SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
POMEROY COMPUTER RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials. N/A
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PCR LOGO
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Pomeroy Computer Resources, Inc. on Wednesday, June 9, 1999 at 10 a.m. at the
Northern Kentucky Convention Center, One West RiverCenter Boulevard, Covington,
KY 41011.
We hope that you will be able to attend the Meeting. If you do not expect to be
present and wish your stock to be voted, please sign, date and mail the enclosed
proxy card. Your shares cannot be voted unless you sign and return a proxy or
vote by ballot at the Meeting.
If you plan to attend the Meeting and will need special assistance because of a
disability, please contact Addie Rosenthal, Vice President of Marketing and
Investor Relations, 1020 Petersburg Road, Hebron, KY 41048, (606) 586-0600.
Very truly yours,
/s/ David B. Pomeroy, II
David B. Pomeroy, II
Chairman of the Board
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return Your Proxy
<PAGE>
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Pomeroy
Computer Resources, Inc. will be held at the Northern Kentucky Convention
Center, One West RiverCenter Boulevard, Covington, KY 41011 on Wednesday, June
9, 1999 at 10:00 A.M., E.D.T. for the following purposes:
1. To elect seven directors, and;
2. To approve an increase in the number of shares of Common Stock reserved
for issuance under the Company's 1992 Non-Qualified and Incentive Stock Option
Plan from 1,850,000 shares to 2,350,000 shares, and;
3. To consider and approve the 1998 Employee Stock Purchase Plan, and;
4. To transact such other business as may be properly brought before the
meeting and any and all adjournments thereof.
Stockholders of record at the close of business on April 26, 1999 will be
entitled to notice of and to vote at the meeting.
Stockholders are cordially invited to attend the meeting. Please complete,
execute and return the enclosed proxy card in the enclosed envelope whether or
not you plan to attend so that your shares may be represented at the meeting. If
you attend the meeting, you may revoke your proxy and vote in person if you
choose.
By Order of The Board of Directors
/s/ Dino Lucarelli
- --------------------
Dino Lucarelli, Secretary
Dated: May 7, 1999
1
<PAGE>
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Pomeroy Computer Resources, Inc., a
Delaware corporation (the "Company") for use at the Annual Meeting of
Stockholders, which will be held Wednesday, June 9, 1999 at 10:00 A.M., E.D.T.,
at the Northern Kentucky Convention Center, One West RiverCenter Boulevard,
Covington, KY 41011 and at any and all adjournments of that meeting for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and the enclosed proxy card are first being sent to
stockholders on or about May 7, 1999. The Company's principal executive offices
are located at 1020 Petersburg Road, Hebron, KY 41048.
Shares represented by properly executed proxy cards received by the Company
at or prior to the meeting will be voted according to the instructions indicated
on the proxy card. You can specify how you want your shares voted on each
proposal by marking the appropriate boxes on the proxy card. If your proxy card
is signed and returned without specifying a vote or abstention on any proposal,
it will be voted according to the recommendation of the Board of Directors on
that proposal. The Board of Directors knows of no other matters which may be
brought before the meeting. However, if any other business is properly presented
for action at the meeting, the persons named on the proxy card will vote
according to their best judgment.
A proxy card may be revoked at any time before it is voted at the meeting
by filing with the corporate secretary an instrument revoking it, by a duly
executed proxy bearing a later date, or by voting in person by ballot at the
meeting.
Only stockholders of record at the close of business on April 26, 1999 will
be entitled to the notice of and to vote at the meeting. On that date, there
were 11,725,121 common shares outstanding and entitled to vote, and each such
share is entitled to one (1) vote on each matter to be considered. Stockholders
do not have cumulative voting rights in the election of directors. Tabulation of
proxies and votes cast at the meeting will be counted and certified to by an
independent agent.
A majority of the votes entitled to be cast on matters to be considered at
the meeting will constitute a quorum. If a share is represented for any purpose
at the meeting, it is deemed to be present for quorum purposes and for all other
matters. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker non-votes will not
be deemed to have been cast either "for" or "against" a matter, although they
will be counted in determining if a quorum is present. Proxies marked "abstain"
or a vote to abstain by a stockholder present in person at the Annual Meeting
will have the same legal effect as a vote "against" a matter because it
represents a share present or represented at the meeting and entitled to vote,
thereby increasing the number of affirmative votes required to approve a
proposal. The specific vote requirements for the proposals being submitted to
stockholder vote at the Annual Meeting are set forth under the description of
each proposal in this Proxy Statement.
