nomination
matters during meetings of the entire Board as well as through telephone
conferences. The Nominating Committee's responsibilities are to seek,
evaluate and recommend to the Board qualified individuals for election to
the Board by the stockholders, or by the Board to fill vacancies thereon
whenever vacancies occur; advise the Board on matters pertaining to the
size and composition of the Board; and consider nominees for the Board
whose names are timely submitted by stockholders in writing to the
Chairperson of the Nominating Committee accompanied by such information
regarding the nominee as would be required under SEC rules if the
stockholder were soliciting proxies with regard to the election of such
nominee.
COMPENSATION OF DIRECTORS
All non-employee directors of the Company receive automatic grants of
stock options under the Company's 1996 Stock Option Plan ("1996 Plan") of
15,000 shares upon initial election (30,000 in the case of the non-employee
Chairperson of the Board), and upon each subsequent annual re-election, to
the Board. Each such automatic option grant vests over a 12-month period,
with the first vesting occurring at the end of the month in which the date
of grant occurred. Such options are granted at exercise prices equal to
the closing price of Common Stock on The Nasdaq Stock Market on the date
of grant. As of March 1, 1999, options to purchase an aggregate of 355,000
shares had been granted to the Company's seven non-employee directors under
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7
the 1996 Plan, at exercise prices ranging from $4.88 to $5.44 per share.
Non-employee directors of the Company are not eligible to participate in
the Company's other stock option plans or the ESPP. Directors of the
Company do not receive any other compensation for their service on the
Board or any committee thereof, but are reimbursed for their reasonable
out-of-pocket expenses incurred in association with the performance of
their duties.
In January 1998, the Company entered into an agreement with Federal
Airways Corporation, a company of which Mr. Johnson is the owner and
president, whereby it would be compensated by the Company for his services
as primary negotiator in the Company's February 1998 acquisition of the
Technology Systems Division of BTG, Inc., and for ongoing matters related
thereto, as follows: (1) a daily fee of $1,500 for each full day devoted
to the acquisition effort and for ongoing matters related thereto; (2) a
cash payment of $300,000 payable after the closing; (3) an option to
purchase 50,000 shares of Common Stock at $5.25 per share (i.e., the
closing price of Common Stock on the date of grant, which coincided with
the date of execution of the initial letter of intent with BTG, Inc. for
the acquisition), fully vested and exercisable upon grant for a term of 10
years; and (4) reimbursement of reasonable and documented expenses incurred
in connection with such efforts. During the period from January 1, 1998
through March 1, 1999, Federal Airways had been paid an aggregate of
$476,852.48 under the foregoing agreement. In addition, the Company and
Federal Airways entered into a consulting agreement which provides for the
Company to pay a daily fee of $1,500 (not to exceed an aggregate of $50,000
per year) for Mr. Johnson's consulting services on general company business
matters. During the period from January 1, 1998 through March 1, 1999, no
payments have been made to Federal Airways under the agreement, which began
in January 1997 and will continue until Mr. Johnson ceases to be a director
or until either party terminates the agreement.
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8
COMMON STOCK OWNERSHIP OF
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of Common Stock as of March 1, 1999 (except as noted
otherwise) by: (i) each person who is known to own beneficially more than
5% of the outstanding shares of Common Stock; (ii) each of the Company's
directors who owns Common Stock; (iii) each of the executive officers
named in the Summary Compensation Table on page 12; and (iv) all current
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER (1) OWNED CLASS
- ------------------------------ ------------- -------
<S> <C> <C>
BTG, Inc. 1,300,000 12.0%
3877 Fairfax Ridge Road
Fairfax, VA 22030-7448
Linwood A. Lacy, Jr. 1,239,700 11.5
c/o Solomon, Ward, Seidenwurm & Smith
401 B Street, Suite 1200
San Diego, CA 92101
Dendy Young (2) 904,130 8.4
Shufro, Rose & Ehrman, LLC 827,780 7.7
745 Fifth Avenue
New York, NY 10151-2600
Hal Lashlee (3) 715,500 6.6
P.O. Box 7680
491 Alpine View
Incline Village, NV 89450
Franklin Resources, Inc. 685,800 6.3
777 Mariners Island Blvd.
P.O. Box 777
San Mateo, CA 94403-7777
Lawrence J. Schoenberg (4) 288,002 2.7
Gerald W. Ebker (5) 176,200 1.6
Lee Johnson (6) 100,000 *
William E. Johnson, Jr. (7) 79,666 *
Stephen L. Waechter (8) 72,954 *
Tania Amochaev (9) 59,000 *
James J. Leto (10) 51,000 *
Arthur D. Lambert (11) 40,500 *
Steven Kelman, Ph.D. (12) 25,000 *
John M. Toups (13) 25,000 *
Joel A. Lipkin, Ph.D. (14) 20,000 *
All current directors and executive
officers as a group (22 persons) (15) 2,038,469 18.8%
* Less than one percent.
