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
POMEROY COMPUTER RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-11
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies: N/A
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):
N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] 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:
PCR LOGO
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Pomeroy Computer Resources, Inc. on Wednesday, June 13, 2001 at 9:00 a.m. at the
Northern Kentucky Convention Center, One West RiverCenter Boulevard, Covington
KY 41011.
We hope that you will be able to attend the Meeting. If you do not expect to be
present and wish your stock to be voted, please sign, date and mail the enclosed
proxy card. Your shares cannot be voted unless you either vote by a proxy or
by ballot at the Meeting.
If you plan to attend the Meeting and will need special assistance because of a
disability, please contact Dino Lucarelli, Chief Financial Officer, 1020
Petersburg Road, Hebron, KY 41048, (859) 586-0600.
Very truly yours,
David B. Pomeroy, II
Chairman of the Board
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return Your Proxy
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
Pomeroy Computer Resources, Inc. will be held at the Northern Kentucky
Convention Center, One West RiverCenter Boulevard, Covington, KY 41011
on Wednesday, June 13, 2001 at 9:00 A.M., E.D.T. for the following
purposes:
1. To elect seven directors, and;
2. To approve an increase in the number of shares of Common
Stock reserved for issuance under the Company's 1998
Employee Stock Purchase Plan from 100,000 shares to 200,000,
and;
3. To approve an increase in the number of shares of Common
Stock reserved for issuance under the Company's 1992
Non-Qualified and Incentive Stock Option Plan from 3,500,000
shares to 5,300,000 shares, and;
4. To transact such other business as may be properly brought
before the meeting and any and all adjournments thereof.
Stockholders of record at the close of business on April 30, 2001 will be
entitled to notice of and to vote at the meeting.
Stockholders are cordially invited to attend the meeting. Please complete,
execute and return the enclosed proxy card in the enclosed envelope whether or
not you plan to attend so that your shares may be represented at the meeting. If
you attend the meeting, you may revoke your proxy and vote in person if you
choose.
By Order of The Board of Directors
- ----------------------------------
Dino Lucarelli, Secretary
May 4, 2001
- -----------
Date
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Pomeroy Computer Resources, Inc., a Delaware
corporation (the "Company") for use at the Annual Meeting of Stockholders, which
will be held Wednesday, June 13, 2001 at 9:00 A.M., E.D.T., at the Northern
Kentucky Convention Center, One West RiverCenter Boulevard, Covington, KY 41011
and at any and all adjournments of that meeting for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement
and the enclosed proxy card are first being sent to stockholders on or about May
11, 2001. The Company's principal executive offices are located at 1020
Petersburg Road, Hebron, KY 41048.
Shares represented by proxies received by the Company at or prior to the meeting
will be voted according to the instructions indicated on the proxy card. You can
specify how you want your shares voted on each proposal by marking the
appropriate boxes on the proxy. If your proxy card is signed and returned
without specifying a vote or abstention on any proposal, it will be voted
according to the recommendation of the Board of Directors on that proposal. The
Board of Directors knows of no other matters that may be brought before the
meeting. However, if any other business is properly presented for action at the
meeting, the persons named on the proxy card will vote according to their best
judgment.
A proxy card may be revoked at any time before it is voted at the meeting by
filing with the corporate secretary an instrument revoking it, by a duly
executed proxy bearing a later date, or by voting in person by ballot at the
meeting.
Only stockholders of record at the close of business on April 30, 2001 will be
entitled to the notice of and to vote at the meeting. On that date, there were
12,579,898 Common shares outstanding and entitled to vote, and each such share
is entitled to one (1) vote on each matter to be considered. Stockholders do not
have cumulative voting rights in the election of directors. Tabulation of
proxies and votes cast at the meeting will be counted and certified to by an
independent agent.
A majority of the votes entitled to be cast on matters to be considered at the
meeting will constitute a quorum. If a share is represented for any purpose at
the meeting, it is deemed to be present for quorum purposes and for all other
matters. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker non-votes will not
be deemed to have been cast either "for" or "against" a matter, although they
will be counted in determining if a quorum is present. Proxies marked "abstain"
or a vote to abstain by a stockholder present in person at the Annual Meeting
will have the same legal effect as a vote "against" a matter because it
represents a share present or represented at the meeting and entitled to vote.
The specific vote requirements for the proposals being submitted to stockholder
vote at the Annual Meeting are set forth under the description of each proposal
in this Proxy Statement.
The expense of this solicitation will be borne by the Company. The Company has
retained D.F. King and Company, Inc. to assist in the solicitation of proxies
for a fee of up to $5000 plus reimbursement of expenses. In addition,
arrangements may be made with brokerage firms and other custodians, nominees and
fiduciaries to forward solicitation material for the Annual Meeting to
beneficial owners of the Company's stock and the Company will reimburse these
institutions for their expense in so doing.
Page 1
STOCK OWNERSHIP
The following table sets forth, as of April 16, 2001, the beneficial ownership
of shares of the Company's Common stock, $.01 par value ("Common Stock"), by
each Director and nominee for Director of the Company, each executive officer
named in the Summary Compensation Table (below), each person known to the
Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, and by the Directors and executive officers
of the Company as a group.
AMOUNT & NATURE OF
NAME AND ADDRESS (1) BENEFICIAL OWNERSHIP (2) % OF CLASS
--------------------------------- ------------------------ -----------
David B. Pomeroy, II 2,427,508 (3) 18.72%
Stephen E. Pomeroy 192,200 (4) 1.50%
Victor R. Eilau 55,605 (5) *
Timothy E. Tonges 49,313 (6) *
James H. Smith, III 12,362 (7) *
Michael E. Rohrkemper 14,939 (8) *
William H. Lomicka 7,501 (9) *
Vincent D. Rinaldi 10,001 (10) *
Dino M. Lucarelli 11,875 (11) *
Kenneth D. Waters 14,000 (12) *
Directors and all Executive
Officers as a Group 2,795,304 (13) 20.98%
FMR Corporation, Edward C. Johnson 3d, 1,257,700 (14) 9.97%
and Abigail P. Johnson
82 Devonshire Street
Boston, MA 02109
Liberty Wanger Asset Management, L.P. 785,000 (15) 6.23%
227 W. Monroe Street, Suite 3000
Chicago, IL 60606
________________________________________
* Less than one percent (1%)
(1) The address for all directors and executive officers is the corporate
address.
(2) The "Beneficial Owner" of a security includes any person who shares voting
power or investment power with respect to such security or has the right to
acquire beneficial ownership of such security within 60 days based solely
on information provided to the Company.
(3) Includes 22,636 shares owned by his spouse as to which Mr. Pomeroy
disclaims beneficial ownership. Also includes 335,875 shares of Common
Stock issuable upon exercise of stock options.