The expense of this solicitation will be borne by the Company. In addition,
arrangements may be made with brokerage firms and other custodians, nominees and
fiduciaries to forward solicitation material for the Annual Meeting to
beneficial owners of the Company's stock and the Company will reimburse these
institutions for their expense in so doing.
2
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of March 11, 1999, the beneficial
ownership of shares of the Company's common stock, $.01 par value ("Common
Stock"), by each Director and nominee for Director of the Company, each
executive officer named in the Summary Compensation Table (below), each person
known to the Company to be the beneficial owner of more than five percent (5%)
of its outstanding shares of Common Stock, and by the Directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
NAME BENEFICIAL OWNERSHIP (1) % OF CLASS
- --------------------------- ------------------------ -----------
<S> <C> <C>
David B. Pomeroy, II. . . . 2,458,425 (2) 20.64%
Richard C. Mills. . . . . . 185,866 (3) 1.58%
Stephen E. Pomeroy. . . . . 122,201 (4) 1.03%
James C. Eck. . . . . . . . 18,000 (5) *
Victor Eilau. . . . . . . . 25,000 (6) *
James H. Smith, III . . . . 14,798 (7) *
David W. Rosenthal . . . . 5,000 (8) *
Michael E. Rohrkemper . . . 15,688 (9) *
Kenneth R. Waters . . . . . 5,500 (10) *
William H. Lomicka. . . . . - *
Vincent D. Rinaldi. . . . . - *
Directors and all Executive
Officers as a Group. . . . 2,850,478 (11) 23.43%
<FN>
* 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 193,375 shares issuable upon
exercise of stock options. Mr. Pomeroy's address is 1020 Petersburg Road,
Hebron, KY 41048.
(3) Includes 65,000 shares of Common Stock issuable upon exercise of stock
options.
(4) Includes 116,625 shares of Common Stock issuable upon exercise of stock
options.
(5) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options.
(6) Includes 25,000 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 11,187 shares issuable upon exercise of stock options.
(8) Includes 1,500 shares of Common Stock owned by his spouse and 3,000
shares issuable to his spouse upon the exercise of stock options, as to which
Dr. Rosenthal disclaims beneficial ownership.
(9) Includes 247 shares of Common Stock held by Rohrkemper & Ossege Ltd., a
partnership in which Mr. Rohrkemper has a 60% interest. Also includes 10,625
shares of Common Stock issuable upon exercise of stock options.
(10) Includes 5,000 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 444,812 shares of Common Stock issuable upon exercise of stock
options and shares as to which Directors and executive officers disclaim
beneficial ownership as stated above.
</TABLE>
3
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Seven directors are to be elected at the Annual Meeting of Stockholders,
each to serve until the next annual meeting and until his successor shall have
been elected and qualified. Each of the following nominees, except Mr. Rinaldi,
is presently a member of the Board of Directors. The election of each nominee
for director requires the affirmative vote of the holders of a plurality of the
shares of Common Stock cast in the election of directors. The proxy solicited
hereunder will be voted, unless otherwise instructed, for the election of the
seven nominees named below. If, for any unforeseen reason, any nominee should
become unavailable, the proxies will exercise their discretion in voting for a
substitute. The Board of Directors recommends that the stockholders vote for the
seven nominees for director named below. The following contains information
relating to each nominee for election to the Board of Directors:
<TABLE>
<CAPTION>
YEAR FIRST
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE ELECTED A
YEARS; AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR
- ------------------------------------------------------------------ ----------
<S> <C>
David B. Pomeroy II, 49, is Chairman of the Board, President 1992
and Chief Executive Officer of the Company. Mr. Pomeroy was
a founder of the first of the Company's predecessor businesses
("the Pomeroy Companies") in 1981. Mr. Pomeroy controlled
the Pomeroy Companies until their reorganization into Pomeroy
Computer Resources in 1992 and has served as Chairman of
the Board, President and Chief Executive Officer since 1992.
James H. Smith, III, 48, has been a Director of the Company 1992
since April 1992. He 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.
David W. Rosenthal, 47, has been a Director of the 1992
Company since April 1992. He is a Professor of Marketing at
Miami University, Oxford, Ohio, a position he has held for more
than the last five years. Dr. Rosenthal also served as a
consultant with Stratvertise, a marketing, research and strategic
consulting firm since 1975.
