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 1 of 18
<PAGE>
PCR LOGO
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Pomeroy Computer Resources, Inc. on Thursday, June 8, 2000 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 Dino Lucarelli, Vice President of Finance, 1020
Petersburg Road, Hebron, KY 41048, (859) 586-0600.
Very truly yours,
David B. Pomeroy, II
Chairman of the Board
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return Your Proxy
Page 2 of 18
<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 Thursday, June 8,
2000 at 10:00 A.M., E.D.T. for the following purposes:
1. To elect six directors, and;
2. To approve an increase in the number of authorized shares of
common stock, $0.01 par value, from 15,000,000 to 20,000,000, and;
3. 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 2,350,000 shares to 3,500,000
shares, 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 28, 2000 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
28 April, 2000
- ----------------
Date
Page 3 of 18
<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 Thursday, June 8, 2000 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, 2000. 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 28, 2000 will be
entitled to the notice of and to vote at the meeting. On that date, there were
12,094,226 common shares outstanding and entitled to vote, and each such share
is entitled to one (1) vote on each matter to be considered. Stockholders do not
have cumulative voting rights in the election of directors. Tabulation of
proxies and votes cast at the meeting will be counted and certified to by an
independent agent.
A majority of the votes entitled to be cast on matters to be considered at the
meeting will constitute a quorum. If a share is represented for any purpose at
the meeting, it is deemed to be present for quorum purposes and for all other
matters. Abstentions and shares held of record by a broker or its nominee
("Broker Shares") that are voted on any matter are included in determining the
number of votes present or represented at the meeting. Broker non-votes will not
be deemed to have been cast either "for" or "against" a matter, although they
will be counted in determining if a quorum is present. Proxies marked "abstain"
or a vote to abstain by a stockholder present in person at the Annual Meeting
will have the same legal effect as a vote "against" a matter because it
represents a share present or represented at the meeting and entitled to vote.
The specific vote requirements for the proposals being submitted to stockholder
vote at the Annual Meeting are set forth under the description of each proposal
in this Proxy Statement.
The expense of this solicitation will be borne by the Company. 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.
Page 4 of 18
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of April 12, 2000, 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 2,420,425 (2) 19.52%
Stephen E. Pomeroy 122,201 (3) 1.00%
James C. Eck 27,611 (4) *
Victor Eilau 51,787 (5) *
Timothy E. Tonges 55,907 (6) *
James H. Smith, III 15,488 (7) *
David W. Rosenthal 4,053 (8) *
Michael E. Rohrkemper 13,022 (9) *
William H. Lomicka 3,334 (10) *
Vincent D. Rinaldi 3,334 (10) *
Directors and all Executive
Officers as a Group 2,717,162 (11) 21.44%
- ----------------------------
* Less than one percent (1%)
</TABLE>
(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 and includes 36,417
shares held in Pomeroy Computer Resources, Inc. 401 (k) plan.
Also includes 280,875 shares of Common Stock issuable upon
exercise of stock options.
(3) Includes 116,625 shares of Common Stock issuable upon exercise of
stock options.
(4) Includes 24,000 shares of Common Stock issuable upon exercise of
stock options.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of
stock options.
(6) Includes 54,750 shares of Common Stock issuable upon exercise of
stock options.
(7) Includes 11,877 shares of Common Stock issuable upon exercise of
stock options.
(8) Includes 301 shares of Common Stock owned by his spouse as to which
Dr. Rosenthal disclaims beneficial ownership and includes 3,752
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 8,959 shares of Common Stock issuable upon exercise
of stock options.
(10) Includes 3,334 shares of Common Stock issuable upon exercise of
stock options.
(11) Includes 557,506 shares of Common Stock issuable upon exercise of
stock options, 22,937 shares of Common stock owned by Mr. David B.
Pomeroy's spouse and Dr. David W. Rosenthal's spouse, and 247
shares of stock owned by Rohrkemper & Ossege Ltd.
