AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
By and Between
Pomeroy IT Solutions, Inc.
fka Pomeroy Computer Resources, Inc.
and
Stephen E. Pomeroy
________________
TABLE OF CONTENTS
1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Position and Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Place of Performance . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Compensation and Related Matters. . . . . . . . . . . . . . . . . . . 3
(a) Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Annual Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Annual Bonus Determination. . . . . . . . . . . . . . . . . . . . 5
(d) Incentive Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Stock Option Award. . . . . . . . . . . . . . . . . . . . . . . . 8
6. Fringe Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(a) Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . .10
(b) Vacation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(c) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(d) Automobile Use . . . . . . . . . . . . . . . . . . . . . . . . . .11
(e) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(f) Retirement Plan. . . . . . . . . . . . . . . . . . . . . . . . . .12
(g) Flight Time Business Usage . . . . . . . . . . . . . . . . . . .12
7. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(a) Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(b) Disability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(c) Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(d) Good Reason. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(e) Notice of Termination . . . . . . . . . . . . . . . . . . . . . .18
(f) Date of Termination . . . . . . . . . . . . . . . . . . . . . . .19
8. Compensation Upon Termination. . . . . . . . . . . . . . . . . . . . .21
9. Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . .28
10. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
11. Binding Employment Agreement . . . . . . . . . . . . . . . . . . . . .31
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12. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
13. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . .32
14. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
16. Entire Employment Agreement. . . . . . . . . . . . . . . . . . . . . .34
17. Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . .34
18. Consent to Jurisdiction and Forum. . . . . . . . . . . . . . . . . .34
19. Signing Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
This Amended and Restated Employment Agreement (the "Employment Agreement")
made this 3rd day of November, 2003 (the "Effective Date") between POMEROY IT
SOLUTIONS, INC., a Delaware corporation, fka Pomeroy Computer Resources, Inc.,
(the "Company"), and STEPHEN E. POMEROY (the "Executive").
WHEREAS, on the 6th day of January, 1999, the Company's wholly owned
subsidiary, Pomeroy Select Integration Solutions, inc. and Executive executed an
Employment Agreement; and
WHEREAS, effective September 1, 1999, Pomeroy Select Integration Solutions,
Inc. and Executive executed a First Amendment to Employment Agreement; and
WHEREAS, Company and Executive entered into a Second Amendment to Employment
Agreement effective January 6, 2001; and
WHEREAS, Company and Executive entered into a Third Amendment to Employment
Agreement effective January 6, 2002; and
WHEREAS, Company and Executive entered into a Fourth Amendment to
Employment Agreement effective January 6, 2003; and
WHEREAS, Company and Executive desire to amend and restate the Employment
Agreement in its entirety, to reflect certain changes agreed upon by Company and
Executive regarding compensation and other matters.
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NOW, THEREFORE, in consideration of the continued employment of the
Executive by the Company and the benefits to be derived by the Executive
hereunder, and of the Executive's agreement to continued employment by the
Company as provided herein, the parties mutually agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
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the Executive hereby agrees to serve the Company, on the terms and conditions
set forth herein.
2. Term. Subject to the provisions for termination as hereinafter
----
provided, the term of this Employment Agreement shall begin on the Effective
Date and shall continue for five (5) years thereafter. On each day during the
term of this Employment Agreement, such term automatically shall be extended on
a daily basis such that the term of this Employment Agreement shall continue to
be five (5) years unless this Employment Agreement is terminated as provided in
Section 7.
3. Position and Duties. The Executive shall initially serve as
----------------------
President and Chief Operating Officer of the Company and shall be responsible
for overall executive management and planning and shall have such other
responsibilities, duties and authority as are customary of a President and Chief
Operating Officer of a company the size and structure of the Company and as may
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from time to time be assigned to the Executive by the Board of Directors of the
Company (the "Board") that are consistent with such responsibilities, duties,
authority and applicable law. The Executive shall devote substantially all his
working time and efforts to the business and affairs of the Company.
4. Place of Performance. In connection with the Executive's employment
---------------------
by the Company, the Executive shall be based at the principal executive offices
of the Company in the greater Cincinnati, Ohio area.
5. Compensation and Related Matters. As compensation and consideration
---------------------------------
for the performance by the Executive of the Executive's duties, responsibilities
and covenants pursuant to this Employment Agreement, the Company will pay the
Executive and the Executive agrees to accept in full payment for such
performance the amounts and benefits set forth below:
(a) Base Salary. During the portion of the Company's 2003 fiscal
------------
year covered by this Agreement, Executive shall be paid at the annual rate
of Four Hundred Fifty Thousand Dollars ($450,000.00) per year. During the
Company's 2004 fiscal year, Executive shall be paid at the annual rate of
Four Hundred Ninety-Five Thousand Dollars ($495,000.00) per year. During
the Company's 2005 fiscal year, Executive shall be paid at the annual rate
of Five Hundred Forty-Four Thousand Five Hundred Dollars ($544,500.00) per
year. The 2005 fiscal year rate shall continue for each subsequent year of
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the Employment Agreement unless modified by the Compensation Committee of
the Company.
Compensation of the Executive by salary payments shall not be deemed
exclusive and shall not prevent the Executive from participating in any
other compensation or benefit plan of the Company. The salary payments
(including any increased salary payments) hereunder shall not in any way
limit or reduce any other obligation of the Company hereunder or under any
other compensation or benefit plan or agreement under which the Executive
is entitled to receive payments or other benefits from the Company, and no
other compensation, benefit or payment hereunder or under any other
compensation or benefit plan or agreement under which the Executive is
entitled to receive payments or other benefits from the Company shall in
any way limit or reduce the obligation of the Company to pay the
Executive's salary hereunder.