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9
(1) Such persons have sole voting and investment power with respect to all shares of common stock shown as being beneficially
owned by them, subject to community property laws, where applicable, and the information contained in the footnotes to this
table.
(2) Includes 760,000 shares for which options are exercisable or become exercisable within 60 days after March 1, 1998, and 830
shares held in the name of Mr. Young's minor children.
(3) To the Company's knowledge, includes 500,000 and 100,000 shares held by UZONA II and UZONA III, respectively, Nevada
corporations of which Mr. Lashlee is the sole director and owns 100% of the voting stock. To the Company's knowledge, all of
the non-voting interest in UZONA III is held by Lou Ann Barton, the mother of Mr. Lashlee's minor children.
(4) Includes 81,000 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(5) Includes 104,000 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(6) Includes 95,000 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(7) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(8) Includes 66,666 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(9) Includes 54,000 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(10) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(11) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(12) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(13) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(14) Consists of shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
(15) Includes 1,618,229 shares for which options are exercisable or become exercisable within 60 days after March 1, 1999.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the SEC
reports concerning their beneficial ownership of the Company's equity
securities. Pursuant to Item 405 of Regulation S-K, the Company has an
affirmative duty to provide proxy statement disclosure of "insiders" who
do not timely file such reports. To the knowledge of the Company, based
solely on its review of the copies of such forms received by it from its
directors, officers and greater than 10% beneficial owners, Messrs. Ebker
and Zelinger each filed on an untimely timely basis one report, each
containing one transaction relating to Common Stock beneficially owned by
them.
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10
EXECUTIVE OFFICERS
The executive officers of the Company, and certain information about
each of them, are as follows:
NAME AGE TITLE
- ----------------------- --- ----------------------------------------
Dendy Young 51 Chairman of the Board and
Chief Executive Officer
Michael E. Berman 45 Senior Vice President, Sales
William E. Johnson, Jr. 58 Senior Vice President, Operations
Stephen L. Waechter 48 Senior Vice President and
Chief Financial Officer (until
April 12, 1999)
Robert D. Russell 59 Senior Vice President and
Chief Financial Officer (beginning
no later than April 15, 1999)
Dennis G. Defensor 46 Vice President, Web Commerce
John H. Demmon 42 Vice President and
Chief Information Officer
Joseph J. Draham, Jr. 51 Vice President, Marketing &
Congressional Affairs
Kenneth B. Grimsley 36 Vice President, Sales Operations
Judith B. Kassel, Esq. 41 Vice President & General Counsel, and
Corporate Secretary
Joel A. Lipkin, Ph.D. 45 Vice President, Business Development
Mark P. Noftsinger 50 Vice President, Corporate Financial
Planning and Analysis
Mark A. Smith 40 Vice President, Purchasing
Michelle F. Tutt 40 Vice President, Human Resources
J. David Weaver 33 Vice President, Operations
Mark A. Zelinger 47 Vice President, Vendor Relations
and Product Marketing
Officers are appointed by and serve at the discretion of the Board or,
with respect to officers at the Vice President level, the Chief Executive
Officer.
For information concerning Mr. Young, see "Election of Directors --
Nominees."
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11
Mr. Berman joined the Company in February 1999 as Senior Vice
President, Sales. From November 1994 until joining the Company, he served
as Vice President, Business Development for NCR Government Systems
Corporation, a world leader in scalable data warehouses, networked
computing and server enabling software. From April 1992 to November 1994,
Mr. Berman served as Vice President, Sales and Marketing for PRC.
Mr. Johnson joined the Company in August 1994 as a result of the
Company's acquisition of Falcon. He served as Vice President, Product
Management from October 1994 to June 1995; as Vice President, Purchasing &
Distribution from June 1995 to January 1996; and as Vice President,
Operations from January 1996 until his promotion to Senior Vice President,
Operations in October 1997. From February 1988 until joining the Company,
he served in various inventory management positions, most recently as
Senior Director of Distribution, at Falcon.
Mr. Waechter (who is leaving the Company effective April 12, 1999)
joined the Company in December 1997, serving as Vice President and Chief
Financial Officer until his promotion in March 1998 to Senior Vice
President and Chief Financial Officer. From September 1996 until joining
the Company, he served as Chief Financial Officer for the Vincam Group,
Inc., a professional employers' organization. From September 1993 to
September 1996, he served as Chief Financial Officer for Applied Bioscience
International, Inc., a contract research organization.
Mr. Russell will be joining the Company no later than April 15, 1999,
as Senior Vice President and Chief Financial Officer. From May 1995 until
joining the Company, he served as Vice President, Treasurer & Chief
Financial Officer for TelePad Corporation, a provider of mobile computer
integration services. From August 1994 to May 1995, Mr. Russell was a
consultant to the Company. From April 1986 to August 1994, he served as
Vice President, Finance and Administration, Secretary and Treasurer for
Falcon.