Page 5 of 18
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Six 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 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 six 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 six nominees for
director named below. The following contains information relating to each
nominee for election to the Board of Directors:
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE YEAR FIRST ELECTED
YEARS; AND DIRECTORSHIPS IN PUBLIC CORPORATIONS A DIRECTOR
- ----------------------------------------------- ------------------
<S> <C>
David B. Pomeroy II, 50, is Chairman of the Board, President and Chief 1992
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, 49, has been a Director of the Company since April 1992
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.
Michael E. Rohrkemper, 53, has been a Director of the Company since 1993
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, 31, has been a Director of the Company since 1998
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, 63, was elected to the Board of Directors effective 1999
January 7, 1999. Mr. Lomicka is chairman of Coulter Ridge Capital, Inc.
a private investment firm, a position he has held since 1999. Between
1989 and 1999, he was president of Mayfair Capital, Inc., a private
investment firm. Mr. Lomicka is a Director of Vencor, Inc.
Page 6 of 18
</PAGE>
Vincent D. Rinaldi, 51, has been a Director of the Company since June 1999
6, 1999. 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 1999. 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 1999,
composed of two non-employee directors, Messrs. Smith and Rohrkemper, and Mr.
David B. 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 does not have a standing nominating committee.
The Company has a standing compensation committee which held one meeting during
1999, composed of two non-employee directors, Messrs. Smith, Rohrkemper, and Mr.
David B. Pomeroy. This committee reviews the compensation paid by the Company
and makes recommendations on these matters to the Board of Directors.
In 1999, the Company had a standing stock option committee consisting of Messrs.
Rosenthal, Rohrkemper and Smith. This committee administers the 1992 Non-
Qualified and Incentive Stock Option Plan. During fiscal 1999, this committee
held no formal meeting.
DIRECTOR'S FEES
Each director who is not an employee of the Company, except for Mr. Smith,
receives a quarterly retainer of Two Thousand Dollars ($2,000) plus Five Hundred
Dollars ($500) for each Board of Directors meeting attended (including as part
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.
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. The Committee is
Page 7 of 18
<PAGE>
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, the
experience of the executive and the competitive marketplace for executive
talent. The Company has entered into Employment Agreements that establish
salaries for certain executive officers. Salaries for executives and other
employees are reviewed periodically and may be set at higher levels if the
Company concludes that is appropriate in light of that particular individual's
responsibilities, experience and performance.
ANNUAL CASH BONUSES
The Company's executives and other employees are eligible to receive annual cash
awards or bonuses at the discretion of the Committee with the approval of the
Board of Directors. In determining whether such discretionary awards should be
made, the Committee considers corporate performance measured by financial and
operating results including income, return on assets and management of expenses
and costs.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. David B. Pomeroy served as Chairman of the Board and Chief Executive Officer
throughout fiscal 1999. Mr. Pomeroy's compensation, which includes an annual
salary, bonuses and stock options, was determined in accordance with the terms
of the Eighth Amendment to his Employment Agreement. The Eighth Amendment, which
established the performance criteria for fiscal 1999, was adopted by the
Compensation Committee in December 1998. The Ninth Amendment to Mr. David B.
Pomeroy's Employment agreement, which will establish the performance criteria
for fiscal 2000, was adopted by the Compensation Committee in January 2000. The
terms of Mr. David B. Pomeroy's Employment Agreement and any amendments thereto
are based on the factors described above including a review of the compensation
paid to executives of comparable companies.
Submitted by the Compensation Committee
James H. Smith, III, Michael E. Rohrkemper and David B. Pomeroy, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1999, the Compensation Committee consisted of David B. Pomeroy, II,
James H. Smith, III, and Michael E. Rohrkemper. Mr. David B. Pomeroy is the
Chief Executive Officer of the Company.
Page 8 of 18
<PAGE>
The Company's principal executive offices and distribution facility comprised of
approximately 36,000 and 161,417 square feet of space, respectively are located
in Hebron, Kentucky. These facilities are leased from Pomeroy Investments, LLC
("Pomeroy Investments"), a Kentucky limited liability company controlled by
David B. Pomeroy, II, Chief Executive Officer of the Company, under a ten year
triple-net lease agreement which expires in May 2006. The lease agreement
provides for 2 five year renewal options. During fiscal 1999, Pomeroy
Investments entered into a contract to begin construction of an additional
22,000 square feet of executive office space for the Company's use. The
Company's Board of Directors has approved the transaction and the Company
entered into an amended lease agreement with Pomeroy Investments on March 24,
2000, which provides that the lease term for the existing executive offices and
distribution facility, which currently has approximately six years remaining,
shall be extended and the new lease term for the existing executive offices, the
distribution facility and the additional executive offices shall be for a
ten-year period beginning upon the completion of the construction. It is
anticipated that the construction will be complete and the amended lease will be
effective in the summer of 2000. The terms of the amended lease were determined
on the basis of the rental rates of comparable rental properties provided by an
independent real estate company.
