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 Thursday, June 13, 2002 at 9:00 a.m. at the
Drawbridge Inn, 2477 Royal Drive, Fort Mitchell, KY 41017.
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 either vote by proxy or vote by
ballot at the Meeting.
If you plan to attend the Meeting and will need special assistance because of a
disability, please contact Michael E. Rohrkemper, 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 Drawbridge Inn, 2477 Royal Drive,
Fort Mitchell, KY 41017 on Thursday, June 13, 2002 at 9:00 A.M., E.D.T. for the
following purposes:
1. To elect nine directors, and;
2. To approve the Company's 2002 Non-Qualified and Incentive Stock
Option Plan, and;
3. To approve the Company's 2002 Outside Directors' Stock Option
Plan, 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, 2002 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
- ---------------------------------------
Michael E. Rohrkemper, Secretary
May 3, 2002
- -------------
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 Thursday, June 13, 2002 at 9:00 A.M., E.D.T., at Drawbridge Inn,
2477 Royal Drive, Fort Mitchell, KY 41017 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 10, 2002. 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. You can
specify how you want your shares voted on each proposal by marking the
appropriate boxes on the proxy card. 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, 2002 will be
entitled to the notice of and to vote at the meeting. On that date, there were
12,815,135 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. 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 March 31, 2002, 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 2,482,433 (3) 18.87%
Stephen E. Pomeroy 312,200 (4) 2.40%
Victor R. Eilau 43,216 (5) *
Timothy E. Tonges 68,214 (6) *
James H. Smith, III 14,862 (7) *
Michael E. Rohrkemper 14,314 (8) *
William H. Lomicka 12,501 (9) *
Vincent D. Rinaldi 7,501 (10) *
Kenneth R. Waters 17,500 (11) *
Debra E. Tibey 0 *
Edward E. Faber 0 *
Directors and all Executive
Officers as a Group 2,972,741 (12) 22.67%
Paradigm Capital Management, Inc. 1,000,300 (13) 7.87%
9 Elk Street
Albany, NY 12207-1002
Skyline Asset Management, L.P. 872,000 (14) 6.86%
311 South Wacker Drive, Suite 4500
Chicago, IL 60606
Liberty Wanger Asset Management, L.P. 750,000 (15) 5.90%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
American Century Investment Management, Inc. 675,600 (16) 5.31%
4500 Main Street
Kansas City, MO 64141-9210
Dimensional Fund Advisors, Inc. 648,449 (17) 5.10%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Page 2
(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 412,500 shares of common
stock issuable upon exercise of stock options.
(4) Includes 306,624 shares of Common Stock issuable upon exercise of stock
options.
(5) Includes 41,000 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 68,085 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 11,251 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 11,251 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 12,501 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 7,501 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 2,500 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes 873,213 shares of Common Stock issuable upon exercise of stock
options, and 22,636 shares of Common stock owned by Mr. David B. Pomeroy's
spouse as to which Mr. Pomeroy disclaims beneficial ownership.
(13) Beneficial ownership information is taken from latest Form 13G filed
February 14, 2002 for the reporting period ending December 31, 2001.
(14) Beneficial ownership information is taken from latest Form 13G filed
February 15, 2002 for the reporting period ending December 31, 2001.
(15) Beneficial ownership information is taken from latest Form 13G filed
February 12, 2002 for the reporting period ending December 31, 2001.
(16) Beneficial ownership information is taken from latest Form 13G filed
February 8, 2002 for the reporting period ending December 31, 2001.
(17) Beneficial ownership information is taken from latest Form 13G filed
February 12, 2002 for the reporting period ending December 31, 2001.
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Nine 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. Seven of the nine of the following nominees are presently
members 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 March 27, 2002, the Board of
Directors unanimously approved an increase in the size of the Board of Directors
to nine directors. The proxy solicited hereunder will be voted, unless otherwise
instructed, for the election of the nine 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 nine nominees for director named
below. The following contains information relating to each nominee for election
to the Board of Directors:
Year First Elected As A
Name, Age, Principal Occupation for Last Five -----------------------
Years; and Directorships in Public Corporations Director
----------------------------------------------- --------
David B. Pomeroy, II, 52, is Chairman of the Board and Chief Executive 1992
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 and Chief Executive Officer since 1992 and he served as
President of the Company from 1992 through January 2001.
Page 3
James H. Smith, III, 51, has been a Director of the Company since April 1992
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, 55, has been a Director of the Company since July 1993
1993. Mr. Rohrkemper is a certified public accountant and was formerly a
partner in the Cincinnati, Ohio accounting firm of Rohrkemper & Ossege
Ltd., from 1991 through May 2001, at which time he left his accounting
practice to join Pomeroy as its Vice President of Finance and Administration.
On August 10, 2001, Mr. Rohrkemper was promoted to Chief Financial
Officer and named Secretary and Treasurer of the Company.
Stephen E. Pomeroy, 33, has been a Director of the Company since 1998
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.
William H. Lomicka, 65, has been a Director of the Company since January 1999
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 currently a Director of Vencor, Inc.
Vincent D. Rinaldi, 53, has been a Director of the Company since June 1999
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, 50, has been a Director of the Company since June 2001
2001. Mr. Waters was previously a director of the Company from April 1997
until he resigned from the board in January 1999 in order to serve as a
director of the Company's wholly owned subsidiary, Pomeroy Select
Integration Solutions, Inc., ("Pomeroy Select"). He served as a director of
Pomeroy Select from December 1998 through March 2001. Mr. Waters has
worked in the computer industry since 1978. Most recently, he has been an
industry consultant, serving as such for the Company from January 1997
through March 2001.
Debra E. Tibey, 43, has been an independent consultant since March 2000. N/A
She formerly served as Senior Vice President of Sales from October 1988
through February 2000 for Ingram Micro, Inc., a wholesale provider of
technology solutions, products and services. During her thirteen year tenure
with Ingram Micro, Ms. Tibey was responsible for leading the domestic sales
organization. From July 1986 through August 1988, Ms. Tibey also
previously served as Vice President and General Manager of export for
Aakasoft, a European software distributor. She is currently a Director of
Healthzones.
Page 4
Edward E. Faber, 69, has been retired since 1992 from active management. N/A
Mr. Faber has more than thirty years of experience building and managing
high-technology growth companies including twelve years in sales and
marketing management with IBM Corporation, Memorex Corporation and
Four Phase Systems before becoming the founding President of
Computerland Corporation ("Computerland") in September 1976. During his
twelve year tenure with Computerland, Mr. Faber also served as
Computerland's Vice Chairman, Chairman, and Chief Executive Officer.
Prior to retiring from an active management career, Mr. Faber also served
as the President and Chief Executive Officer of SuperCuts, Inc., where he
was responsible for organizing and executing a successful initial public stock
offering for the company. Mr. Faber currently serves as Vice Chairman of
the Board of Cotelligent Incorporated and Chairman of the Board of Gum
Tech International, Inc., both of which are publicly traded companies.
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 6 meetings of the Board of Directors in 2001. 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 4 meetings and monthly
discussions during 2001. The Company's audit committee is currently composed of
three non-employee directors, Mr. James H. Smith, III, Mr. Vincent D. Rinaldi,
and Mr. Kenneth R. Waters. Prior to June 14, 2001, Messrs. David B. Pomeroy and
Michael E. Rohrkemper had served on the audit committee but resigned their
positions in order to comply with NASD Rule 4350(d)92, which requires that the
audit committee be comprised solely of independent directors, as defined
therein. 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. See Report of the Audit Committee beginning on page 18.