Michael E. Rohrkemper, 52, has been a Director of the 1993
Company since July 1993. He is a certified public accountant
and has been a partner in the accounting firm of Rohrkemper
and Ossege Ltd. Since January 1991.
Stephen E. Pomeroy, 30, has been a Director of the Company 1998
since February, 1998, and Chief Financial Officer since May
1997. In December 1998, Mr. Pomeroy was named President
and Chief Executive Officer of Pomeroy Select Integration
Solutions, Inc. ("Pomeroy Select"), a wholly-owned subsidiary of
the Company. Mr. Pomeroy was the Vice President of
Marketing and Corporate Development of the Company 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.
William H. Lomicka, 62, was elected to the Board of Directors 1999
effective January 7, 1999. Mr. Lomicka is president of Mayfair
Capital, Inc., a private investment firm, a position he has held
since 1989.
4
<PAGE>
Vincent D. Rinaldi, 50, is a nominee for election to the Board of
Directors. Mr. Rinaldi is the president of Information Leasing
Corporation ("ILC") and Procurement Alternatives Corporation
("PAC"), both wholly-owned subsidiaries of Provident Financial
Group, Inc. ("Provident"). The combined companies finance and
manage equipment for a wide range of companies. Mr. Rinaldi
was the founder of ILC in 1984 prior to the acquisition by
Provident in 1996. Mr. Rinaldi is currently a director of Thrucom,
Inc., Qsys International Inc. and Infonet Inc.
</TABLE>
Stephen E. Pomeroy is the son of David B. Pomeroy, II. There are no other
family relationships among the Company's directors and executive officers.
There were four meetings of the Board of Directors in 1998. 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
1998. The audit committee is 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 1998. In 1998, the compensation committee was 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. Mr. Waters resigned
from the Board effective January 5, 1999 in order to become a director of
Pomeroy Select. Mr. Waters' position on the compensation committee has not been
replaced.
The Company has a standing stock option committee which held one meeting
during 1998. The stock option committee consists of Messrs. Rosenthal,
Rohrkemper and Smith. This committee administers the 1992 Non-Qualified and
Incentive Stock Option Plan.
The Company does not have a standing nominating committee or committee
performing a similar function.
DIRECTOR'S FEES
Each director who was not an employee of the Company, except for Messrs.
Smith and Waters, received 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.
During 1998, Mr. Waters was paid a monthly consulting fee of $1,500 in lieu of
the quarterly retainer and the fee for meetings attended and for consulting
services to the Company.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is currently composed
of two (2) non-employee directors, Messrs. Smith and Rohrkemper, and Mr.
Pomeroy, Chairman of the Board, President and Chief Executive Officer. During
5
<PAGE>
fiscal 1998, Mr. Waters was also a member of the compensation committee. Mr.
Waters resigned from the Company's Board of Directors effective January 5, 1999.
The Committee is responsible for the establishment and oversight of the
Company's Executive Compensation Program. This program is designed to meet the
objectives of attracting, retaining and motivating executive employees and
providing a balance of short term and long term incentives that can recognize
individual contributions from an executive and the overall operating and
financial results of the Company. The Committee intends to review Executive
Compensation on a regular basis and to compare the competitiveness of the
Company's executive compensation and corporate performance with other
corporations comparable to the Company. The committee believes that the
significant equity interest in the Company held by the Company's management
aligns the interests of the stockholders and management. Through the programs
adopted by the Company a significant portion of Executive Compensation is linked
to individual and corporate performance and stock price appreciation.
The basic elements of the Company's Executive Compensation Program consist
primarily of base salary, potential for annual cash opportunities and stock
options. The Committee believes that incentives play an important role in
motivating executive performance and attempts to reward achievement of both
short and long term goals. However, the emphasis on using stock options as a
long term incentive is intended to insure a proper balance in the achievement of
long term business objectives which ties a significant portion of the
executive's compensation to factors which impact on the performance of the
Company's stock.
Compensation opportunities must be adequate to enable the Company to
compete effectively in the labor market for qualified executives. The elements
of the Executive Compensation Program are designed to meet these demands, and at
the same time encourage increases in shareholder value.
BASE SALARIES
Base salaries for executives are initially determined by evaluating the
duties and responsibilities of the position to be held by the individual,
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.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Pomeroy served as Chairman of the Board and Chief Executive Officer
throughout fiscal 1998. Mr. Pomeroy's compensation, which includes an annual
salary, bonuses and stock options, was determined in accordance with the terms
of the Seventh Amendment to his Employment Agreement. The Seventh Amendment,
which established the performance criteria for fiscal 1998, was adopted by the
Compensation Committee in December 1997. 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 and David B. Pomeroy, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1998, 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.