Mr. Defensor joined the Company in October 1997 as Vice President,
Marketing Communications. From February 1994 to March 1997, he was
President and Chief Executive Officer of TerraGlyph Interactive Studios,
Inc., a developer and producer of feature film animation-quality
edutainment software products. From March 1993 to February 1994, Mr.
Defensor was President and Chief Executive Officer of ICOM Simulations,
Inc., a software development company.
Mr. Demmon joined the Company in February 1998 as Director,
Information Technology as a result of the Company's acquisition of the
Technology Systems Division of BTG, Inc., where he served as Director,
Business Information Systems from October 1995 to February 1998. From
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12
December 1992 until its October 1995 acquisition by BTG, Mr. Demmon served
as Director, Operations for Concept Automation, Inc., a reseller of
microcomputer products and services to the government.
Mr. Draham joined the Company in November 1998 as Vice President,
Marketing & Congressional Affairs. From July 1991 until joining the
Company, he served as Vice President, Marketing for EDS, a manufacturer of
computer hardware and peripherals.
Mr. Grimsley joined the Company in August 1994 as a result of the
Company's acquisition of Falcon and served in various sales management
positions until his appointment in March 1998 as Vice President, Sales
Operations. From November 1987 until joining the Company, he served in
various sales management positions, most recently as Special Project
Manager, at Falcon.
Ms. Kassel joined the Company in November 1991 and served in various
legal positions until her appointment in February 1998 as Vice President &
General Counsel. She has served in the additional capacity of Corporate
Secretary since November 1997 and previously served as an Assistant
Corporate Secretary from May 1996 to November 1997.
Mr. Lipkin joined the Company in March 1997 as Vice President,
Business Development. From March 1987 to January 1997, he was employed by
Zenith Data Systems, an integrator and reseller of microcomputer products
and services to the Government, where he served in various business
management positions, including serving as Vice President, Systems
Integration from August 1991 to January 1997.
Mr. Noftsinger joined the Company in February 1998 as Vice President,
Corporate Financial Planning and Analysis, as a result of the Company's
acquisition of the Technology Systems Division of BTG, Inc., where he
served as Vice President of Finance from October 1995 to February 1998.
From September 1990 until its October 1995 acquisition by BTG, Mr.
Noftsinger served as Vice President of Finance and Chief Financial Officer
for Concept Automation, Inc., a reseller of microcomputer products and
services to the government.
Mr. Smith joined the Company in August 1994 as a result of the
Company's acquisition of Falcon, and served as Director of Purchasing until
his appointment in December 1997 as Vice President, Purchasing. From July
1993 until joining the Company, he served as Director of Purchasing for
Falcon.
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13
Ms. Tutt joined the Company in December 1987 and served in various
human resources management positions until her appointment in February 1998
as Vice President, Human Resources.
Mr. Weaver joined the Company in February 1998 as Vice President,
Operations, as a result of the Company's acquisition of the Technology
Systems Division of BTG, Inc., where he served as Vice President,
Operations from September 1997 until joining the Company. From January
1996 to September 1997, Mr. Weaver served as Manager, Transportation and
Distribution for Monarch Marking Systems, a manufacturer of bar code
printing and scanning equipment. He served as Product Distribution Manager
for Legent Corporation, a software developer and reseller, from May 1994
until its acquisition by Computer Associates International in August 1995,
and continued to serve in the same capacity for Computer Associates until
October 1995. From July 1984 to May 1994, Mr. Weaver served as Operations
Manager for Merchandise Warehouse Company, a provider of commercial
warehousing and related services.
Mr. Zelinger joined the Company in November 1998 as Vice President,
Vendor Relations. From April 1998 until joining the Company, he served as
Vice President, Sales for Atlantic Duncans International, a provider of
enterprise resource planning in information technology solutions. From
April 1996 to April 1998, Mr. Zelinger served as Director of Marketing for
BTG, Inc. From October 1994 to April 1996, he served as Vice President,
Field Operations for FCP Technologies, Inc., a microcomputer systems
integrator.
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14
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the three years
ended December 31, 1998 concerning compensation paid or accrued by the
Company to or on behalf of: (i) the Chief Executive Officer ("CEO"); and
(ii) the four most highly compensated executive officers other than the CEO
whose compensation during 1998 exceeded $100,000 (collectively, the "Named
Executive Officers"):
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LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- -----------------------
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
($)(1) ($)(2) ($)(3) ($) (#) ($)
- --------------------------- ---- --------- --------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dendy Young 1998 $ 310,374 $ 69,405 $ 0 $ 0 0 $ 150,000(4)
Chairman and 1997 1 0 0 0 0 323,077(4)
Chief Executive Officer 1996 1 0 0 0 0 400,000(4)
Stephen L. Waechter (5) 1998 212,096 71,489(6) 0 0 0 0
Senior Vice President and 1997 6,308(7) 0 0 0 100,000 0
Chief Financial Officer 1996 0 0 0 0 0 0
William E. Johnson, Jr. 1998 181,846 73,381 0 0 20,000 0
Senior Vice President, 1997 123,654 8,625 0 0 40,000 0
Operations 1996 115,000 0 0 0 10,000 0
Joel A. Lipkin, Ph.D. 1998 155,073 61,961 0 0 0 0
Vice President, 1997 116,558(7) 0 0 0 50,000 0
Business Development 1996 0 0 0 0 0 0
Arthur D. Lambert 1998 159,255 41,345 0 0 0 0
Vice President, 1997 145,000 105,556(8) 0 0 0 0
Field Sales 1996 9,365(7) 0 0 0 90,000 0
(1) Includes amounts, if any, deferred by the Named Executive Officer pursuant to the Company's 401(k) plan.
