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, 1998
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 (I.R.S. Employer
of incorporation or Identification No.)
organization)
1020 Petersburg Road, Hebron, Kentucky 41048
______________________________________ __________
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area (606)586-0600
code _____________
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 $200,508,000 as of March 30, 1998 .
The number of shares outstanding of the Registrant's common stock, par
value $.01 per share, as of March 30, 1998 was 11,431,876 shares of
common stock.
<PAGE>
The following items were to be incorporated by reference to the
Company's definitive proxy statement for the 1998 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 48 Chairman of the Board, President
and Chief Executive Officer
Stephen E. Pomeroy 29 Director, Chief Financial
Officer, Treasurer and Secretary
Richard C. Mills 42 Director, Chief Operating Officer
James C. Eck 49 Vice President of Sales and Services
Victor Eilau 39 President, Technology Integration
Financial Services, Inc.
James H. Smith, III 47 Director
David W. Rosenthal 46 Director
Michael E. Rohrkemper 51 Director
Kenneth R. Waters 46 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.
Stephen E. Pomeroy was named a Director and Secretary and
Treasurer in February, 1998, and Chief Financial Officer in May
1997. Mr. Pomeroy was the Vice President of Marketing and Corporate
Development from September 1996 to May 1997. 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.
Richard C. Mills was named a Director in February 1998 and Chief
Operating Officer in May 1997. Mr. Mills joined the Company in
January 1993 and was Vice President of Operations from July 1993 to
May 1997. 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.
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.
Victor Eilau joined the Company in July 1997 and was made
President of Technology Integration Financial Services, Inc. (a
wholly-owned subsidiary of the Company). For the previous five
years Mr. Eilau was a Vice President of Comdisco, Inc.
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.
<PAGE>
On February 18, 1998, Edwin S. Weinstein resigned as the
Company's Vice President of Finance, Treasurer, and Secretary.
Also on February 18, 1998, the Board of Directors increased the
size of the Board from six to eight Directors and appointed
Richard C. Mills and Stephen E. Pomeroy to fill the vacancies
resulting from the increase. Mr. Pomeroy was also elected as
Treasurer and Secretary to fill the vacancy resulting from Mr.
Weinstein's resignation. On March 20, 1998, Mr. Weinstein
resigned as a Director of the Company. The vacancy resulting
from Mr. Weinstein's resignation has not been filled. The
Company expects that the number of Directors will be decreased
from eight to seven at the Annual Meeting of Stockholders.
Stephen E. Pomeroy is the son of David B. Pomeroy, II. There are
no other family relationships among the Company's directors and
executive officers.
Board of Directors
There were five meetings of the Board of Directors in 1997. 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 1997, 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 1997, composed of three non-employee directors,
Messrs. Smith, Rohrkemper and Waters, 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 1997, 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 1997, Mr. David W. Rosenthal, a Director of Pomeroy
Computer Resources, Inc., failed to file one Form 4 with respect to
the acquisition of 3,000 shares of Common Stock in December 1997,
which transaction was subsequently reported on a Form 5 for
December 1997.
During fiscal 1997, Mr. Richard C. Mills, Chief Operating Officer
for Pomeroy Computer Resources, Inc., failed to file one Form 4
with respect to 1,004 shares of Common Stock acquired through the
exercise of an option and the simultaneous gifting of such shares,
which transaction was subsequently reported on a Form 5 for
December 1997.
<PAGE>
Item 11. Executive Compensation
Summary of Cash and Certain Other Compensation
______________________________________________
The following table is a summary for the fiscal years 1995, 1996
and 1997 of certain information concerning the compensation paid or
accrued by the Company to the Chief Executive Officer and to each
person who at any time during 1997 was an executive officer of
the Company and whose aggregate salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers" ).
Summary Compensation Table
Long Term
Compensation Awards
Annual Compensation
-------------------------------- Stock
Name and Principal Other Annual Options
Position Year Salary(1) Bonus Compensation # (2)
__________________ ____ ________ ________ __________ ____________
David B. Pomeroy 1997 $395,000 $720,000 - 25,000
CEO 1996 $395,000 $499,845 - 56,250
1995 $350,000 $329,812 - 61,875
Richard C. Mills 1997 $185,000 $14,000 $61,833 (3) 35,000
Chief Operating 1996 $156,967 $10,000 $56,220 (4) 54,000
Officer 1995 $137,875 $62,205 - -
Stephen E. Pomeroy 1997 $115,000 $41,324 $18,500 (5) 30,000
CFO 1996 $100,000 $100,000 $21,762 (5) 29,250
1995 $70,000 $47,442 12,375
James C. Eck 1997 $175,000 $34,400 $31,067 (6) 10,000
Vice President of 1996 $150,000 $75,000 $17,400 (7) -
Sales and Services
Victor Eilau 1997 $124,800 $50,000 - 15,000
President, Technology
Integration Financial
Services, Inc.