(4) Includes 186,624 shares of Common Stock issuable upon exercise of stock
options.
(5) Includes 55,000 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 48,084 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 8,751 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 247 shares of Common Stock held by Rohrkemper & Ossege Ltd., a
partnership in which Mr. Rohrkemper has a 60% interest. Also includes
11,876 shares of Common Stock issuable upon exercise of stock options.
(9) Includes 7,501 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 10,001 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 11,667 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes 14,000 shares of Common Stock issuable upon exercise of stock
options.
(13) Includes 689,379 shares of Common Stock issuable upon exercise of stock
options, 22,636 shares of Common stock owned by Mr. David B. Pomeroy's
spouse and 247 shares of stock owned by Rohrkemper & Ossege Ltd.
Page 2
(14) Beneficial ownership information is taken from latest Form 13G/A filed
February 20, 2001 for the reporting ending December 31, 2000.
(15) Beneficial ownership information is taken from latest Form 13G filed
February 14, 2001 for the reporting period December 31, 2000.
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Seven directors are to be elected at the Annual Meeting of Stockholders, each to
serve until the next annual meeting and until his successor shall have been
elected and qualified. Each of the following nominees is presently a member of
the Board of Directors. The election of each nominee for director requires the
affirmative vote of the holders of a plurality of the shares of Common Stock
cast in the election of directors. On May 3, 2001, the Board of Directors
unanimously approved an increase in the size of the Board of Directors to seven
directors. The proxy solicited hereunder will be voted, unless otherwise
instructed, for the election of the seven nominees named below. If, for any
unforeseen reason, any nominee should become unavailable, the proxies will
exercise their discretion in voting for a substitute. The Board of Directors
recommends that the stockholders vote for the seven nominees for director named
below. The following contains information relating to each nominee for election
to the Board of Directors:
Name, Age, Principal Occupation for Last Five Year First Elected As A
Years; and Directorships in Public Corporations Director
- ----------------------------------------------- --------
David B. Pomeroy, II , 51, is Chairman of the 1992
Board and Chief Executive Officer of the Company.
Mr. Pomeroy was a founder of the first of the
Company's predecessor businesses ("the Pomeroy
Companies") in 1981. Mr. Pomeroy controlled the
Pomeroy Companies until their reorganization into
Pomeroy Computer Resources in 1992, and has served
as Chairman of the Board, President and Chief
Executive Officer since 1992. Mr. Pomeroy resigned
the position of President effective January 11,
2001.
James H. Smith, III, 50, has been a Director of 1992
the Company since April 1992. Mr. Smith is a
shareholder in the law firm of Lindhorst &
Dreidame Co., L.P.A., Cincinnati, Ohio, where he
has practiced law since 1979. Lindhorst & Dreidame
acts as outside general counsel to the Company.
Michael E. Rohrkemper, 54, has been a Director of 1993
the Company since July 1993. Mr. Rohrkemper is a
certified public accountant and has been a partner
in the accounting firm of Rohrkemper and Ossege
Ltd. since January 1991. 1993
Stephen E. Pomeroy, 32, has been a Director of the 1998
Company since February, 1998. On January 11, 2001,
Mr. Stephen Pomeroy was promoted to the position
of President and Chief Operating Officer of the
Company. From May 1997 to January 2001 Mr. Stephen
Pomeroy was the Chief Financial Officer of the
Company. In December 1998, Mr. Pomeroy was named
President and Chief Executive Officer of Pomeroy
Select Integration Solutions, Inc. (a wholly owned
subsidiary of the Company). Mr. Stephen Pomeroy
was the Vice President of Marketing and Corporate
Development from September 1996 to May 1997. Prior
to that time, Mr. Stephen Pomeroy was the Director
of New Market Development of the Company from 1994
to September 1996 and Account Executive from 1991
to 1994.
William H. Lomicka, 64, has been a director of the 1999
Company since January 1999. Mr. Lomicka is
chairman of Coulter Ridge Capital, Inc. a private
investment firm, a position he has held since
1999. Between 1989 and 1999, he was president of
Mayfair Capital, Inc., a private investment firm.
Mr. Lomicka is a Director of Vencor, Inc.
Page 3
Vincent D. Rinaldi, 52, has been a director of the 1999
Company since June 1999. Mr. Rinaldi is President
of Information Leasing Corporation ("ILC") and
Procurement Alternatives Corporation ("PAC"), both
wholly-owned subsidiaries of Provident Financial
Group, Inc. ("Provident'). The combined companies
finance and manage equipment for a wide range of
companies. Mr. Rinaldi was the founder of ILC in
1984 prior to its acquisition by Provident in
1996. Mr. Rinaldi is currently a director of
Thrucom, Inc., Qsys International Inc. and Infonet
Inc.
Kenneth R. Waters,49, was a director of Pomeroy 1997*
Select Integration Solutions ("Pomeroy Select"),
Inc., a wholly-owned subsidiary of the Company,
from December 1998 until his resignation in March
2001. Mr. Waters was a director of the Company
from April 1997 until his resignation in January
1999. Mr. Waters has worked in the computer
industry since 1978. Most recently, he has been an
industry consultant, serving as such from February
1995 until present as well as from April 1993 to
August 1993 and from January 1991 to August 1992.
Mr. Waters has provided consulting services to the
Company since January 1997.
*Mr. Waters was a director of the Company from 1997 until 1999 and a director of
Pomeroy Select from 1999 until 2001.
Stephen E. Pomeroy is the son of David B. Pomeroy, II. There are no other family
relationships among the Company's directors and executive officers.
There were 7 meetings of the Board of Directors in 2000. Each member of the
Board of Directors attended at least seventy-five percent (75%) of the aggregate
of the total number of meetings of the Board and committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing audit committee, which held 2 meetings during 2000,
composed of two non-employee directors, Messrs. Smith and Rohrkemper, and Mr.
David B. Pomeroy, Chairman of the Board, and Chief Executive Officer. The audit
committee consults with the independent auditors regarding their examination of
the financial statements of the Company and regarding the adequacy of internal
controls. It reports to the Board of Directors on these matters and recommends
the independent auditors to be designated for the ensuing year. The Board's
charter for the audit committee is attached as Exhibit A. See Report of the
Audit Committee beginning on page 21.
The Company does not have a standing nominating committee.
The Company has a standing compensation committee which held 1 meeting during
2000, composed of two non-employee directors, Messrs. Smith, Rohrkemper, and Mr.
David B. Pomeroy. This committee reviews the compensation paid by the Company
and makes recommendations on these matters to the Board of Directors.
The Company had a standing stock option committee consisting of Messrs.