6
<PAGE>
The Company's principal executive offices and distribution facility are
located in Hebron, Kentucky, comprised of approximately 36,000 and 111,000
square feet of space, respectively. These facilities are leased from Pomeroy
Investments, LLC ("Pomeroy Investments"), a Kentucky limited liability company
controlled by David B. Pomeroy, II, Chief Executive Officer of the Company,
under a ten year triple-net lease agreement which expires in May 2006. The lease
agreement provides for 2 five year renewal options.
The Company from time to time has made advances to Pomeroy Investments to
satisfy Pomeroy Investments' working capital needs.
The Company pays Mr. Pomeroy $5,000 per month for the business use of real
estate owned by Mr. Pomeroy in Arizona.
James H. Smith, a director of the Company, is a shareholder 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 1998.
Mr. Rinaldi, a nominee for director of the Company, is the president of
Information Leasing Corporation ("ILC"), a wholly-owned subsidiary of Provident
Financial Group, Inc. Since 1992, the Company has participated in a Remarketing
and Agency Agreement ("Agreement") with ILC whereby the Company obtains rights
to 50% of lease residual values for services rendered in connection with
locating the lessee, selling the equipment to ILC and agreeing to assist in
remarketing the used equipment. During fiscal 1998 the Company sold equipment
and related support services to ILC, for lease to ILC's customers, in the amount
of $2.8 million. The Company also obtained rights to lease residuals from ILC in
the amount of $250 thousand in fiscal 1998.
7
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table is a summary for the fiscal years 1998, 1997 and 1996
of certain information concerning the compensation paid or accrued by the
Company to the Chief Executive Officer and the four other most highly
compensated executive officers of the Company who served in such capacities as
of January 5, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
----------------------------------------------------------
Name and Principal Other Annual Stock Options
Position Year Salary (1) Bonus Compensation # (2)
- ----------------------- ---- ---------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
David B. Pomeroy. . . . 1998 $ 475,000 - (3) - 25,000 (4)
CEO . . . . . . . . . . 1997 $ 395,000 $720,000 - 25,000
1996 $ 395,000 $499,845 - 56,250
Richard C. Mills. . . . 1998 $ 250,000 $ 7,500 $ 98,953 (5) 30,000
Chief Operating Officer 1997 $ 185,000 $ 14,000 $ 61,833 (5) 35,000
1996 $ 156,967 $ 10,000 $ 56,220 (5) 54,000
Stephen E. Pomeroy. . . 1998 $ 125,000 $ 52,000 $ 38,504 (6) 45,000
CFO . . . . . . . . . . 1997 $ 115,000 $ 41,324 $ 18,500 (6) 30,000
1996 $ 100,000 $100,000 $ 21,762 (6) 29,250
James C. Eck. . . . . . 1998 $ 192,500 $ 16,000 $ 35,668 (7) 5,000
Vice President of . . . 1997 $ 175,000 $ 34,400 $ 31,067 (7) 10,000
Sales . . . . . . . . . 1996 $ 150,000 $ 75,000 $ 17,400 (7) -
Victor Eilau. . . . . . 1998 $ 294,665 $ 46,934 - 10,000
President, Technology . 1997 $ 124,800 $ 50,000 - 15,000
Integration Financial
Services, Inc.
<FN>
(1) Includes amounts deferred at the direction of the executive officer
pursuant to the Company's 401(k) Retirement Plan.
(2) Unless otherwise noted, all stock options are awarded based on the fair
market value of the Company's common stock at the time of grant.
(3) Excludes $300,000 of incentive cash bonus that was forgone.
(4) Does not include options that were granted to Mr. Pomeroy after fiscal
1998.
(5) Includes commission of $37,616, $20,500 and $48,220 in 1998, 1997 and
1996, respectively. Includes accruals pursuant to deferred
compensation agreements of $61,337, $41,333 and $8,000 in 1998, 1997 and
1996, respectively.
(6) Represents amounts accrued pursuant to deferred compensation agreements.
(7) Includes commissions of $19,000, $14,400 and $17,400 in 1998, 1997 and
1996, respectively. Includes amounts accrued pursuant to deferred
compensation agreements of $16,668 and $16,667 in 1998 and 1997,
respectively.