The Company does not have a standing nominating committee.
The Company has a standing compensation committee which held 1 meeting during
2001, composed of two non-employee directors, Mr. James H. Smith, III, and Mr.
Kenneth R. Waters, and Mr. David B. Pomeroy, Chairman of the Board and Chief
Executive Officer. This committee reviews the compensation paid by the Company
and makes recommendations on these matters to the Board of Directors.
The Company has 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 2001, this committee held no formal
meeting.
DIRECTOR'S FEES
Each director who is not an employee of the Company, except for Mr. Smith,
receives a quarterly retainer of Two Thousand Dollars ($2,000) plus Five Hundred
Dollars ($500) for each Board of Directors meeting attended (including as part
Page 5
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. 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, Mr. James H. Smith, III, and Mr. Kenneth R.
Waters, 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 bonus 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.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. David B. Pomeroy, II served as Chairman of the Board and Chief Executive
Officer throughout fiscal 2001. Mr. Pomeroy's compensation, which includes an
annual salary, bonuses and stock options, was determined in accordance with the
terms of the Tenth Amendment to his Employment Agreement. The Tenth Amendment,
Page 6
which established the performance criteria for fiscal 2001, was adopted by the
Compensation Committee in January, 2001. The Eleventh Amendment to Mr. David
B. Pomeroy's Employment agreement, which will establish the performance criteria
for fiscal 2002, was adopted by the Compensation Committee in January 2002. 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, Kenneth R. Waters and David B. Pomeroy, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2001, the Compensation Committee consisted of David B. Pomeroy, II,
James H. Smith, III, and Kenneth R. Waters. 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.
Mr. 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 to the Company by Lindhorst
& Dreidame Co. constituted less than 5% of the firm's business in 2001.
-
Mr. Vincent D. Rinaldi, a director of the Company, is the President of ILC.
During fiscal 2001, the Company sold equipment and related support services to
ILC, for lease to ILC's customers, in the amount of $2.3 million. On April 16,
2002, the Company closed the sale of a majority of the assets of its wholly
owned subsidiary - Technology Integration Financial Services, Inc. to ILC.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table is a summary for the fiscal years 1999, 2000 and 2001 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 7
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ -------------------
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS
POSITION YEAR SALARY (1) BONUS COMPENSATION # (2)
- ------------------------ ---- ----------- -------- -------------- -------------------
David B. Pomeroy 2001 $ 495,000 $ 41,250 - 125,000
Chief Executive Officer 2000 $ 495,000 $574,000 - 112,500
1999 $ 475,000 $500,000 - 125,000
Stephen E. Pomeroy 2001 $ 356,539 $ 25,000 - 100,000
President and Chief 2000 $ 275,000 $300,000 - 80,000
Operating Officer 1999 $ 208,332 $255,000 $ 38,966 (3) -
Timothy E. Tonges 2001 $ 200,000 $ 76,500 $ 10,000 (4) 50,000
Executive Vice President 2000 $ 186,539 $102,000 $ 73,660 (4) 39,750
of Sales & Operations 1999 $ 140,096 $ 74,500 $ 64,996 (4) 25,000
Michael E. Rohrkemper 2001 $ 100,962 $ 25,775 - 7,500
Chief Financial Officer,
Secretary, and Treasurer
Victor Eilau 2001 $ 350,000 - 3,000
President, Technology 2000 $ 350,000 $125,000 - 25,000
Integration Financial 1999 $ 350,000 $ 75,000 - 25,000
Services, Inc.
William K. Merriman 2001 $ 26 - $ 804,591 (5) -
Sales Representative 2000 $ 26 - $ 800,032 (5) -
Sheri Litchfield 2001 $ 25 $ 1,360 $ 459,727 (6) 1,000
Sales Representative
(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 2001,
2000 and 1999.
(3) Represents amounts accrued pursuant to deferred compensation
agreements.
(4) Includes commissions of $10,000, $69,000, $50,000 in 2001, 2000,
and 1999, respectively. Includes amounts accrued pursuant to
deferred compensation agreements of $4,660, $14,996 in 2000 and
1999, respectively.
(5) Includes commissions of $804,591 and $800,032 in 2001 and 2000,
respectively.
(6) Includes commissions of $459,727.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
options to purchase Common Stock to any of the Named Executive Officers during
fiscal year 2001.
Page 8
Individual Grants
- -----------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual
No. of Shares of Percent of Total Rates of Stock Price
Common Stock Options Granted to Exercise or Appreciation for Option Term
Underlying Options Employees Base Price Expiration -----------------------------------
Name Granted in Fiscal Year ($/Sh) Date 5% 10%
- --------------------- ------------------ ------------------- ------------- ---------- ------------------ ---------------
David B. Pomeroy, II 75,000 9.13% $ 14.88 01/06/06 $ 308,330 $ 681,329
50,000 6.09% $ 13.04 12/26/06 $ 180,136 $ 398,053
Stephen E. Pomeroy 50,000 6.09% $ 14.88 01/06/06 $ 205,553 $ 454,219
50,000 6.09% $ 13.04 12/26/06 $ 180,136 $ 398,053
Timothy E. Tonges 25,000 3.04% $ 14.88 01/06/06 $ 102,777 $ 227,110
25,000 3.04% $ 14.44 05/31/06 $ 99,738 $ 220,394
Victor R. Eilau 3,000 0.37% $ 14.88 01/06/06 $ 12,333 $ 27,253
Michael E. Rohrkemper 7,500 0.91% $ 14.95 05/28/06 $ 30,978 $ 68,453
AGGREGATE STOCK OPTION EXERCISES IN YEAR ENDED JANUARY 5, 2002
AND YEAR END STOCK OPTION VALUES
The following table sets forth information concerning aggregated option
exercises in fiscal year 2001 and the number and value of unexercised options
held by each of the Named Executive Officers at January 5, 2002.
Page 9
No. of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
January 5, 2002 January 5, 2002
(#) ($)
Shares ----------------------- -------------------------
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- --------------------- --------------- ------------- ----------------------- -------------------------
David B. Pomeroy, II 28,375 $ 237,052 362,500 / 0 $ 313,281 / $0
Stephen E. Pomeroy - $ - 236,625 / 40,000 $ 469,041 / $52,480
Timothy E. Tonges - $ - 48,084 / 56,666 $ 69,673 / $8,746
Victor R. Eilau - $ - 40,000 / 3,000 $ 0 / $0
Michael E. Rohrkemper 5,625 $ 3,043 8,751 / 9,999 $ 834 / $417
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, 2002, Mr. David B. Pomeroy entered into an Eleventh
Amendment to the Employment Agreement with the Company (the "Eleventh
Amendment"). Mr. David B. Pomeroy's compensation under the Eleventh Amendment
shall remain the same as that provided to Mr. Pomeroy for fiscal 2001 under the
Tenth Amendment to the Employment Agreement with the Company, ("Tenth
Amendment") with a base salary of $495,000 for fiscal 2002 and each subsequent
fiscal year unless modified by the Compensation Committee. Under the Tenth
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
2001 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 2001 under
the Tenth Amendment, were unchanged and restated in the Eleventh Amendment for
fiscal 2002; however the maximum number of non-qualified options that Mr.
