UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 5, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
1020 Petersburg Road, Hebron, Kentucky 41048
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (606)586-0600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained , to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock of the Registrant held by non
affiliates was $125,361,000 as of March 24, 1997 1, 1996.
The number of shares outstanding of the Registrant's common stock, par
value $.01 per share, as of March 24, 1997 was 7,503,287 shares of
common stock.
<PAGE>
The following items were to be incorporated by reference to the
Company's definitive proxy statement for the 1997 Annual Meeting of
Shareholders but are now being filed by this Amendment on Form 10-
K/A to the Company's Annual Report on Form 10-K.
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information with respect
to each person who is a director or executive officer of the
Company:
Name Age Position
David B. Pomeroy, II 47 Chairman of the Board, President
and Chief Executive Officer
Edwin S. Weinstein 50 Director, Chief Financial
Officer, Treasurer and Secretary
Richard C. Mills 41 Vice President of Operations
Carol Teufel Weinstein 44 Vice President of Finance and
Administration
James C. Eck 48 Vice President of Sales and
Services
Stephen E. Pomeroy 28 Vice President of Marketing and
Corporate Development
James H. Smith, III 46 Director
David W. Rosenthal 45 Director
Michael E. Rohrkemper 50 Director
Kenneth R. Waters 45 Director
David B. Pomeroy, II was a founder of the first of the Company's
predecessor businesses ( the Pomeroy Companies ) in 1981. Mr.
Pomeroy controlled the Pomeroy Companies until their reorganization
into Pomeroy Computer Resources in 1992 and has served as Chairman
of the Board, President and Chief Executive Officer since 1992.
Edwin S. Weinstein has been with the Pomeroy Companies in
substantially his present capacity since January 1983. Mr.
Weinstein became a Director and Chief Financial Officer of the
Company when it was organized in February 1992.
Richard C. Mills joined the Company in January 1993 and has been
Vice President of Operations since July 1993. Prior to that time,
Mr. Mills was the founder and president of The Computer Store of
Kentucky, Inc., a Louisville-based retailer of computer products.
Carol Teufel Weinstein has been Vice President of Finance and
Administration since January 1993. Prior to that time, Mrs.
Weinstein was Vice President of Operations of the Company from
October 1992 to July 1993 and Controller of the Pomeroy Companies
from March 1987 to February 1992.
James C. Eck joined the Company in September 1995 and was made
Vice President of Sales and Services effective February 1996. From
1983 until 1995, Mr. Eck was employed by Canon USA Incorporated, a
New York-based manufacturer of digital and analog office equipment,
and served as the director and general manager of the National
Accounts Division Office Equipment Group for Canon since 1991.
<PAGE>
Stephen E. Pomeroy has been the Vice President of Marketing and
Corporate Development since September 1996. Prior to that time, Mr.
Pomeroy was the Director of New Market Development of the Company
from 1994 to September 1996 and Account Executive from 1991 to
1994. From 1985 to 1991, Mr. Pomeroy was employed by the Company on
a part-time basis.
James H. Smith, III has been a Director of the Company since
April 1992. Mr. Smith is a shareholder in the law firm of Lindhorst
& Dreidame Co., L.P.A., Cincinnati, Ohio, where he has practiced
law since 1979. Lindhorst & Dreidame acts as outside general
counsel to the Company.
Dr. David W. Rosenthal has been a Director of the Company since
April 1992. Dr. Rosenthal is a Professor of Marketing at Miami
University, Oxford, Ohio, a position he has held for more than the
last five years. Dr. Rosenthal has also served as a consultant with
Stratvertise, a marketing research and strategic consulting firm
since 1975.
Michael E. Rohrkemper has been a Director of the Company since
July 1993. Mr. Rohrkemper is a certified public accountant and has
been a partner in the accounting firm of Rohrkemper and Ossege Ltd.
since January 1991.
Kenneth R. Waters became a Director of the Company in April 1997
and provides consulting services to the Company. Mr. Waters has
worked in the computer industry since 1977. Most recently, he has
been an industry consultant, serving as such from February 1995
until present as well as from April 1993 to August 1993 and January
1991 to August 1992. From September 1993 to January 1995, Mr.
Waters was the President of MicroAge Inc., a computer reseller.