</TABLE>
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
options to purchase Common Stock to any of the Named Executive Officers during
fiscal year 1998.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------------
Potential Realizable Value
No. of Shares of Percent of Total at Assumed Annual
Common Stock Options Granted to Exercise or Rates of Stock Price
Underlying Options Employees Base Price Expiration Appreciation for Option Term
----------------------------
Name Granted in Fiscal Year ($/Sh) Date 5% 10%
- -------------------- ------------------- ------------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Pomeroy, II 25,000 (1) 16.78% $ 17.50 01/06/03 $ 121,000 $ 267,000
Richard C. Mills . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
25,000 16.78% $ 16.00 08/21/00 $ 41,000 $ 84,000
Stephen E. Pomeroy . 20,000 13.43% $ 17.50 01/06/00 $ 36,000 $ 74,000
25,000 16.78% $ 16.00 08/21/00 $ 41,000 $ 84,000
James C. Eck . . . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
Victor Eilau . . . . 5,000 3.36% $ 17.50 01/06/00 $ 9,000 $ 18,000
5,000 3.36% $ 25.06 07/06/00 $ 13,000 $ 26,000
<FN>
(1) Does not include options that were granted to Mr. Pomeroy after fiscal 1998.
</TABLE>
AGGREGATE STOCK OPTION EXERCISES IN YEAR ENDED JANUARY 5, 1999
AND YEAR-END STOCK OPTION VALUES
The following table sets forth information concerning aggregated option
exercises in fiscal year 1998 and the number and value of unexercised options
held by each of the Named Executive Officers at January 5, 1999.
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT JANUARY 5, 1999 VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 5, 1999 JANUARY 5, 1999
SHARES (#) ($)
--------------------------- -------------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------- --------------- ------------- --------------------------- -------------------------
<S> <C> <C> <C> <C>
David B. Pomeroy, II 20,000 $ 318,245 123,375 / 0 $ 1,488,000 / $0
Richard C. Mills . . 120,866 $ 2,106,540 65,000 / 0 $ 368,000 / $0
Stephen E. Pomeroy . - $ - 116,625 / 0 $ 1,136,000 / $0
James C. Eck . . . . - $ - 15,000 / 0 $ 77,000 / $0
Victor Eilau . . . . - $ - 25,000 / 0 $ 92,000 / $0
</TABLE>
9
<PAGE>
Submitted by Board of Directors
EMPLOYMENT AGREEMENTS
David B. Pomeroy, II, the Chairman of the Board and Chief Executive Officer
of the Company, has an employment agreement with the Company for a term of three
years, which is extended on a daily basis resulting in a perpetual three year
term.
Effective January 6, 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 consisted 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 was 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 has forgone a fiscal 1998 incentive cash bonus of $300,000.
Mr. Pomeroy may also be paid a discretionary bonus under any compensation,
benefit or management incentive plan. Fifty percent of any discretionary bonus
would be paid in cash and fifty percent would be treated as incentive deferred
compensation.
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.
Mr. Stephen E. Pomeroy's employment agreement with the Company was
terminated upon the execution of an employment agreement between Pomeroy Select
and Mr. Pomeroy effective January 6, 1999. Mr. Pomeroy's employment agreement
with Pomeroy Select has a term of three years, which is extended on a daily
basis resulting in a perpetual three year term. Mr. Pomeroy's employment
agreement provides for an annual base salary of $175,000 during the year ending
January 5, 2000 and for each subsequent year unless modified by the Compensation
Committee. Under the employment agreement, he may earn quarterly and annual
bonuses upon Pomeroy Select meeting certain predetermined goals. Mr. Pomeroy's
base salary was $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 was $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 was $295,000 in fiscal 1998, deferred
compensation based on Company revenues and pre-tax income and cash bonuses based
on TIFS pre-tax income.
Mr. Mills had an employment agreement with the Company effective January 1,
1993. The term of Mr. Mills' agreement was three years and was extended annually
for additional one-year periods unless either party gave 60 days written notice
of termination. The agreement provided for a stated base salary, which was
$250,000 in fiscal 1998, and a discretionary bonus to be determined by the Board
of Directors. Effective March 1, 1999, Mr. Mills resigned as Chief Operating
Officer and his employment agreement was terminated as of that date by the
agreement of the parties.