(b) Annual Bonus. Executive shall be entitled to a bonus and
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non-qualified stock option award for the 2003 fiscal year in the event
Executive satisfies the applicable criteria set forth below of the income
from operations (as defined) of the Company for 2003, as follows:
(i) Income from operations greater than $26,000,000.00 but
less than or equal to $27,500,000.00 = $150,000.00 cash bonus and
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75,000 non-qualified stock options;
(ii) Income from operations greater than $27,500,000.00 but
less than or equal to $29,000,000.00 = $250,000.00 cash bonus and
100,000 non-qualified stock options;
(iii) Income from operations greater than $29,000,000.00 but
less than or equal to $30,500,000.00 = $350,000.00 cash bonus and
125,000 non-qualified stock options;
(iv) Income from operations greater than $30,500,000.00 =
$500,000.00 cash bonus and 150,000 non-qualified stock options.
(c) Annual Bonus Determination. Within thirty (30) days of the
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conclusion of the 2003 fiscal year of the Company and each fiscal year
thereafter, Executive and Company shall agree upon the threshold of
operating income or any other performance related criteria to be utilized
for determining any bonus and non-qualified stock options to be awarded to
Executive for such year. Such bonus and non-qualified stock option awards
for each subsequent year of this Employment Agreement shall be consistent
with Executive's prior plan.
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Any award of stock options to acquire the common stock of the Company shall
be at the fair market value of such common stock as of the applicable date. For
purposes of this Employment Agreement, the fair market value as of the
applicable date shall mean with respect to the common shares, the average
between the high and low bid and asked prices for such shares on the over the
counter market on the last business day prior to the date on which the value is
to be determined (or the next preceding date on which sales occurred if there
were no sales on such date).
For purposes of this Employment Agreement, the term income from operations
shall be computed without respect to the bonus payable to the Executive pursuant
to Section 5(b), shall exclude any gains or losses realized by the Company on
the sale or other disposition of its assets (other than in the ordinary course
of business) and shall exclude any extraordinary one-time charges made by
Company during said fiscal year. Such income from operations of the Company
shall be determined on a consolidated basis by the independent accountant
regularly retained by the Company, subject to the foregoing provisions of this
subparagraph in accordance with generally accepted accounting principles. Said
determination and payment of such bonus shall be made within ninety (90) days
following the end of the fiscal year of the Company and the determination by the
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accountant shall be final, binding and conclusive upon all parties hereto. In
the event the audited financial statements are not issued within such ninety-day
period, the Company shall make the payment due hereunder (if any) based on its
best reasonable estimate of any liability hereunder, which amount shall be
reconciled by both parties once the audited financial statements are issued.
Company shall have the ability to advance amounts to Executive based on the
projected amount of the bonus compensation to be paid hereunder. In the event
that such advance payments are in excess of the amount due hereunder, any such
excess shall be reimbursed to Company by Executive within ninety (90) days
following the end of the fiscal year. In the event such advance payments are
less than the amount of said bonus as determined hereunder, any additional
amount due Executive shall be paid within ninety (90) days following the end of
the fiscal year of the Company.
In the event that Company would acquire during its 2003 fiscal year a
company that had gross revenues in excess of $100,000,000 for its most recently
concluded fiscal year, Company and Executive shall in good faith determine
whether any adjustments to the income from operations criteria set forth above,
whether upward or downward, shall be made in order to reflect the effect of such
acquisition on the operations of the Company.
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(d) Incentive Plans. During the term of the Executive's employment
----------------
hereunder, the Executive shall participate in all management incentive
plans made generally available to executives of the Company in comparable
positions (the "Bonus Plans"). In addition to the foregoing, the Board
shall review at least annually the Executive's performance to determine, in
its sole discretion, whether bonus compensation other than pursuant to the
Bonus Plans is appropriate.
(e) Expenses. During the term of the Executive's employment
---------
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable and customary travel and entertainment expenses or other
out-of-pocket business expenses incurred by the Executive in fulfilling the
Executive's duties and responsibilities hereunder, including all expenses
of travel and living expenses while away from home on business or at the
request of and in the service of the Company and telephone expenses,
provided that such expenses are incurred and accounted for in accordance
with the policies and procedures established by the Company.
(f) Stock Option Award. Upon the execution of this Employment
Agreement and on each subsequent four consecutive annual anniversary
date(s) of the Effective Date of this Employment Agreement, provided that
Executive is
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employed by Company on such date (i.e., November ____, 2004, November ____,
2005, November ____, 2006 and November ____, 2007), Executive shall be
awarded an option to acquire 100,000 shares of the common shares of Company
at the fair market value of such common shares as of the date of the award.
Such options shall be awarded to Executive by Company pursuant to the terms
of an Award Agreement to be executed on the applicable date. The number of
shares that shall be subject to this option on each of the annual
anniversary dates of the Effective Date of the Employment Agreement shall
be subject to adjustment as set forth in the Plan. The options to be
granted incident thereto shall be Non-Qualified Stock Options and shall not
be treated by the Company or the Executive as Incentive Stock Options for
federal income tax purposes. The term of each Award set forth above shall
be for a period of five (5) years from the date of each such award.