Rohrkemper and Smith. This committee administers the 1992 Non-Qualified and
Incentive Stock Option Plan. During fiscal 2000, this committee held no formal
meeting.
Page 4
DIRECTOR'S FEES
Each director who is not an employee of the Company, except for Mr. Smith,
receives a quarterly retainer of Three Thousand Dollars ($3,000) plus Five
Hundred Dollars ($500) for each Board of Directors meeting attended (including
as part of each such meeting any committee meetings held on the same date), and
Five Hundred Dollars ($500) for any committee meetings attended which were not
held on the same date as a Board of Directors meeting. Beginning with the fourth
quarter of fiscal 1993, the amount earned by such directors is automatically
deposited by the Company, on a quarterly basis, into a broker account
established for each such Director unless the Director requests receipt of the
cash instead. The broker is directed to utilize the funds deposited for each
Director to purchase shares of Common Stock of the Company on the open market.
Mr. Smith's law firm, Lindhorst & Dreidame Co., L.P.A., is compensated for his
time in attendance at Directors' Meetings based on his hourly rate.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is currently composed of
two (2) non-employee directors, Messrs. Smith and Rohrkemper, and Mr. David
Pomeroy, II Chairman of the Board and Chief Executive Officer. The Committee is
responsible for the establishment and oversight of the Company's Executive
Compensation Program. This program is designed to meet the objectives of
attracting, retaining and motivating executive employees and providing a balance
of short term and long term incentives that can recognize individual
contributions from an executive and the overall operating and financial results
of the Company. The Committee intends to review Executive Compensation on a
regular basis and to compare the competitiveness of the Company's executive
compensation and corporate performance with other corporations comparable to the
Company. The committee believes that the significant equity interest in the
Company held by the Company's management aligns the interests of the
stockholders and management. Through the programs adopted by the Company a
significant portion of Executive Compensation is linked to individual and
corporate performance and stock price appreciation.
The basic elements of the Company's Executive Compensation Program consist
primarily of base salary, potential for annual cash opportunities and stock
options. The Committee believes that incentives play an important role in
motivating executive performance and attempts to reward achievement of both
short and long term goals. However, the emphasis on using stock options as a
long term incentive is intended to insure a proper balance in the achievement of
long term business objectives which ties a significant portion of the
executive's compensation to factors which impact on the performance of the
Company's stock.
Compensation opportunities must be adequate to enable the Company to compete
effectively in the labor market for qualified executives. The elements of the
Executive Compensation Program are designed to meet these demands, and at the
same time encourage increases in shareholder value.
BASE SALARIES
Base salaries for executives are initially determined by evaluating the duties
and responsibilities of the position to be held by the individual, the
experience of the executive and the competitive marketplace for executive
talent. The Company has entered into Employment Agreements that establish
salaries for certain executive officers. Salaries for executives and other
employees are reviewed periodically and may be set at higher levels if the
Company concludes that is appropriate in light of that particular individual's
responsibilities, experience and performance.
ANNUAL CASH BONUSES
The Company's executives and other employees are eligible to receive annual cash
awards or bonuses at the discretion of the Committee with the approval of the
Board of Directors. In determining whether such discretionary awards should be
made, the Committee considers corporate performance measured by financial and
operating results including income, return on assets and management of expenses
and costs.
Page 5
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. David B. Pomeroy, II served as Chairman of the Board and Chief Executive
Officer throughout fiscal 2000. Mr. Pomeroy's compensation, which includes an
annual salary, bonuses and stock options, was determined in accordance with the
terms of the Ninth Amendment to his Employment Agreement. The Ninth Amendment,
which established the performance criteria for fiscal 2000, was adopted by the
Compensation Committee in January, 2000. The Tenth Amendment to Mr. David B.
Pomeroy's Employment agreement, which will establish the performance criteria
for fiscal 2001, was adopted by the Compensation Committee in January 2001. The
terms of Mr. David B. Pomeroy's Employment Agreement and any amendments thereto
are based on the factors described above including a review of the compensation
paid to executives of comparable companies.
Submitted by the Compensation Committee
James H. Smith, III, Michael E. Rohrkemper and David B. Pomeroy, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2000, the Compensation Committee consisted of David B. Pomeroy, II,
James H. Smith, III, and Michael E. Rohrkemper. Mr. David B. Pomeroy is the
Chief Executive Officer of the Company.
The Company's principal executive offices, distribution facility and national
training center comprised of approximately 36,000, 161,417 and 22,000 square
feet of space, respectively, are located in Hebron, Kentucky. These facilities
are leased from Pomeroy Investments, LLC ("Pomeroy Investments"), a Kentucky
limited liability company controlled by David B. Pomeroy, II, Chief Executive
Officer of the Company, under a ten year triple-net lease agreement which
expires in July 2010. The lease agreement provides for 2 five-year renewal
options.
The Company from time to time has made advances to Pomeroy Investments to
satisfy Pomeroy Investments' working capital needs.
James H. Smith, a director of the Company, is a stockholder in the law firm of
Lindhorst & Dreidame Co., L.P.A. Lindhorst & Dreidame Co. serves as general
counsel to the Company. The legal services provided by Lindhorst & Dreidame Co.
constituted less than 5% of the firm's business in 2000.
Kenneth R. Waters, a director of Pomeroy Select from December 1998 until March
2001, provides consulting services to the Company on an ongoing basis. Mr.
Waters is paid $1,500 per month for such consulting services.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table is a summary for the fiscal years 1998, 1999 and 2000 of
certain information concerning the compensation paid or accrued by the Company
to the four most highly compensated executive officers other and the Chief
Executive Officer whose aggregate salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers") and two additional employees.
Page 6
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
------------------------------------- --------------
Name and Principal Other Annual Stock Options
Position Year Salary (1) Bonus Compensation # (2)
- --------------------------- ---- ----------- -------- -------------- --------------
David B. Pomeroy, II 2000 $ 495,000 $574,000 - 112,500
CEO and President (through 1999 $ 475,000 $500,000 - 125,000
January 11, 2001) 1998 $ 475,000 - (3) - 25,000
Stephen E. Pomeroy 2000 $ 275,000 $300,000 - 80,000
President and COO (as of 1999 $ 208,332 $255,000 $ 38,966 (4) -
January 11, 2001) and CFO 1998 $ 125,000 $ 52,000 $ 38,504 (4) 45,000
(through January 11, 2001)
Timothy E. Tonges 2000 $ 186,539 $102,000 $ 73,660 (5) 39,750
Executive Vice President 1999 $ 140,096 $ 74,500 $ 64,996 (5) 25,000
of Sales & Operations 1998 $ 120,000 $ 43,400 $ 88,932 (5) 6,000
James C. Eck 2000 $ 125,971 $ 34,000 $ 90,000 (6) 29,000
Vice President of 1999 $ 192,500 $ 9,000 $ 52,835 (6) -
Sales (through 1998 $ 192,500 $ 16,000 $ 35,668 (6) 5,000
January 5, 2001)
Victor R. Eilau 2000 $ 350,000 $125,000 - 25,000
President, Technology 1999 $ 350,000 $ 75,000 - 25,000
Integration Financial 1998 $ 294,665 $ 46,934 - 10,000
Services, Inc.