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Company's 401(k) Retirement Plan.
(2) Unless otherwise noted, all stock options are awarded based on the
fair market value of the Company's common stock at the time of
grant. On January 14, 1998, the Board of Directors repriced the
stock options granted on January 6, 1997 (see Report on Repricing
Options). All other options were adjusted for the 3-for-2 stock
split effected as a dividend on October 6, 1997 in accordance with
the terms of the anti-dilution provisions of the applicable Plan.
(3) Includes $20,500 for commissions related to monthly sales goals and
$41,333 accrued pursuant to deferred compensation agreements.
(4) Includes $48,220 for commissions related to monthly sales goals and
$8,000 accrued pursuant to deferred compensation agreements.
(5) Represents amounts accrued pursuant to deferred compensation
agreements.
(6) Includes $14,400 for commissions related to monthly sales goals and
$16,667 accrued pursuant to deferred compensation agreements.
(7) Represents commissions related to monthly sales goals.
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning the
grant of options to purchase Common Stock to any of the Named
Executive Officers during fiscal year 1997.
<CAPTION>
Individual Grants
--------------------------------------------------------
Number of Percent of
Shares of Total Potential Realizable Value at
Common Options Assumed Annual Rates of Stock
Stock Granted to Exercise Price Appreciation for Option Term
Underlying Employees or Base __________________________________
Options in Fiscal Price Expiration
Name Granted (1) Year ($/Sh)(1) Date 5% 10%
____ __________ _________ ________ __________ ____________ _____________
<S> <C> <C> <C> <C> <C> <C>
David B.
Pomeroy, II 25,000 7.7% $16.63 1/6/02 $115,000 $254,000
Richard C.
Mills 5,000 1.5% $16.63 1/6/99 $ 9,000 $ 17,000
30,000 9.3% $16.50 2/24/99 $ 51,000 $104,000
Stephen E.
Pomeroy 30,000 9.3% $15.75 6/26/99 $ 48,000 $ 99,000
James C. Eck 10,000 3.1% $16.63 1/6/99 $ 17,000 $ 35,000
Victor Eilau 15,000 4.6% $17.42 7/6/02 $ 73,000 $160,000
<FN>
(1) The number of shares underlying the options and the exercise
price were adjusted for the three-for-two stock split effected
as a stock dividend on October 6, 1997. The options granted January 6,
1997 were repriced by the Board of Directors in January 1998 but
the shares were not adjusted for the 1997 three-for-two stock
split. (See Report on Repricing of Options).
</TABLE>
<TABLE>
Aggregate Stock Option Exercises In Year Ended January 5, 1998
and Year-End Stock Option Values
The following table sets forth information concerning aggregated
option exercises in fiscal year 1997 and the number and value of
unexercised options held by each of the Named Executive Officers at
January 5, 1998.
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
January 5, 1988 January 5, 1998
(#) ($)
Shares ------------- -------------
Acquired Value Exercisable Exercisable
Name on Exercise (#) Realized Unexercisable Unexercisable
_____ __________ ________ _____________ _____________
<S> <C> <C> <C> <C>
David B. Pomeroy, II 24,750 $592,685 118,375/0 $1,240,000/$0
Richard C. Mills 9,254 $243,098 155,866/0 $1,671,000/$0
Stephen E. Pomeroy - - 71,625/0 $ 593,000/$0
James C. Eck - - 10,000/0 $ 12,000/$0
Victor Eilau - - 15,000/0 $ 7,000/$0
</TABLE>
<PAGE>
<TABLE>
Report on Repricing Options
On January 14, 1998, based on the recommendation of the
Compensation Committee, the Board of Directors adjusted the
exercise price of all stock options previously awarded to certain
management emplolyees on January 6, 1997. The decision to reprice
was made because the price of the Company's stock was
historically very high on that date. Even though the financial
performance of the Company met the expectations of analysts, the
price of the Company's stock did not reflect this performance.
The Board of Directors believes that the price of its stock was
adversely affected by market conditions outside the control of
management. The number of shares awarded under the repriced
options remained the same as the number originally granted on
January 6, 1997; as part of its decision, the Board of Directors
determined not to give effect to the 3-for-2 stock split effected
as a dividend on October 6, 1997.