Company's award agreement for the grant of the initial 100,000 shares of
its common stock hereunder is attached hereto as Exhibit A.
Any award of stock options to acquire the common stock of the Company
shall be at the fair market value of such common stock as of the applicable
date. For purposes of this Employment Agreement, the fair market value as
of the applicable date shall mean with respect to the common shares, the
average
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between the high and low bid and asked prices for such shares on the
over-the-counter market on the last business day prior to the date on which
the value is to be determined (or the next preceding date on which sales
occurred if there were no sales on such date).
6. Fringe Benefits. During the term of this Employment Agreement,
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Executive shall be entitled to the following benefits:
(a) Health Insurance. During the term of this Employment
------------------
Agreement, Executive shall be provided with the standard medical health and
insurance coverage maintained by Company on its employees. Company and
Executive shall each pay fifty percent (50%) of the cost of such coverage.
(b) Vacation. Executive shall be entitled each year to a vacation
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of four (4) weeks during which his compensation will be paid in full.
Provided, however, such weeks may not be taken consecutively without the
written consent of Company.
(c) Insurance. During the term of this Employment Agreement,
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Company shall maintain on the life of Executive, provided he is insurable
at standard rates, a term life insurance policy in the amount of
$1,000,000.00. Executive shall have the right to designate the beneficiary
of such policy. Executive agrees to take any and all physicals that are
necessary incident to the issuance and/or renewal of said policy. In
addition, Executive agrees to take any and all physicals that are necessary
incident to the procurement of key person insurance upon his life by
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Company. In the event that Executive is not insurable at standard rates
during the term of this Employment Agreement, but Executive is able to
procure rated coverage, Executive shall have the right to procure coverage
for a lower amount of insurance, the cost of which is equivalent to the
standard term rate cost of $1,000,000.00 of coverage. In the event
Executive is not insurable, then Company shall pay Executive an amount
equal to the projected cost of the contemplated term insurance of
$1,000,000.00 at standard rates.
(d) Automobile Use. Company shall provide Executive with an
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automobile that is comparable to the Mercedes owned by Company and
currently utilized by Executive. Company shall directly pay for all
maintenance, repairs, gasoline and insurance costs related to said
automobile. Company shall reimburse Executive for any costs of gasoline or
any other reasonable item that he expends on behalf of Company incident to
its business use within thirty (30) days of Executive incurring such cost.
(e) Expenses. During the term of this Employment Agreement,
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Company shall provide an expense allowance of One Thousand Two Hundred
Dollars ($1,200.00) per month to Executive to reimburse Executive for the
business use of his home and various cellular phones, home phones, faxes,
computers, etc. Executive shall provide Company, upon request, with any
documentation substantiating such expenditures hereunder.
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(f) Retirement Plan. Executive shall participate, after meeting
-----------------
eligibility requirements, in any qualified retirement plans and/or welfare
plans maintained by the Company during the term of this Employment
Agreement.
(g) Flight Time Business Usage. In the event of a Change of
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Control as defined under the terms of this Employment Agreement, Executive
shall be provided each year with one hundred fifty (150) hours of flight
time for business usage by private air carrier provided by Cincinnati Air
or some other executive jet service that may be designated by Executive. In
the event Executive does not use such designated hours of flight time for
business usage during any particular year after a Change in Control has
occurred, no carryover shall exist for any unused time.
Executive shall be responsible for any and all taxes owed, if any, on the
fringe benefits provided to him pursuant to this Section 6.
7. Termination. The Executive's employment hereunder may be terminated
------------
under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
------
upon his death.
(b) Disability. If the Executive is "permanently disabled" (as
-----------
defined below), the Company may terminate the Executive's employment
hereunder. For purposes of this Employment Agreement, the Executive's
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permanent disability shall be deemed to occur after one hundred fifty (150)
days in the aggregate during any consecutive twelve (12) month period, or
after one hundred fifty (150) consecutive days, during which the Executive,
by reason of his physical or mental illness, shall have been unable to
discharge fully his duties under this Employment Agreement. In the event
the Executive, after receipt of Notice of Termination from the Company,
with respect to his permanent disability, shall dispute that his permanent
disability shall have occurred, he shall promptly submit to a physical
examination by the Chief of Medicine of any major accredited hospital in
the metropolitan Cincinnati area and unless such physician shall issue his
written statement to the effect that in his opinion, based on his
diagnosis, the Executive is capable of resuming his employment and devoting
his full time and energy to discharging his duties within ten (10) days
after the date of such statement, such permanent disability shall be deemed
to have occurred without further dispute by the Executive. If at any time
prior to the expiration of said above-described period of permanent
disability, the Executive shall no longer be disabled so that he is, on a
regular and continuous basis and for the foreseeable future, able to resume
and carry on his duties under this Employment Agreement, then he shall be
reinstated under this Employment Agreement for the then remainder of the
term hereof at the salary level herein set forth.
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(c) Cause. The Company may terminate the Executive's employment
------
hereunder for Cause. For purposes of this Employment Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder upon:
(i) continuous refusal to perform his duties or
responsibilities hereunder which continues after being brought to the
attention of the Executive (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of
Termination (as defined in subsection (e) hereof) by the Executive for
Good Reason (as defined in subsection (d) hereof)); or
(ii) the willful act, willful failure to act or willful
misconduct by the Executive that is materially and manifestly
injurious to the Company and that is brought to the attention of the
Executive in writing not more than thirty days from the date of its
discovery by the Company or the Board.