William K. Merriman 2000 $ 26 - $ 800,032 (7) -
Sales Representative
Stephen R. Rodenhiser 2000 - - $ 626,240 (8) 250
Sales Representative
<FN>
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Company's 401(k) Retirement Plan.
(2) Unless otherwise noted, all stock options are awarded based on the fair
market value of the Company's common stock at the time of grant. Represents
options granted during fiscal years 2000, 1999, and 1998.
(3) Excludes $300,000 of incentive cash bonus that was forgone.
(4) Represents amounts accrued pursuant to deferred compensation agreements.
(5) Includes commissions of $69,000, $50,000 and $73,000 in 2000, 1999 and
1998, respectively. Includes amounts accrued pursuant to deferred
compensation agreements of $4,660, $14,996 and $15,932 in 2000, 1999 and
1998, respectively.
(6) Includes commissions of $40,000, $19,500 and $19,000 in 2000, 1999 and
1998, respectively. Includes amounts accrued pursuant to deferred
compensation agreements of $50,000, $33,335 and $16,668 in 2000, 1999 and
1998, respectively.
(7) Includes commissions of $800,032.
(8) Includes commissions of $626,240
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
options to purchase Common Stock to any of the Named Executive Officers during
fiscal year 2000.
Page 7
Individual Grants
- --------------------------------------------------------------------------------------- Potential Realizable Value
at Assumed Annual
No. of Shares of Percent of Total Rates of Stock Price
Common Stock Options Granted to Exercise or Appreciation for Option Term
Underlying Options Employees Base Price Expiration --------------------------
Name Granted in Fiscal Year ($/Sh) Date 5% 10%
- -------------------- ------------------ ------------------- ------------ ---------- ------------ ------------
David B. Pomeroy, II 37,500 2.37% $ 12.69 01/06/2005 $ 131,450 $ 290,469
75,000 4.75% $ 12.69 01/06/2005 $ 262,899 $ 580,938
Stephen E. Pomeroy 60,000 3.80% $ 12.69 01/06/2005 $ 210,319 $ 464,751
20,000 1.27% $ 12.69 01/06/2005 $ 70,106 $ 154,917
Timothy E. Tonges 3,750 0.79% $ 12.69 01/06/2005 $ 13,145 $ 29,047
6,000 0.49% $ 12.69 01/06/2005 $ 21,032 $ 46,475
10,000 0.63% $ 12.69 01/06/2005 $ 35,053 $ 77,458
20,000 1.27% $ 12.69 01/06/2005 $ 70,106 $ 154,917
James C. Eck 15,000 0.95% $ 12.69 01/06/2005 $ 52,580 $ 116,188
5,000 0.82% $ 12.69 01/06/2005 $ 17,527 $ 38,729
2,000 0.13% $ 12.69 01/06/2005 $ 7,011 $ 15,492
5,000 0.82% $ 12.69 01/06/2005 $ 17,527 $ 38,729
2,000 0.13% $ 12.69 01/06/2005 $ 7,011 $ 15,492
Victor R. Eilau 5,000 0.32% $ 12.69 01/06/2005 $ 17,527 $ 38,729
20,000 1.27% $ 12.69 01/06/2005 $ 70,106 $ 154,917
Page 8
AGGREGATE STOCK OPTION EXERCISES IN YEAR ENDED JANUARY 5, 2001
AND YEAR END STOCK OPTION VALUES
The following table sets forth information concerning aggregated option
exercises in fiscal year 2000 and the number and value of unexercised options
held by each of the Named Executive Officers at January 5, 2001.
No. of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
January 5, 2001 January 5, 2001
(#) ($)
Shares ----------------------- -------------------------
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------- --------------- ------------- ----------------------- -------------------------
David B. Pomeroy, II 20,000 $ 246,021 265,875 / 0 $ 743,763 / $0
Stephen E. Pomeroy - $ - 116,624 / 60,000 $ 456,426 / $138,720
Timothy E. Tonges 10,000 $ 99,400 44,750 / 10,000 $ 68,782/ $23,120
James C. Eck 7,000 $ 68,688 17,000 / 5,000 $ 39,304 / $11,560
Victor R. Eilau 10,000 $ 112,500 55,000 / 0 $ 99,050 / 0
Submitted by Board of Directors
EMPLOYMENT AGREEMENTS
David B. Pomeroy, II, the Chairman of the Board and Chief Executive Officer of
the Company, has an employment agreement with the Company for a term of three
years, which is extended on a daily basis resulting in a perpetual three year
term.
Effective January 6, 2001, Mr. David B. Pomeroy entered into a Tenth Amendment
to the Employment Agreement with the Company (the "Tenth Amendment"). Mr.
David B. Pomeroy's compensation under the Tenth Amendment shall remain the same
as that provided to Mr. Pomeroy for fiscal 2000 under the Ninth Amendment to the
Employment Agreement with the Company,("Ninth Amendment") with a base salary of
$495,000 for fiscal 2001 and each subsequent fiscal year unless modified by the
Compensation Committee. Under the Ninth Amendment Mr. David B. Pomeroy was
entitled to a cash bonus of up to a maximum of $600,000 and up to a maximum of
75,000 non-qualified stock options in fiscal 2000 based upon the Company's
operating income. Mr. David B. Pomeroy may also be paid a discretionary bonus
under any compensation, benefit or management incentive plan. Fifty percent of
any discretionary bonus would be paid in cash and fifty percent would be treated
as incentive deferred compensation. The aforementioned cash bonus provisions,
which were in effect for fiscal 2000 under the Ninth Amendment, were unchanged
and restated in the Tenth Amendment for fiscal 2001.
Under the amended Employment Agreement, the Company has agreed to pay all
premiums for a term life insurance policy with a death benefit equal to
$3,000,000 insuring the life of Mr. David B. Pomeroy. The owner and beneficiary
of this term life insurance policy are a trust established by Mr. David B.
Pomeroy. The Company and the trust entered into a split dollar arrangement
whereunder the Company will pay all premiums on a whole life insurance policy
with a death benefit equal to $2,000,000 insuring the life of Mr. David B.