<CAPTION>
Length of
Original Option
Term
Number of Securities Market Price of Exercise Price Remaining at
Underlying Options Stock at Time of at Time of Date of
Repriced or Amended Repricing or Repricing or New Exercise Repricing or
Name Date (1) Amendment $ Amendment $ Price ($) Amendment
- ------------------------ ------ --------------------- ----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David B. Pomeroy, II 1/14/98 25,000 $16.63 $34.19 $16.63 4 Years
Richard C. Mills 1/14/98 5,000 $16.63 $34.19 $16.63 1 Year
Stephen E. Pomeroy N/A None
James C. Eck 1/14/98 10,000 $16.63 $34.19 $16.63 1 Year
Victor Eilau N/A None
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) If the options had not been repriced, under the terms of the anti-dilution provisions of the
1992 Nonqualified and Incentive Stock Option Plan, the number of shares subject to the options
would have been increased by one-half and the price would have been decreased by one-third,
from $34.19 to $22.79, as a result of the 3-for-2 stock split effected on October 6, 1997.
Submitted by Board of Directors
-----------------------------------------------
David B. Pomeroy, II, James H. Smith, III, Michael E. Rohrkemper,
Kenneth R. Waters, David W. Rosenthal and Edwin S. Weinstein
</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.,
<PAGE>
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.
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, 1998, Mr. Pomeroy entered into a Seventh
Amendment to the Employment Agreement with the Company (the
"Seventh Amendment"). Mr. Pomeroy's compensation under the Seventh
Amendment will consist of a base salary of $475,000 for fiscal 1998
and each subsequent fiscal year unless modified by the Compensation
Committee. Under the Seventh Amendment Mr. Pomeroy is also entitled
to a cash bonus of up to a maximum of $400,000 and up to a maximum
of 75,000 non-qualified stock options in fiscal 1998 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 amended Employment Agreement the Company has agreed to
pay all premiums for a term life insurance policy with a death
benefit equal to $3,000,000 insuring the life of Mr. 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 $2,000,000 insuring the life of Mr. Pomeroy, less the
reportable economic benefit to the trust.
Under the Seventh Amendment Mr. Pomeroy was 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 addition, the Company agreed to pay Mr. Pomeroy $5,000 per month
during the term of the Agreement, for the business use of real
estate owned by Mr. Pomeroy in Arizona. In the event of a change
of control (as defined in the Agreement), the Company is required
to provide Mr. Pomeroy with 100 hours of flight time on a private
air carrier for business use per year for the term of the agreement.
Currently the cost of one hour of flight time ranges from $1,400
to $2,300 depending on various factors.
<PAGE>
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, which will be $250,000
in fiscal 1998, and a discretionary bonus to be determined by the
Board of Directors.
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
base salary was $115,000 for fiscal 1997 and will increase to
$125,000 in fiscal 1998. The amount of any annual bonus will be
paid 50% in cash and 50% as incentive deferred compensation.
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 will be $192,500
in fiscal 1998, 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. Eilau, President of Technology Integration Financial
Services, Inc.( "TIFS" ), a wholly-owned subsidiary of the Company,
has an employment agreement with the Company extending from July 6,
1997 to July 5, 2000, which is extended annually for successive
one-year periods unless either party gives 30 days written notice
of termination. Mr. Eilau's compensation under the agreement
consists of a base salary, which will be $295,000 in fiscal 1998,
deferred compensation based on Company revenues and pre-tax income
and cash bonuses based on TIFS pre-tax income.
Compensation Committee Interlocks and Insider Participation
In fiscal 1997, the Compensation Committee consisted of David B.
Pomeroy, II, James H. Smith, III, Michael E. Rohrkemper and Kenneth
R. Waters. 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, acquired 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 expanded its existing distribution center in fiscal
1997 to include a new depot repair facility that replaced the
Company's former depot repair facility. Pomeroy Investments
exercised its option to purchase 4.323 acres of the 15.56 acres of
land described above and financed, purchased and owns the land and
improvements necessary to accommodate the new depot repair
facility. The Company is leasing 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 Company from time to time has made advances to Pomeroy
Investments to satisfy Pomeroy Investments' working capital needs.
James H. Smith, a director of the Company, is a stockholder in
the law firm of Lindhorst & Dreidame Co., L.P.A. Lindhorst &
Dreidame Co. serves as general counsel to the Company. The legal
services provided by Lindhorst & Dreidame Co. constituted less than
5% of the firm's business in 1997.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed
of three (3) non-employee directors, Messrs. Smith, Rohrkemper and
Waters, 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.
<PAGE>
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 1,350,000 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
<PAGE>
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.
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
262,500 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).
<PAGE>
C. Employee Benefit Plans
The Company maintains a 401(k) savings plan which generally
covers all employees of the Company. Plan participants may
contibute 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. Beginning in fiscal
1998 the Company will make contributions to the plan based on a
participant's annual pay.