Pomeroy may be entitled to earn under the bonus provision in the Eleventh
Amendment has been increased to 100,000. The Eleventh Amendment also provides
that effective January 6,2002, Mr. Pomeroy shall be awarded the option to
acquire 50,000 shares of the common stock of the Company at the fair market
value of such shares on January 5, 2002.
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,
Page 10
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
seven-year period according to the schedule set forth in the supplemental
executive compensation agreement. Mr. David B. Pomeroy was 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. 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, 2002, Mr. Stephen Pomeroy entered into a
Third Amendment to the Employment Agreement with the Company (the "Third
Amendment"). Under the Second Amendment to the Employment Agreement with the
Company, Mr. Stephen Pomeroy received a base salary of $375,000 in fiscal 2001.
The Second 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 2002 to $450,000 as reflected in the Third Amendment.
Pursuant to the Second Amendment, Mr. Stephen Pomeroy was eligible to earn an
annual bonus up to $200,000 and 50,000 non-qualified stock options upon the
Company meeting certain predetermined goals in fiscal 2001. Under the Third
Amendment, Mr. Stephen Pomeroy is eligible to earn an annual bonus of up to
$600,000 and 100,000 non-qualified stock options upon the Company meeting
certain predetermined goals in fiscal 2002. The Third Amendment also provides
that effective January 6, 2002, 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, 2002.
Michael E. Rohrkemper entered into a three-year Employment Agreement with the
Company on May 28, 2001. Said Employment Agreement shall automatically renew
for successive one year renewal terms unless either party gives notice of
its/his intent not to renew the Employment Agreement. Mr. Rohrkemper's
compensation under the Employment Agreement consists of a base annual salary of
$175,000.00 for fiscal 2001, along with quarterly bonuses and year-end deferred
compensation based upon the Company's performance and attainment of certain
pre-determined criteria. On March 1, 2002, the Company and Mr. Rohrkemper
entered into a First Amendment to Employment Agreement ("First Amendment"),
which extended the term of his Employment Agreement for a period of three years
from the effective date of the First Amendment. Under the First Amendment, Mr.
Rohrkemper was awarded the option to acquire 15,000 shares of common stock of
the Company, which options are subject to a three year vesting schedule
effective March 1, 2002. Mr. Rohrkemper's base salary for fiscal 2002 will be
increased to $200,000.00 effective June 1, 2002 under the First Amendment. In
addition, Mr. Rohrkemper shall remain eligible for certain quarterly and year
end bonuses in fiscal 2002 based upon the Company's performance and attainment
of certain pre-determined criteria under the First Amendment.
Timothy E. Tonges entered into an Employment Agreement with the Company during
fiscal 2001. The initial term of said Employment Agreement is three years and
it commenced on May 31, 2001. The Employment Agreement includes an automatic
renewal provision for consecutive one-year renewal terms so long as neither
party to the Employment Agreement gives written notice to the other party of
its/his intent not to renew the Employment Agreement. Mr. Tonges' compensation
under the Employment Agreement consists of a base salary, which was $200,000.00
in fiscal 2001, quarterly bonuses and year-end deferred compensation based on
the Company's performance and attainment of certain pre-determined criteria. On
March 25, 2002, the Company and Mr. Tonges entered into a First Amendment to
Employment Agreement ("First Amendment"), which extended the term of his
Employment Agreement for a period of three years from the effective date of the
First Amendment. Under the First Amendment, Mr. Tonges base salary for fiscal
Page 11
2002 is increased to $225,000.00 and effective March 25, 2002 he was awarded the
option to acquire 25,000 shares of the common stock of the Company, which
options are subject to a three year vesting schedule. In addition, Mr. Tonges
shall remain eligible for certain quarterly and year end bonuses in fiscal 2002
based upon the Company's performance and attainment of certain pre-determined
criteria under the First Amendment.
Mr. Dino Lucarelli, the Company's former Chief Financial Officer, voluntarily
terminated his employment with the Company effective August 10, 2001. Prior to
his voluntary resignation, Mr. Lucarelli was a party to a three-year Employment
Agreement with the Company, which commenced on March 7, 2001, whereunder he
earned an annual base salary of $200,000.00, along with being eligible for
certain quarterly bonuses and annual deferred compensation awards based upon the
Company's performance and attainment of certain pre-determined criteria.
Mr. Victor R. Eilau, President of Technology Integration Financial Services,
Inc. ("TIFS"), a wholly owned subsidiary of the Company, and President of
T.I.F.S. Advisory Services, Inc. ("Advisory"), a second-tier subsidiary of the
Company and a wholly owned subsidiary of TIFS, has an employment agreement with
Advisory. Mr. Eilau first entered into an employment agreement with TIFS on
July 6, 1997, for an initial term of three years. Said employment agreement
contained a provision for the automatic renewal of the employment agreement,
after the initial three year 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 January 5, 2000, prior to the end of the initial
term of the employment agreement and with Mr. Eilau's express written consent,
TIFS assigned Mr. Eilau's employment agreement and all of its rights, duties and
obligations thereunder to Advisory and Advisory assumed all such rights, duties
and obligations. 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. On July 6, 2001, the parties entered into a First Amendment to Employment
Agreement ("First Amendment"), which extended the term of Mr. Eilau's employment
for another three years. Mr. Eilau's compensation under the First Amendment
consisted of a base salary, which was $350,000 in fiscal 2001, deferred
compensation based on Company revenues and pre-tax income and cash bonuses based
on TIFS pre-tax income. Due to the sale of the majority assets of TIFS on
April 16, 2002, Mr. Eilau is no longer an employee of the Company as he is now
employed by ILC.
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 Composite Index.
Page 12
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1996
[GRAPH OMITTED]
Pomeroy S&P500 NASDAQ Composite
Dec-96 100 100 100
Dec-97 76.6 131.01 141.5
Dec-98 94.6 165.95 197.6
Dec-99 54.7 198.35 366.7
Dec-00 64.3 178.24 222.6
Dec-01 60 154.99 175.8
PROPOSAL 2 - APPROVAL OF THE 2002 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
In 1992, the Board of Directors and the stockholders of the Company adopted the
1992 Non-Qualified and Incentive Stock Option Plan (the "1992 Option Plan").
The 1992 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 1992 Option Plan terminated in April 2002. As a
result and due to the increased competition to attract and retain talented
personnel, the Board of Directors adopted the 2002 Non-Qualified and Incentive
Stock Option Plan (the "2002 Option Plan") effective March 27, 2002. The Board
of Directors hereby seeks stockholder approval of the Company's 2002 Option Plan
as discussed in detail below.
DESCRIPTION OF THE 2002 OPTION PLAN
The following summary of the 2002 Option Plan is qualified, in its entirety, by
the specific language of the 2002 Option Plan, a copy of which is attached to
this proxy statement as Exhibit A.