Pomeroy, less the reportable economic benefit to the trust.
In addition, the Company agreed to pay Mr. David B. Pomeroy (or to a legal
entity controlled by him) $7,916.67 per month during the term of the Agreement,
for the business use of real estate owned by Mr. David B. Pomeroy in Arizona. In
the event of a change of control (as defined in the Agreement), the Company is
required to provide Mr. David B. Pomeroy with 100 hours of flight time on a
private air carrier for business use per year for the term of the agreement.
Currently the cost of one hour of flight time ranges from $1,400 to $2,300
depending on various factors.
Mr. David B. Pomeroy also has a supplemental executive compensation agreement
which provides supplemental income up to $50,000 per year, subject to a seven
year vesting schedule, for a period of ten years commencing on the earliest to
occur of the following events: (i) death, (ii) disability, (iii) retirement, or
(iv) the expiration of seven years from the effective date of the agreement
which was January 6, 1995. The supplemental compensation vest over the initial
Page 9
seven-year period according to the schedule set forth in the supplemental
executive compensation agreement. Mr. David B. Pomeroy shall be entitled to
100% vesting in the event of his death or disability prior to the end of the
seven-year period and the vested amount in the event of his retirement prior to
the end of the seven-year vesting period. All payments shall be paid out
according to the ten-year payment plan. Mr. David B. Pomeroy elected to waive
all compensation associated with this supplemental executive agreement for
fiscal years 1995 through 2000.
Mr. Stephen E. Pomeroy's employment agreement with the Company has a term of
three years, which is extended on a daily basis resulting in a perpetual
three-year term. Effective January 6, 2001, Mr. Stephen Pomeroy entered into a
Second Amendment to the Employment Agreement with the Company (the "Second
Amendment"), wherein his duties were amended to include those of President and
Chief Operating Officer of the Company, as well as continuing to serve as the
President and Chief Executive Officer of Pomeroy Select. Under the First
Amendment to the Employment Agreement with Pomeroy Select ("First Amendment"),
Mr. Stephen Pomeroy received base salary of $275,000 in fiscal 2000. The First
Amendment expressly stated that such base salary shall be in effect during the
term of the employment agreement unless modified by the Compensation Committee.
The Compensation Committee increased Mr. Stephen Pomeroy's base salary for
fiscal 2001 to $375,000 as reflected in the Second Amendment. Pursuant to the
First Amendment, Mr. Stephen Pomeroy is eligible to earn up to $100,000 in
quarterly bonuses and a $100,000 annual bonus upon Pomeroy Select meeting
certain predetermined goals in fiscal 2000. Under the Second Amendment, Mr.
Stephen Pomeroy is eligible to an annual bonus of up to $200,000, and 50,000
non-qualified stock options upon the Company meeting certain predetermined goals
in fiscal 2001. Any such annual bonus deemed earned by Mr. Stephen Pomeroy
pursuant to the terms and conditions of the employment agreement shall be paid
as incentive deferred compensation, which is subject to a five year vesting
schedule. Section 5(e) of the employment agreement states that Mr. Stephen
Pomeroy may receive discretionary compensation or benefits in addition to those
referenced herein above. The Second Amendment also provides that effective
January 6, 2001, Mr. Stephen Pomeroy shall be awarded the option to acquire
fifty thousand (50,000) shares of the common stock of the Company at the fair
market value of such shares on January 5, 2001.
Mr. Tonges is not currently a party to an employment agreement with the Company.
Mr. Eck was not a party to an employment agreement with the Company during
fiscal 2000. Mr. Eck resigned his position of employment with the Company on
January 5, 2001.
Mr. Eilau, President of Technology Integration Financial Services, Inc.
("TIFS"), a wholly owned subsidiary of the Company, has an employment agreement
with the Company. The initial term of the employment agreement extended from
July 6, 1997 to July 5, 2000, with a provision for the automatic renewal of the
employment agreement, after the initial term, for successive one-year periods
unless either party gives 30 days prior written notice of its/his intent not to
renew the employment agreement. On July 6, 2000, Mr. Eilau's employment
agreement automatically renewed for a term of one year from July 6, 2000 through
July 5, 2001. Mr. Eilau's compensation under the agreement consists of a base
salary, which was $350,000 in fiscal 2000, deferred compensation based on
Company revenues and pre-tax income and cash bonuses based on TIFS pre-tax
income.
Page 10
PERFORMANCE GRAPH
The following Performance Graph compares the percentage of the cumulative total
stockholder return on the Company's Common shares with the cumulative total
return assuming reinvestment of dividends of (i) the S&P 500 Stock Index and
(ii) the NASDAQ Industrial Index.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1995
POMEROY S&P500 NASDAQ INDUSTRIAL
DEC-95 100 100 100
DEC-96 437.7 120.26 115
DEC-97 335.5 157.55 162.8
DEC-98 413.9 199.57 227.3
DEC-99 239.2 238.54 421.8
DEC-00 281.4 214.35 256.1
PROPOSAL 2 - PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE UNDER THE 1998 EMPLOYEE STOCK PURCHASE PLAN
In June 1999, the Board of Directors of the Company adopted, and the
stockholders approved the Company's 1998 Employee Stock Purchase Plan (the "1998
Plan"). The 1998 Plan is intended to meet the requirements of Section 423 of
the Internal Revenue Code of 1986, as amended. The purpose of the 1998 Plan is
to provide eligible employees of the Company the ability to purchase common
stock from the Company at a discount from the market price, and to provide an
additional means of attracting and retaining competent personnel. The 1998 Plan
provides substantially all employees of the Company with an opportunity to
purchase through payroll deductions up to 2,000 shares of common stock of the
Company with a maximum market value of $25,000. The purchase price per share is
the lower of 85% of the closing market price of the Company's common stock in
the first trading date of an offering period (grant date), or 85% of the closing
market price of the Company's common stock in the last trading date of an
offering period (exercise date). There are currently 100,000 shares of the
Company's common stock reserved for issuance under the 1998 Plan. Directors of
the Company may at any time terminate or amend the 1998 Plan. The 1998 Plan
will terminate twenty years from the effective date unless sooner terminated.
As of January 5, 2001, 61,205 shares of common stock had been issued pursuant to
rights granted under the 1998 Plan and 38,795 shares of common stock remained
available for future issuance under the 1998 Plan.
On May 3, 2001, the Board of Directors approved an amendment to the 1998 Plan,
subject to stockholder approval, to increase the number of shares of common
stock reserved for issuance under the 1998 Plan from 100,000 to 200,000 shares.
DESCRIPTION OF THE 1998 PLAN
The material features of the 1998 Plan, as amended, are outlined below:
Administration. The Board supervises and administers the 1998 Plan and has
--------------
full power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the 1998 Plan to construe and interpret
the 1998 Plan, and to make all other determinations necessary or advisable for
the administration of the 1998 Plan.