For purposes of this subsection (c), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith or without reasonable belief that his
action or omission was in the best interest of the Company. Notwithstanding
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the foregoing, the Executive shall not be deemed to have been terminated
for Cause without (1) reasonable written notice to the Executive specifying
in detail the specific reasons for the Company's intention to terminate for
Cause, (2) an opportunity for the Executive, together with his counsel, to
be heard before the Board, and (3) delivery to the Executive of a Notice of
Termination, as defined in subsection (e) hereof, approved by the
affirmative vote of not less than a majority of the entire membership of
the Board upon a finding that, in the good faith opinion of the Board, the
Executive was guilty of conduct set forth above in clause (i) or (ii)
above.
(d) Good Reason.
------------
(i) The Executive may terminate his employment hereunder (A)
for Good Reason or (B) otherwise upon not less than thirty (30) days'
written notice to the Company.
(ii) For purposes of this Employment Agreement, "Good Reason"
shall mean, without the Executive's express consent, the occurrence of
any of the following circumstances unless, in the case of clauses (A),
(B), (C), (D), (F) and (H) below, such circumstances are fully
corrected prior to the Date of Termination (as defined in subsection
(f) of this Section 7) specified in the Notice of Termination (as
defined in subsection (e) of
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this Section 7) given in respect thereof and such circumstances do not
reoccur: (A) a substantial diminution in the Executive's duties,
responsibilities or authority (except during periods when the
Executive is unable to perform in all or substantially all of the
Executive's duties and/or responsibilities as a result of the
Executive's illness (either physical or mental) or other incapacity),
(B) a reduction in either the Executive's annual rate of base salary
or bonus compensation under Section 5(a) and/or 5(b) hereof, (C) an
elimination or reduction of the Executive's participation in any
benefit plan generally available to executive employees of the
Company, unless the Company continues to offer the Executive benefits
substantially similar to those made available by such plan; provided,
--------
however, that a change to a plan in which salaried employees of the
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Company generally participate, including termination of any such plan,
if it does not result in a proportionately greater reduction in the
rights of or benefits to the Executive as compared with the other
salaried employees of the Company or is required by law or a technical
change shall not be deemed to be Good Reason, (D) failure to provide
facilities or services which, in any material respect, are suitable to
the
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Executive's position and adequate for the performance of the
Executive's duties and responsibilities, (E) failure of any successor
(whether direct or indirect, by purchase of stock or assets, merger,
consolidation or otherwise) to the Company to assume the Company's
obligations hereunder or failure by the Company to remain liable to
the Executive hereunder after an assignment by the Company of this
Employment Agreement, (F) any purported termination by the Company of
the Executive's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of subsection (e) of this
Section 7 (and for purposes of this Employment Agreement no such
purported termination shall be effective), (G) a termination of
employment by the Executive within ninety (90) days following a Change
in Control (as defined herein); provided, however, that Good Reason
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shall not exist if (i) the Change in Control does not result in a
successor entity or the Executive has accepted employment with the
successor entity, and (ii) the Company has expressly reaffirmed this
Employment Agreement after the Change in Control or such successor
entity has assumed this Employment Agreement, or (H) a material breach
of this
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Employment Agreement by the Company. The Executive's right to
terminate employment pursuant to this subsection (d) shall not be
affected by the Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder; provided, however, that the
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Executive shall be deemed to have waived his rights pursuant to
circumstances constituting Good Reason hereunder if he shall not have
provided to the Company a Notice of Termination within ninety (90)
days following his knowledge of the circumstances constituting Good
Reason.
(e) Notice of Termination. Any termination of the Executive's
------------------------
employment by the Company or by the Executive (other than a termination
pursuant to subsection (a) hereof) shall be communicated by written Notice
of Termination to the other party hereto, in accordance with Section 12.
For purposes of this Employment Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Employment Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
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(f) Date of Termination. "Date of Termination" shall mean (i) if
---------------------
the Executive's employment is terminated pursuant to subsection (a) above,
the date of his death, (ii) if the Executive's employment is terminated
pursuant to subsection (b) above, thirty (30) days after Notice of
Termination is given, (iii) if the Executive's employment is terminated
pursuant to subsection (c) or (d) above, the date specified in the Notice
of Termination which, in the case of a termination for Cause shall not be
less than fifteen (15) days from the date such Notice of Termination is
given, and, in the case of a termination for Good Reason or a termination
pursuant to subsection 7(d)(i)(B), such date hereof shall not be less than
fifteen (15) days nor more than thirty (30) days from the date such Notice
of Termination is given), (iv) if the Executive's employment is terminated
by the Company other than for Cause, thirty (30) days from the date the
Executive is notified of such termination, or (v) if the Executive
terminates his employment and fails to provide written notice to the
Company of such termination, the date of such termination; provided,
---------
however, that if within fifteen (15) days after any Notice of Termination
--------
is given, or, if later, prior to the Date of Termination (as determined
without regard to this proviso), the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the
dispute is finally determined, by mutual written agreement of the parties,
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by a binding arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and for which no appeal has
been perfected); and provided, further, that the Date of Termination
--------- --------
shall be extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the foregoing, if the
dispute is resolved in favor of the Company, the Date of Termination shall
not be deemed to have been extended for purposes of this Employment
Agreement. If the Date of Termination is extended by a notice of dispute,
the rights of the parties upon a final determination shall be governed by
the terms of this Employment Agreement, regardless of whether the
Employment Agreement otherwise remains in effect on the date of such final
determination. Notwithstanding the pendency of any such dispute, the
Company will continue to pay to the Execute his full compensation in effect
when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until
the dispute is finally resolved in accordance with this subsection (d).