The Company also has noncancelable operating leases for its regional offices,
expiring at various dates between 2000 and 2008. The Company believes there will
be no difficulty in negotiating the renewal of its real property leases as they
expire or in finding other satisfactory space. In the opinion of management, the
properties are in good condition and repair and are adequate for the particular
operations for which they are used. The Company does not own any real property.
The Company from time to time has made advances to Pomeroy Investments to
satisfy Pomeroy Investments' working capital needs.
The Company pays Mr. Pomeroy approximately $7,900 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 1999.
Mr. Rinaldi, a 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 1999 the Company sold equipment and related
support services to ILC, for lease to ILC's customers, in the amount of $2.5
million. The Company also obtained rights to lease residuals from ILC in the
amount of $117 thousand in fiscal 1999. In the first quarter of fiscal 2000,
Technology Integration Financial Services, Inc. ("TIFS"), a wholly-owned
subsidiary of the Company, sold certain leases to ILC for $5.0 million.
Page 9 of 18
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table is a summary for the fiscal years 1999, 1998 and 1997 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,
1999 (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 1999 $ 475,000 $500,000 - 125,000
CEO 1998 $ 475,000 - (3) - 25,000
1997 $ 395,000 $720,000 - 25,000
Stephen E. Pomeroy 1999 $ 208,332 $ 255,000 $ 38,966 (4) -
CFO 1998 $ 125,000 $ 52,000 $ 38,504 (4) 45,000
1997 $ 115,000 $ 41,324 $ 18,500 (4) 30,000
Timothy E. Tonges 1999 $ 140,096 $ 74,500 $ 64,996 (5) 25,000
Executive Vice President 1998 $ 120,000 $ 43,400 $ 88,932 (5) 6,000
of Sales & Operations 1997 $ 120,000 $ 78,600 $ 5,932 (5) 3,750
James C. Eck 1999 $ 192,500 $ 9,000 $ 52,835 (6) -
Vice President of 1998 $ 192,500 $ 16,000 $ 35,668 (6) 5,000
Sales 1997 $ 175,000 $ 34,400 $ 31,067 (6) 10,000
Victor Eilau 1999 $ 350,000 $ 75,000 - 25,000
President, Technology 1998 $ 294,665 $ 46,934 - 10,000
Integration Financial 1997 $ 124,800 $ 50,000 - 15,000
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. Represents
options granted during fiscal years 1999, 1998 and 1997.
(3) Excludes $300,000 of incentive cash bonus that was forgone.
(4) Represents amounts accrued pursuant to deferred compensation agreements.
(5) Includes commissions of $50,000, and $73,000 in 1999 and 1998,
respectively. Includes amounts accrued pursuant to deferred compensation
agreements of $14,996, $15,932 and $5,932 in 1999, 1998 and 1997, respectively.
(6) Includes commissions of $19,500, $19,000 and $14,400 in 1999, 1998 and
1997, respectively. Includes amounts accrued pursuant to deferred compensation
agreements of $33,335, $16,668 and $16,667 in 1999, 1998 and 1997, respectively.
</TABLE>
Page 10 of 18
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of options to purchase Common Stock
to any of the Named Executive Officers during fiscal year 1999.