(2) Bonuses under any Executive Bonus Plan are based on corporate and individual performance. See "Compensation Committee Report
on Executive Compensation -- Executive Bonus Plan."
(3) Pursuant to SEC rules, perquisites not exceeding the lesser of $50,000 or 10% of a Named Executive Officer's combined salary
and bonus are not required to be reported.
(4) Consists of payments under the August 16, 1994 Consulting and Non-Competition Agreement entered into between Mr. Young and
the Company in connection with the August 1994 Falcon acquisition.
(5) Mr. Waechter is leaving the Company effective April 12, 1999.
(6) Includes $48,493 payable under the 1997 Executive Bonus Plan, a $2,996 "spot" bonus and $20,000 payable in connection with
Mr. Waechter's acceptance of Company employment.
(7) Represents compensation for that portion of the year in which the officer commenced employment with the Company.
(8) Includes $15,000 payable under the 1997 Executive Bonus Plan and $90,556 payable in connection with Mr. Lambert's acceptance
of Company employment.
/TABLE
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15
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options made during the year ended December 31, 1998 to each of the Named
Executive Officers:
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POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
- ---------------------------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED(1) IN 1998(2) PRICE(3) DATE 5% 10%
(#) (%) ($/SH) ($) ($)
- ---------------------- ---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dendy Young 0 0 0 - - -
Stephen L. Waechter (5) 0 0 0 - - -
William E. Johnson, Jr. 20,000 3.4% $4.875 2/4/2005 $39,692 $92,500
Joel A. Lipkin, Ph.D. 0 0 0 - - -
Arthur D. Lambert 0 0 0 - - -
(1) Such options were granted under the Company's various stock option plans, vest and become exercisable in three equal annual
installments and were granted for a term of seven years, subject to earlier termination under certain circum stances relating
to termination of employment.
(2) During fiscal 1998, employees were granted under the Company's various stock option plans or in accordance with employment
offers, and non-employee directors were granted automatically under the 1996 Plan, options to purchase an aggregate of
597,250 shares of Common Stock.
(3) Represents the closing price of the Company's common stock on The Nasdaq Stock Market on the grant date.
(4) Potential values are net of exercise price and before taxes payable in connection with the exercise of such options or the
subsequent sale of shares acquired upon the exercise of such options. These values are based on certain assumed rates of
appreciation (i.e., 5% and 10% compounded annually over the term of such options) based on SEC Rules. The actual values, if
any, will depend upon, among other factors, the future performance of Common Stock, overall market conditions and the Named
Executive Officer's continued employment with the Company. Therefore, the potential values reflected in this table may not
necessarily be achieved.
(5) Mr. Waechter is leaving the Company effective April 12, 1999.
</TABLE>
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16
AGGREGATED OPTION EXERCISES IN 1998 AND OPTION VALUES AT DECEMBER 31, 1998
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the year
ended, and unexercised options held as of, December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/98 12/31/98
SHARES ------------- -------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($)(1) (#) ($)(2)
- ---------------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Dendy Young 0 0 780,000 $546,875
20,000 0
Stephen L. Waechter (3) 0 0 66,666 0
33,334 0
William E. Johnson, Jr. 0 0 62,332 0
37,668 0
Joel A. Lipkin, Ph.D. 0 0 15,000 0
35,000 0
Arthur D. Lambert (4) 0 0 31,500 0
58,500 0
(1) Represents the excess of the market value of the shares acquired upon exercise of such options over the exercise price of
such options.
(2) Represents the excess of the market value of the shares subject to such options over the exercise price of such options.
(3) Mr. Waechter is leaving the Company effective April 15, 1999, at which time 66,666 of his options will be fully vested and
exercisable, and the remaining 33,334 unvested options will be canceled.
(4) Mr. Lambert is leaving the Company effective April 15, 1999, at which time 40,500 of his options will be fully vested and
exercisable, and the remaining 49,500 unvested options will be canceled.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently consists of three non-employee
directors: Messrs. Ebker, Leto and Toups. No member of the Compensation
Committee is a current or former officer or employee of the Company.
Although Mr. Young is not a member of the Compensation Committee, he is
expected to attend Committee meetings at the request of the Committee to
provide information to, and respond to questions from, the Committee. Mr.