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Amounts paid under this subsection (d) are in addition to all other amounts
due under this Employment Agreement or under any other compensation or
benefit plan, agreement or arrangement under which the Executive is
entitled to receive payments or other benefits from the Company, shall not
be offset against or reduce any other amounts due under any plan, agreement
or arrangement under which the Executive is entitled to receive payments or
other benefits from the Company, and shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer.
8. Compensation Upon Termination.
------------------------------
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness the Executive shall continue to receive his full base salary at the
rate then in effect for such period (offset by any payments to the
Executive received pursuant to disability benefit plans, if any, maintained
by the Company) and all other compensation and benefits to which he was
then entitled hereunder until his employment is terminated pursuant to
Section 7(b) hereof. Thereafter, in the event of the termination of
Executive's employment due to his permanent disability pursuant to Section
7(b) hereof, the Executive,
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(i) for a period of one (1) year thereafter, Executive shall
be entitled to receive his full base salary payable in equal monthly
installments (offset by any payments to Executive received pursuant to
any disability benefit plans, if any, maintained by the Company), and
all other amounts under any compensation plan or program of the
Company, at the time such payments are due and shall receive any bonus
due under Section 5(b)(i) for the year in which this Employment
Agreement is terminated pursuant to Section 7(b); and
(ii) for the period referred to in subparagraph (i) above
shall be entitled to participate in all medical, life and other
employee "welfare" benefit plans and programs in which the Executive
was entitled to participate immediately prior to the Date of
Termination provided that the Executive's continued participation is
possible under the general terms and provisions of such plans and
programs. In the event that the Executive's participation in any such
plan or program is barred, the Company shall arrange to provide the
Executive with benefits substantially similar to those which the
Executive would otherwise have been entitled to receive under such
plans and programs from which his continued participation is barred.
Page 22 of 36
(b) If the Executive's employment is terminated by the Company for
Cause or by the Executive other than for Good Reason, the Company shall pay
the Executive his full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given and all other
unpaid amounts, if any, to which the Executive is entitled as of the Date
of Termination, including any expenses owed pursuant to Section 5(e), any
amounts under any compensation plan or program of the Company, at the time
such payments are due, and any life insurance payments pursuant to Section
6(c), and the Company shall, thereafter, have no further obligations to the
Executive under this Employment Agreement.
(c) If
(i) in breach of this Employment Agreement, the Company shall
terminate the Executive's employment (it being understood that a
purported termination for disability pursuant to Section 7(b) hereof
or for Cause which is disputed and finally determined not to have been
proper shall be a termination by the Company in breach of this
Employment Agreement), or
(ii) the Executive shall terminate his employment for Good
Reason;
Page 23 of 36
(A) through the Date of Termination and thereafter for
the balance of the five (5) year term of this Employment
Agreement, the Company shall pay and provide the Executive his
full base salary, bonus (in no event less than the amount of the
average bonus or bonuses for the two (2) previous years) and all
other amounts under any compensation plan or program of the
Company (including, but not limited to, payment for any stock
option award valued under the Black Scholes Method that was made
or would have been made under Section 5(f) had Executive's
employment not been terminated for the reasons set forth in this
Section 8(c)), at the time such payments are due;
(B) the Company shall continue the participation of the
Executive for the five (5) year period referred to in
subparagraph (A) above in all medical, life and other employee
"welfare" benefit plans and programs in which the Executive was
entitled to participate immediately prior to the Date of
Termination provided that the Executive's continued participation
is possible under the general terms and provisions of such plans
Page 24 of 36
and programs. In the event that the Executive's participation in
any such plan or program is barred, the Company shall arrange to
provide the Executive with benefits substantially similar to
those which the Executive would otherwise have been entitled to
receive under such plans and programs from which his continued
participation is barred; and
(C) the Company shall pay to the Executive an amount
equal to the amount of all legal fees and expenses incurred by
the Executive as a result of such termination, including all such
fees and expenses, if any, incurred in contesting, arbitrating or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this Employment Agreement,
provided, in each case, that such claim has been brought in good
--------
faith by the Executive.
(D) For purposes of this Employment Agreement, a "Change
in Control" shall occur upon any of the following: (i) if any
individual or group (as such term is used in Rule 13d-5
promulgated under the Securities Exchange Act of 1934, as
amended) acquires thirty percent (30%) or more of the combined
voting power of the Company's outstanding shares on January 6,
2003; (ii) if continuing directors (defined as directors of the
Page 25 of 36
Company as of January 6, 2003 and any successor to any director
who was nominated by a majority of the directors in office at the
time of his/her nomination or selection and who is not associated
in any way with an individual or group who is a beneficial owner
of more than ten percent (10) of the combined voting power of the
Company's outstanding securities other than Executive or his
affiliates) cease to constitute at least a majority of the board
of directors; or (iii) if the board of directors approves the
sale of all or substantially all of the Company's assets, or any
merger, consolidation or similar business combination or
reorganization of the Company.
