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Pomeroy It Solutions Inc – ‘PREC14A’ on 5/18/07 re: Pomeroy It Solutions Inc

On: Friday, 5/18/07, at 6:08pm ET · Accession #: 1133796-7-154 · File #: 0-20022

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/18/07  Pomeroy It Solutions Inc          PREC14A                1:126K Pomeroy It Solutions Inc          kcomm Fin’l Doc… Svcs/FA

Preliminary Proxy Solicitation Material — Contested Solicitation — Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREC14A     Preliminary Proxy Solicitation Material --            42    199K 
                          Contested Solicitation

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Audit Committee Audit Fees Certain Relationships and Related Transactions Code of Ethics Communications from Stockholders Compensation Committee Compensation Committee Interlocks and Insider Participation Compensation Committee Report Compensation Discussion & Analysis Corporate Governance Director Compensation Director Independence Directors and Nominees Directors Standing for Election Executive Compensation Executive Compensation Tables Fees Paid to Independent Accountants Former Independent Registered Public Accounting Firm Meetings of the Board of Directors Nominating and Corporate Governance Committee Officers Proposals for 2008 Annual Meeting Proposed Proxy Contest Ratification of Appointment of BDO Seidman, LLP Report of the Audit Committee Section 16(a) Beneficial Ownership Reporting Compliance Securities Authorized for Issuance Under Equity Compensation Plans Stock Option Committee Stock Ownership
1	1st Page - Filing Submission
7	Proposed Proxy Contest
8	Directors Standing for Election
11	Stock Ownership
13	Corporate Governance
"	Meetings of the Board of Directors
"	Director Independence
"	Communications from Stockholders
"	Code of Ethics
14	Audit Committee
"	Nominating and Corporate Governance Committee
15	Compensation Committee
"	Stock Option Committee
"	Certain Relationships and Related Transactions
17	Report of the Audit Committee
"	Fees Paid to Independent Accountants
18	Audit Fees
"	Executive Compensation
"	Compensation Discussion & Analysis
27	Compensation Committee Report
"	Executive Compensation Tables
32	Director Compensation
34	Securities Authorized for Issuance Under Equity Compensation Plans
"	Compensation Committee Interlocks and Insider Participation
"	Section 16(a) Beneficial Ownership Reporting Compliance
35	Ratification of Appointment of BDO Seidman, LLP
"	Former Independent Registered Public Accounting Firm
"	Proposals for 2008 Annual Meeting
37	Directors and Nominees
"	Officers

PREC14A 1st Page of 42 TOC ↑Top Previous Next ↓Bottom Just 1st
================================================================================

United States
Securities and Exchange Commission
Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

POMEROY IT SOLUTIONS, 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:

================================================================================

PREC14A 2nd Page of 42 TOC 1st Previous Next ↓Bottom Just 2nd
[LOGO OF POMEROY]

Dear Stockholder,

You are cordially invited to attend the Annual Meeting of Stockholders
of Pomeroy IT Solutions, Inc. on _________, ____ __, 2007 at _____ a.m.
at ___________________________.

The Board of Directors recommends that you complete and return the
accompanying WHITE Proxy Card in the enclosed postage-paid envelope to
be sure that your shares will be represented and voted in accordance
with the recommendations of your Board of Directors at the Annual
Meeting.

You should also be aware that Flagg Street Capital, LLC ("Flagg
Street"), a hedge fund that has invested in the Company, has announced
that it intends to nominate three directors to our Board of Directors
to replace three of the Board's nominees. You may receive solicitation
materials from Flagg Street or its affiliates. The Board of Directors
recommends that you not sign or return any gold or other proxy card
sent you by Flagg Street or any of its affiliates and dispose of any
such card that you do receive. By returning the Company's enclosed
WHITE Proxy Card, any proxy card previously returned to Flagg Street or
its affiliates bearing an earlier date will be revoked.

Your vote is important regardless of the number of shares you own. We
urge you to sign, date and return the enclosed WHITE Proxy Card in the
enclosed postage-paid envelope and not to return any card furnished by
Flagg Street.

We hope that you will be able to attend the Meeting. If you plan to
attend the Meeting and will need special assistance because of a
disability, please contact Samantha Shirley, 1020 Petersburg Road,
Hebron, KY 41048, (859) 586-0600, Ext. 1402.

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 WHITE Proxy Card

Pomeroy IT Solutions, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048

PREC14A 3rd Page of 42 TOC 1st Previous Next ↓Bottom Just 3rd
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The 2007 annual meeting of shareholders of Pomeroy IT Solutions, Inc. will be
held at ____________________________ on ________ ____ __, 2007, at ______ A.M.,
E.D.T., for the following purposes:

1. To elect nine directors; and

2. To ratify the appointment of BDO Seidman, LLP as our
independent registered public accounting firm for fiscal year
2007.

Stockholders of record at the close of business on June 6, 2007 will be entitled
to notice of and to vote at the meeting.

Please note that Flagg Street has indicated its intention to solicit proxies for
use at the Annual Meeting to vote for its three hand-picked nominees for
directors to replace three current directors, nominated by your Board. You may
receive proxy solicitation materials from Flagg Street. THE BOARD OF DIRECTORS
STRONGLY URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY FLAGG
STREET. Even if you have previously signed a proxy card sent to you by Flagg
Street, you have every legal right to change your vote by signing, dating and
mailing the enclosed WHITE Proxy Card in the enclosed postage-paid envelope.

Stockholders are cordially invited to attend the meeting. Please complete,
execute and return the enclosed WHITE 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/ Kevin G. Gregory
------------------------------------
Kevin G. Gregory, Secretary

_____ ___, 2007

IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND DATE THE ENCLOSED WHITE PROXY CARD AND RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.

If you have any questions, or need assistance voting, please contact
D.F. King & Co., Inc., the proxy solicitation firm assisting the Company:

D.F. King & Co., Inc.
Toll free at 800-735-3591
Banks and brokers may call collect at 212-269-5550

PREC14A 4th Page of 42 TOC 1st Previous Next ↓Bottom Just 4th
PROXY STATEMENT

PROXY SOLICITATION AND EXPENSES

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Pomeroy IT Solutions, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders,
which will be held on _________ _____ ___, 2007 at _______ A.M., E.D.T., at
________________________________ 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 WHITE proxy card are first
being sent to stockholders on or about _____ ___, 2007. The Company's principal
executive offices are located at 1020 Petersburg Road, Hebron, KY 41048.

Shares represented by proxies received by the Company at or prior to
the meeting will be voted according to the instructions indicated on the proxy.
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 that 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 June 6, 2007,
will be entitled to the notice of and to vote at the meeting. On that date,
there were [______________________] shares of Common Stock 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.