Young does not exercise any of the rights or have any of the
responsibilities of a Committee member. He is not entitled to vote on any
matters before the Compensation Committee and does not participate in any
Committee decisions regarding compensation, including his own. See
"Compensation Committee Report on Executive Compensation."
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17
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL ARRANGEMENTS
Pursuant to an employment agreement dated January 1, 1998 (the "1998
Employment Agreement"), Mr. Young serves as the President and Chief
Executive Officer of the Company for a term ending December 31, 2000, and
he is nominated each year to serve as a member of its Board. Mr. Young is
paid a salary of $300,000 per year, reviewed annually by the Board of
Directors, plus a $150,000 annual bonus payable quarterly within 30 days
after the end of each fiscal quarter. Eligibility for the bonus payment is
determined as follows: 50% upon attainment of earnings before interest and
taxes ("EBIT") (adjusted for Board-approved one-time charges (e.g.
acquisition costs)) to be determined annually by the Board (provided,
however, that for 1998 the EBIT target shall be 1%); and 50% upon
attainment of a return on assets to be determined annually by the Board.
Return on assets is defined as annualized net income divided by average
assets calculated on a 12-month rolling average. (Effective January 1,
1999, the Company and Mr. Young amended the 1998 Employment Agreement (1)
to provide that eligibility for the bonus payment shall be upon attainment
of earnings before taxes ("EBT") (adjusted for Board-approved one-time
charges (e.g. acquisition costs)) to be determined annually by the Board;
and (2) to delete the return on assets component therefrom.) Bonus
payments are paid in ratio to the percentage of the goal achieved
contingent upon achievement of at least 80% of the target. Mr. Young is
also entitled to such other benefits and perquisites as provided to other
senior officers pursuant to policies established from time to time by the
Board.
The 1998 Employment Agreement may be terminated by the Company for
Cause (as defined in such agreement) upon 10 business days' notice to Mr.
Young; and other than for Cause upon 60 days' notice to Mr. Young and by
paying to him a lump sum equal to 12 months' salary plus accrued bonus to
date. Mr. Young may terminate the 1998 Employment Agreement without cause
at any time upon 60 days' notice and, in such event, he will be entitled to
all compensation and other benefits that have accrued as of the termination
date. In addition, Mr. Young may terminate the 1998 Employment Agreement
upon five days' notice to the Company in the event of a Change of Control
(as defined in such agreement) and the assignment of duties to him
materially inconsistent with his position and status with the Company, in
which event the Company will be obligated to pay to him a lump sum equal to
12 months' salary plus all compensation and other benefits that have
accrued as of the termination date.
Pursuant to an agreement dated December 18, 1995 (the "1995 Employment
Agreement"), Mr. Young served as the President and Chief Executive Officer
of the Company, as well as a member of its Board of Directors, for a term
ending January 1, 1998. Mr. Young was paid annual cash compensation of
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18
$1.00 per year, payable annually in advance, and was entitled to such other
benefits and perquisites, including any executive bonus plan, as provided
to other senior officers pursuant to policies established from time to time
by the Board. In addition, as a material inducement to Mr. Young to enter
into the 1995 Employment Agreement, the Company granted to him a
non-statutory stock option to purchase an aggregate of 700,000 shares of
Common Stock at $3.75 per share (which price represents the closing price
on the date of grant of Common Stock on The Nasdaq Stock Market), vesting
as to 350,000, 250,000 and 100,000 shares on December 18, 1995, 1996 and
1997, respectively.
Mr. Young is also entitled to the remaining payments under the
Consulting and Non-Competition Agreement (entered into between Mr. Young
and the Company in connection with the August 1994 Falcon acquisition), the
aggregate of which equaled $69,231 as of March 1, 1999.
Under an offer letter agreement dated November 14, 1997, Mr. Waechter
would be eligible for six months' base salary and immediate vesting all
outstanding stock options if his duties or responsibility are materially
modified without his consent, or in the case of a change of control (as
defined in the agreement), or if his employment ceases for any reason other
than for cause (as defined in the agreement). However, Mr. Waechter is
leaving the Company voluntarily effective April 12, 1999 and is therefore
not eligible for any severance benefits.