From September 1992 to March 1993, Mr. Waters was the President and
CEO of Power Up Software, a software manufacturer. From July 1978
to September 1988, Mr. Waters was employed by Vanstar (then known
as ComputerLand), holding various management positions, with his
last position being CEO. Mr. Waters was also a Director of Vanstar
from September 1987 to July 1989.
Stephen E. Pomeroy is the son of David B. Pomeroy, II and Edwin
S. Weinstein and Carol Teufel Weinstein are husband and wife. There
are no other family relationships among the Company's directors and
executive officers.
Board of Directors
There were three meetings of the Board of Directors in 1996.
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 two
meetings during 1996, composed of two non-employee directors,
Messrs. Smith and Rohrkemper, and Mr. Pomeroy, Chairman of the
Board, President and Chief Executive Officer. The audit committee
consults with the independent auditors regarding their examination
of the financial statements of the Company and regarding the
adequacy of internal controls. It reports to the Board of Directors
on these matters and recommends the independent auditors to be
designated for the ensuing year.
The Company has a standing compensation committee, which held one
meeting during 1996, composed of two non-employee directors,
Messrs. Smith and Rohrkemper, and Mr. Pomeroy. 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, which held one
meeting during 1996, consisting of Messrs. Rosenthal, Rohrkemper
and Smith. This committee administers the 1992 Non-Qualified and
Incentive Stock Option Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
During fiscal 1996, Mr. James C. Eck, Vice President of Sales and
Services for Pomeroy Computer Resources, Inc., failed to file one
Form 4 with respect to the acquisition of 1,000 shares of Common
Stock in May 1996, which transaction was subsequently reported on a
Form 4 for February 1997.
<PAGE>
<TABLE>
Item 11. Executive Compensation
Summary of Cash and Certain Other Compensation
The following table is a summary for the fiscal years 1994, 1995
and 1996 of certain information concerning the compensation paid or
accrued by the Company to the Chief Executive Officer and to each
person who was at any time during 1996 an executive officer of the
Company and whose aggregate salary and bonus exceeded $100,000
(collectively, the Named Executive Officers).
Summary Compensation Table
<CAPTION>
Long Term
Compensation Awards
Restricted Stock
Other Annual Stock Awards Options
Name and Principal Year Salary(1) Bonus Compensation $ (2) # (3)
Position
<C> <C> <C> <C> <C> <C> <C>
David B. Pomeroy 1996 $395,000 $499,845 - - 37,500
CEO 1995 $350,000 $329,812 - - 41,250
1994 $300,000 $274,000 $55,540 (4) - -
Edwin S. Weinstein 1996 $110,000 $25,000 $14,500 (5) $20,000 6,000
CFO 1995 $109,500 $25,000 $21,500 (6) $20,000 -
1994 $98,000 $4,000 - $20,000 -
Richard C. Mills 1996 $156,967 $10,000 $56,220 (7) - 36,000
Vice President of 1995 $137,875 $62,205 - - -
Operations 1994 $129,000 - - - -
James C. Eck 1996 $150,000 $75,000 $17,400 (8) - -
Vice President of
Sales and Services
Stephen E. Pomeroy 1996 $100,000 $100,000 $21,762 (5) - 19,500
Vice President of
Marketing and
Corporate Development
<FN>
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Company's 401(k) Retirement Plan.
(2) At January 5, 1997 a total of 5,851 restricted shares were held with
an aggregate value of approximately $205,000. Dividends, if any, are
payable on all issued and outstanding shares of Common Stock
including shares of restricted stock.
(3) Adjusted for three-for-two stock split effected as a stock dividend
on October 4, 1996.
(4) Includes $25,000 for personal guarantee of the Datago Agreement with
Vanstar and $14,787 for reimbursement of automobile expenses. Other
amounts individually were less than 25% of the total perquisites and
other benefits reported for Mr. Pomeroy.
(5) Represents amounts accrued pursuant to deferred compensation
agreements.
(6) Represents reimbursement for taxes related to stock awards incurred
because the stock awards resulted in immediate taxation.
(7) Includes $48,220 for commissions related to monthly sales goals and
$8,000 accrued pursuant to deferred compensation agreements.
(8) Represents commissions related to monthly sales goals.
</TABLE>
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning the
grant of options to purchase Common Stock to any of the Named
Executive Officers during fiscal year 1996.