Page 11
Eligible Participants. Employees of the Company and its subsidiaries whose
---------------------
customary employment is for more than 20 hours per week, and if their customary
employment is for more than five months in a calendar year, are eligible to
participate in the 1998 Plan. However, an employee who owns 5% or more of the
total shares of the Company's common stock issued and outstanding, including as
common stock any options held to acquire common stock, may not participate.
Terms of Options. The 1998 Plan is implemented by a series of offering
------------------
periods of six (6) months duration, with new offering periods commencing on or
about January 1 and July 1 of each year (or at such other time or times as may
be determined by the Board of Directors). The option price per share of the
shares offered shall be the lower of: (i) 85% of the fair market value of a
share of the common stock of the Company at the beginning of an offering period;
or (ii) 85% of the fair market value of a share of the common stock of the
Company at the end of an offering period. The fair market value of the
Company's common stock on a given date shall be determined by the Board in its
discretion based on the closing price of the common stock for such date (or, in
the event that the common stock is not traded on such date, on the immediately
preceding trading date), as reported by the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market or, if such price is not
reported, the mean of the bid and asked prices per share of the common stock as
reported by NASDAQ or, in the event the common stock is listed on a stock
exchange, the fair market value per share shall be the closing price on such
exchange on such date (or, in the event that the common stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
Street Journal.
Adjustments Upon Changes in Capitalization: Corporate Transactions.
-------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of common stock covered by each option under
the 1998 Plan which has not yet been exercised and the number of shares of
common stock which have been authorized for issuance under the 1998 Plan but
have not yet been placed under option (collectively, the "Reserves"), as well as
the price per share of common stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of common stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the common stock, or any other increase or decrease in the
number of shares of common stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of common stock subject to an option.
(b) Corporate Transactions. In the event of the proposed dissolution
-----------------------
or liquidation of the Company, the offering period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the 1998 Plan shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten the offering period then in progress by setting a new exercise date.
If the Board shortens the offering period then in progress in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify each participant in writing, at least ten (10) days prior to the new
exercise date, that the exercise date for his or her option has been changed to
the new exercise date and that his or her option will be exercised automatically
on the new exercise date, unless prior to such date he or she has withdrawn from
the offering period as provided in Section 10 of the 1998 Plan. For purposes of
this paragraph, an option granted under the 1998 Plan shall be deemed to be
assumed if, following the sale of assets or merger, the option confers the right
to purchase, for each share of option stock subject to the option immediately
prior to the sale of assets or merger the consideration (whether stock, cash or
other securities or property) received in the sale of assets or merger by
holders of common stock for each share of common stock held on the effective
date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of common stock); provided, however, that if such
Page 12
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
common stock and the sale of assets or merger.
(c) The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of common stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding common
stock, and in the event of the Company being consolidated with or merged into
any other corporation.
Tax Consequences. Options granted under the 1998 Plan will be qualified
-----------------
options within the meaning of the Internal Revenue Code of 1986, as amended. An
employee realizes no income upon the grant of a qualified option. An employee
who holds his or her shares for two years after the grant of the option and for
one year after he or she receives the shares upon its exercise generally will
not incur any federal income tax liability upon receipt of the shares pursuant
to the exercise. However, the spread between the exercise price and the fair
market value of the shares at the time of exercise will be included in
alternative minimum taxable income for the year of exercise. After satisfying
such holding periods, upon a disposition of the shares at a price greater than
the option exercise price, the employee will realize taxable long-term capital
gain. The Company will not be allowed a deduction for federal income tax
purposes in connection with the grant or exercise of a qualified option;
however, if the employee does not comply with the holding periods, he or she
will realize ordinary income in the year of sale equal to the difference between
the exercise price and the value of the underlying shares on the date of
exercise (or the sale price if lower where the sale is to an unrelated party).
Where the sale price is lower than the fair market value of the shares on the
date of exercise and the sale is to an unrelated party, and the exercise and
sale occur within the same taxable year, the amount included in alternative
minimum taxable income will be the amount of the sale price. In such a case,
the Company would be entitled to a deduction in an amount equal to the ordinary
income realized by the employee. In the event of any disposition of shares
which meets the holding period requirements, there shall be included as
compensation (rather than capital gain) in gross income, for the taxable year in
which falls the date of such disposition an amount equal to the lesser of (i)
the excess of the fair market value of the shares at the time of such
disposition over the amount paid for the shares under the option, or (ii) the
excess of the fair market value of the shares at the time the option was granted
over the option price.
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking the
approval of the amendment to the 1998 Plan is as follows:
RESOLVED, that the first sentence of Section 12 of the 1998 Employee Stock
Purchase Plan be amended to read as follows:
"The maximum number of shares of the Company's Common Stock which shall be made
available for sale under the Plan shall be 200,000 shares subject to adjustment
upon changes in capitalization of the Company as provided in Section 18."
Assuming the presence of a quorum at the Annual Meeting, the affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy and entitled to vote at the meeting will be required to approve the
amendment to the 1998 Plan. Abstentions will be counted toward the tabulation
of votes cast and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved. The Board of Directors recommends a vote
in favor of this proposal.
Page 13
PROPOSAL 3 - PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE UNDER THE 1992 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
On February 13, 1992 the Board of Directors and the stockholders of the Company
adopted the 1992 Non-Qualified and Incentive Stock Option Plan (the "Option
Plan"). The Option Plan was adopted to encourage ownership of Common Stock by
officers and key employees of the Company, to encourage their continued
employment with the Company and to provide them with incentives to promote the
success of the Company. The Stock Option Committee of the Board of Directors
grants options under and otherwise administers the Option Plan. The exercise
price for options under the Option Plan must be at least one hundred percent
(100%) of the fair market value of the Common Stock on the date of grant;
provided, however, in the event that an incentive stock option is granted to an
employee who owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or, if applicable, a subsidiary or parent
corporation of the Company, the exercise price per share for such incentive
stock options cannot be less than one hundred ten percent (110%) of the fair
market value of the Common shares on the date of grant. The exercise price of
options granted under the Option Plan is payable in cash or, at the discretion
of the Stock Option Committee in whole or in part, in shares of Common Stock,
valued at their fair market value at the date of exercise. The cash proceeds
from the exercise of options will constitute general funds of the Company and
may be used by it for any purpose. Each option granted under the Option Plan
expires on the date or dates set forth in the specific option award as
determined by the Stock Option Committee in its sole discretion, but not later
than ten (10) years from the date of grant. The Option Plan will terminate on
February 13, 2002, but such termination will not affect any outstanding options
previously granted.