Under the Company's severance plan as amended to date (the "Severance
Plan"), officers of the Company at the Vice President level and above (not
including Mr. Young) who have completed nine full consecutive calendar
months of employment ("Eligible Officers") are entitled to receive certain
severance benefits for one year following termination of employment, if
such termination is non-temporary, involuntary and without cause. An
Eligible Officer is entitled to such severance benefits regardless of
length of employment with the Company if such termination is a result of
the Company's divestment of an operating unit and the Eligible Officer is
not offered employment with the acquiring company on substantially the same
terms as his or her employment with the Company. In addition, if there is
a "change of control" of the Company, an Eligible Officer will receive
benefits under the Severance Plan regardless of length of employment with
the Company if such officer terminates his or her employment with the
Company either for any reason within one year following the change in
control or for "good reason" (which includes the assignment to the Eligible
Officer of significant duties inconsistent with his or her prior position
or a reduction in his or her compensation or benefits) within two years
following such change in control. A "change in control" of the Company is
defined in the Severance Plan to mean: (i) an acquisition of 50% or more
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19
of the Company's outstanding voting securities; (ii) during any 12-month
period, individuals who were directors at the beginning of such period
cease to constitute at least a majority of the Board of Directors, unless
the election of each new director is approved by a majority of directors
then in office who were directors at the beginning of such period; (iii)
certain mergers of the Company or a sale of all or substantially all of its
assets; or (iv) a liquidation of the Company. Each Eligible Officer is
entitled to one year of severance pay based on his or her highest annual
compensation (base salary plus car allowance) prior to termination. In
addition, an Eligible Officer may elect to accept accelerated vesting of
his or her then outstanding but unvested stock options partially or wholly
in lieu of accrued severance pay. In order to receive severance benefits
under the Severance Plan, each Eligible Officer is required to execute an
employment separation agreement with the Company which provides, among
other things, for confidentiality, a general release in favor of the
Company, and a covenant not to compete with the Company for a period of 12
months after any termination of Company employment.
On March 10, 1997, the Board unanimously voted to terminate the
Severance Plan. However, such termination will not be effective with
respect to current Eligible Officers, including Mr. Johnson (whose benefits
under the Severance Plan, in accordance with the terms thereof, may not be
adversely affected without his consent and, in any case, not affecting Mr.
Young, as noted above), but only to officers who had not qualified as
Eligible Officers prior to March 10, 1997.
Based on current compensation levels, the amount that would be payable
under the Severance Plan to Mr. Johnson if his employment were terminated
in March 1999, if he was eligible for and elected severance benefits solely
under the Severance Plan and if he did not elect accelerated vesting, would
be $181,846, payable pro rata over 24 semimonthly periods. Messrs.
Waechter, Lambert, Lipkin and Young are not eligible for benefits under the
Severance Plan.
Under an offer letter agreement dated February 12, 1997, Mr. Lipkin
would be eligible for immediate vesting all outstanding stock options in
the event of a change of control (as defined in the agreement).
Under an employment agreement entered into between the Company and Mr.
Lambert in September 1998, Mr. Lambert agreed to remain an employee of the
Company until April 15, 1999, at which time he is leaving the Company
voluntarily and is not in any event eligible for severance benefits.
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20
THE FOLLOWING REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION
COMMITTEE SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL
STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER
SUCH ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
POLICY AND OBJECTIVES
The Company's compensation program for executive officers is designed
to attract, motivate and retain qualified executive officers and is
generally administered by the Compensation Committee. The Company's
program is based on compensation policies and plans which seek to enhance
the profitability of the Company, and thus stockholder value, by aligning
closely the financial interests of the Company's executive officers with
those of its stockholders. Accordingly, the Committee, which is composed
entirely of non-employee directors, structures such policies and plans to
pay competitive levels of compensation for competitive levels of
performance, and to provide for superior compensation opportunities for
superior levels of performance.
The Company actively collects and analyzes compensation information
from ten competitive computer resellers (the "Competitive Group"; all of
which are publicly traded companies, and six of which are listed in the
Company's Peer Index used in the Performance Graph appearing elsewhere in
this Proxy Statement). This information, and other market and competitive
information collected by the Company's Human Resources department, is used
as the basis for comparing the compensation of the Company's executive
officers to amounts paid to executive officers with comparable
qualifications, experience and responsibilities at other companies engaged
in the same or similar business as the Company.
COMPONENTS
The Company's executive compensation program includes three
components, each of which is intended to serve the overall compensation
approach described above: base salary, an executive bonus and stock
options.
BASE SALARY
The Committee believes that the Company pays base salaries to its
executive officers that are set conservatively, and below the median,
compared with executive officers employed at competing companies. The
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21
Committee, among other things, reviews and approves the annual salaries of
the Company's CEO, and Executive Vice President(s). The CEO and the
Chairperson of the Committee have been delegated by the Board the
collective authority to set the annual base salaries of the remaining, less
senior executive officer positions. Additionally, all full-time executive
officers are eligible to participate in the Company's broad-based employee
benefit plans.
EXECUTIVE BONUS PLAN
The Committee believes that a significant portion of each executive
officer's total compensation should be "at risk" in the form of incentive
compensation. Accordingly, under an annual Executive Bonus Plan developed
and implemented under the Committee's supervision, the Company pays cash
bonuses to all its eligible executive officers according to a formula that
varies, according to position, on two factors: (1) certain Company
financial goals (net income and gross margin); and (2) certain individual
goals. Individual bonuses are calculated as a percentage of base salary
and range from 25% to 40% in the case of officers generally, other than the
CEO. In 1998, bonuses were earned by executive officers based on
application of the Executive Bonus Plan's formula. The CEO additionally
employs the occasional use of "spot" bonuses in recognition of
extraordinary performance.