<CAPTION>
Number of Percent of
Shares of Total Potential Realizable Value
Common Options at Assumed Annual Rates of Stock
Stock Granted to Exercise Price Appreciation for Option Term
Underlying in Fiscal or Base
Options Year Price Expiration
Name Granted (1) ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
David B. Pomeroy, II 37,500 16.7% $8.33 1/6/01 $86,000 $191,000
Edwin S. Weinstein 6,000 2.7% $8.33 1/6/98 $5,000 $11,000
Richard C. Mills 6,000 2.7% $8.33 1/6/98 $5,000 $11,000
30,000 13.4% $9.50 6/26/98 $29,000 $60,000
Stephen E. Pomeroy 4,500 2.0% $8.33 1/6/98 $4,000 $8,000
15,000 6.7% $8.50 8/15/98 $13,000 $27,000
<FN>
(1) The number of shares underlying the options was adjusted
for the three-for-two stock split effected as a stock
dividend on October 4, 1996.
</TABLE>
<TABLE>
Aggregate Stock Option Exercises In Year Ended January 5, 1997
and Year-End Stock Option Values
The following table sets forth information concerning aggregated
option exercises in fiscal year 1996 and the number and value of
unexercised options held by each of the Named Executive Officers at
January 5, 1997.
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
January 5, 1997 January 5, 1997
Shares (#) ($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)Unexercisable Unexercisable
<S> <C> <C> <C> <C>
David B. Pomeroy, II - - 78,750/0 $2,196,787/$0
Edwin S. Weinstein 3,575 $56,235 6,000/0 $160,020/$0
Richard C. Mills 12,000 $177,750 89,497/0 $2,557,591/$0
Stephen E. Pomeroy - - 27,750/0 $756,847/$0
</TABLE>
Compensation of the Board of Directors
Each director who is not an employee of the Company, except
for Messrs. Smith and Waters, 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 of each such
meeting any committee meetings held on the same date), and Five
Hundred Dollars ($500) for any committee meetings attended which
were not held on the same date as a Board of Directors meeting.
Beginning with the fourth quarter of fiscal 1993, the amount earned
by such directors is automatically deposited by the Company, on a
quarterly basis, into a broker account established for each such
Director unless the Director requests receipt of the cash instead.
The broker is directed to utilize the funds deposited for each
Director to purchase shares of Common Stock of the Company on the
open market. Mr. Smith's law firm, Lindhorst & Dreidame Co.,
L.P.A., is compensated for his time in attendance at Directors'
Meetings based on his hourly rate. Mr. Waters is paid a monthly
consulting fee of $1,500 in lieu of the quarterly retainer and the
fee for meetings attended and for providing consulting.
<PAGE>
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, 1997, Mr. Pomeroy entered into a Sixth
Amendment to the Employment Agreement with the Company (the "Sixth
Amendment"). Mr. Pomeroy's compensation under the Sixth Amendment
will consist of a base salary of $395,000 for fiscal 1997 and each
subsequent fiscal year unless modified by the Compensation
Committee. Under the Sixth Amendment Mr. Pomeroy is also entitled
to a bonus of up to a maximum of $720,000 in fiscal 1997 and each
subsequent fiscal year based upon the Company's operating income.
Mr. Pomeroy may also be paid a discretionary bonus under any
compensation, benefit or management incentive plan. Fifty percent
of any discretionary bonus will be paid in cash and fifty percent
will be treated as incentive deferred compensation.
Under the Sixth Amendment 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. Pomeroy. The owner and
beneficiary of this term life insurance policy is a trust
established by Mr. 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 $1,000,000 insuring the life of Mr. Pomeroy, less the
reportable economic benefit to the trust.
Under the Sixth Amendment Mr. Pomeroy was also granted an option
to acquire 25,000 shares of Common Stock at a per share price equal
to the fair market value of a share of Common Stock on January 3,
1997. In connection with the Sixth Amendment, Mr. Pomeroy and the
Company also entered into a registration rights agreement which
entitles Mr. Pomeroy to demand and piggy back registration rights
in the event of a change in control of the Company. Also, upon the
occurrence of a change in control (as defined in the Sixth
Amendment to the Employment Agreement), Mr. Pomeroy is entitled to
receive (a) through the date of termination of his employment and
thereafter for the balance of the three (3) year term of the
Agreement, his full base salary, bonus and all other amounts under
any compensation plan or program of the Company (other than the
amounts referred to in (b) below) at the time such payments are due
and to continue participation in all medical, life and other
employee welfare benefit plans in which Mr. Pomeroy was entitled to
participate immediately prior to the date of termination (or
substantially similar benefits if a continued participation is not
possible under such plans and programs) and (b) a lump sum payment
equal to the present value of his benefits under the supplemental
compensation agreement based upon a 100% vesting percentage.