Individual Grants Potential
- ------------------------------------------------------------------------------------ Realizable Value
at Assumed Annual
Rates of Stock Price
No. of Shares of Percent of Total Appreciation
Common Stock Options Granted to Exercise or for Option Term
Underlying Options Employees Base Price Expiration --------------------
Name Granted in Fiscal Year ($/Sh) Date 5% 10%
- -------------------- ------------------ ------------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David B. Pomeroy, II 25,000 3.18% $ 21.78 01/06/04 $ 150,435 $ 332,422
50,000 6.35% $ 21.78 02/17/04 $ 300,871 $ 664,845
50,000 6.35% $ 10.69 12/15/04 $ 147,672 $ 326,317
Stephen E. Pomeroy - - $ - - $ - $ -
Timothy E. Tonges 25,000 3.18% $ 12.25 04/16/01 $ 31,390 $ 64,313
James C. Eck - - $ - - $ - $ -
Victor Eilau 25,000 3.18% $ 12.25 04/16/01 $ 31,390 $ 64,313
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE STOCK OPTION EXERCISES IN YEAR ENDED JANUARY 5, 2000
AND YEAR-END STOCK OPTION VALUES
The following table sets forth information concerning aggregated option exercises in fiscal year 1999 and
the number and value of unexercised options held by each of the Named Executive Officers at January 5, 2000.
No. of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
January 5, 2000 January 5, 2000
(#) ($)
Shares ----------------------- -----------------------
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------- --------------- ------------ ----------------------- -----------------------
<S> <C> <C> <C> <C>
David B. Pomeroy, II 20,000 $ 213,814 240,875 / 0 $ 495,100 / $ 0
Stephen E. Pomeroy - $ - 116,625 / 0 $ 316,530 / $ 0
Timothy E. Tonges - $ - 34,750 / 0 $ 12,500 / $ 0
James C. Eck - $ - 5,000 / 0 $ 0 / $ 0
Victor Eilau - $ - 50,000 / 0 $ 12,500 / $ 0
</TABLE>
Submitted by Board of Directors
Page 11 of 18
<PAGE>
EMPLOYMENT AGREEMENTS
David B. Pomeroy, II, the Chairman of the Board and Chief Executive Officer of
the Company, has an employment agreement with the Company for a term of three
years, which is extended on a daily basis resulting in a perpetual three year
term.
Effective January 6, 1999, Mr. David B. Pomeroy entered into an Eighth Amendment
to the Employment Agreement with the Company (the "Eighth Amendment"). Mr. David
B. Pomeroy's compensation under the Eighth Amendment consisted of a base salary
of $475,000 for fiscal 1999 and each subsequent fiscal year unless modified by
the Compensation Committee. Under the Eighth Amendment, Mr. David B. Pomeroy was
entitled to a cash bonus of up to a maximum of $500,000 and up to a maximum of
75,000 non-qualified stock options in fiscal 1999 based upon the Company's
operating income. Mr. David B. Pomeroy may also be paid a discretionary bonus
under any compensation, benefit or management incentive plan. Fifty percent of
any discretionary bonus would be paid in cash and fifty percent would be treated
as incentive deferred compensation.
Under the amended Employment Agreement, the Company has agreed to pay all
premiums for a term life insurance policy with a death benefit equal to
$3,000,000 insuring the life of Mr. David B. Pomeroy. The owner and beneficiary
of this term life insurance policy is a trust established by Mr. David B.
Pomeroy. The Company and the trust entered into a split dollar arrangement
whereunder the Company will pay all premiums on a whole life insurance policy
with a death benefit equal to $2,000,000 insuring the life of Mr. David B.
Pomeroy, less the reportable economic benefit to the trust.
In addition, the Company pays Mr. David B. Pomeroy (or to a legal entity
controlled by him) $7,916.67 per month during the term of the Agreement, for the
business use of real estate owned by Mr. David B. Pomeroy in Arizona. In the
event of a change of control (as defined in the Agreement), the Company is
required to provide Mr. David B. Pomeroy with 100 hours of flight time on a
private air carrier for business use per year for the term of the agreement.
Currently the cost of one hour of flight time ranges from $1,400 to $2,300
depending on various factors.
Effective January 6, 2000, Mr. David B. Pomeroy entered into a Ninth Amendment
to the Employment Agreement with the Company (the "Ninth Amendment"). Under the
Ninth Amendment, Mr. David B. Pomeroy was awarded, with an effective date of
December 15, 1999, an option to acquire 50,000 shares of the common stock of the
Company at the per share price equal to the fair market value of a share of
Common Stock on December 15, 1999.