The Option Plan contains no maximum limitation as to the number of participants.
Incentive stock options may be awarded to officers and key employees of the
Company or its subsidiaries as determined by the Stock Option Committee.
Non-qualified stock options may also be awarded by the Stock Option Committee to
outside consultants employed by the Company. In fiscal 2000, approximately 914
employees participated in the Option Plan.
The Option Plan may be amended from time to time by the Board of Directors of
the Company provided that no amendment without stockholder approval may be made
if approval of the stockholders is required under Section 422 of the Internal
Revenue Code as in effect at the time of reference or Rule 16b-3 under the
Securities Exchange Act of 1934 as in effect at the time of reference.
The proposal is to increase the number of shares of Common Stock reserved for
issuance under the Option Plan from 3,500,000 shares to 5,300,000 shares. In
fiscal 1995, the Board of Directors and stockholders of the Company increased
the Common Stock reserved for issuance under the Option Plan to a total of
600,000 shares of Common Stock. During 1996 and 1997, the number of reserved
shares was adjusted by the Board to 1,350,000 shares of Common Stock as provided
in the Option Plan to reflect stock splits and dividends. In 1998, the Board of
Directors and stockholders of the Company increased the Common Stock reserved
for issuance under the Option Plan to a total of 1,850,000 shares of Common
Stock. In 1999, the Board of Directors and stockholders of the Company
increased the Common Stock reserved for issuance under the Option Plan to a
total of 2,350,000 shares of Common Stock. In 2000, the Board of Directors and
stockholders of the Company increased the Common Stock reserved for issuance
under the Option Plan to a total of 3,500,000 shares of Common Stock. The Board
of Directors believes that stock options are an important part of the total
compensation package needed to attract and retain key employees including
skilled technical personnel. The number of employees of the Company has grown
from 923 in 1996 to 2,138 in 2000 reflecting the Company's growth in revenues
and, in particular, the growth in the provision of services. The Board
recommends that 1,800,000 additional shares be reserved for issuance under the
Option Plan to enable the Company to continue to attract and retain a strong
management group as it grows. Except for the proposal to increase the number of
shares of Common Stock reserved for issuance under the Option Plan, there is no
difference between the Option Plan as it presently exists and as it would exist
if the proposal is approved.
At April 5, 2001 options to purchase 1,885,538 shares of Common Stock were
outstanding, which represents approximately 15% of the total number of shares of
Common Stock outstanding. The market value of the Common Stock underlying the
outstanding options at April 5, 2001 was $22,626,456. Under this proposal, the
total number of options outstanding to the total number of shares outstanding
will not exceed 30%.
Page 14
Neither the granting, nor the exercise, of an incentive stock option will result
in income for federal income tax purposes for the optionee or in a deduction for
the Company. Any gain realized on the sale of shares exercised under an
incentive stock option is considered long-term capital gain to the optionee for
federal income tax purposes if the stock has been held for at least one year
after it was acquired on exercise of the option and at least two years have
expired after the grant of the option. If the shares are sold or otherwise
disposed of within one year after exercise or two years after the date of grant,
then any appreciation at the date of exercise above the exercise price is
treated, subject to certain limitations, as "ordinary" income; and any
appreciation between the date of exercise and the date of sale is considered as
long or short-term capital gain to the optionee depending on whether or not the
stock was held longer than one year. In such event, the amount of ordinary
income received by the optionee generally is treated as a tax deductible expense
to the Company.
The grant of a nonqualified stock option will not result in income for the
optionee or in a deduction for the Company. The exercise of a nonqualified stock
option would result in ordinary income for the optionee and a deduction for the
Company measured by the difference between the exercise price and the fair
market value of the shares received at the time of exercise.
Options to employees are awarded on the basis of the achievement of financial
objectives established by the Stock Option Committee, the contribution of the
employee to the Company's objectives and such other matters as the Stock Option
Committee deems relevant. As such, the number of shares subject to options that
will be received by any executive officer or other employee of the Company is
not determinable. Non-employee directors of the Company are not eligible to
participate in the Option Plan.
For information concerning grants of stock options during fiscal 2000 under the
Option Plan to the Company's Chief Executive Officer and the other four most
highly compensated executive officers, see the Option Grants in Last Fiscal Year
Table on page 8. Other than Dino M. Lucarelli, who was appointed Chief Financial
Officer on January 11, 2001, there are no other current executive officers of
the Company other than those named in the Table. The following table sets forth
the number of shares subject to options granted in fiscal 2000 to all employees
excluding executive officers. The dollar value of the options granted is
dependent upon the future share price of the Common Stock of the Company.
OPTIONS GRANTED IN FISCAL 2000
NAME AND POSITION NO. OF SHARES SUBJECT TO OPTIONS
----------------- --------------------------------
Non-Executive Officer Employee Group 1,281,610
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking the
approval of the amendment to the Option Plan is as follows:
RESOLVED, that the first sentence of Section 3 of the 1992 Non-qualified and
Incentive Stock Option Plan be amended to read as follows:
"There will be reserved for use, upon exercise of Awards to be granted from time
to time under the Plan, an aggregate of 5,300,000 Shares, which Shares may be,
in whole or in part, as the Board shall from time to time determine, authorized
but unissued Shares, or issued Shares which shall have been reacquired by the
Company."
Assuming the presence of a quorum at the Annual Meeting, approval of this
proposal will require the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy an entitled to
vote at the Annual Meeting. The Board of Directors recommends that the
stockholders vote in favor of this proposal.
Page 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. James H. Smith, III, a director of the Company, is a shareholder in the law
firm of Lindhorst & Dreidame Co. L.P.A., which serves as general counsel to the
Company. See "Compensation Committee Interlocks and Insider Participation".
Mr. David B. Pomeroy, II the Chairman of the Board and Chief Executive Officer
of the Company, engaged in certain transactions with the Company in the last
fiscal year. See "Compensation Committee Interlocks and Insider Participation"
and "Employment Agreements."
Mr. Vincent D. Rinaldi, a director of the Company, is the president of
Information Leasing Corporation ("ILC"), a wholly owned subsidiary of Provident
Financial Group, Inc. See "Compensation Committee Interlocks and Insider
Participation".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Timothy E. Tonges, Executive Vice President of Sales and Operations for the
Company filed an amended Form 4 with respect to correctly reporting 30,000
options granted on January 6, 2000 with an exercise price of $12.69.
Mr. James C. Eck, Vice President of Sales (through January 5, 2001) filed an
amended Form 4 with respect to correctly reporting 7,000 options granted on
January 6, 2000 with an exercise price of $12.69.