Mr. Weinstein has an employment agreement with the Company
effective February 13, 1992. The initial term of Mr. Weinstein's
agreement continued until December 31, 1994, but the agreement is
extended annually for additional one-year periods unless either
party gives 60 days written notice of termination. The agreement
provides for a stated base salary and a discretionary bonus to be
determined by the Board of Directors.
Mr. Mills has an employment agreement with the Company effective
January 1, 1993. The term of Mr. Mills' agreement is three years
and is extended annually for additional one-year periods unless
either party gives 60 days written notice of termination. The
agreement provides for a stated base salary and a discretionary
bonus to be determined by the Board of Directors.
Mr. Eck has an employment agreement with the Company extending
from September 18, 1995 to January 5, 1999, which is extended
annually for successive one-year periods unless either party gives
30 days written notice of termination. Mr. Eck's compensation under
the agreement consists of a base salary, which may be adjusted
annually based on the achievement of certain economic goals, annual
and quarterly bonuses, monthly commissions based on gross sales,
and stock options. The amount of any annual bonuses are determined
on the basis of attainment of certain economic goals, and are to be
paid 50% in cash and 50% as incentive deferred compensation.
Mr. Stephen E. Pomeroy has an employment agreement with the
Company which extends to December 31,1999, and thereafter may be
extended on a daily basis unless either party gives 60 days written
notice of termination (or three days written notice if the Company
terminates Mr. Pomeroy's employment for cause). Mr. Pomeroy's
compensation under the agreement consists of a base salary at a
rate of $100,000 for fiscal 1996 and an annual bonus, to be
negotiated annually. Mr. Pomeroy's base salary will increase to
$115,000 for fiscal 1997 and is subject to increases in subsequent
fiscal years at the discretion of the Board of Directors. The
amount of any annual bonus will be paid 50% in cash and 50% as
incentive deferred compensation.
Compensation Committee Interlocks and Insider Participation
In fiscal 1996, the Compensation Committee consisted of David B.
Pomeroy, II, James H. Smith, III and Michael E. Rohrkemper. Mr.
Pomeroy is the Chief Executive Officer of the Company.
In September 1995, Pomeroy Investments, LLC ( Pomeroy
Investments ), a Kentucky limited liability company controlled
by David B. Pomeroy II, acquire from Paul Hemmer & Associates, III
(the Seller ) approximately 11.5 acres of property at AirPark
International in Boone County, Kentucky, and contracted with Paul
Hemmer Construction Company, an affiliate of the Seller, for the
construction of a new headquarters and distribution facility on the
site. In addition, under the purchase agreement with the Seller,
Pomeroy Investments was granted an option to purchase the
contiguous 15.56 acres of land at any time during the three (3)
years following completion of the construction project, subject to
certain extensions and related rights. Pomeroy Investments has
entered into a ten year triple-net lease with the Company (subject
to an option to extend the term for two consecutive five year
periods) for the new headquarters for an initial annual base rent
of $7.50 per square foot for approximately 36,000 square feet of
office use, $3.50 per square foot for approximately 88,084 square
feet of service, sales and distribution use, and $1.50 per square
foot for approximately 3,333 square feet of storage (calculated on
a weighted average basis). The total base rent to be paid by the
Company under the lease for all types of uses is $583,294 per year
(plus pass-through costs such as taxes and insurance). These terms
were determined on the basis of a fair market rental opinion given
to the Company by West Shell Commercial, dated April 24, 1995.
The Company intends to expand its existing distribution center to
include a new depot repair facility that will replace the Company's
existing depot repair facility. Pomeroy Investments intends
exercise its option to purchase the 15.56 acres of land described
above and to finance, purchase and own the land and improvements
necessary to accommodate the new depot repair facility. The
estimated cost of the additional land and improvements is expected
to be $1.8 million. The Company will lease the additional space
from Pomeroy Investments at an annual base rent no less favorable
to the Company than can be obtained from unaffiliated third
parties. The expansion of the existing distribution center to
accommodate the new depot repair facility is expected to be
completed in the third quarter of 1997.