10
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the percentage of the cumulative
total stockholder return on the Company's common shares with the cumulative
total return assuming reinvestment of dividends of (i) the S&P 500 Stock Index
and (ii) the NASDAQ Industrial Index.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning April 10, 1992
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Pomeroy S&P500 NASDAQ Industrial
<S> <C> <C> <C>
4/92. 100 100 100
12/92 81.9 107.9 107.2
12/93 135.2 115.5 119.2
12/94 119.6 113.8 111.5
12/95 166 152.6 142.7
12/96 726.8 183.5 164.1
12/97 557 240.4 232.2
12/98 687.2 304.5 324.3
</TABLE>
ITEM 2 - PROPOSAL TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE UNDER THE 1992 NON-QUALIFIED AND INCENTIVE STOCK OPTION PLAN
On February 13, 1992 the Board of Directors and the stockholders of the
Company adopted the 1992 Non-Qualified and Incentive Stock Option Plan (the
"Option Plan"). The Option Plan was adopted to encourage ownership of Common
Stock by officers and key employees of the Company, to encourage their continued
employment with the Company and to provide them with incentives to promote the
success of the Company. The Stock Option Committee of the Board of Directors
grants options under and otherwise administers the Option Plan. The exercise
price for options under the Option Plan must be at least one hundred percent
(100%) of the fair market value of the Common Stock on the date of grant;
provided, however, in the event that an incentive stock option is granted to an
employee who owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or, if applicable, a subsidiary or parent
corporation of the Company, the exercise price per share for such incentive
stock options cannot be less than one hundred ten percent (110%) of the fair
market value of the common shares on the date of grant. The exercise price of
options granted under the Option Plan is payable in cash or, at the discretion
of the Stock Option Committee in whole or in part, in shares of Common Stock,
valued at their fair market value at the date of exercise. The cash proceeds
from the exercise of options will constitute general funds of the Company and
may be used by it for any purpose. Each option granted under the Option Plan
expires on the date or dates set forth in the specific option award as
determined by the Stock Option Committee in its sole discretion, but not later
than ten (10) years from the date of grant. The Option Plan will terminate on
February 13, 2002, but such termination will not affect any outstanding options
previously granted.
11
<PAGE>
The Option Plan contains no maximum limitation as to the number of
participants. Incentive stock options may be awarded to officers and key
employees of the Company or its subsidiaries as determined by the Stock Option
Committee. Nonqualified stock options may also be awarded by the Stock Option
Committee to outside consultants employed by the Company. In fiscal 1998, 97
employees and one consultant participated in the Option Plan.
The Option Plan may be amended from time to time by the Board of Directors
of the Company provided that no amendment without stockholder approval may be
made if approval of the stockholders is required under Section 422 of the
Internal Revenue Code as in effect at the time of reference or Rule 16b-3 under
the Securities Exchange Act of 1934 as in effect at the time of reference.
The proposal is to increase the number of shares of Common Stock reserved
for issuance under the Option Plan from 1,850,000 shares to 2,350,000 shares. In
fiscal 1995, the Board of Directors and stockholders of the Company increased
the Common Stock reserved for issuance under the Option Plan to a total of
600,000 shares of Common Stock. During 1996 and 1997, the number of reserved
shares was adjusted by the Board to 1,350,000 shares of Common Stock as provided
in the Option Plan to reflect stock splits and dividends. In 1998 the Board of
Directors and stockholders of the Company increased the Common Stock reserved
for issuance under the Option Plan to a total of 1,850,000 shares of Common
Stock. The Board of Directors believes that stock options are an important part
of the total compensation package needed to attract and retain key employees
including skilled technical personnel. The number of employees of the Company
has grown from 923 in 1996 to 1,699 in 1999 reflecting the Company's growth in
revenues and, in particular, the growth in the provision of services. The Board
recommends that 500,000 additional shares be reserved for issuance under the
Option Plan to enable the Company to continue to attract and retain a strong
management group as it grows. Except for the proposal to increase the number of
shares of Common Stock reserved for issuance under the Option Plan, there is no
difference between the Option Plan as it presently exists and as it would exist
if the proposal is approved.
At April 26, 1999, options to purchase 735,236 shares of Common Stock were
outstanding. The market value of the Common Stock underlying the outstanding
options at April 26, 1999 was $9,742,000.