The Company will bear the costs of the solicitation of proxies on
behalf of the Board of Directors, which may include the cost of preparing,
printing and mailing the proxy materials. In addition, the Company will request
banks, brokers and other custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of common stock and obtain their voting
instructions relating thereto from beneficial owners of Common Stock. Proxies
may be solicited, without additional compensation, by directors, officers and
employees of the Company by mail, telephone, telegram, facsimile, electronic
mail, in person and postings on the Company's Internet site or otherwise. In
addition, the Company has retained D.F. King & Co., Inc. to assist in soliciting
proxies, for which services the Company will pay a fee not to exceed $85,000 in
the aggregate plus out-of- pocket expenses. D.F. King & Co., Inc., will employ
approximately [ ] persons in connection with its solicitation of proxies.

Expenses related to the solicitation of stockholders in excess of those
normally incurred for an Annual Meeting are expected to aggregate approximately
$[ __], of which approximately $[ __ ] has been spent to date.

Appendix A sets forth certain information relating to the Company's
directors and other persons who may be deemed to be participants in the
solicitation of proxies on the Company's behalf.

If you have any questions, or need assistance voting, please contact
D.F. King & Co., Inc., who is assisting us.

D.F. King & Co., Inc.
Toll free at 800-735-3591
Banks and brokers may call collect at
212-269-5550

PREC14A 5th Page of 42 TOC 1st Previous Next ↓Bottom Just 5th
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.

PREC14A 6th Page of 42 TOC 1st Previous Next ↓Bottom Just 6th
TABLE OF CONTENTS

PAGE
----
Proposed Proxy Contest ......................................................

Proposal No. 1 - Election of Directors

Directors Standing for Election.........................................
Stock Ownership.........................................................
Corporate Governance....................................................
Meetings of the Board of Directors..................................
Directors Commitment and Attendance.................................
Director Independence...............................................
Communications from Stockholders....................................
Code of Ethics......................................................
Committees of the Board.............................................
Audit Committee................................................
Nominating and Corporate Governance Committee..................
Compensation Committee.........................................
Stock Option Committee.........................................
Certain Relationships and Related Transactions......................

Report of the Audit Committee...........................................
Fees Paid to Independent Accountants....................................
Executive Compensation..................................................
Compensation Discussion & Analysis..................................
Compensation Committee Report.......................................
Executive Compensation Tables.......................................
Director Compensation...................................................
Securities Authorized for Issuance Under Equity Compensation Plans......
Compensation Committee Interlocks and Insider Participation.............
Section 16(a) Beneficial Ownership Reporting Compliance.................

Proposal No. 2 - Ratification of Appointment of Independent Registered
Public Accounting Firm

Ratification of Appointment of BDO Seidman, LLP.........................
Former Independent Registered Public Accounting Firm....................

Proposals for 2008 Annual Meeting............................................

PREC14A 7th Page of 42 TOC 1st Previous Next ↓Bottom Just 7th
PROPOSED PROXY CONTEST

Flagg Street Partners Qualified LP and certain of its affiliates, which
we collectively refer to in this proxy statement as "Flagg Street," has notified
the Company of its intention to nominate for election three individuals to the
Board to replace three of our nominees. Flagg Street is a hedge fund that first
invested in our stock in March 2006, according to public filings.

YOUR BOARD URGES YOU NOT TO RETURN FLAGG STREET'S GOLD PROXY CARD OR
OTHERWISE VOTE FOR FLAGG STREET'S NOMINEES.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ITS
NOMINEES DESCRIBED IN THIS PROXY STATEMENT BY EXECUTING AND RETURNING THE WHITE
PROXY CARD OR VOTING BY ONE OF THE OTHER WAYS INDICATED THEREON.

REASONS FOR THE BOARD'S OPPOSITION TO THE FLAGG STREET NOMINEES

The Board has determined that the election of Flagg Street's three nominees
would not be in the best interests of the Company and all of its stockholders.
In making this determination, your Board of Directors considered, among other
factors, the following:

o The Board believes that our recent results of operations, including the
Company's results for its first fiscal quarter of 2007, and prospects
demonstrate that current management is successfully implementing our
strategy. The Board believes that a change in the composition of the
Board or management at this time would be disruptive of the Company's
efforts to maximize stockholder value.

o Your current directors understand the Company's business and have
worked to develop the Company's strategic direction, and the Board does
not believe it would be in the best interests of the stockholders to
replace three knowledgeable, experienced members of the Board of
Directors (representing one-third of the total number of directors)
with Flagg Street's three nominees. The Board has concerns about the
Flagg Street nominees' lack of experience in, and knowledge of, the
Company's business.

o Flagg Street has been invested in the Company for only a short period
of time. Flagg Street's criticisms of the Company and management relate
primarily to matters that occurred before it first became a stockholder
in March 2006. These matters have been previously disclosed on numerous
occasions and have been remedied. For example, the Company has returned
to profitability, strengthened its management team through the addition
of new executive officers with significant industry experience,
remediated its 2005 material weaknesses and reported no material
weaknesses in 2006, appointed a lead independent director and is
undertaking a full corporate governance review.

o Flagg Street has not provided any specific alternative strategy that it
plans to pursue.

o Independent members of the Board engaged in numerous discussions with
Flagg Street regarding its demands. We requested that Flagg Street sign
a standard confidentiality agreement, in compliance with SEC
regulations, so that we could engage in a meaningful, productive
dialogue that would involve confidential information. This information
could have provided Flagg Street with a better understanding of the
facts and circumstances behind some of the Company's past issues and
Flagg Street's other expressed concerns. Flagg Street refused to sign a
confidentiality agreement.

o Flagg Street's launch of a proxy contest in light of the Company's
improving performance could be disruptive to the Company, its employees
and customers, and cause a temporary diversion of management's
attention from the Company's operations. Also, it could cause the
Company to make unplanned cash expenditures that could have been
available for investment in the Company or for other more productive

PREC14A 8th Page of 42 TOC 1st Previous Next ↓Bottom Just 8th
uses. The Board believes that it would be in the best interests of all
stockholders for Flagg Street to withdraw its proposed director
nominees and its proxy solicitation.

o In concluding that the election of any of Flagg Street's nominees would
not be in stockholders' best interests, the Board also considered (a)
the substantial costs that may be involved, (b) that election contests
typically consume a substantial amount of management time, (c) the
potential adverse publicity Flagg Street could try to generate about
the Company, our Board and management, and (d) the impact on our
customers, employees and other stakeholders. The Board determined that,
on balance, these factors were substantially outweighed by our
commitment to pursue what we believe is the best strategy for all of
our stockholders.

o As fellow stockholders, our directors' interests are aligned with
maximizing value for all stockholders, and they understand our business
and strategy. The Board is optimistic about the Company's future
prospects with its current senior management team, no long-term debt,
and return to profitability. The Board understands and appreciates that
a large number of our stockholders have been investors for many years,
and is committed to maximizing value for all stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU SIGN, DATE AND
RETURN THE WHITE PROXY CARD ONLY AND NOT RETURN ANY PROXY CARD PROVIDED TO YOU
BY FLAGG STREET.