The Company from time to time has made advances to Pomeroy
Investments to satisfy Pomeroy Investments' working capital needs.
In July 1996, the Company made two advances to Pomeroy Investments
in the amounts of $100,000 and $150,000, respectively. In September
and October 1996, the Company made two additional advances in the
amounts of $20,000 and $25,000, respectively. The largest amount of
advances outstanding at any time during fiscal 1996 was $295,000.
No interest was charged on the advanced funds, which were repaid in
full on December 20, 1996.
<PAGE>
On April 29, 1996, the Company entered into a settlement
agreement with Vanstar (the "Settlement Agreement"). Pursuant to
the Settlement Agreement, the Company agreed to pay to Vanstar $3.3
million consisting of $1.65 million in cash and a promissory note
in the amount of $1.65 million (the "Vanstar Note"). The Vanstar
Note was due on August 27, 1996 and bore interest at 8.0% per
annum.
The Vanstar Note was secured by a pledge of 100,000 shares of
Common Stock owned by Mr. Pomeroy (the "Pledge"). In consideration
of the Pledge, the Company agreed to indemnify Mr. Pomeroy against
any loss, including attorneys' fees suffered by Mr. Pomeroy in
connection with the Pledge. Also in connection with the Settlement
Agreement the Company incurred approximately $0.4 million of legal
fees, which included the defense of the Company and the Pomeroys.
All agreements between the Company and Vanstar were terminated as
of the effective date of the Settlement Agreement. In partial
consideration of the Settlement Agreement, Vanstar agreed to
release Mr. and Mrs. Pomeroy from their personal guarantees of
certain obligations of the Company to Vanstar. The Company paid the
Vanstar Note in full on August 27, 1996 and the Pledge was
terminated.
James H. Smith, a director of the Company, is a stockholder in
the law firm of Lindhorst & Dreidame Co., L.P.A. Lindhorst &
Dreidame Co. serves as general counsel to the Company. The legal
services provided by Lindhorst & Dreidame Co. constituted less than
5% of the firm's business in 1996.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed
of two (2) non-employee directors, Messrs. Rohrkemper and Smith,
and Mr. Pomeroy, Chairman of the Board, President 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 shareholders and management.
Through the programs adopted by the Company a significant portion
of Executive Compensation is linked to individual and corporate
performance and stock price appreciation.
The basic elements of the Company's Executive Compensation
Program consist primarily of base salary, potential for annual cash
opportunities and stock options. The Committee believes that
incentives play an important role in motivating executive
performance and attempts to reward achievement of both short and
long term goals. However, the emphasis on using stock options as a
long term incentive is intended to insure a proper balance in the
achievement of long term business objectives which ties a
significant portion of the executive's compensation to factors
which impact on the performance of the Company's stock.
Compensation opportunities must be adequate to enable the Company
to compete effectively in the labor market for qualified
executives. The elements of the Executive Compensation Program are
designed to meet these demands, and at the same time encourage
increases in shareholder value.
Base Salaries
Base salaries for executives are initially determined by
evaluating the duties and responsibilities of the position to be
held by the individual, experience 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.
Long Term Compensation
A. 1992 Non-Qualified and Incentive Stock Option Plan
The Company's 1992 Non-Qualified and Incentive Stock Option Plan
(the "Option Plan") has presently reserved for issuance an
aggregate of 900,000 common shares. The Option Plan was adopted to
encourage ownership of common shares by officers and key employees
of the Company to encourage their continued employment with the
Company and to provide them with incentives to promote the success
of the Company. The Stock Option Committee of the Board of
Directors grants options under and otherwise administers the Option
Plan. The exercise price for options under the Option Plan must be
at least one hundred percent (100%) of the fair market value of the
common shares on the date of grant; provided, however, in the event
that an incentive stock option is granted to an employee who owns
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or, if applicable, a subsidiary
or parent corporation of the Company, the exercise price per share
for such incentive stock options cannot be less than one hundred
ten percent (110%) of the fair market value of the common shares on
the date of grant. The exercise price of options granted under the
Option Plan is payable in cash or, at the discretion of the Stock
Option Committee in whole or in part, in common shares, valued at
their fair market value at the date of exercise. Each option
granted under the Option Plan expires on the date or dates set
forth in the specific option award as determined by the Stock
Option Committee in its sole discretion, but not later than ten
(10) years from the date of grant. The Option Plan will terminate
on February 13, 2002, but such termination will not affect any
outstanding options previously granted.