Neither the granting, nor the exercise, of an incentive stock option will
result in income for federal income tax purposes for the optionee or in a
deduction for the Company. Any gain realized on the sale of shares exercised
under an incentive stock option is considered long-term capital gain to the
optionee for federal income tax purposes if the stock has been held for at least
one year after it was acquired on exercise of the option and at least two years
have expired after the grant of the option. If the shares are sold or otherwise
disposed of within one year after exercise or two years after the date of grant,
then any appreciation at the date of exercise above the exercise price is
treated, subject to certain limitations, as "ordinary" income; and any
appreciation between the date of exercise and the date of sale is considered as
long or short-term capital gain to the optionee depending on whether or not the
stock was held longer than one year. In such event, the amount of ordinary
income received by the optionee generally is treated as a tax deductible expense
to the Company.
The grant of a nonqualified stock option will not result in income for the
optionee or in a deduction for the Company. The exercise of a nonqualified stock
option would result in ordinary income for the optionee and a deduction for the
Company measured by the difference between the exercise price and the fair
market value of the shares received at the time of exercise.
Options to employees are awarded on the basis of the achievement of
financial objectives established by the Stock Option Committee, the contribution
of the employee to the Company's objectives and such other matters as the Stock
Option Committee deems relevant. As such, the number of shares subject to
options that will be received by any executive officer or other employee of the
Company is not determinable. Non-employee directors of the Company are not
eligible to participate in the Option Plan.
For information concerning grants of stock options during fiscal 1998 under
the Option Plan to the Company's Chief Executive Officer and the other four most
highly compensated executive officers, see the Option Grants in Last Fiscal Year
Table above. There are no other current executive officers of the Company other
than those named in the Table. The following table sets forth the number of
shares subject to options granted in fiscal 1998 to all employees excluding
executive officers. The dollar value of the options granted is dependent upon
the future share price of the Common Stock of the Company.
12
<PAGE>
<TABLE>
<CAPTION>
OPTIONS GRANTED IN FISCAL 1998
NAME AND POSITION NUMBER OF SHARES SUBJECT TO OPTIONS
- ------------------------------------ -----------------------------------
<S> <C>
Non-Executive Officer Employee Group 148,953
</TABLE>
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking the
approval of the amendment to the Option Plan is as follows:
RESOLVED, that the first sentence of Section 3 of the 1992 Non-Qualified
and Incentive Stock Option Plan be amended to read as follows:
"There will be reserved for use, upon exercise of Awards to be granted from
time to time under the Plan, an aggregate of 2,350,000 Shares, which Shares may
be, in whole or in part, as the Board shall from time to time determine,
authorized but unissued Shares, or issued Shares which shall have been
reacquired by the Company."
Assuming the presence of a quorum at the Annual Meeting, approval of this
proposal will require the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting. The Board of Directors recommends that the
stockholders vote in favor of this proposal.
ITEM 3 - PROPOSAL TO APPROVE THE 1998 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company has adopted, subject to stockholder
approval, the 1998 Employee Stock Purchase Plan (the "1998 Plan"). The purpose
of the 1998 Plan is to provide eligible employees of the Company the ability to
purchase Common Stock from the Company at a discount from the market price, and
to provide an additional means of attracting and retaining competent personnel.
Administration. The Board, or a Committee named by the Board, shall
---------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
Eligible Participants. Employees of the Company and its subsidiaries whose
-----------------------
customary employment is for more than 20 hours per week, and if their customary
employment is for more than five months in a calendar year. However, an
employee who owns 5% or more of the total shares of the Company's Common Stock
issued and outstanding, including as Common Stock any options held to acquire
Common Stock, may not participate.
Terms of Options. The Plan shall be implemented by a series of offering
-------------------
periods of six (6) months duration, with new offering periods commencing on or
about January 1 and July 1 of each year (or at such other time or times as may
be determined by the Board of Directors).The option price per share of the
shares offered shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company at the beginning of an offering period;
or (ii) 85% of the fair market value of a share of the Common Stock of the
Company at the end of an offering period. The fair market value of the Company's
Common Stock on a given date shall be determined by the Board in its discretion
based on the closing price of the Common Stock for such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) National Market or, if such price is not reported,
the mean of the bid and asked prices per share of the Common Stock as reported
by NASDAQ or, in the event the Common Stock is listed on a stock exchange, the
fair market value per share shall be the closing price on such exchange on such
date (or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported in The Wall Street Journal.
13
<PAGE>
Adjustments Upon Changes in Capitalization: Corporate Transactions.