PROPOSAL 1 - ELECTION OF DIRECTORS

DIRECTORS STANDING FOR ELECTION

The Company's Bylaws allow for the Board of Directors to fix the number
of directors, and the Company's Board of Directors currently consists of ten
members. However, because one of our current directors, Mr. James H. Smith, III,
is retiring from the Board effective as of the Annual Meeting, the Board of
directors has resolved to decrease the number of directors constituting the
board from ten to nine effective as of the Annual Meeting. Accordingly, nine
directors are to be elected at the Annual Meeting, each to serve until the next
annual meeting and until his or her successor shall have been elected and
qualified. All nominees are presently members 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 nine nominees named below. If, for any
unforeseen reason, any nominee should become unavailable, the proxies will
exercise their discretion in voting for a substitute. It is not anticipated that
any of the nominees will be unable or unwilling to serve. The Board of Directors
recommends that the stockholders vote for the nine nominees for director named
below. The following contains information relating to each nominee for election
to the Board of Directors:

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
THE NINE PERSONS NOMINATED TO SERVE AS DIRECTOR.

Year First
Name, Age, Principal Occupation for Last Five Elected
Years; and Directorships in Public Corporations As A Director
--------------------------------------------------- ----------------
David B. Pomeroy, II, 57, has served as Chairman of 1992
the Board since 1992, and was Chief Executive
Officer of the Company from 1992 through June 2004.
Mr. David B. Pomeroy, II, was a founder of the
first of the Company's predecessor businesses (the
"Pomeroy Companies") in 1981. Mr. David B. Pomeroy,
II, controlled the Pomeroy Companies until their
reorganization into Pomeroy Computer Resources in
1992.

PREC14A 9th Page of 42 TOC 1st Previous Next ↓Bottom Just 9th
He served as President of the Company from 1992
through January 2001.

Stephen E. Pomeroy, 38, has been a director of the 1998
Company since February, 1998. Mr. Stephen Pomeroy
has been President and Chief Executive Officer of
the Company since June 2004. From May 1997 to
January 2001, Mr. Stephen Pomeroy was the Chief
Financial Officer of the Company. In December 1998,
Mr. Stephen Pomeroy was named President and Chief
Executive Officer of Pomeroy Select Integration
Solutions, Inc. (a wholly owned subsidiary of the
Company). Mr. Stephen Pomeroy was the Vice
President of Marketing and Corporate Development
from September 1996 to May 1997.

Kevin G. Gregory, 44, has been a director of the 2006
Company since January, 2006. Mr. Gregory was named
Senior Vice President and Chief Financial Officer,
Secretary and Treasurer in January 2006. Prior to
joining the Company, Mr. Gregory was Senior Vice
President and Chief Financial Officer for ProQuest
Company. He joined ProQuest in 1996. Prior to that
time, he spent eight years in public accounting.
Mr. Gregory holds a bachelor's degree in Accounting
from the University of Notre Dame and is a CPA. He
holds both a law degree and a master of law in
taxation from the DePaul University College of Law.

William H. Lomicka, 70, has been a director of the 1999
Company since January 1999. Mr. Lomicka is Chairman
of Coulter Ridge Capital, a private investment
firm, a position he has held since 1999. Mr.
Lomicka is currently a director of Counsel
Corporation, a publicly traded investment company.
Between 1989 and 1999, he was President of Mayfair
Capital, Inc., a private investment firm. Mr.
Lomicka is a graduate of the College of Wooster in
Wooster, Ohio and has a Master's of Business
Administration degree from the Wharton School of
the University of Pennsylvania.

Vincent D. Rinaldi, 58, has been a director of the 1999
Company since June 1999. Mr. Rinaldi is President
and Chief Executive Officer of National City
Commercial Capital Corporation (formerly,
Information Leasing Corporation ("ILC")) and
Procurement Alternatives Corporation ("PAC"), both
wholly-owned subsidiaries of National City
Corporation. The combined companies finance and
manage equipment for a wide range of companies. Mr.
Rinaldi was the founder of ILC in 1984 prior to its
acquisition by Provident (now National City) in
1996.

Debra E. Tibey, 48, has been a director of the 2002
Company since June 2002. Ms. Tibey is currently a
consultant in the IT industry and a prinapal of
Zoey LP, an educational publishing company that
markets to the healthcare industry. Ms. Tibey has
been in the IT Industry for over 24 years and has
held various senior management positions in sales
and marketing. From 1988 through 2000, she worked
for Ingram Micro, the world's largest distributor
of technology products and services. During her 12
year tenure with Ingram Micro she served in various
leadership roles ultimately serving as Senior Vice
President of Sales. She also sits on the advisory
board for Soft Search, a private company.

Kenneth R. Waters, 56, has been a director since 2004
June 2004. He currently serves as our Lead
Independent Director. Mr. Waters is currently
President of KRW LLC, a private consulting company,
and Chief Executive Officer of E-Seek Inc., a
private ID hardware company. Mr. Waters was
previously a director of the Company from April
1997 until January 1999, and from June 2001 until
January 2003. He served as a director of Pomeroy
Select Integration Solutions, Inc., a wholly owned
subsidiary of the Company, from December 1998
through March 2001. Mr. Waters

PREC14A 10th Page of 42 TOC 1st Previous Next ↓Bottom Just 10th
has worked in the computer industry since 1978. Mr.
Waters was an executive with ComputerLand from 1978
to 1988, Chief Executive Officer of Power Up
Software from 1992 to 1993 and President of
MicroAge from 1993 to 1995. Most recently, he has
been an industry consultant, serving as such for
the Company from January 1997 through March 2001.

David G. Boucher, 63, has been a director of the 2005
Company since June 2005. Mr. Boucher is currently
Chairman and Chief Executive Officer of Dave
Boucher Enterprises, a consultant in distribution
channels marketing. Mr. Boucher is also the
Non-Executive Chairman of Verity Professionals Inc.
In addition, he sits on the boards of directors of
Market Velocity Inc., Advisors for Knowlagent and
Telephonetics Inc. He also serves on the Advisory
Board of Clearpath Networks Inc. In May 2000, Mr.
Boucher, retired after thirty years with IBM
Corporation where he held numerous executive
positions in the IBM Personal Systems Group.

Ronald E. Krieg, 64, has been a director of the 2005
Company since December 2005. Mr. Krieg is a
Certified Public Accountant and has been an audit
partner of Jackson, Rolfes, Spurgeon & Co. since
August 1, 2004. Prior to August 1, 2004, Mr. Krieg
was with Grant Thornton LLP since 1965, other than
for two years when he served in the United States
Marine Corps. He became a partner in Grant Thornton
LLP in 1978. Mr. Krieg has 40 years in the practice
of public accounting with a national firm, and has
considerable experience in the areas of
Sarbanes-Oxley and internal auditing. He is a past
president of the Cincinnati Chapter of the
Institute of Internal Auditors and has served on
its Board of Governors for over 30 years. Mr. Krieg
also serves as a member of the Board of Directors
of CECO Environmental Corp., a publicly traded
company, and serves on its Audit Committee.