(E) If the Executive becomes entitled to any payment or
benefit whether pursuant to the terms of this Employment
Agreement or any other plan, arrangement or agreement with the
Company (or any person whose actions result in a Change in
Control or any person affiliated with the Company or such person)
in connection with any termination of the Executive's employment
within one (1) year following a Change in Control (all such
Page 26 of 36
payments being called the "Severance Payment") which is subject
to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision), the Company shall pay the Executive
pursuant to the procedures set forth below an additional amount
(the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Severance
Payment and any federal and state and local income tax and Excise
Tax upon such payment shall be equal to the Severance Payment.
(F) The Executive shall not be required to mitigate the
amount of any payment provided for in this Section 8 by seeking
---
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 8 be reduced by
any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the
Company, or otherwise.
Page 27 of 36
(G) The obligations of the Company to make payments and
provide benefits under this Section 8 shall survive the
termination of this Employment Agreement.
9. Covenant Not to Compete. The Executive acknowledges that as a key
--------------------------
management employee, the Executive will be involved on a high level, in the
development, implementation and management of the Company's business strategies
and plans. By virtue of the Executive's unique and sensitive position and
special background, employment of the Executive by a competitor of the Company
represents a serious competitive danger to the Company, and the use of the
Executive's talent and knowledge and information about the Company's business,
strategies and plans can and would constitute a valuable competitive advantage
over the Company. In view of the foregoing, the Executive covenants and agrees
that, if the Executive's employment is terminated (i) by the Company for Cause
or by the Executive pursuant to an event not constituting Good Reason; or (ii)
Page 28 of 36
in any other case (including the expiration of this Employment Agreement), then
for a period of one (1) year after the Date of Termination, the Executive will
not engage or be engaged, in any capacity, directly or indirectly, including but
not limited as employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than a 2% equity interest
in any enterprise) in any business entity engaged in any business conducted by
the Company on the Date of Termination in any state in which the Company does
business. In addition, in the case of termination pursuant to clause (ii)
above, Executive shall not, for a period of three (3) years after the date of
termination, (A) attempt to cause any person, partnership, limited liability
company, corporation or other entity who is a Key Customer of the Company to
divert such Key Customer's business away from the Company to any other person or
entity, whether or not Executive is affiliated with such person or entity or (B)
solicit any member of senior management of the Company. For purposes of this
Employment Agreement, the term "Key Customer" means any existing customer who,
as of the time of termination of Executive's employment with the Company,
constitutes one of its ten (10) largest customers based on gross revenues during
the prior fiscal year, or any prospective customer to whom Company has made a
written proposal or submitted a quote, and based upon such proposal, if accepted
by the customer, the prospective customer would meet the definition of Key
Customer; and the term "solicit" means any act, directly or indirectly by
Executive, which endeavors, tries or seeks to obtain, or asks the person to
leave the employ of the Company.
The covenant not to compete contained in this Section 9 shall survive the
termination or expiration of this Employment Agreement.
If any court determines that the covenant not to compete contained in this
Section 9, or any part hereof, is unenforceable because of the duration or
Page 29 of 36
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
10. Confidentiality. The Executive acknowledges that the Company's
----------------
trade secrets and confidential and proprietary information, including without
limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished
information concerning revenues, profits and profit margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for
purposes of the Securities Exchange Act of 1934, as amended; all constitute
valuable, special and unique proprietary and trade secret information of
the Company. In recognition of this fact, the Executive agrees that the
Executive will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly
available without
Page 30 of 36
violation of this Employment Agreement, (ii) information of which the
Executive did not know and should not have known was disclosed to the
Executive in violation of any other person's confidentiality obligation,
and (iii) disclosure required in connection with any legal process, nor
shall the Executive make use of any such information for the benefit of any
person, firm, corporation or other entity except the Company and its
subsidiaries or affiliates. The Executive's obligation to keep all of such
information confidential shall be in effect during and for a period of five
(5) years after the Date of Termination; provided, however, that the
-------- -------
Executive will keep confidential and will not disclose any trade secret or
similar information protected under law as intangible property (subject to
the same exceptions set forth in the parenthetical clause above) for so
long as such protection under law is extended.
11. Binding Employment Agreement This Employment Agreement and all
------------------------------
rights of the Executive and the Company hereunder shall inure to the benefit of
and be enforceable by their respective personal or legal representatives,
executors, administrators, successors, assigns, heirs, distributees, devisees
and legatees, as the case may be. If the Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
Page 31 of 36
terms of this Employment Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
12. Notice. Notices, demands and all other communications provided for
-------
in this Employment Agreement shall be in writing and shall be deemed to have
been duly given when delivered, if delivered personally, or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, and when received if delivered otherwise, addressed
as follows:
If to the Executive:
Stephen E. Pomeroy
604 Palmer Court
Crestview Hills, KY 41017
If to the Company:
Pomeroy IT Solutions, Inc.
1020 Petersburg Road
Hebron, KY 41048-8222
With a copy to:
James H. Smith III
312 Walnut Street
Suite 2300
Cincinnati, Ohio 45202
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. General Provisions. No provision of this Employment Agreement may
--------------------
be modified, waived or discharged unless such waiver, modification or discharge
Page 32 of 36
is agreed to in writing signed by the Executive and such officer of the Company
as may be specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Employment Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Employment Agreement. The validity, interpretation,
construction and performance of this Employment Agreement shall be governed by
the laws of the State of Ohio without regard to its conflicts of law principles.