The 2002 Option Plan was adopted by the Board of Directors effective March 27,
2002 and must be approved by the stockholders of the Company. The Company has
reserved up to a maximum of 3,410,905 shares of common stock for issuance under
the 2002 Option Plan. It is the Company's intention that the number of shares
reserved for the issuance under the 1992 Option Plan at the time of its
expiration be available under the 2002 Option Plan for future awards (to the
extent that such shares are not actually issued pursuant to the exercise of
options awarded under the 1992 Option Plan). As of the date hereof, options
exercisable with respect to approximately 1,939,218 shares of common stock are
outstanding under the 1992 Option Plan (the "1992 Outstanding Options") and, at
the time of the expiration of the 1992 Option Plan, the Company had the ability
to issue options with respect to approximately an additional 1,471,687 shares of
common stock. Initially, 1,471,687 shares of common stock shall be reserved
for issuance upon the exercise of options awarded under the 2002 Option Plan
(the number available for additional awards under the 1992 Option Plan
immediately prior to its expiration), however, the number of shares reserved for
issuance under the 2002 Option Plan shall automatically increase as the 1992
Outstanding Options are canceled or expire (by an amount equal to the number of
shares of common stock issuable upon exercise of such canceled or expired 1992
Outstanding Options). The number of shares reserved for issuance under the 2002
Option Plan shall not increase as a result of the exercise of any of the 1992
Page 13
Outstanding Options. As a result, the total of the shares reserved under the
2002 Option Plan and the number of shares issued as a result of the exercise of
the 1992 Outstanding Options shall not exceed 3,410,905, the total number of
shares available for issuance under the 1992 Option Plan immediately prior to
its expiration (including the 1992 Outstanding Options). The adoption of the
2002 Option Plan and the reservation of shares for issuance thereunder as set
forth above does not increase the number of shares previously reserved for
option grants and approved by the stockholders under the 1992 Option Plan. The
Company currently desires only to reserve under the 2002 Option Plan the same
number of shares that were available for future grants under the 1992 Option
Plan immediately prior to its expiration in April 2002. The shares to be issued
pursuant to awards under the 2002 Option Plan may be authorized, but unissued,
or reacquired common stock. As of the Record Date, there were no options or
awards of restricted stock outstanding under the 2002 Option Plan.
Purpose. The Board of Directors believes that our long-term success is
-------
dependent upon our ability to attract and retain highly qualified individuals
who, by virtue of their ability and qualifications, make important contributions
to the Company. The 2002 Option Plan is intended 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. We believe that grants of stock options
motivate high levels of performance and provide an effective means of
recognizing contributions to the success of the Company. Most newly hired
full-time employees and consultants expect to be granted options. We believe
that meeting this expectation will provide heightened value in recruiting and
retaining highly qualified technical and other key personnel who are in demand
in the industry. The Board believes that the ability to grant options will be
important to our future success by allowing us to remain competitive in
attracting and retaining key personnel.
Administration. Subject to the provisions of the 2002 Option Plan, the
--------------
2002 Option Plan will be administered by the Board of Directors (if it may
administer the 2002 Option Plan in accordance with Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) or by the Stock Option
Committee of the Board of Directors. Furthermore, to the extent permitted by
Rule 16b-3, the 2002 Option Plan may be administered by different bodies with
respect to: (i) employees which are directors and officers of the Company; (ii)
employees which are officers but not directors of the Company; and (iii)
employees which are neither officers nor directors of the Company. The
administrator of the 2002 Option Plan, whether the Board of Directors or the
Stock Option Committee of the Board of Directors (the "Administrator"), will
have the authority to determine which eligible persons shall receive grants, the
time of grant, the type of grant and the number of shares underlying the
options, the term of the options, the vesting schedule and other option terms.
The exercise price for options under the 2002 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 2002 Option Plan is payable in cash
or, at the discretion of the Administrator, in whole or in part, by check,
promissory note or 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 2002 Option Plan expires on the date or dates set
forth in the specific option award as determined by the Administrator in its
sole discretion, but not later than ten (10) years from the date of grant. The
Option Plan will terminate on March 26, 2012, but such termination will not
affect any outstanding options previously granted.
Eligibility. Any of our employees, officers or consultants will be
-----------
eligible to participate in the 2002 Option Plan. The 2002 Option Plan contains
no maximum limitation as to the number of participants. Incentive stock
options, qualified under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), may be awarded to officers and key employees of the
Company or its subsidiaries as determined by the Administrator. Non-qualified
stock options may also be awarded by the Administrator to outside consultants
employed by the Company. Options to employees are awarded on the basis of the
achievement of financial objectives established by the Administrator, the
contribution of the employee to the Company's objectives and such other matters
Page 14
as the Administrator 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 2002 Option Plan.
Amendment. The 2002 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 Exchange Act as in effect at the time of reference.
Tax Consequences. 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.
2002 Option Plan Benefits. Any of our employees, officers, or consultants
--------------------------
will be eligible to participate in the 2002 Option Plan. As stated above, the
Administrator will have the authority to determine which eligible persons shall
receive grants, the time of grant, the type of grant, and the number of shares
underlying the options, the term of the options, the vesting schedule and other
option terms. The actual benefits, if any, to the holders of stock options
issued under the 2002 Option Plan are not determinable prior to exercise as the
value, if any, of such stock options to their holders is represented by the
difference between the market price of a share of the Company's common shares on
the date of exercise and the exercise price of a holder's stock option. To
date, the Administrator has not made any determination as to whom awards under
the 2002 Option Plan will be made or the amounts or forms thereof.
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking the
authorization, adoption and approval of the 2002 Option Plan is as follows:
"RESOLVED, that the 2002 Non-Qualified and Incentive Stock Option Plan be,
and it hereby is, authorized, adopted and approved by the stockholders of
this Corporation."
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 authorize, adopt
and approve the 2002 Option 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 15
PROPOSAL 3 - APPROVAL OF THE 2002 OUTSIDE DIRECTORS' STOCK OPTION PLAN
In 1992, the Board of Directors and the stockholders of the Company adopted the
1992 Outside Directors' Stock Option Plan (the "1992 Directors' Plan"). The
1992 Directors' Plan was adopted to encourage outside directors of the Company
to acquire or increase their ownership of common shares on reasonable terms, to
foster a strong incentive for outside directors to put forth maximum effort for
the continued success and growth of the Company, to aid in retaining such
individuals who put forth such efforts and to assist in attracting the best
available individuals to serve as directors of the Company in the future. The
1992 Directors' Plan terminated in April, 2002. As a result and due to the
increased competition to attract and retain talented directors, the Board of
Directors adopted the 2002 Outside Directors' Stock Option Plan (the '2002
Directors' Plan"), effective March 27, 2002. The Board of Directors hereby
seeks stockholder approval of the Company's 2002 Directors' Plan as discussed in
detail below.
The 2002 Directors' Plan was adopted by the Board of Directors effective March
27, 2002 and must be approved by the stockholders of the Company. The Company
has reserved up to a maximum of 106,356 shares of common stock for issuance
under the 2002 Directors' Plan. It is the Company's intention that the number of
shares reserved for the issuance under the 1992 Directors' Plan at the time of
its expiration be available under the 2002 Directors' Plan for future awards (to
the extent that such shares are not actually issued pursuant to the exercise of
options awarded under the 1992 Directors' Plan). As of the date hereof, options
exercisable with respect to approximately 62,500 shares of common stock are
outstanding under the 1992 Directors' Plan (the "1992 Directors' Outstanding
Options") and, at the time of the expiration of the 1992 Directors' Plan, the
Company had the ability to issue options with respect to approximately an
additional 43,856 shares of common stock. Initially, 43,856 shares of common
stock shall be reserved for issuance upon the exercise of options awarded under
the 2002 Directors' Plan (the number available for additional awards under the
1992 Directors' Plan immediately prior to its expiration), however, the number
of shares reserved for issuance under the 2002 Directors' Plan shall
automatically increase as the 1992 Directors' Outstanding Options are canceled
or expire (by an amount equal to the number of shares of common stock issuable
upon exercise of such canceled or expired 1992 Directors' Outstanding Options).