PREC14A 11th Page of 42 TOC 1st Previous Next ↓Bottom Just 11th
STOCK OWNERSHIP

The following table sets forth, as of April 5, 2007, 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.

[Download Table]

Amount & Nature of
Name and Address (1) Beneficial Ownership (2) % of Class
------------------------------------- ------------------------ ----------

David B. Pomeroy, II (3) 2,208,315 17.24%
Stephen E. Pomeroy (4) 677,315 5.04%
Kevin G. Gregory (5) 72,500 *
Keith Blachowiak (6) 64,688 *
P. Hope Griffith (7) 40,938 *
John E. McKenzie (8) 91,820 *
James H. Smith, III (9) 21,911 *
William H. Lomicka (10) 26,667 *
Vincent D. Rinaldi (11) 18,300 *
Debra E. Tibey (12) 25,800 *
Kenneth R. Waters (13) 17,050 *
David G. Boucher (14) 13,300 *
Ronald E. Krieg (15) 13,300 *
Directors and all Executive 3,291,904 23.38%
Officers as a Group (16)

FMR Corp. (17) 1,290,645 10.45%
82 Devonshire Street
Boston, MA 02109

Wells Fargo and Company (18) 1,674,673 13.55%
420 Montgomery Street
San Francisco, CA 94104

Wells Capital Management Inc. (19) 1,603,673 12.98%
525 Market Street, 10th Floor
San Francisco, CA 94104

Dimensional Fund Advisors, Inc. (20) 1,069,440 8.66%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401

Byram Capital Management LLC (21) 888,865 7.19%
41 West Putnam Avenue
Greenwich, CT 06830

Certain funds and individuals related 1,249,325 10.11%
to Flagg Street Capital LLC (22)
44 Brattle Street
Cambridge, MA 02138

PREC14A 12th Page of 42 TOC 1st Previous Next ↓Bottom Just 12th
* Less than one percent (1%)

(1) The address for all directors and executive officers is the Company's
executive office at 1020 Petersburg Road, Hebron, KY.

(2) 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.

(3) Includes 22,636 shares owned by his spouse as to which Mr. David B.
Pomeroy disclaims beneficial ownership. Also includes 452,000 shares of
common stock issuable upon exercise of stock options.

(4) Includes 545,750 shares of Common Stock issuable upon exercise of stock
options. Also includes 99,000 restricted shares.

(5) Includes 50,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 22,500 restricted shares.

(6) Includes 50,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 14,688 shares of restricted stock.

(7) Includes 20,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 17,438 restricted shares

(8) Includes 69,833 shares of Common Stock issuable upon exercise of stock
options. Also includes 20,875 restricted shares

(9) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(10) Includes 26,667 shares of Common Stock issuable upon exercise of stock
options.

(11) Includes 15,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(12) Includes 22,500 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(13) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(14) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(15) Includes 10,000 shares of Common Stock issuable upon exercise of stock
options. Also includes 3,300 restricted shares.

(16) Includes 1,352,584 shares of Common Stock issuable upon exercise of
stock options. Includes 194,301 restricted shares. Includes 22,636
shares of Common Stock owned by the spouse of Mr. David B. Pomeroy as
to which he disclaims beneficial ownership.

(17) Beneficial ownership information is taken from latest Schedule 13G
filed February 14, 2007, for the reporting period ending December 31,
2006.

(18) Beneficial ownership information is taken from latest Schedule 13G
filed February 7, 2007, for the reporting period ending December 31,
2006.

(19) Beneficial ownership information is taken from latest Schedule 13G
filed February 7, 2007, for the reporting period ending December 31,
2006.

(20) Beneficial ownership information is taken from latest Schedule 13G
filed February 2, 2007, for the reporting period ending December 31,
2006.

(21) Beneficial ownership information is taken from latest Schedule 13G
filed February 12, 2007, for the reporting period ending December 31,
2006.

(22) Beneficial ownership information is taken from latest Schedule 13D
filed January 3, 2007, as amended February 9, 2007 and April 3, 2007,
filed by Jonathan Starr, Flagg Street Capital, LLC, Flagg Street
Partners LP, Flagg Street Partners

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Qualified LP, Flagg Street Offshore, LP, Michael Ruffolo and Richard
Press. Certain of such persons disclaim beneficial ownership of all
shares reported as beneficially owned in such Schedule 13D as so
amended.

CORPORATE GOVERNANCE

MEETINGS OF THE BOARD OF DIRECTORS

There were six (6) formal meetings of the Board of Directors in 2006.
Each member of the Board of Directors attended at least seventy-five percent
(75%) of (1) the aggregate of the total number of meetings of the Board, and (2)
the total number of meetings held by committees on which he or she served.

DIRECTOR COMMITMENT AND ATTENDANCE

It is the policy of the Company that all directors should make every
effort to attend in person the four regularly scheduled quarterly meetings of
the Board, the organizational meeting held in conjunction with the Company's
Annual Stockholders' Meeting, and the associated meetings of committees of which
they are members; provided, however, that members may attend such meetings by
telephone or video conference if necessary to mitigate conflicts. The 2006
Annual Meeting of stockholders was attended by four directors.

DIRECTOR INDEPENDENCE

The Board of Directors has determined that the following seven current
directors are "independent" as defined by applicable law and NASDAQ listing
standards: James H. Smith, III, William H. Lomicka, Vincent D. Rinaldi, Debra E.
Tibey, Kenneth R. Waters, David G. Boucher and Ronald E. Krieg. All of the
foregoing directors, except Mr. James H. Smith, III, who is not standing for
re-election, are independent as "independence" is defined for audit committee
members in NASDAQ Rule 4350(d).

COMMUNICATIONS FROM STOCKHOLDERS

The Board will give appropriate attention to written communications
that are submitted by stockholders, and will respond if and as appropriate. The
Secretary will review each stockholder communication. The Secretary will forward
to the entire Board (or to members of the Board committee, if the communication
relates to a subject matter clearly within that committee's area of
responsibility) each communication that (a) relates to the Company's business or
governance, (b) is not offensive and is legible in form and reasonably
understandable in content, and (c) does not merely relate to a personal
grievance against the Company or a team member or further personal interest not
shared by the other stockholders generally.

Stockholders of the Company may communicate with the Board in writing
addressed to:

Board of Directors
c/o Corporate Secretary
Pomeroy IT Solutions, Inc.
1020 Petersburg Road
Hebron, KY 41048

CODE OF ETHICS

The Company has adopted a written Code of Ethics ("Code") that applies
to our directors, officers, and employees of the Company and its subsidiaries
including the Company's Chief Executive Officer and Chief Financial Officer. The
Code is available under the corporate governance section of the Company's
website at www.pomeroy.com. The Company will post amendments to or waivers from
its Code at the same location on its website. Additionally, the Company has
incorporated ethical and conduct standards into its policies and agreements with
employees.