STOCK OPTIONS
Options to purchase Common Stock are a key component of the Company's
executive compensation program. The Committee views the grant of stock
options as a valuable incentive that serves to align the interests of
executive officers with the Company's goal of enhancing stockholder value.
Options will only have value to an executive officer if the stock price
increases over the exercise price. The Committee reviews and acts upon
recommendations by the Company's CEO with regard to the grant of stock
options to executive officers (other than to himself). In determining the
size and other terms of an option grant to an executive officer, the
Committee considers a number of factors, including such officer's position,
responsibilities and previous stock option grants (if any). Options
typically vest in equal installments over three to five years and,
therefore, encourage an officer to remain in the employ of the Company.
During 1998, option grants were made to eight executive officers in
connection with each person's acceptance of an officer-level position with
the Company, and to one current executive officer as a performance
incentive.
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22
CHIEF EXECUTIVE OFFICER COMPENSATION
In evaluating the CEO's compensation, the Committee reviewed the
compensation for similar positions at each of the companies in the
Competitive Group. In addition, the Committee selected for review 48 of
the companies (based on primary business focus, size and location)
participating in the Radford Associates 1997 Executive Compensation Report
for the position of Corporate CEO/President. The Committee studied the
base salary, annual bonuses, stock options and grants, and other long-term
compensation of the chief executive officers in each of the companies, and
recommended Mr. Young's salary to the Board by targeting the 50th
percentile of base and target bonus based upon the Committee's research.
Mr. Young's current compensation plan is intended to provide significant
incentives to him to increase the Company's value (as reflected in its
stock price) to the benefit of all Company stockholders, while the focus of
his annual bonus is on achieving short-term financial goals.
Mr. Young's compensation, as set forth in the 1998 Employment
Agreement and the 1995 Employment Agreement, respectively (See "Employment
Agreements and Termination of Employment and Change of Control
Arrangements" on page 14), was unanimously approved by the Board. Mr.
Young has been the Company's CEO, as well as a member of its Board, since
December 18, 1995.
OTHER MATTERS
Mr. Young from time to time consulted with, and made recommendations
to, the Committee with respect to the compensation of the Company's
executive officers other than himself. Other than as delegated by the
Board (as set forth above), Mr. Young did not participate in decisions
relating to executive officer compensation, including his own, and did not
participate on matters relating to the administration of the Company's
stock option plans.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), a publicly-held corporation such as the Company will not be
allowed a federal income tax deduction for compensation paid to the chief
executive officer or one of the four most highly compensated officers
(other than the chief executive officer) to the extent that compensation
(including stock-based compensation) paid to each such officer exceeds $1
million in any fiscal year unless such compensation was based on
performance goals or paid under a written contract that was in effect on
February 17, 1993. The 1996 Stock Option Plan is designed so that amounts
realized on the exercise of options granted thereunder may qualify as
"performance-based compensation" that is not subject to the deduction
limitation of Section 162(m). The Committee intends to evaluate other
elements of compensation in light of Section 162(m), but may enter into
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23
arrangements that do not satisfy exceptions to Section 162(m), as the
Committee determines to be appropriate. In particular, based upon the
Company's current compensation plans and policies and the final regulations
under Section 162(m), it is possible that the compensation to be paid to
Mr. Young (primarily due to the stock option component of his compensation
arrangement) for 1999 may exceed the $1 million limitation per officer.
COMPENSATION COMMITTEE
Gerald W. Ebker
James J. Leto (Chairperson)
John M. Toups
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24
THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the
cumulative total return on Common Stock with the cumulative total return of
the Nasdaq Composite Index and a Peer Index of companies with the same
four-digit standard industrial classification (SIC) code as the Company
(SIC Code 5045 -- Computers and Peripheral Equipment and Software)(1) for
the period commencing December 31, 1993 and ending December 31, 1998.(2)
The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq Index 100.00 104.99 136.18 169.23 207.00 291.96
Peer Index 100.00 64.68 84.09 113.36 99.58 93.52
GTSI 100.00 87.76 35.71 45.92 46.94 36.99
(1) The 46 companies listed in SIC Code 5045 are: Allstar Systems, Inc.; Alphanet Solutions, Inc.; Applied Cellular Tech.; Atec
Group, Inc.; Bristol Tech. Sys.; Capital Associates, Inc.; CDW Computer Centers, Inc.; Celerity Systems, Inc.; CHS
Electronics, Inc.; CompuCom Systems, Inc.; Continental Info. Sys.; Cumetrix Data Systems Corp.; Egghead.com, Inc.; En Pointe
Technologies; Enstar, Inc.; European Micro Holdings; Global Intellicom, Inc; Government Technology Services, Inc.; Heartland
Technology, Inc.; IFS Intl., Inc.; Ikon Office Solutions; Ingram Micro, Inc.; Internet Commerce Cl. A.; Liuski International,
Inc.; Mechanical Dynamics, Inc.; Merisel, Inc.; Miami Computer Supply Corp.; Michael Foods, Inc.; MicroAge, Inc.;
Micros-to-Mainframes, Inc.; Omni U.S.A., Inc.; Orcad, Inc.; PC Services Source, Inc.; PCC Group, Inc.; Peerless Systems
Corp.; Programmers Paradise, Inc.; Safeguard Scientific, Inc.; Sand Technology Systems International; Scansource, Inc.; SED
Intl. Holdings, Inc.; Software Spectrum, Inc.; Syscomm Intl. Corp.; Tech Data Corporation; Tekgraf Inc., Cl. A.; and V-One
Corp.