The number of shares reserved for issuance under the 2002 Directors' Plan shall
not increase as a result of the exercise of any of the 1992 Directors'
Outstanding Options. As a result, the total of the shares reserved under the
2002 Directors' Plan and the number of shares issued as a result of the
exercise of the 1992 Directors' Outstanding Options shall not exceed 106,356,
the total number of shares available for issuance under the 1992 Directors' Plan
immediately prior to its expiration (including the 1992 Directors' Outstanding
Options). The adoption of the 2002 Directors' Plan and the reservation of shares
for issuance thereunder as set forth above does not increase the number of
shares previously reserved for option grants and approved by the stockholders
under the 1992 Directors' Plan. The Company currently desires only to reserve
under the 2002 Directors' Plan the same number of shares that were available for
future grants under the 1992 Directors' Plan immediately prior to its expiration
in April 2002. The shares to be issued pursuant to awards may be authorized,
but unissued, or reacquired common stock. As of the Record Date, there were no
options or awards of restricted stock outstanding under the 2002 Option Plan.
DESCRIPTION OF THE 2002 DIRECTORS' PLAN
The following summary of the 2002 Directors' Plan is qualified, in its entirety,
by the specific language of the 2002 Directors' Plan, a copy of which is
attached to this proxy statement as Exhibit B.
Purpose. The Board of Directors believes that our long-term success is
-------
dependent upon our ability to attract and retain highly qualified directors who,
by virtue of their ability and qualifications, make important contributions to
the Company. The 2002 Directors' Plan is intended to encourage outside
directors of the Company to acquire or increase their ownership of common shares
on reasonable terms, to foster a strong incentive for outside directors to put
forth maximum effort for the continued success and growth of the Company, to aid
in retaining such individuals who put forth such efforts and to assist in
Page 16
attracting the best available individuals to serve as directors of the Company
in the future. We believe that grants of stock options motivate high levels of
performance and provide an effective means of recognizing contributions to the
success of the Company. The Board believes that the ability to grant options
will be important to our future success by allowing us to remain competitive in
attracting and retaining qualified directors.
Administration. Subject to the provisions of the 2002 Directors' Plan, the
--------------
2002 Directors' Plan will be administered by the Stock Option Committee of the
Board of Directors. Under the 2002 Directors' Plan, an option to purchase
10,000 common shares will be automatically granted on the first day of the
initial term of an outside director. Thereafter, an option to purchase an
additional 2,500 common shares will automatically be granted upon the first day
of each consecutive year of service on the Board of Directors. The exercise
price of the options will be the fair market value of the shares on the date the
option is granted. The exercise price of options granted under the 2002
Directors' Plan is payable in cash or, at the discretion of the Stock Option
Committee, in whole or in part, by check, promissory note or in shares of common
stock, valued at their fair market value at the date of exercise. The cash
proceeds from the exercise of options constitute general funds of the company
and may be used by it for any purpose. The options may be exercised after one
year from the date of grant for not more than one-third of the shares subject to
the option and an additional one-third of the shares subject to the option may
be exercised for each of the next two years thereafter. To the extent not
exercised, options granted under the 2002 Directors' Plan will expire five years
after the date of grant except upon termination of the director's service on the
Board, in which case the option may be exercised within three months of the date
of such termination (but not beyond the term of the option) and, except upon
death of the director in which case the option may be exercised by the deceased
director's legatee, personal representative or distributee within one year of
the date of death (but not beyond the term of the option). The Option Plan will
terminate on March 26, 2012, but such termination will not affect any
outstanding options previously granted.
Eligibility. Only non-employee directors (or outside directors) of the
-----------
Company will be eligible to participate in the 2002 Directors' Plan. The
options awarded under the 2002 Directors' Plan will be non-qualified under
Section 422 of the Code.
Amendment. The 2002 Directors' 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 the Internal Revenue Code or Rule 16b-3 under the Exchange Act as in
effect at the time of reference.
Tax Consequences. 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.
2002 Directors' Plan Benefits. Only eligible non-employee directors may
--------------------------------
receive stock options under the 2002 Directors' Plan. As stated above, each
eligible non-employee director is automatically granted an option to purchase
10,000 common shares on the first day of his or her initial term and an option
to purchase an additional 2,500 common shares upon the first day of each
consecutive year of service on the Board of Directors. The actual benefits,
if any, to the holders of stock options issued under the 2002 Directors' Plan
are not determinable prior to exercise as the value, if any, of such stock
options to their holders as represented by the difference between the market
price of a share of the Company's common shares on the date of exercise and the
exercise price of a holder's stock option.
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking the
authorization, adoption and approval of the 2002 Directors' Plan is as follows:
Page 17
"RESOLVED, that the 2002 Outside Directors' Stock Option Plan be, and it
hereby is, authorized, adopted and approved by the stockholders of this
Corporation."
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 authorize, adopt
and approve the amendment to the 2002 Directors' 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.
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. On April 16, 2002, the Company closed the sale of a
majority of the assets of Technology Integration Financial Services, Inc. to
ILC. See "Compensation Committee Interlocks and Insider Participation".
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On February 20, 2001, Mr. David B. Pomeroy filed an amended Form 4 with respect
to correctly reporting the exercise date of 75,000 options granted on January 6,
2001 with an exercise price of $14.88.
On March 9, 2001, Mr. Stephen E. Pomeroy filed an amended Form 4 with respect to
correctly reporting the exercise date of 50,000 options granted on January 6,
2001 with an exercise price of $14.88.
REPORT OF THE AUDIT COMMITTEE
The audit committee is comprised of Mr. James H. Smith, III, Mr. Vincent D.
Rinaldi and Mr. Kenneth R. Waters; all three of which 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.
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 accounting principles generally accepted
in the United States of America.
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 18
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, 2002.
Submitted by the Audit Committee
James H. Smith, III, Vincent D. Rinaldi, and Kenneth R. Waters
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 2002. 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,
2002.
Audit fees $ 114,000
All other fees 23,569
----------
Total $ 137,569
==========
Page 19
PROPOSALS FOR 2003 MEETING
In order to be eligible for inclusion in the Company's proxy statement for the
2003 annual meeting of stockholders, stockholder proposals must be received by
the Company at its principal office, 1020 Petersburg Road, Hebron, Kentucky
41048, by January 6, 2003.
By Order of the Board of Directors
/s/ Michael E. Rohrkemper
- ----------------------------
Michael E. Rohrkemper, Secretary
May 3, 2002
- -----------
Date
Page 20
EXHIBIT A
2002 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
OF
POMEROY COMPUTER RESOURCES, INC.