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COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

The Company has a standing Audit Committee established in accordance
with Section 3(a)(58)(A) of the Exchange Act which oversees the accounting and
financial reporting processes of the Company and audits of the financial
statements of the Company. The Audit Committee operates under a written charter
adopted by the Board of Directors, a copy of which is included as Exhibit B to
the Company's Proxy Statement in connection with the Company's 2006 annual
meeting of stockholders. The Company's Audit Committee is currently composed of
three independent directors (as defined by NASDAQ Rule 4350(d)), Mr. William H.
Lomicka, Mr. Ronald E. Krieg and Ms. Debra E. Tibey. The Board of Directors has
determined that Mr. Ronald E. Krieg is an "audit committee financial expert" as
defined in Item 401(h) of Regulation S-K. The Audit Committee held eleven (11)
meetings during fiscal 2006. The Audit Committee consults with the independent
auditors regarding their assessment 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. See Report of the Audit Committee beginning
on page 10.

Nominating and Corporate Governance Committee

The Company has a standing Nominating and Corporate Governance
Committee which operates under a written charter adopted by the Board of
Directors, a copy of which is included as Exhibit A to the Company's Proxy
Statement in connection with the Company's 2006 annual meeting of stockholders.
The Nominating and Corporate Governance Committee held six (6) meetings during
fiscal 2006. The Company's Nominating and Corporate Governance Committee is
currently composed of three independent directors, Kenneth R. Waters, David G.
Boucher and Debra E. Tibey. The principal functions of the Nominating and
Corporate Governance Committee are to assist the Board in identifying
individuals for service as directors of the Company and as Board committee
members, to develop and monitor a process for evaluating Board effectiveness,
and to develop, oversee and administer the establishment of the Company's
corporate governance guidelines. This committee is comprised of independent
directors as defined by applicable NASDAQ listing requirements and has adopted a
formal written charter.

Candidates for Board Membership. The Board as a whole is responsible
for selecting nominees for the Board. The Nominating and Corporate Governance
Committee is responsible for screening and recommending candidates. In
fulfilling this role, the committee may, without obligation, receive
recommendations from the Chief Executive Officer or shareholders of the Company.
The Nominating and Corporate Governance Committee will consider shareholder
recommendations for candidates for the Board. The name of any recommended
candidate for director, together with a brief biological sketch, a document
indicating the candidate's willingness to serve, if elected, and evidence of the
nominating shareholder's ownership of the Company stock should be sent to the
attention of the Corporate Secretary of the Company. Factors to be considered by
the Nominating and Corporate Governance Committee in recommending candidates for
Board membership include, but are not limited to:

o Personal qualities and characteristics, accomplishments and
reputation in the business community;

o Current knowledge and contacts in the communities in which the
Company does business and in the Company's industry or other
industries relevant to the Company's business;

o Ability and willingness to commit adequate time to Board and
committee matters;

o The fit of the individual's skills and personality with those of
other directors and potential directors in building a Board that
is effective, collegial and responsive to the needs of the
Company; and

o Diversity of viewpoints, backgrounds and experience.

In recommending directors for re-election to the Board at the
expiration of their terms, the Nominating and Corporate Governance Committee
shall consider a director's overall effectiveness, including whether changes in
employment status, health, community activity or other factors may impair a
director's continuing contributions to

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the Board. The Board does not believe that adopting a set term limit for
directors serves the interests of the Company.

Compensation Committee

The Company has a standing Compensation Committee which held two (2)
meetings and numerous conference calls and discussions during fiscal 2006. The
committee is currently composed of two independent directors, Mr. Vincent D.
Rinaldi and Mr. William H. Lomicka. This committee reviews the compensation paid
by the Company and makes recommendations on these matters to the Board of
Directors. The Compensation Committee operates under a written charter adopted
by the Board of Directors, a copy of which is included as Appendix B to this
proxy statement.

Stock Option Committee

The Company has a standing Stock Option Committee, currently consisting
of Mr. James H. Smith III., This committee administers the 2002 Non-Qualified
and Incentive Stock Option Plan. During fiscal 2006, this committee held no
formal meeting.

Lead Independent Director

In March 2007, the Board of Directors elected Mr. Kenneth Waters to
serve as Lead Independent Director. The Lead Independent Director's duties and
responsibilities are set forth in a written charter adopted by the Board of
Directors. The primary responsibilities of the Lead Independent Director are to
coordinate the activities of the independent directors and to serve as a liaison
between Chairman of the Board, senior management, when appropriate, and the
independent directors. Specific duties and responsibilities include, among other
things: (a) consulting with the Chairman of the Board as to an appropriate
schedule of Board meetings; (b) providing the Chairman of the Board with input
as to the preparation of the agendas for Board and Committee meetings; (c)
advising the Chairman of the Board and the Chief Executive Officer as to the
quality, quantity and timeliness of the information submitted by the Company's
management that is necessary or appropriate for the independent directors to
effectively and responsibly perform their duties; (d) calling meetings of,
develop the agendas for, and serving as chairman of the executive sessions of
the independent directors; (e) consulting with the Chairman of the Board and
Chief Executive Officer as to the membership of the various Board Committees, as
well as the selection of the Committee Chairs; (f) serving as Chairman of the
Board at Board meetings in the absence of the Chairman of the Board; and (g)
assisting the Board of Directors, the Corporate Governance and Nominating
Committee and the Company's officers in ensuring compliance with the Company's
Corporate Governance Policies and recommending revisions to such policies.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has leased facilities in Hebron, Kentucky since 1994 on a
33 acre campus that provides the Company consolidated facilities, ease of
access, and the ability to expand. These facilities include the Company's
headquarters (58,000 sq. ft.), distribution facility (161,417 sq. ft.) and
national call center\depot repair facility (76,664 sq. ft.). The Company leases
this property from an entity controlled by Mr. David B. Pomeroy. These
facilities were leased by the Company pursuant to a triple net lease agreement,
which expires in the year 2015. Base rental for fiscal 2006 was $1.3 million,
and $1.2 million for each of 2005 and 2004. The annual rental for these
properties was determined on the basis of a fair market value rental opinion
provided by an independent real estate company, which was updated in 2005.
Monthly rental for these facilities are as follows: for the headquarters
offices, $0.93 per square foot per month; for the distribution facility, $0.35
per square foot per month; and for the call center, $0.21 per square foot per
month.

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On January 31, 2005, the Company and Mr. David B. Pomeroy entered into
a Consulting Agreement for Mr. David B. Pomeroy (the "Consulting Agreement").
The Consulting Agreement has a term of five (5) years commencing January 5, 2005
(the "Effective Date").