The tax consequences of the granting and exercise of an option
under the Option Plan to the recipient of the option depend upon
the type of option granted. Taxable gain on a non-qualified stock
option is determined on the date of exercise of the option and is
measured by the difference between the fair market value of the
common shares on the date of exercise and the exercise price. Gain
from the granting and exercise of incentive stock options is
deferred until the option holder sells the common shares received
upon exercise of the option. Generally, the amount of gain is
measured by the difference between the sales price of the common
shares and the exercise price of the option. In the case of a non-
qualified stock option granted and exercised under the Option Plan,
the Company is entitled to a tax deduction equal to the amount of
income recognized by the option holder, subject to certain
withholding and reporting requirements. With respect to incentive
stock options, the Company is not entitled to a deduction in
connection with the granting or exercise of such an option or the
sale of the common shares issued upon the exercise of the option.
<PAGE>
The Option Plan may be amended any time by the Board of
Directors, but no amendment can be made without the approval of the
Company's shareholders if shareholder approval is required under
Section 422A of the Internal Revenue Code of 1986 or Rule 16b-3
under the Securities Exchange Act of 1934. No amendment may,
however, impair the rights or obligations of the holder of any
option granted under the Option Plan without his or her consent.
B. 1992 Outside Directors' Stock Option Plan
The Company's 1992 Outside Directors' Stock Option Plan (the
"Directors' Plan") has reserved for issuance an aggregate of
123,750 common shares to outside directors. The purpose of the plan
is 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 Directors' Plan became
effective February 13, 1992 and will terminate ten (10) years from
that date. Pursuant to the Directors' Plan, an option to purchase
10,000 common shares is 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 options may be exercised after one (1) year from the
date of grant for not more than one-third (1/3) of the shares
subject to the option and an additional one-third (1/3) of the
shares subject to the option may be exercised for each of the next
two (2) years thereafter. To the extent not exercised, options
granted under the Directors' Plan will expire five (5) 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 (3) 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 (1) year
of the date of death (but not beyond the term of the option).
C. Employee Benefit Plans
As of July 1, 1992, the Company converted its Profit Sharing
Plan, which covers substantially all employees, to an Employee
Stock Ownership Plan (ESOP). Participation requirements under the
ESOP are essentially those as existed under the Profit Sharing
Plan. No less than the majority and no more than seventy-five
percent (75%) of the assets of the ESOP are invested in common
shares of the Company purchased on the open market. As of April 30,
1007, the ESOP owned 57,129 common shares of the Company. In
December 1996 the Board of Directors took action to initiate
proceedings to terminate the e ESOP which is expected to become
effective during fiscal 1997.
In addition the Company maintains a 401(k) savings plan which
generally covers all employees of the Company. Plan participants
may contribute up to fifteen percent (15%) of their annual base
salary on a pre-tax basis, although contributions of certain highly
compensated employees may be limited under federal tax laws. The
Company does not contribute to the plan.
Chief Executive Officer Compensation
Mr. Pomeroy served as Chairman of the Board and Chief Executive
Officer throughout fiscal 1996. Mr. Pomeroy's compensation, which
includes an annual salary, bonuses, and stock options, were
determined in accordance with the terms of the Fifth Amendment to
his Employment Agreement. The Fifth Amendment, which established
the performance criteria for fiscal 1996 was adopted by the
Compensation Committee in December 1995.
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PERFORMANCE GRAPH
The following Performance Graph compares the percentage of the
cumulative total shareholder return on the Company's common shares
with the cumulative total return assuming reinvestment of dividends
of (i) the S&P 500 Stock Index and (ii) the NASDAQ Industrial
Index.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning
(GRAPH)
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information, as of April
30, 1997, with respect to each person known to the Company to be
the beneficial owner of more than five percent (5%) of its
outstanding common shares, and information with respect to the
beneficial ownership of its common stock by each Director, each
Named Executive Officer, and by the Directors and executive
officers of the Company as a group.