14. Validity. The invalidity or unenforceability of any provision or
---------
provisions, in whole or in part, of this Employment Agreement shall not affect
the validity or enforceability of any other provision or enforceable part of
such partially unenforceable provision of this Employment Agreement, which shall
remain in full force and effect.
15. Counterparts. This Employment Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
Page 33 of 36
16. Entire Employment Agreement. This Employment Agreement sets forth
-----------------------------
the entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto; and any
prior agreement of the parties hereto in respect of the subject mater contained
herein is hereby terminated and canceled. Nothing contained herein shall
constitute a release of any stock option award, deferred incentive compensation
or other benefits that have been awarded to Executive under prior employment
agreements that are being superceded by this Agreement.
17. Injunctive Relief. The Executive agrees that in addition to any
-------------------
other remedy provided at law or in equity or in this Employment Agreement, the
Company shall be entitled to a temporary restraining order and both preliminary
and permanent injunctions restraining Executive from violating any provision of
Sections 9 or 10 of this Employment Agreement.
18. Consent to Jurisdiction and Forum. The Executive hereby expressly
-----------------------------------
and irrevocably agrees that the Company may bring any action, whether at law or
in equity, arising out of or based upon this Employment Agreement or the
Executive's employment by the Company in the Commonwealth of Kentucky or in any
federal court therein. The Executive hereby irrevocably consents to personal
jurisdiction in such court and to accept service of process in accordance with
Page 34 of 36
the provisions of the laws of the Commonwealth of Kentucky.
19. Signing Bonus. Upon the execution of this Amended and Restated
---------------
Employment Agreement, incident to which Executive is entering into a new
five-year agreement with Company, Company shall pay Executive the sum of Five
Hundred Thousand Dollars ($500,000.00) as a signing bonus. In the event that
Executive terminates employment with the Company prior to the expiration of the
five-year term of this Amended and Restated Employment Agreement and enters into
employment with a competitor in violation of the provisions of paragraph 9
(other than because of the death or disability of Executive, termination of
Executive by Company without cause, termination of employment by Executive for
Good Reason or voluntary termination by Executive and not entering into a
transaction that violates the provisions of paragraph 9), Executive shall repay
Company an amount to be determined by multiplying said signing bonus by a
fraction, the numerator of which shall be the number of days that Executive was
not employed by the Company during the five (5) years of the initial term of
this Amended and Restated Employment Agreement, and the denominator of which
shall be 1,825.
For example, if Executive voluntarily terminated his employment at the
expiration of the first year of the five-year initial term of this Amended and
Restated Employment Agreement and went to work for a competitor in violation of
the provisions of paragraph 9, Executive would repay Company the sum of
$400,000.00:
$500,000.00 x 1460
----
1825
Page 35 of 36
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Employment Agreement on the date and year first above written, to be effective
as of the Effective Date.
POMEROY IT SOLUTIONS, INC.
By:
---------------------------------------
---------------------------------------
Stephen E. Pomeroy
Page 36 of 36
EXHIBIT A
AWARD AGREEMENT
----------------
(Non-Qualified Stock Option)
This Award Agreement is made effective November 3, 2003, between POMEROY IT
SOLUTIONS, INC., formerly known as Pomeroy Computer Resources, Inc., a Delaware
corporation (hereinafter called the "Company"), and STEPHEN E. POMEROY, an
employee of the Company (hereinafter called the "Executive").
WHEREAS, the Company has heretofore adopted the 2002 Non-Qualified and
Incentive Stock Option Plan (the "Plan");
WHEREAS, per an Amended and Restated Employment Agreement between Company
and Executive dated November 3, 2003, as amended, Executive is to be awarded One
Hundred Thousand (100,000) stock options under the Plan as of November 3, 2003;
WHEREAS, it is a requirement of the Plan that an Award Agreement be
executed to evidence the Non-Qualified Stock Option (the "Award") granted to the
Executive;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Grant of Award. The Company hereby grants to the Executive the
----------------
right and option (hereinafter called the "Option") to purchase all or any part
of an aggregate of One Hundred Thousand (100,000) shares of the Common Stock,
$.01 par value, of the Company ("Shares") (such number being subject to
adjustment as set forth herein and in the Plan) on the terms and conditions set
forth herein and in the Plan.
2. Type of Award. The Option granted under this Award Agreement is a
---------------
Non-Qualified Stock Option and shall not be treated by the Company or the
Executive as an Incentive Stock Option for Federal income tax purposes.
3. Purchase Price. The option price of the Shares covered by the
---------------
Option is $______ per Share.
4. Term of Award.
---------------
(a) The Term of the Award shall be for a period of five (5) years from
the effective date hereof, subject to earlier termination as hereinafter
provided; and
(b) prior to its expiration or termination the Award may be exercised
as to any part or all of the Shares originally subject to the Option.
5. Exercise of Award.
--------------------
(a) In order to exercise the Award, the person or persons entitled to
exercise it shall deliver to the Treasurer of the Company written notice of
the number of full Shares with respect to which the Award is to be
exercised. The notice shall be accompanied by payment in full for any
Shares being purchased, which payment will be in cash, or, with the
Committee's (as defined in the Plan) approval, in Shares (as defined in the
Plan) held by the Executive for at least six months valued at Fair Market
Value (as defined in the Plan) at the time of exercise, or a combination
thereof. No fractional Shares will be issued.
(b) No Shares shall be issued until full payment therefor has been
made, and the Executive will have none of the rights of a stockholder in
respect of such Shares until they are issued.