The Consulting Agreement provides that David B. Pomeroy will be paid
base compensation of $250,000 per year, and provides for the payment of certain
bonuses, including a $100,000 bonus that was paid in the first quarter of 2005.
The Consulting Agreement also calls for the payment of a lump-sum cash service
award in the amount of $750,000 in consideration of David B. Pomeroy's
long-standing service, contributions, and leadership to the Company which amount
was paid in 2005, the payment of an annual housing allowance of $25,000 for the
Company's use of certain real property in Arizona beneficially owned by David B.
Pomeroy, the continuation of medical and disability insurance coverage
throughout the term of the Consulting Agreement, and the reimbursement of
certain expenses incurred by David B. Pomeroy in the performance of his duties
under the Consulting Agreement. Except as specifically set forth in the
Consulting Agreement, David B. Pomeroy shall not be eligible to participate in
any long-term incentive plans, retirement plans, or benefit plans offered by the
Company to employees.

The Consulting Agreement contains certain non-compete, nondisclosure of
confidential information, and non-solicitation provisions applicable throughout
the term of the Consulting Agreement, and provides that the Company will
indemnify and hold harmless David B. Pomeroy from all actions, claims, losses,
etc. resulting from his good faith performance of his duties under the
Consulting Agreement.

Mr. James H. Smith, a director of the Company, is a stockholder in the
law firm of Lindhorst & Dreidame Co., L.P.A. The legal services provided to the
Company by Lindhorst & Dreidame Co. constituted less than 5% of the firm's
business in 2006.

Mr. Vincent D. Rinaldi, a director of the Company, is the President and
Chief Executive Officer of National City Commercial Capital Corporation
("NCCC"), (formerly, Information Leasing Corporation) a wholly-owned subsidiary
of National City Corporation. On April 16, 2002, the Company closed the sale of
a majority of the assets of its wholly owned subsidiary - Technology Integration
Financial Services, Inc. to Information Leasing Corporation. In connection with
this sale, the Company signed an exclusive seven-year vendor agreement whereby
NCCC has a right of first refusal to refer to NCCC equipment sales to customers
of the Company in order for NCCC to offer financing for such sales (in which
case NCCC purchases the equipment from the Company to lease to the Company's
customers), and the Company receives a referral fee on any equipment purchases
that NCCC agrees to finance, and the Company is appointed as an agent for
remarketing and reselling of the leased equipment sold. For fiscal year 2006,
the Company was paid $17.7 million for equipment and support services under its
arrangement with NCCC, and $116,000 in referral fees. Mr. Rinaldi does not
receive any direct compensation or benefit from NCCC relating to the arrangement
between NCCC and the Company. NCCC's total revenues from all of its new business
originations for fiscal 2006 were approximately $3.4 billion, of which
approximately $17.7 million related to Pomeroy lease transactions.

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.

On an annual basis, each director is required to complete a
questionnaire which requires disclosure of any transactions the director or his
or her immediate family members or associates may have with the Company in which
the director or his or her immediate family members or associates has a direct
or indirect material interest. A majority of disinterested directors is required
to approve transactions between the Company and interested directors or
executive offices. In addition, where appropriate, the Company engages an
independent third party consultant to advise it as to fair market rates in
connection with the establishment of principle terms of such a transaction.

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REPORT OF THE AUDIT COMMITTEE

The Audit Committee is currently comprised of Mr. William H. Lomicka,
Mr. Ronald E. Krieg and Ms. Debra E. Tibey, all of whom are independent as
defined by NASDAQ Rule 4350(d). The Audit Committee operates under a written
charter adopted by the Board of Directors. As described more fully in its
charter, the purpose of the Audit Committee is to assist the Board of Directors
in its general oversight of the Company's financial reporting, internal control
and audit functions. Management is responsible for the preparation, presentation
and integrity of the Company's financial statements, accounting and financial
reporting principles, internal controls and procedures designed to ensure
compliance with accounting standards, applicable laws and regulations. BDO
Seidman, LLP, the Company's independent auditor, is responsible for performing
an independent audit of the consolidated financial statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States).

The role of the Audit Committee's members is not intended to duplicate
or to certify the activities of management and the independent auditor, nor can
the Audit Committee certify that the independent auditor is "independent" under
applicable rules. The Audit Committee serves a Board-level oversight role, in
which it provides advice, counsel and direction to management and the auditors
on the basis of the information it receives, discussions with management and the
auditors and the experience of the audit committee's members in business,
financial and accounting matters.

Among other matters, the Audit Committee monitors the activities and
performance of the Company's external auditors, including the audit scope,
external audit fees, auditor independence matters and the extent to which the
independent auditor may be retained to perform non-audit services. The Audit
Committee and the Board have ultimate authority and responsibility to select,
evaluate and, when appropriate, replace the Company's independent auditor. The
audit committee also reviews the results of the external audit work with regard
to the adequacy and appropriateness of the Company's financial, accounting and
internal controls. The Audit Committee meets with the independent auditor, with
and without management present, to discuss internal control, financial
reporting, and other topics and events that may have a significant financial
impact.

The Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditor and management
represented to the audit committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. The independent auditor represented that its presentations included
the matters required to be discussed with the independent auditor by Statement
on Auditing Standards No. 61, as amended, "Communication with Audit Committees,"
and Section 204 of the Sarbanes-Oxley Act and it implementing SEC rules.

The Company's independent auditor also provided the Committee with the
written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Audit Committee
discussed with the independent auditor that firm's independence.

Following the Audit Committee's discussions with management and the
independent auditor, the Audit Committee recommended that the Board of Directors
include the audited consolidated financial statements in the Company's annual
report on Form 10-K for the fiscal year ended January 5, 2007.

Submitted by the Audit Committee
William H. Lomicka, Ronald E. Krieg and Debra E. Tibey

FEES PAID TO INDEPENDENT ACCOUNTANTS

The following table shows the fees paid or accrued by the Company for
the audit and other services provided by the Company's independent accountants
for the fiscal years 2006 and 2005:

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FISCAL 2006
FISCAL 2006 CROWE
BDO CHIZEK FISCAL 2005
------------ ------------ ------------
Audit Fees $ 518,329 $ 10,365 $ 122,707
Audit-Related Fees 5,750 19,465 322,411
Tax Fees - 28,500 177,950
All Other Fees - - -
------------ ------------ ------------
Total $ 524,079 $ 58,330 $ 633,068
============ ============ ============

Audit Fees. Audit fees consist of fees for the audit of our annual financial
statements and the reviews of interim financial statements included in our
quarterly reports on Form 10-Q and all services that are normally provided in
connection with statutory and regulatory filings or engagements.

Audit-Related Fees. Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the audit and the
review of our financial statements and which are not reported under "Audit
Fees." These services relate to, employee benefit plan audits, due diligence
related to acquisitions, accounting consultations in connection with
acquisitions, consultations related to internal control, attest services that
are not required by statute or regulation and consultations concerning financial
accounting and reporting standards.

Tax Fees. Tax fees consist of fees for tax compliance, tax advice and tax
planning services.

All Other Fees. All other fees related to professional services rendered for
services not reported in other categories above.