Amount & Nature of
Name Beneficial Ownership (1) % of Class
David B. Pomeroy, II 1,670,877 (2) 21.96%
Edwin S. Weinstein 78,436 (3) 1.04%
Richard C. Mills 94,648 (4) 1.25%
James C. Eck 11,500 (5) *
Stephen E. Pomeroy 33,332 (6) *
James H. Smith, III 11,825 (7) *
David W. Rosenthal 10,493 (8) *
Michael E. Rohrkemper 19,276 (9) *
Kenneth R. Waters - -
Pomeroy Computer
Resources, ESOP 57,129 (10) *
Directors and all Executive
Officers as a Group 1,883,792 (11) 23.93%
* Less than one percent (1%)
(1) 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.
(2) Includes 15,091 shares owned by his spouse as to which Mr.
Pomeroy disclaims beneficial ownership. Also includes 103,750
shares issuable upon exercise of stock options and 57,129 shares
owned by the ESOP. See note (10) below. Of the 57,129 shares
owned by the ESOP, Mr. Pomeroy disclaims beneficial ownership
except as to the 23,989 shares allocated to the account of Mr.
Pomeroy which shares he has the right to vote under the Plan
with respect to certain matters. Mr. Pomeroy's address is 1020
Petersburg Road, Hebron, KY. 41048.
(3) Includes a total of 16,000 shares issuable upon exercise of
stock options, 57,129 shares owned by the ESOP and excludes
11,297 shares owned by his spouse as to which he disclaims
beneficial ownership. See note (10) below. Of the 57,129 shares
owned by the ESOP, Mr. Weinstein disclaims beneficial ownership
except as to the 3,179 shares allocated to Mr. Weinstein which
shares he has the right to vote under the Plan with respect to
certain matters.
(4) Includes 94,497 shares of Common Stock issuable upon exercise
of stock options and 151 shares held by the ESOP allocated to the
account of Mr. Mills, which shares he has the right to vote under
the Plan with respect to certain matters.
(5) Includes 10,000 shares of Common Stock issuable upon exercise
of stock options.
(6) Includes 27,750 shares of Common Stock issuable upon exercise
of stock options and 137 shares held by the ESOP allocated to the
account of Mr. Pomeroy which shares he has the right to vote
under the Plan with respect to certain matters.
(7) Includes 11,000 shares issuable upon exercise of stock
options.
(8) Includes 1,800 shares of Common Stock owned by his spouse, 43
shares held by the ESOP allocated to the account of his spouse
(which shares she has the right to vote under the Plan) and 500
shares issuable upon the exercise of stock options, as to which
Dr. Rosenthal disclaims beneficial ownership. Includes 4,386
shares of Common Stock issuable upon exercise of stock options.
(9) Includes 165 shares of Common Stock held by Rohrkemper &
Ossege Ltd., a partnership in which Mr. Rohrkemper has a 60%
interest. Also includes 17,500 shares of Common Stock issuable
upon exercise of stock options.
(10) The trustees of the ESOP are David B. Pomeroy, II and Edwin
S.Weinstein, both officers of the Company who
have voting control over the 57,129 shares of Common Stock
held in the ESOP in certain situations.
(11) Includes all the shares owned by Pomeroy Computer Resources
ESOP. In December 1996 the Board of Directors took action to
initiate proceedings to terminate the ESOP which is expected to
become effective during fiscal 1997.
Item 13. Certain Relationships and Related Transactions
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, President 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."
Addie W. Rosenthal, the spouse of Dr. Rosenthal, a member of the
Board of Directors, serves as Director of Investor Relations for
the Company.
Kenneth R. Waters, a director of the Company since April 1997,
serviced as a consultant to the Company from June 1996 through
November 1996. Mr. Waters was paid $1,500 per month for his services
for a total of $9,000 during the term of the consulting
arrangement. In January 1997, the Company retained Mr. Waters to
provide additional consulting services to the Company on an on-going
basis. Mr. Waters is paid $1,500 per month with also includes his
compensation as a member of the Board of Directors.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
POMEROY COMPUTER RESOURCES, INC.
(Registrant)
/s/ Edwin S. Weinstein
Edwin S. Weinstein
Dated: May 7, 1997 Chief Financial Officer