6. Nontransferability. The Award shall not be transferable otherwise
------------------
than: (a) by will or the laws of descent and distribution, and the Award may be
exercised, during the lifetime of the holder of the Award, only by him or the
event of death, his Successor, as defined in the Plan, or in the event of
disability, his personal representative, or (b) pursuant to a qualified domestic
relations order, as defined in the Code or the Employee Retirement Income
Security Act (ERISA) or the Rules thereunder.
7. Termination of Employment. In the event that the employment of the
--------------------------
Executive is terminated (otherwise than by reason of death, disability or
retirement), the Award may be exercised by the Executive (to the extent that he
was entitled to do so at the termination of his employment) at any time within
three (3) months after such termination, but not beyond the original Term
thereof. So long as the Executive shall continue to be an employee of the
Company or one or more of its subsidiaries, the Award shall not be affected by
any change of duties or position. Nothing in this Award Agreement is intended
to confer upon Executive any right to continue in the employ of the Company or
any of its subsidiaries or interfere in any way with the right of the Company or
any such subsidiary to terminate his employment at any time. Anything herein
contained to the contrary notwithstanding, in the event of any termination of
the Executive's employment for cause or if the Executive voluntarily terminates
his employment without cause, the Award, to the extent not theretofore
exercised, shall forthwith terminate.
8. Death of Executive. If the Executive dies while he is employed by
--------------------
the Company or one or more of its subsidiaries or within three (3) months after
the termination of his employment, the Award may be exercised (to the extent
that Executive was entitled to do so at the time of his death) by a legatee or
legatees of the Executive under his last will, or by his personal
representatives or distributees, at any time within six (6) months after his
death, but not beyond the original Term of the Award.
9. Disability of Executive. If the employment of the Executive
-------------------------
terminates on account of his having become "disabled," as defined in Section
22(e)(3) of the Code, the Award may be exercised by the Executive (to the extent
that he was entitled to do so at the termination of his employment on account of
his becoming disabled) at any time within six (6) months after the date on which
his employment terminated, but not beyond the original Term of the Award.
10. Retirement of Executive. If the employment of the Executive
-------------------------
terminates by reason of retirement entitling the Executive to benefits under the
provisions of any retirement plan of the Company or a subsidiary in which the
Executive participates (or, if no such plans exist, at or after age sixty-five
(65)), the Award may be exercised by the Executive (to the extent that he was
entitled to do so at the time of his retirement) at any time within ninety (90)
days after the date on which his employment terminated, but not beyond the
original Term of the Award.
11 Taxes. The Company shall have the right to require a person
-----
entitled to receive Shares pursuant to the exercise of this Award under the Plan
to pay the Company the amount of any taxes which the Company is or will be
required to withhold with respect to such Shares before the certificate for such
Shares is delivered pursuant to the Award. Furthermore, the Company may elect
to deduct such taxes from any amounts payable in cash or in Shares at the time
of exercise or from any other amounts payable any time thereafter in cash to the
Executive. If the Executive disposes of Shares acquired pursuant to an
Incentive Stock Option in any transaction considered to be a disqualifying
transaction under Sections 421 and 422 of the Code, the Executive shall notify
the Company of such transfer and the Company shall have the right to deduct any
taxes required by law to be withheld from any amounts otherwise payable in cash
then or at any time thereafter to the Executive.
Subject to Committee approval, an Executive may satisfy his tax liability
with respect to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, if the
Executive is subject to Section 16b of the Securities Exchange Act of 1934, as
amended, he may so elect only if such Executive makes an election to do so which
satisfies the requirements of Rule 16b-3.
12. Changes in Capital Structure. In the event of changes in all of
-------------------------------
the outstanding Shares by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
separations, reorganizations or liquidations, or similar events or, in the event
of extraordinary cash dividends being declared with respect to the Shares, or
similar transactions, the number and class of Shares available under the Plan in
the aggregate, the number and class of Shares subject to Awards theretofore
granted, applicable purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by the Committee
(which adjustment may, but need not, include payment in cash or in Shares in an
amount equal to the difference between the price at which such Award may be
exercised and the then current Fair Market Value of the Shares subject to such
Award as equitably determined by the Committee). The foregoing adjustment and
the manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
Award.
13. Securities Law Compliance, The Award may not be exercised and
-------------------------
the Company shall not be required to issue any Shares hereunder if such
issuance would, in the judgment of the Board or the Committee, constitute a
violation of any state or federal law, or of the rules or regulations of
any governmental regulatory body, or any securities exchange. The Company
may, in its sole discretion, require the Executive to furnish the Company
with appropriate representations and a written investment agreement prior
to the exercise of the Award and the delivery of any Shares pursuant to the
Award.
14. Incorporation of Provisions of the Plan. All of the
--------------------------------------------
provisions of the Plan, pursuant to which this Award is granted, are hereby
incorporated by reference and made as part hereof as if specifically set
forth herein, and to the extent of any conflict between this Award
Agreement and the terms contained in the aforesaid Plan, the Plan shall
control. To the extent any capitalized terms are not otherwise defined
herein, they will have the meaning set forth in paragraph 2 of the Plan.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be
duly executed by its officer thereunto duly authorized, and the Executive
has hereunto set his hand, all on the day and year first above written.
POMEROY IT SOLUTIONS, INC.,
formerly known as Pomeroy
Computer Resources, Inc.
By:
--------------------------------------
--------------------------------------
STEPHEN E. POMEROY,
Executive