AUDIT COMMITTEE PRE-APPROVAL POLICY AND PROCEDURES

The Audit Committee has adopted policies and procedures relating to the
approval of all audit and non-audit services that are to be performed by our
independent auditor. This policy generally provides that we will not engage our
independent auditor to render audit or non-audit services unless the service is
specifically approved in advance by the Audit Committee with the exception of
minor incidentals. For fiscal 2006, the Audit Committee pre-approved 100% of the
audit fees, 100% of the audit-related fees, and 100% of the tax fees reported
above.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION & ANALYSIS

Overview of the Company's Business

As an international technology services and solutions provider, the
Company unites core competencies in IT Outsourcing Services and Professional
Services. Some of the Company's services include consulting, project management,
application development, integration, staffing, and technology sourcing. The
Company believes that its capabilities as an end-to-end services and technology
sourcing provider set us apart as a unique, one-stop alternative. The Company
also believes that this combination helps its Fortune 1000, government, and
mid-market clients realize their business goals and objectives by leveraging
information technology to simplify complexities, increase productivity, reduce
costs and improve profitability.

In recent years, the Company identified that the services portion of
its business provided the greatest potential for future growth and made the
strategic decision to focus on enhancing the Company's capabilities as an IT
services provider. In connection with the migration to an IT services provider,
the Company identified the need to hire key executive talent in the areas of
finance, information systems and sales. This need was magnified by problems that
occurred in connection with and after the integration of the ARC acquisition and
the systems

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conversion, the Company's delay in filing its quarterly report on Form 10-Q for
the third quarter of fiscal 2005, and the restatements of the quarterly results
for the first and second quarters of fiscal 2005. The Company determined that
the compensation and incentives for attracting the high-caliber executive talent
that was needed to lead and manage the Company's growing services business would
be somewhat different from the objectives for the Company's executive
compensation program going forward. Specifically, the Committee considered
current market pay practices of comparable IT solutions providers to be the most
important factor is establishing compensation for the new executives.

The Compensation Committee

The Compensation Committee of the Board of Directors is currently
composed of two independent directors, Mr. Vincent D. Rinaldi and Mr. William H.
Lomicka. The Compensation Committee is responsible for the establishment and
oversight of the Company's program for executive compensation. 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 Compensation
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 comparable companies. The Compensation
Committee believes that a significant equity interest in the Company held by the
Company's management aligns the interests of the stockholders and management.

Objectives Of The Company's Compensation Program

Compensation opportunities must be adequate to enable the Company to
compete effectively in the labor market for qualified executives. The objectives
of the Company's program for executive compensation include compensation that is
competitive with the market, is tied to individual performance, is tied to the
Company's performance and creates long-term incentives that are aligned with the
Company's shareholders. The Committee relies upon proxy statements, executive
compensation surveys, and a nationally recognized compensation consultant, for
data on current market pay practices.

The primary elements of the Company's compensation program for
executives consist of base salary, potential for annual cash bonus
opportunities, stock options and restricted stock awards. The Compensation
Committee believes that incentives play an important role in motivating
executive performance and attempts to reward achievement of both short and long
term goals. In 2004, the directors and shareholders approved an amendment to the
Company's Stock Incentive Plan to add restricted stock as a type of award that
could be granted to employees. The objective for restricted stock awards has
been to include both a retention component and a performance component in order
to establish a balance between the Company's need to attract and retain high
caliber executive talent and the goal to tie a significant portion of the
executive's compensation to factors which impact on the performance of the
Company's stock. The Company does not currently have specific policies relating
to the allocations between cash and non-cash compensation, current and long-term
compensation, or different types of long-term compensation, such as stock
options and restricted stock. The Company is working with a compensation
consultant to develop more specific guidelines for the future.

In order to attract high-caliber talent for the Company to meet the
needs of its growing services business, in late fiscal 2005 and in fiscal 2006,
the Company engaged a compensation consultant to assist in finding qualified
candidates and relied primarily upon current market pay practices of comparable
IT solutions providers to determine the compensation packages for its senior
executives exclusive of the President and CEO of the Company who was already
employed. The Committee also recognized the direction set by the Board that the
primary goal after the ARC acquisition was to attract the executive talent
needed to manage a growing services business and resolve the problems that had
resulted from the acquisition and integration of the business of ARC and the
systems conversion. In addition, the Committee took into account that it was
unlikely that the executives would be able to meet Company performance results
for fiscal 2006. With respect to the compensation

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of Mr. Pomeroy, the Committee negotiated an amendment to his Employment
Agreement effective as of October 1, 2006. The terms of Mr. Pomeroy's Employment
Agreement, as amended, are described below.

The objectives for executive compensation in fiscal 2007 will include
both a retention and a performance component. Since the Company is still in the
process of transitioning its business model to an IT services provider, the
Company believes that compensation designed to retain its key executive team is
especially important. For fiscal 2007, the performance criteria that are based
upon the Company's financial performance will be tied to meeting or exceeding
projected results that are prepared by management and approved by the Board.
There may also be performance elements that are based upon individual
performance that are directly related to the Company's financial results, or
more specifically related to the individual's role and performance in the
Company. Examples of such criteria include retention of significant customers,
hiring key employees in a specified needed area, reducing costs in certain
areas, procuring significant customers, or maintaining good relationships with
outside consultants.

Elements of Compensation

Overview

The primary elements of compensation include salary, bonuses and
long-term compensation. Bonuses consists of both cash and non-cash compensation.
While the Company considers current market pay practices as a significant factor
in determining compensation, the Company does not set compensation levels at any
particular benchmark primarily due to the fact that the Committee believes that
there are not many companies whose business is directly comparable in size and
scope to the business of the Company to establish a reasonable benchmark.

The Company has entered into an employment agreement with each of its
named executive officers. The Company believes that employment agreements are
desirable for a company of its size in order to attract and retain high-caliber
talent and to protect its business interests. Each of the agreements provides
for the executive's salary, bonuses, equity awards, and perquisites and contains
customary non-solicitation and non-disclosure provisions and termination and
severance provisions.

Bonuses and equity awards for the Company's executives are determined
in accordance with the provisions of each individual's employment agreement,
including the annual pay plans approved by the Company and the executive. In
addition, the Company approves an annual stock program for senior management.
The Compensation Committee takes into account various items of corporate
performance in setting compensation policies and making compensation decisions
that are reflected in the provisions of the employment agreements, such as net
sales and revenues, earnings per share, and net profit before taxes. Annual
bonuses are tied to achievement of targets for a number of factors, depending
upon the job responsibilities of the particular executive. Such criteria
include: revenues from new business, revenues from particular types of
customers, and days sales outstanding. Typically, there are several targets set
for each bonus potential.

Compensation for the Company's executives does not include a
significant component for retirement benefits. The Company offers a 401(K) Plan
to its employees generally, that includes a Company matching contribution of 1%.
The Company also offers an Employee Stock Purchase Plan that enables employees
to purchase common stock of the Company at a price equal to a fifteen percent
discount from the market price. These plans are available to the named executive
officers on the same basis as other employees. Since the Company does not offer
significant retirement benefits, the Company does not take into account amounts
realizable from prior compensation, such as gains from stock options and stock
awards, in setting retirement benefits.