1. PURPOSE OF THE PLAN. This 2002 Non-Qualified and Incentive Stock
Option Plan of Pomeroy Computer Resources, Inc. is adopted on this 27th day of
March, 2002, is intended to encourage Employees and Consultants of the Company
and its Subsidiaries to acquire or increase their ownership of Common Stock of
the Company on reasonable terms. The opportunity so provided is intended to
foster in participants a strong incentive to put forth maximum effort for the
continued success and growth of the Company and its Subsidiaries, to aid in
retaining individuals who put forth such efforts, and to assist in attracting
the best available individuals to the Company and its Subsidiaries in the
future. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. DEFINITIONS. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
2.2 "Award" means an Option.
2.3 "Award Agreement" means a written agreement in such form as
may be, from time to time, hereafter approved by the Committee, which shall
be duly executed by the Company and the Employee and/or Consultants, as
applicable, and which sets forth the terms and conditions of an Award under
the Plan.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Common Stock" means shares of the Company's common stock,
par value .01 per share.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
2.8 "Company" means Pomeroy Computer Resources, Inc.
2.9 "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and
is compensated for such services.
2.10 "Continuous Status as an Employee" means the absence of any
interruption or termination of employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Board, provided that such leave is
for a period of not more than ninety
(90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) transfers between
locations of the Company or between the Company, it Subsidiaries or its
successor.
2.11 "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.13 "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
Nasdaq National Market, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange for the last market trading day prior to
the time of determination as reported in the Wall Street Journal or such
other source as the Administrator deems reliable; or
(ii) If the Common Stock is quoted on NASDAQ (but not on the
National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Common Stock; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
2.14 "Incentive Stock Option" means an Option meeting the
requirements and containing the limitations and restrictions set forth in
Section 422 of the Code.
2.15 "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option
2.16 "Option" means a stock option granted pursuant to the Plan.
2.17 "Optioned Stock" means the Common Stock subject to an Option.
2.18 "Optionee" means an Employee or Consultant who receives an
Option.
2.19 "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
2.20 "Plan" means the 2002 Stock Plan.
2.21 "Share" means a share of Common Stock, as adjusted in
accordance with Section 12 of this Plan.
2.22 "Subsidiary" means any corporation or other legal entity
other than the employer corporation in an unbroken chain of corporations or
other legal entities beginning with the employer
corporation if each of the corporations or other legal entities other than
the last corporation or other legal entity in the unbroken chain owns
stock, a membership interest, or any other voting interest possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock, membership interests or other voting interests in one of the other
corporations or other legal entities in such chain.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares of which may be optioned and
sold under the Plan is 3,410,905 (the total number of shares of Common Stock
available for issuance under the 1992 Non-Qualified and Incentive Stock Option
Plan (the "1992 Option Plan") immediately prior to its expiration including the
options exercisable with respect to approximately 1,939,218 shares of Common
Stock which are outstanding under the 1992 Options Plan (the "1992 Outstanding
Options")). Initially, 1,471,687 shares of Common Stock shall be reserved for
issuance under the Plan, however, the number of shares reserved for issuance
under the Plan shall automatically increase as the 1992 Outstanding Options are
canceled or expire (by an amount equal to the number of shares of Common Stock
issuable upon exercise of such canceled or expired 1992 Outstanding Options).
The number of shares of Common Stock reserved for issuance under this Plan shall
not increase as a result of the exercise of any of the 1992 Outstanding Options.
The Common Stock may be authorized, but unissued, or reacquired Common Stock.
If an Option would expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
---------
(i) Administration With Respect to Directors and Officers.
-----------------------------------------------------
With respect to grants of Options to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the Board
if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3")
or (B) a Committee designated by the Board to administer the Plan, which
Committee shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Rule 16b-3 with respect
to a plan intended to qualify thereunder. For purposes of any award granted
under the Plan by the Committee that is intended to be exempt from the
restrictions of Section 16(b) of the Exchange Act, the Committee shall
consist only of directors who qualify as "non-Employee directors," as
defined in Rule 16b-3 under the Act. For purposes of any Award granted
under the Plan by the Committee that is intended to qualify for the
performance-based compensation exemption to the $1 million deductibility
limit under Code Section 162(m), the Committee shall consist only of
directors who qualify as "outside directors," as defined in Code Section
162(m) and the related regulations. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and
the vote of the majority of those members present at any meeting shall
decide any question brought before that meeting. In addition, the Committee
may take any action otherwise proper under the Plan by the unanimous
written consent of its Members.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
non-director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees who are neither
---------
directors nor officers of the Company or to Consultants, the Plan shall be
administered by (A) the Board, if the Board may administer the Plan in
compliance with Rule 16b-3, or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of Delaware corporate law and applicable securities laws and
of the Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2.13 of the Plan;
(ii) to select the Employees and Consultants to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such Award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder (including, but
not limited to, the share price and any restriction or limitation or waiver
or forfeiture restrictions regarding any Option and/or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator shall determine, it its sole discretion);
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common
Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Committee's Decision. All decisions,
------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he/she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the Award Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his/her right or the
Company's right to terminate his/her employment or consulting relationship
at any time, with or without cause.
6. TERM OF THE PLAN. The Plan shall become effective on June 13,
2002, provided the Plan has been previously adopted by the Board of Directors
and approved by the shareholders of the Company as described in Section 18 of
the Plan. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of the grant
thereof or such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by
the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all class of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less
than 110% of the Fair Market Value per share on the date of the grant.
(B) granted to any Employee, the per Share price shall
be no less than 100% of the Fair Market Value per Share on the date of the
grant.
(ii) in the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
the grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely
of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in
the case of Shares acquired upon exercise of an Option either have been
owned by the Optionee for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (5)
authorization from the Company to retain from the total number of Shares as
to which the Option is exercised that number of Shares having a Fair Market
Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the option is exercised, (6) delivery of a
properly executed notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the
option holder to take and pay for the Shares not more than twelve months
after the date of delivery of the subscription agreement, (8) any
combination of the foregoing methods of payment or (9) such other
consideration and method of payment for the issuance of Shares to the
extent permitted under all applicable laws. In making its determination as
to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
(c) The Company, in its sole discretion, may establish a
procedure whereby an Employee or Consultant, subject to the requirements of
Section 16 of the Exchange Act, Rule 16b-3, Regulation T, federal income
tax laws, and other federal, state and local tax and securities laws, can
exercise an Option or portion thereof without making a direct payment of
the option price to the Company. If the Company so elects to establish the
cashless exercise program, the Company shall determine, in its sole
discretion, and from time to time, such administrative procedures and
policies as it deems appropriate, and such procedures and policies shall be
binding on any Employee or Consultant wishing to utilize the cashless
exercise program.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including the performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as
authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the
Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued.