Mr. Michael E. Rohrkemper, director filed a late Form 4 with respect to the sale
of 1,000 shares of common stock with a per share sale price of $17.38 on March
10, 2000 and 5,625 shares of common stock with a per share sale price of $18.00
on March 6, 2000. In addition, Mr. Rohrkemper filed a late Form 4 with respect
to the grant of 2,500 options granted on July 9, 2000 with an exercise price of
$16.38.
Mr. Victor Eilau, President of TIFS, failed to file one Form 4 with respect to
the sale of 2,329 shares of common stock with a per share sale price ranging
from $19.25 to 19.50 on August 10, 2000. In addition, Mr. Eilau failed to file
one Form 4 with respect to 605 shares of common stock purchased through the
Company's Employee Stock Purchase Plan with a purchase price of $12.91 on
December 31, 2000. These transactions were subsequently reported on a Form 5
filed with respect to 2000
REPORT OF THE AUDIT COMMITTEE
The audit committee is comprised of Mr. James H. Smith, III, Mr. Michael E.
Rohrkemper and Mr. David B. Pomeroy, II. Mr. Smith and Mr. Rohrkemper are
independent directors, as defined in National Association of Securities Dealers
("NASD") Rule 4200. The audit committee operates under a written charter adopted
by the Board of Directors, a copy of which is attached to this proxy statement
as Exhibit A. Mr. David B. Pomeroy, II is not an independent director as defined
in NASD Rule 4200. NASD Rule 4350(d)(2) requires that by June 14, 2001, the
audit committee be comprised solely of independent directors as defined in NASD
Rule 4200.
As described more fully in its charter, the purpose of the audit committee is to
assist the Board of Directors in its general oversight of the Company's
financial reporting, internal control and audit functions. Management is
responsible for the preparation, presentation and integrity of the Company's
financial statements, accounting and financial reporting principles, internal
controls and procedures designed to ensure compliance with accounting standards,
applicable laws and regulations. Grant Thornton, LLP, the Company's independent
auditor, is responsible for performing an independent audit of the consolidated
financial statements in accordance with generally accepted auditing standards.
Other than Mr. Rohrkemper, the audit committee members are not professional
accountants or auditors, and their functions are not intended to duplicate or to
certify the activities of management and the independent auditor, nor can the
audit committee certify that the independent auditor is "independent" under
applicable rules. The audit committee serves a board-level oversight role, in
which it provides advice, counsel and direction to management and the auditors
on the basis of the information it receives, discussions with management and the
auditors and the experience of the audit committee's members in business,
financial and accounting matters.
Page 16
Among other matters, the audit committee monitors the activities and performance
of the Company's internal and external auditors, including the audit scope,
external audit fees, auditor independence matters and the extent to which the
independent auditor may be retained to perform non-audit services. The audit
committee and the Board have ultimate authority and responsibility to select,
evaluate and, when appropriate, replace the Company's independent auditor. The
audit committee also reviews the results of the internal and external audit work
with regard to the adequacy and appropriateness of the Company's financial,
accounting and internal controls. Management and independent auditor
presentations to and discussions with the audit committee also cover various
topics and events that may have significant financial impact or are the subject
of discussions between management and the independent auditor. In addition, the
audit committee generally oversees the Company's internal compliance programs.
The audit committee has reviewed and discussed the consolidated financial
statements with management and the independent auditor, management represented
to the audit committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
independent auditor represented that its presentations included the matters
required to be discussed with the independent auditor by Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees."
The Company's independent auditor also provided the Committee with the written
disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the audit committee
discussed with the independent auditor that firm's independence.
Following the audit committee's discussions with management and the independent
auditor, the audit committee recommended that the Board of Directors include the
audited consolidated financial statements in the Company's annual report on Form
10-K for the year ended January 5, 2001.
Submitted by the Audit Committee
James H. Smith, III, Michael E. Rohrkemper and David B. Pomeroy, II
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton, LLP, which has served as independent certified public
accountants to the Company since fiscal 1994, has been selected by the Company
to serve in that capacity in fiscal 2001. Representatives of Grant Thornton, LLP
will be present at the Annual Meeting in order to respond to questions and to
make any statement such representative deems appropriate.
Representatives of Grant Thornton, LLP attend most meetings of the audit
committee of the Board. The audit committee reviews audit and non-audit
services performed by Grant Thornton, LLP as well as the fees charged by Grant
Thornton, LLP for such services. In its review of non-audit service fees, the
audit committee considers, among other things, the possible effect of the
performance of such services on the auditor's independence.
FEES PAID TO GRANT THORNTON, LLP
The following table shows the fees paid or accrued by the company for the audit
and other services provided by Grant Thornton, LLP for the year ended January 5,
2001.
Audit Fees $111,070
Financial Information Systems Design and Implementation Fees 0
All Other Fees 10,322
--------
Total $121,392
========
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PROPOSALS FOR 2002 MEETING
In order to be eligible for inclusion in the Company's proxy statement for the
2002 annual meeting of stockholders, stockholder proposals must be received by
the Company at its principal office, 1020 Petersburg Road, Hebron, Kentucky
41048, by January 7, 2002.
By Order of the Board of Directors
/s/ Dino Lucarelli
- --------------------
Dino Lucarelli, Secretary
May 4, 2001
- -------------
Date
Page 18
EXHIBIT A
POMEROY COMPUTER RESOURCES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
------------
There shall be a committee of the board of directors to be known as the
audit committee. The audit committee shall be composed of directors, who
are independent of the management of the corporation, who are free of any
relationship that, in the opinion of the board of directors, would
interfere with their exercise of independent judgment as a committee
member.
Statement of Policy
---------------------
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential
shareholders, and investment community relating to corporate accounting,
reporting practices of the corporation, and the quality and integrity of
the financial reports of the corporation. In so doing, it is the
responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the corporation.
Responsibilities
----------------
In carrying out its responsibilities, the audit committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and shareholders that
the corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
- - Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
- - Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
- - Review with the independent auditors and financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the corporation, and elicit any recommendations for the
improvement of such internal control procedures or particular areas where
new or more detailed controls or procedures are desirable. Particular
emphasis should be give to the adequacy of such internal controls to expose
any payments, transactions, or procedures that might be deemed illegal or
otherwise improper. Further, the committee periodically should review
company policy statements to determine their adherence to the code of
conduct.
- - Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Any changes
in accounting principles should be reviewed.
- - Provide sufficient opportunity for the independent auditors to meet with
the members of the audit committee without members of management present.
Among the items to be discussed in these meetings are the independent
auditors' evaluation of the corporation's financial, accounting, and
auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
- - Review accounting and financial human resources and succession planning
within the company.
- - Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
- - Investigate any matters brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
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