Mr. David B. Pomeroy also has a supplemental executive compensation agreement
which provides supplemental income up to $50,000 per year, subject to a seven
year vesting schedule, for a period of ten years commencing on the earliest to
occur of the following events: (i) death, (ii) disability, (iii) retirement, or
(iv) the expiration of the seven year period beginning on January 6, 1995, the
effective date of the agreement. The supplemental compensation vests over the
initial seven year period according to the schedule set forth in the
supplemental executive compensation agreement. Mr. David B. Pomeroy shall be
entitled to 100% vesting in the event of his death or disability prior to the
end of the seven year period. In the event of his retirement prior to the end
of the seven year vesting period, Mr. David B. Pomeroy shall be entitled to the
amount vested on the date of such retirement pursuant to the agreement. All
payments shall be paid out according to the ten year payment plan.
Mr. Stephen E. 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. Effective September 1, 1999, Mr. Stephen Pomeroy's entered into the
First amendment into his employment agreement which provided Mr. Pomeroy with an
annual base salary of $275,000. Such base salary shall be in effect during the
term of the employment agreement unless modified by the Compensation Committee.
Pursuant to the employment agreement, Mr. Stephen Pomeroy is eligible to earn up
to $100,000 in quarterly bonuses and a $100,000 annual bonus upon Pomeroy Select
meeting certain predetermined goals. Any such annual bonus deemed earned by Mr.
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Stephen Pomeroy pursuant to the terms and conditions of the employment agreement
shall be paid as incentive deferred compensation, which is subject to a five
year vesting schedule. Section 5(e) of the employment agreement provides
Pomeroy Select with the discretion to provide Mr. Stephen Pomeroy with
compensation or benefits in addition to those referenced herein above. Under
the First Amendment to his Employment Agreement, Pomeroy Select agreed to
provide Mr. Stephen Pomeroy with an additional cash bonus of $200,000 for his
performance in identifying various acquisition candidates and implementing the
acquisition of various entities or their assets on behalf of Pomeroy Select and
the Company during fiscal year 1999.
Mr. Eck and Mr. Tonges are not currently parties to employment agreements with
the Company.
Mr. Eilau, President of 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 annual salary of $350,000 in deferred
compensation based on Company revenues and pre-tax income and cash bonuses based
on TIFS pre-tax income.
Page 13 of 18
<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.
POMEROY S&P500 NASDAQ INDUSTRIAL
------- ------ ------ ----------
DEC-94 100 100 100
DEC-95 138.8 134.11 128
DEC-96 607.6 161.28 147.2
DEC-97 465.6 211.29 208.3
DEC-98 574.5 267.64 290.9
DEC-99 332 319.9 539.8
ITEM 2. PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board believes that the increase in the number of authorized shares of
Common Stock is in the best interest of the Company and its stockholders. The
purpose of the Amendment is to ensure the availability of shares of Common Stock
without the delay and expense of obtaining further stockholder approval, subject
to certain situations where stockholder approval may be required under Delaware
law or the rules of any exchange on which the Company's securities are traded.
The availability of additional authorized but unissued shares will provide the
Company with the flexibility to issue Common Stock for corporate purposes as the
Board may determine in its discretion including, without limitation,
acquisitions, stock distributions, stock dividends or splits, anti-takeover
provisions, and the raising of additional capital. The Board has no present
plans to issue any of the proposed additional authorized shares except as
provided under the Company's employee benefit plans including increasing the
number of shares of Common Stock reserved under the 1992 Outside Directors'
Stock Option plan as described in the next proposal below (Item #3).
While the Company has no specific plans to issue shares in connection with an
acquisition, the Company continually seeks to identify and evaluate potential
acquisition candidates. Typically, the consideration paid by the Company for an
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acquired company includes a combination of cash, Common Stock, notes payable and
"earn-out" compensation. Thus, the Company anticipates that to the extent that
it completes acquisitions in the future, shares of Common Stock may be issued in
connection with such acquisitions.