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 were 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 were to be invested in
common stock of the Company purchased on the open market. In
December 1996 the Board of Directors took action to initiate
proceedings to terminate the ESOP. In late 1997, the Company
received a termination letter from the Internal Revenue Service
but the process of winding up the ESOP and distributing the assets
to the participants has not been completed. Employees have the
option to roll over their respective ESOP accounts to the Company's
401-K Plan. As of April 30, 1998, the ESOP still held 17,458
shares of common stock of the Company.
Chief Executive Officer Compensation
Mr. Pomeroy served as Chairman of the Board and Chief Executive
Officer throughout fiscal 1997. Mr. Pomeroy's compensation, which
includes an annual salary, bonuses and stock options, was
determined in accordance with the terms of the Sixth Amendment to
his Employment Agreement. The Sixth Amendment, which established
the performance criteria for fiscal 1997, was adopted by the
Compensation Committee in December 1995.
The terms of Mr. Pomeroy's Employment Agreement and any
amendments thereto are based on the factors described above
including a review of the compensation paid to executives of
comparable companies.
Submitted by the Compensation Committee
-------------------------------------------------
James H. Smith, III, Michael E. Rohrkemper, Kenneth R. Waters
and David B. Pomeroy, II.
<PAGE>
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 April 10,1992
4-10-92 12-31-92 12-31-94 12-31-95 12-31-96 12-31-97
_______ ________ ________ ________ ________ ________
PMRY 100 82 135 166 727 557
S&P 500 100 108 116 153 184 240
NASDAQ 100 107 119 112 143 232
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
______________________________________________________
Management
__________
The following table sets forth certain information, as of April
30, 1998, with respect to each person known to the Company to be
the beneficial owner of more than five percent (5%) of its
outstanding common stock, 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 2,445,883 (2) 21.09%
Richard C. Mills 161,075 (3) 1.39%
Stephen E. Pomeroy 97,391 (4) *
James C. Eck 18,000 (5) *
Victor Eilau 20,000 (6) *
James H. Smith, III 14,798 (7) *
David W. Rosenthal 18,307 (8) *
Michael E. Rohrkemper 19,625 (9) *
Kenneth R. Waters 3,333 (10) *
Pomeroy Computer Resources, ESOP 17,458 (11) *
Directors and all Executive
Officers as a Group 2,797,954 (12) 23.31%
* 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 22,636 shares owned by his spouse as to which Mr.
Pomeroy disclaims beneficial ownership. Also includes 138,375
shares issuable upon exercise of stock options and 17,458 shares
owned by the ESOP. See note (11) below. Mr. Pomeroy disclaims
beneficial ownership as to all of the shares held by the ESOP
since all of the shares which had been allocated to his account
have been transferred from the ESOP pursuant to the termination
process.
(3) Includes 160,866 shares of Common Stock issuable upon exercise
of stock options and 209 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.
(4) Includes 91,625 shares of Common Stock issuable upon exercise
of stock options and 190 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.
(5) Includes 15,000 shares of Common Stock issuable upon exercise
of stock options.
(6) Includes 20,000 shares of Common Stock issuable upon exercise
of stock options.
(7) Includes 13,561 shares issuable upon exercise of stock
options.
(8) Includes 2,700 shares of Common Stock owned by his spouse, 59
shares held by the ESOP allocated to the account of his spouse
(which shares she has the right to vote under the Plan) and 3,500
shares issuable to his spouse upon the exercise of stock options,
as to which Dr. Rosenthal disclaims beneficial ownership.
Includes 5,000 shares of Common Stock issuable upon exercise of
stock options.
(9) Includes 247 shares of Common Stock held by Rohrkemper &
Ossege Ltd., a partnership in which Mr. Rohrkemper has a 60%
interest. Also includes 16,562 shares of Common Stock issuable
upon exercise of stock options.
(10) Includes 3,333 shares of Common Stock issuable upon exercise
of stock options.
(11) The ESOP has been terminated and is in the process of
winding up. As of April 30, 1998, the ESOP still held 17,458
shares of common stock. The trustee of the ESOP is David B.
Pomeroy, II, an officer of the Company who has voting control
over the shares held in the ESOP in certain situations.
(12) 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 for which
distributions are expected to be completed during fiscal 1998.
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"
and "Employment Agreements".
<PAGE>
Addie W. Rosenthal, the spouse of Dr. Rosenthal, a member of the
Board of Directors, serves as Vice President of Marketing and
Investor Relations for the Company.
Kenneth R. Waters, a director of the Company since April 1997,
served 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 which also
includes his compensation as a member of the Board of Directors.
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/ Stephen E. Pomeroy
_______________________
Stephen E. Pomeroy
Chief Financial Officer
Dated: May 20, 1998