-------------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
(b) Corporate Transactions. In the event of the proposed dissolution
-----------------------
or liquidation of the Company, the offering period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, to shorten the
offering period then in progress by setting a new exercise date. If the Board
shortens the offering period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing, at least ten (10) days prior to the new exercise
date, that the exercise date for his or her option has been changed to the new
exercise date and that his or her option will be exercised automatically on the
new exercise date, unless prior to such date he or she has withdrawn from the
offering period as provided in Section 10 of the Plan. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.
(c) The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
Tax Consequences. Options granted under the Purchase Plan will be qualified
-----------------
options within the meaning of the Internal Revenue Code of 1986, as amended. The
price at which shares may be purchased upon exercise of an option will be
equal to 85% of the fair market value of the shares on the date the option is
granted. An employee realizes no income upon the grant of a qualified option. An
employee who holds his or her shares for two years after the grant of the
option and for one year after he or she receives the shares upon its exercise
generally will not incur any federal income tax liability upon receipt of the
shares pursuant to the exercise. However, the spread between the exercise price
and the fair market value of the shares at the time of exercise will be included
in alternative minimum taxable income for the year of exercise. After
satisfying such holding periods, upon a disposition of the shares at a price
greater than the option exercise price, the employee will realize taxable
long-term capital gain. Bancshares will not be allowed a deduction for federal
income tax purposes in connection with the grant or exercise of a qualified
option; however, if the employee does not comply with the holding periods, he or
she will realize ordinary income in the year of sale equal to the difference
between the exercise price and the value of the underlying shares on the date of
exercise (or the sale price if lower where the sale is to an unrelated party).
Where the sale price is lower than the fair market value of the shares on the
date of exercise and the sale is to an unrelated party, and the exercise and
sale occur within the same taxable year, the amount included in alternative
minimum taxable income will be the amount of the sale price. In such a case,
Bancshares would be entitled to a deduction in an amount equal to the ordinary
income realized by the employee. In the event of any disposition of shares which
meets the holding period requirements, there shall be included as compensation
(rather than capital gain) in gross income, for the taxable year in which falls
the date of such disposition an amount equal to the lesser of (i) the excess of
the fair market value of the shares at the time of such disposition over the
amount paid for the shares under the option, or (ii) the excess of the fair
market value of the shares at the time the option was granted over the option
price.
14
<PAGE>
APPROVAL BY STOCKHOLDERS
The resolution that will be introduced at the Annual Meeting seeking
approval of the 1998 Employee Stock Purchase Plan is as follows:
RESOLVED, that the 1998 Employee Stock Purchase Plan adopted by the Board
of Directors is approved and that there will be reserved for use, upon exercise
of options granted under the plan, an aggregate of 100,000 shares, which shares
will be authorized but unissued shares.
Assuming the presence of a quorum at the Annual Meeting, approval of this
proposal will require the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting. The Board of Directors recommends that the
stockholders vote in favor of this proposal.
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."
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.
Mr. Rinaldi, a nominee for director of the Company, is the president of
Information Leasing Corporation ("ILC"), a wholly-owned subsidiary of Provident
Financial Group, Inc. See "Compensation Committee Interlocks and Insider
Participation".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal 1998, Mr. Stephen E. Pomeroy, Chief Financial Officer for
Pomeroy Computer Resources, Inc. failed to file one Form 4 with respect to the
grant of 25,000 options to purchase shares of the Common Stock of the Company in
August 1998. This transaction was subsequently reported on a Form 5 for
December 1998.
During fiscal 1998, Mr. Richard C. Mills, Chief Operating Officer for
Pomeroy Computer Resources, Inc. failed to file one Form 4 with respect to the
grant of 25,000 options to purchase shares of Common Stock of the Company in
August 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton, LLP, which has served as independent certified public
accountants to the Company since fiscal 1994, has been selected by the Company
to serve in that capacity in fiscal 1999. Representatives of Grant Thornton, LLP
will be present at the Annual Meeting in order to respond to questions and to
make any statement such representative deems appropriate.
15
<PAGE>
PROPOSALS FOR 2000 MEETING
In order to be eligible for inclusion in the Company's proxy statement for
the 2000 annual meeting of stockholders, stockholder proposals must be received
by the Company at its principal office, 1020 Petersburg Road, Kentucky 41048, by
January 7, 2000.
By Order of the Board of Directors
/s/ Dino Lucarelli
Dino Lucarelli, Secretary
Dated: May 7, 1999
16
<PAGE>