Under the Company's Certificate of Incorporation, the Company's stockholders do
not have preemptive rights with respect to Common Stock. Thus, should the Board
of Directors elect to issue additional shares of Common Stock, existing
stockholders would not have any preferential rights to purchase shares. In
addition, depending on the nature and terms of future transactions in which any
additional shares are issued, the issuance could have a dilutive effect on the
earnings per share, voting power, and/or share holdings of current stockholders.
The Board of Directors recommends that the stockholders vote for approval of the
proposed amendment of the Company's Certificate of Incorporation as described
above.
Approval of such amendment will require the affirmative vote of a majority of
the outstanding Common Stock. Holders of shares of Common Stock have no rights
of appraisal or similar rights of dissenting stockholders with respect to the
proposed increase in the number of authorized shares of common stock. The
persons named in the enclosed form of Proxy have advised that it is their
intention to vote each Proxy for such proposal unless a contrary decision is
indicated on the Proxy.
ITEM 3 - 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.
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.
Non-qualified stock options may also be awarded by the Stock Option Committee to
outside consultants employed by the Company. In fiscal 1999, 357 employees
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 2,350,000 shares to 3,500,000 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. In 1999, the Board of Directors and stockholders of the Company
increased the Common Stock reserved for issuance under the Option Plan to a
Page 15 of 18
<PAGE>
total of 2,350,000 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 1,843 in 1999
reflecting the Company's growth in revenues and, in particular, the growth in
the provision of services. The Board recommends that 1,000,000 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 28, 2000, options to purchase 1,355,957 shares of Common Stock were
outstanding. The market value of the Common Stock underlying the outstanding
options at April 28, 2000 was $22,373,291.
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 1999 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 on page 12. 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 1999 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.
OPTIONS GRANTED IN FISCAL 1999
-----------------------------------------------------------------------------
| NAME AND POSITION | NO. OF SHARES SUBJECT TO OPTIONS |
|----------------------------------------|------------------------------------|
| Non-Executive Officer Employee Group | 611,852 |
-----------------------------------------------------------------------------
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:
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"There will be reserved for use, upon exercise of Awards to be granted from time
to time under the Plan, an aggregate of 3,500,000 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 reaquired 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 an 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."
Mr. Rinaldi, a 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
Mr. David B. Pomeroy, Chief Executive Officer for the Company, failed to file
one Form 4 with respect to 50,000 options that were granted on December 15, 1999
with an exercise price of $10.69 per share in December 1999. The transaction
was subsequently reported on a Form 5 filed with respect to 1999.
Mr. Timothy E. Tonges, Executive Vice President of Sales and Operations for the
Company, failed to file one Form 4 with respect to 50 shares of common stock
purchased through the Company's Employee Stock Purchase Plan with a purchase
price of $11.79 per share in July 1999. The transaction was subsequently
reported on a Form 5 with respect to 1999. Mr. Timothy Tonges filed an
amended Form 3 with respect to correctly reporting 3,750 options granted on
January 6, 1997 with an exercise price of $22.79 per share and reporting 25,000
options that were granted on April 16, 1999 with an exercise price of $12.25.
Mr. Victor Eilau, President of TIFS, filed a late Form 4 with respect to 1,000
shares of common stock purchased through the Company's Employee Stock Purchase
Plan with a purchase price of $11.79 per share on July 1, 1999.
Dr. David W. Rosenthal, director, filed late Form 4s with respect to 2,000
options granted to his spouse on March 31, 1999 with an exercise price of $12.47
per share, 20,000 options granted to his spouse on May 11, 1999 with an exercise
price of $11.75 per share, 75 shares of common stock purchased through the
Company's Employee Stock Purchase Plan with a purchase price of $11.79 per share
on July 1, 1999, and 1,000 shares sold with a purchase price of $13.75 per share
on August 25, 1999.
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 2000. 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.
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PROPOSALS FOR 2001 MEETING
In order to be eligible for inclusion in the Company's proxy statement for the
2001 annual meeting of stockholders, stockholder proposals must be received by
the Company at its principal office, 1020 Petersburg Road, Kentucky 41048, by
January 7, 2001.
By Order of the Board of Directors
/S/ Dino Lucarelli
- -----------------------------------
Dino Lucarelli, Secretary
May 5, 2000
- -------------------------
Date
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