Exercise of an Option in any manner will result in a decrease in
the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Employment. In the event of termination of an
-------------------------
Optionee's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Optionee may, but only within ninety
(90) days (or such other period of time as is determined by the Board, with
such determination in the case of an Incentive Stock Option being made at
the time of grant of the Option and not exceeding ninety (90) days) after
the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement),
exercise his/her Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee
was not entitled to exercise the Option at the date of such termination, or
if Optionee does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
----------------------
Section 9(b) above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his/her
total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee,
-----------------
the Option may be exercised at any time within twelve (12) months following
the date of death (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent
so entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
----------
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than: (a) by will or the laws of descent and distribution, and an Option may be
exercised during the lifetime of the holder of the Option, only by him/her, or
in the event of his/her death, by the legal representative of the estate of the
deceased Employee or Consultant, or the person or persons who shall acquire the
right to exercise an Option by the bequest or inheritance by reason of the death
of the Employee or Consultant, or in the event of disability, his/her personal
representative, or (b) pursuant to a Qualified Domestic Relations Order, as
defined in the Code, or the Employee Retirement and Security Act (ERISA), or the
rules thereunder; provided, however, that Incentive Stock Options may not be
transferred pursuant to a Qualified Domestic Relations Order unless such
transfer is otherwise permitted pursuant to the Code and the regulations
thereunder without affecting the Option's qualification under Section 422 as an
Incentive Stock Option.
11. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable laws, the Optionee is obligated to pay the Company an amount
required to be withheld under applicable tax laws, the Optionee may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or
restrictions as may be required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued 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 for 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 issuance 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.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another corporation or the sale of substantially all of the Company's assets
(hereinafter, a "merger"), the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation. In the event that such successor corporation does
not agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise the exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such notice
and the Option will terminate upon the expiration of such period. For purposes
of this paragraph, the Option shall be considered assumed if, following the
merger, the Option or right confers the right to purchase, for each Share of
stock subject to the Option immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its
parent, the Board may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option, for each Share of stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal to the Fair Market Value
to the per share consideration received by holders of Common Stock in the merger
or sale of assets.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is to be granted within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alternation,
suspension or discontinuation shall be made which would impair the rights
of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with
Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any
other applicable law or regulation, including the requirements of the NASD
or an established stock exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such representation is required by any of
the aforementioned relevant provisions of law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19 INFORMATION TO OPTIONEES . The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
EXHIBIT B
2002 OUTSIDE DIRECTORS' STOCK OPTION PLAN
OF
POMEROY COMPUTER RESOURCES, INC.
1. PURPOSE OF THE PLAN. This 2002 Outside Directors' Stock Option Plan
of Pomeroy Computer Resources, Inc. adopted on this 27th day of March, 2002, is
intended to encourage directors of the Company who are not officers or employees
of the Company or any of its Subsidiaries to acquire or increase their ownership
of common stock of the Company on reasonable terms. The opportunity so provided
is intended to foster in participants a strong incentive to put forth maximum
effort for the continued success and growth of the Company and its Subsidiaries,
to aid in retaining individuals who put forth such efforts, and to assist in
attracting the best available individuals to the Company to serve as directors
in the future.
2. DEFINITIONS. When used herein, the following terms shall have the
meaning set forth below:
2.1 "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
2.2 "Award" means an Option.
2.3 "Award Agreement" means a written agreement in such form as
may be, from time to time, hereafter approved by the Committee, which shall be
duly executed by the Company and the Director and which sets forth the terms and
conditions of an Option as provided under the Plan.
2.4 "Board" means the Board of Directors of Pomeroy Computer
Resources, Inc.
2.5 "Common Stock" means shares of the Company's common stock,
par value .01 per share.
2.6 "Code" means the Internal Revenue Code of 1986, as in effect
at the time of reference, or any successor revenue code which may hereafter be
adopted in lieu thereof, and reference to any specific provisions of the Code
shall refer to the corresponding provisions of the Code as it may hereafter be
amended or replaced.
2.7 "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
2.8 "Company" means Pomeroy Computer Resources, Inc.
2.9 "Directors" means directors who serve on the Board and who are
not officers or employees of the Company or any of its Subsidiaries.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.11 "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such system
or exchange for the last market trading day prior to the time of determination
as reported in the Wall Street Journal or such other source as the Administrator
deems reliable; or
(ii) If the Common Stock is quoted on NASDAQ (but not on the
National Market System thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the Common Stock; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
2.12 "Option" means the right to purchase the number of the Common
Stock specified by the Plan, at a price and for a term fixed by the Plan, and
subject to such other limitations and restrictions as the Plan and the Committee
impose.
2.13 "Optioned Stock" means the Common Stock subject to an Option.
2.14 "Optionee" means a Director who receives an Option.
2.15 "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
2.16 "Plan" means the Company's 2002 Outside Directors' Stock
Option Plan.
2.17 "Share" means a share of Common Stock, as adjusted in
accordance with Section 12 of this Plan.
2.18 "Subsidiary" means any corporation or other legal entity
other than the employer corporation in an unbroken chain of corporations or
other legal entities beginning with the employer corporation if each of the
corporations or other legal entities other than the last corporation or other
legal entity in the unbroken chain owns stock, a membership interest, or any
other voting interest possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock, membership interests or other
voting interests in one of the other corporations or other legal entities in
such chain.
2.19 "Term" means the period during which a particular Option may
be exercised.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares of which may be optioned and
sold under the Plan is 106,356 (the total number of shares of Common Stock
available for issuance under the 1992 Outside Directors' Stock Option Plan (the
"1992 Directors' Plan") immediately prior to its expiration including the
options exercisable with respect to approximately 62,500 shares of Common Stock
which are outstanding under the 1992 Directors' Plan (the "1992 Outstanding
Options")). Initially, 43,856 shares of Common Stock shall be reserved for
issuance under the Plan, however, the number of shares reserved for issuance
under the Plan shall automatically increase as the 1992 Outstanding Options are
canceled or expire (by an amount equal to the number of shares of Common Stock
issuable upon exercise of such canceled or expired 1992 Outstanding Options).
The number of shares of Common Stock reserved for issuance under this Plan shall
not increase as a result of the exercise of any of the 1992 Outstanding Options.
The Common Stock may be authorized, but unissued, or reacquired Common Stock.
If an Option would expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
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4. ADMINISTRATION OF THE PLAN.
(a) The Board shall appoint the Committee, which shall consist of
not less than two (2) disinterested persons as defined in Rule 16b-3 of the
Exchange Act. Subject to the provisions of the Plan, the Committee shall have
full authority to interpret the Plan, and to prescribe, amend, and rescind rules
and regulations relating to it. The Board may, from time to time, appoint
members to the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee shall select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of its
members shall constitute a quorum. Any action of the Committee may be taken by
a written instrument signed by all of the members, and any action so taken shall
be fully as effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held. The Committee shall make such rules
and regulations for the conduct of its business as it shall deem advisable and
shall keep minutes of its meetings and records of all action taken in writing
without a meeting. No member of the Committee shall be liable, in the absence
of bad faith, for any act or omission with respect to his/her service on the
Committee.
(b) Powers of the Administrator. Subject to the provisions
---------------------------
of the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(c)
(d) (i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2.11 of the Plan;
(e)
(f) (ii) to approve forms of agreement for use under the
Plan;
(g)
(h) (iii) to determine whether and under what
circumstance an Option may be settled in cash under Section 8(d) instead of
Common Stock;
(i)
(j) (c) Effective Committee's Decision. All decisions,
------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
(k)
(l) 5. GRANT OF OPTIONS. An Option to purchase 10,000 shares of
Common Stock shall, without action by the Board or Committee, be granted to each
Director on the first day of his/her initial term as a director or on the
effective date of the Plan, whichever shall occur later, provided he/she meets
the definition of a disinterested director in Rule 16b-3 of the Exchange Act.