Since last year's proxy statement, Actrade Intl. Ltd; Aurora Electronics, Inc.; Computer Integration Corp.; Computer
Marketplace, Inc.; Dataflex Corporation; Hirel Holdings, Inc.; Infosafe Sys. Inc.; Intelligent Electronics, Inc.; OCG
Technology, Inc.; Venturian Corp. and XOX Corp. were deleted from SIC Code 5045, and Cumetrix Data Systems Corp.; European
Micro Holdings; Heartland Technology, Inc.; Internet Commerce CL.A.; and Tekgraf Inc., Cl. A. were added to SIC Code 5045.
(2) Assumes: (i) $100 invested on December 31, 1993 in GTSI common stock and in the stocks of the companies comprising the
Nasdaq Composite Index and the Peer Index; and (ii) immediate reinvestment of all dividends.
</TABLE>
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25
INDEPENDENT ACCOUNTANTS
The Board has appointed Arthur Andersen LLP, independent accountants,
to audit the Company's financial statements for the year ending December
31, 1999. A representative of Arthur Andersen is expected to be present at
the Annual Meeting, will have an opportunity to make a statement if he or
she so desires, and is expected to be available to respond to appropriate
questions.
ANNUAL REPORT
A copy of the Company's 1998 Annual Report to Stockholders is being
delivered to each stockholder as of the Record Date. The Company's Annual
Report on Form 10-K, as filed with the SEC, is also available free of
charge to all stockholders of record as of the Record Date by writing to
the Company at 3901 Stonecroft Boulevard, Chantilly, Virginia 20151-0808,
Attention: Investor Relations.
OTHER MATTERS
The Company currently knows of no matters to be submitted at the
Annual Meeting other than those described herein. If any other matters
properly come before the Annual Meeting, the proxies will vote the shares
they represent as they deem advisable.
By Order of the Board of Directors
Judith B. Kassel
Corporate Secretary
Chantilly, Virginia
April 5, 1999
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[GTSI Logo] Government Technology Services, Inc.
3901 Stonecroft Boulevard
Chantilly, Virginia 20151-0808
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 18, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders
(the "Annual Meeting") of Government Technology Services, Inc., a Delaware
corporation (the "Company"), will be held at 9:00 a.m. on Tuesday, May 18,
1999, at the Company's headquarters located at 3901 Stonecroft Boulevard in
Chantilly, Virginia, for the following purposes, each as more fully
described in the attached Proxy Statement:
1. To elect eight directors to serve for the ensuing year.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
Only holders of common stock at the close of business on March 22,
1999 are entitled to notice of, and to vote at, the Annual Meeting and at
any adjournment(s) thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting in person,
in order to ensure your representation at the Annual Meeting, please mark,
sign, date and return the proxy card appearing below as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if such
stockholder has returned a proxy.
By Order of the Board of Directors
Chantilly, Virginia Judith B. Kassel
April 5, 1999 Corporate Secretary
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GOVERNMENT TECHNOLOGY SERVICES, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Government Technology Services, Inc., a Delaware corporation (the "Company"), hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 5, 1999, and Annual
Report on Form 10-K for the year ended December 31, 1998, and hereby appoints Dendy Young and Judith B. Kassel, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Annual Meeting of Stockholders of the Company to be held at 9:00 a.m. on May 18, 1999, at the Company's
headquarters located at 3901 Stonecroft Boulevard in Chantilly, Virginia, and at any adjournment(s) thereof, and to vote all
shares of Common Stock to which the undersigned would be entitled, if then and there personally present, on the matters set forth
below:
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<TABLE>
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1. ELECTION OF DIRECTORS: [ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for ALL nominees listed below.
(Instruction: To Withhold the authority to vote for any individual nominee, mark the box next to the nominee's name
below.) Name of Nominee:
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[ ] Tania Amochaev [ ] Gerald W. Ebker [ ] Lee Johnson [ ] Steven Kelman, Ph.D.
[ ] James J. Leto [ ] Lawrence J. Schoenberg [ ] John M. Toups [ ] Dendy Young
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2. OTHER BUSINESS:
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting
or any adjournment(s) thereof.
Any one of such attorneys-in-fact or substitutes as shall be present and shall act at said meeting or any adjournment(s)
thereof 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 PROPOSAL 1 AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
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Dated: , 1999
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(Signature)
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(Signature)
(This Proxy should be marked, dated and signed by
each stockholder exactly as his or her name
appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held
by joint tenants or as community property, both
parties should sign.)
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