Upon the first day of an eligible Director's second consecutive year of service
on the Board, and on the first day of each consecutive year of service
thereafter, an additional Option to purchase 2,500 shares of Common Stock shall,
without action by the Board or Committee, be granted to such Director.
Notwithstanding the foregoing, if the number of shares of Common Stock available
to grant under the Plan on a scheduled date of grant is insufficient to make all
automatic grants required to be made pursuant to the Plan on such date, then
each eligible Director shall receive an Option to purchase a pro rata number of
the remaining shares of Common Stock available under the Plan; provided,
however, that if such proration results in fractional shares of Common Stock,
then such Option shall be rounded down to the nearest number of whole shares of
Common Stock.
(m)
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6. STOCK OPTIONS.
6.1 Option Price.
------------
(a) The option price per share of any Option granted under
the Plan shall be the Fair Market Value of the shares of Common Stock covered
by the Option on the date set forth in Section 2.11.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) other Shares which (x) in the case of Shares acquired upon
exercise of an Option either have been owned by the Optionee for more than six
months on the date of surrender or were not acquired, directly or indirectly,
from the Company, and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (5) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan proceeds required
to pay the exercise price, (7) by delivering an irrevocable subscription
agreement for the Shares which irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under all applicable laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
(c) The Company, in its sole discretion, may establish a
procedure whereby a Director, subject to the requirements of Section 16 of the
Exchange Act, Rule 16b-3, Regulation T, federal income tax laws, and other
federal, state and local tax and securities laws, can exercise an Option or
portion thereof without making a direct payment of the option price to the
Company. If the Company so elects to establish the cashless exercise program,
the Company shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate, and such
procedures and policies shall be binding on any Director wishing to utilize the
cashless exercise program.
6.2 Terms of Options.
----------------
(a) An Option granted hereunder shall be exercisable for a
Term of five (5) years from the date of grant thereof (Date of Grant), but
shall be subject to earlier termination as hereinafter provided, and
(b) prior to its expiration or termination the Option may be
exercised within the following time limitations.
(i) After one (1) year from the Date of Grant, it may be
exercised as to not more than one-third (1/3) of the shares of Common Stock
originally subject to the Option.
(ii) After two (2) years from the Date of Grant, it may
be exercised as to not more than two-thirds (2/3) of the shares of Common Stock
originally subject to the Option.
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(iii) After three (3) years from the Date of Grant, it
may be exercised as to any part or all of the shares of Common Stock originally
subject to Option.
6.3 Termination of Directorship. In the event that a Director
---------------------------
ceases to be a member of the Board (other than by reason of death), an Option
may be exercised by the Director (to the extent that the Director was entitled
to do so at the time he/she ceased to be a member of the Board) at any time
within three (3) months after he/she ceases to be a member of the Board, but not
beyond the Term of the Option.
6.4 Death of a Director. In the event of the death of a Director,
-------------------
the Option may be exercised at any time within twelve (12) months following the
date of death, but in no event later than the expiration date of the Term of
such Option as set forth in the Option Agreement (by the Director's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance), but only to the extent that the Director was entitled to exercise
the Option at the date of death. To the extent that the Director was not
entitled to exercise the Option at the date of termination or if the Director
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
7. TERM OF THE PLAN. The Plan shall become effective on June 13, 2002,
provided the Plan has been previously adopted by the Board of Directors and
approved by the shareholders of the Company as determined in Section 18 of the
Plan. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
8. EXERCISE OF OPTION.
(a) Any Option granted hereunder shall be exercisable at such
times under such conditions as determined by the Administrator, and shall be
permissible under the terms of the Plan.
(b) The Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
Option has been given to the Company in accordance with the terms of the Option
by the person entitled to exercise the Option and full payment for the Shares
with respect to which the Option is exercised has been received by the Company.
Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 6.1(b) of the Plan.
Exercise of an Option in any manner will result in a decrease in the
number of Shares which may thereafter be available, both for purpose of the Plan
and for sale under the Option by the number of Shares as to which the Option is
exercised.
(c) Options granted to persons subject to Section 16(b) of the
Exchange Act, must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(d) Buy-Out Provisions. The Administrator may at any time offer
------------------
to buy-out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
5
9. RIGHTS OF OPTIONEE. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue, or cause to be issued, such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued.
10. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than: (a) by will or the laws of descent and distribution, and an Option may be
exercised during the lifetime of the holder of the Option, only by him/her, or
in the event of his/her death, by the legal representative of the estate of the
deceased Director, or the person or persons who shall acquire the right to
exercise an Option by the bequest or inheritance by reason of the death of the
Director, or in the event of disability, his/her personal representative, or (b)
pursuant to a Qualified Domestic Relations Order, as defined in the Code, or the
Employee Retirement and Security Act (ERISA), or the rules thereunder.
11. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable laws, the Optionee is obligated to pay the Company an amount
required to be withheld under applicable tax laws, the Optionee may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
6
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued 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 for 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 issuance 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.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another corporation or the sale of substantially all of the Company's assets
(hereinafter, a "merger"), the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation. In the event that such successor corporation does
not agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise the exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such notice
and the Option will terminate upon the expiration of such period. For purposes
of this paragraph, the Option shall be considered assumed if, following the
merger, the Option or right confers the right to purchase, for each Share of
stock subject to the Option immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its parent, the Board may,
with the consent of the successor corporation and the participant, provide for
the consideration to be received upon the exercise of the Option, for each Share
of stock subject to the Option, to be solely common stock of the successor
corporation or its Parent equal to the Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. FORM OF OPTIONS. Nothing contained in the Plan nor any resolution
adopted or to be adopted by the Board or the stockholders of the Company shall
constitute the granting of any Option. An Option shall be granted hereunder on
the date or dates specified in the Plan. Whenever the Plan provides for the
receipt of an Option by a Director, the Secretary or the President of the
Company, or such other person as the Committee shall appoint, shall forthwith
send notice thereof to the Director, in such form as the Committee shall
approve, stating the number of Shares of
7
Common Stock subject to the Option, the Term of the Option, and all other terms
and conditions thereof provided by the Plan. The notice shall be accompanied by
a written Award Agreement which shall have been duly executed by or on behalf of
the Company. Execution by the Director to whom such Option is granted of said
Award Agreement in accordance with the provisions set forth in this Plan shall
be a condition precedent to the exercise of any Option.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alternation,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such representation is required by any of
the aforementioned relevant provisions of law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after
8
the date the Plan is adopted. Such shareholder approval shall be obtained in the
degree and manner required under applicable state and federal law.
19 INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to Directors whose duties in connection with the Company assure their access to
equivalent information.
20. FEES AND COSTS. The Company shall pay all original issue taxes on
the exercise of any Option granted under the Plan and all other fees and
expenses necessarily incurred by the Company in connection therewith.
21. OTHER PROVISIONS. As used in the Plan, and in Award Agreements and
other documents prepared in implementation of the Plan, references to the
masculine pronoun shall be deemed to refer to the feminine or neuter, and
references in the singular or the plural shall refer to the plural or the
singular, as the identity of the person or persons or entity or entities being
referred to may require. The captions used in the Plan and in such Award
Agreements and other documents prepared in implementation of the Plan are for
convenience only and shall not affect the meaning of any provision hereof or
thereof.
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