Base Salary

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

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executive officers, including the named executive officers. The employment
agreements may also provide for specific increases in salary in some cases. In
addition, salaries for executives and other employees are reviewed periodically
and may be set at higher or lower levels if the Company concludes that is
appropriate in light of that particular individual's responsibilities,
experience and performance.

Annual base salaries for executive officers and certain other
management personnel are reviewed and approved by the Committee. The Committee
considers the recommendations of each executive officer for those personnel who
report directly to such officer.

Annual Bonus/Short Term Incentives

The Company's named executive officers and other employees are eligible
to receive annual cash and stock bonuses as provided in each executive's
employment agreement and annual pay plan. These bonuses are tied to the
Company's financial performance and individual performance. Generally, the
Company does not award bonuses on a discretionary basis, although the
Compensation Committee would consider making such award for particular
excellence in performance by an executive.

The Company does not currently have a policy regarding adjustments or
recoveries of bonuses or awards if the financial performance criteria on which
they were based are later restated or adjusted so that the amount of the bonus
would be different. The Compensation Committee has requested information from
its compensation consultant on this topic.

Stock Plans - Long Term Incentives

The Company believes that equity ownership plays a key role in aligning
the interests of executives with those of our shareholders, although the Company
does not have a specific requirement of, or guidelines for, equity ownership by
its executives. Generally, the Company allocates equity in a manner that is
proportionate to overall compensation. A further purpose of the Company's Stock
Incentive Plan is to provide a means through which the Company may attract the
best talent, to encourage our employees to engage in the business strategy and
success of our Company, and to provide a retention and performance tool through
vesting obligations for executives. In accordance with our continuing commitment
to meet these objectives, the Company generally has granted stock options, and
more recently, restricted stock awards, to executives on an annual basis. During
2006, the Company determined to utilize restrictive stock awards more, and stock
options less, than in previous years.

Upon the recommendation of the Compensation Committee, the Board of
Directors will adopt a Stock Program for Management (the "Program") for fiscal
2007. The Program will provide for awards of both restricted stock and stock
options to a number of members of senior management, including the named
executive officers. The Program contains stock awards that are primarily
retention incentives and stock awards that are tied to achieving certain
performance criteria. With respect to the financial performance criteria, the
Program is based upon a projected operating plan for the current fiscal year
that is developed by management and approved by the Board. The awards for each
executive are based upon (i) the Company achieving its earnings per share (EPS)
target, (ii) the individual executive achieving specific financial operating
criteria, and (iii) the individual executive achieving specific non-financial
criteria related to his or her particular job functions. The Compensation
Committee is working with its compensation consultant to establish guidelines
for the mix of restricted stock and stock options for the senior executives of
the Company.

Personal Benefits, Perquisites

Our executive officers receive health and welfare benefits, such as
group medical, group life and long-term disability coverage, under plans
generally available to other salaried personnel. We also provide our executive
officers with various perquisites and other personal benefits that the Company
feels are reasonable and consistent with its overall compensation program to
better enable us to attract and retain the best talent for key

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executive positions. The following is a list of perquisites that are currently
provided to one or more of the Named Executive Officers, but not all of these
items are provided to each of the Named Executive Officers:

- Personal use of corporate aircraft on a reimbursement basis
- Reimbursement of relocation expenses
- Housing expenses
- Automobile allowances
- Entertainment allowances
- Company memberships in country/health clubs for the primary benefit of
particular executives
- Home office/communications allowances
- Term life insurance policies

Employment Agreements

Stephen E. Pomeroy, CEO

Mr. Stephen E. Pomeroy's Amended and Restated Employment Agreement (the
"Pomeroy Employment Agreement") with the Company was entered into effective
November 3, 2003, and amended as of January 6, 2004, October 13, 2005, and
October 1, 2006. The Pomeroy Employment Agreement provides for a fixed term of
45 months and five days commencing October 1, 2006, but with an extension to the
term on a daily basis commencing January 1, 2008, resulting in a perpetual
30-month term from January 5, 2008. The Pomeroy Employment Agreement provided
Mr. Pomeroy with a base salary of $544,000 for fiscal 2006 and each subsequent
year unless modified by the Compensation Committee of the Company.

The Pomeroy Employment Agreement, as amended, including the annual pay
plan, provides for an annual bonus of cash and shares of restricted stock in the
event the Company meets certain performance-related goals for the applicable
fiscal years, as agreed upon by the Company and Mr. Pomeroy. Mr. Pomeroy and the
Company agreed that he would not be eligible for a bonus pay plan for fiscal
2006 and no bonuses were paid to Mr. Pomeroy for the 2006 fiscal year. Mr.
Pomeroy received a restricted stock grant of 24,000 shares of Common Stock on
February 16, 2007 under the Company's Stock Program for Management.

The Pomeroy Employment Agreement also provides that on each consecutive
annual anniversary dates of the November 3, 2003 effective date for the next
four so long as Mr. Pomeroy remains employed by the Company, he shall be granted
an option to acquire 50,000 shares of the Common Stock at the fair market value
of such shares as of the date of the grant and to be eligible for future grants
of restricted stock, as determined by the Board of Directors of the Company,
under the Company's Stock Program for Management. The last option grant under
this provision will be November 3, 2007.

The Third Amendment modified the term of the Employment Agreement from
a perpetual 5-year term to the term described above. The Third Amendment also
redefined the circumstances under which Mr. Pomeroy's employment may be
terminated "for cause", and added a provision permitting termination on 30 days
notice, without cause, at any time commencing on or after January 1, 2008. The
Third Amendment also set forth compensation, stock, medical, insurance and
related benefits that Mr. Pomeroy is to receive if the Company terminates Mr.
Pomeroy's employment without cause and modified the procedures for reimbursement
of expenses.

The 2007 pay plan for Mr. Pomeroy has not been finalized. The
Compensation Committee is working with Mr. Pomeroy and its compensation
consultant to complete his 2007 pay plan as soon as possible.

Kevin G. Gregory, Senior Vice President and CFO

Effective January 3, 2006, the Company and Mr. Kevin G. Gregory entered
into an Employment Agreement (the "Gregory Employment Agreement") which
continues for a period of three (3) years thereafter.

PREC14A 23rd Page of 42 TOC 1st Previous Next ↓Bottom Just 23rd
The term of Mr. Gregory's employment shall automatically renew for additional
consecutive renewal terms of one (1) year unless either party gives written
notice of his/its intent not to renew the term of the Gregory Employment
Agreement at least 90 days prior to the expiration of the then expiring term.
Under the Gregory Employment Agreement, Mr. Gregory receives a base annual
salary of $300,000, which base salary shall remain in effect unless or until
modified in writing by the parties. The Gregory Employment Agreement provided
for quarterly cash bonuses of up to $50,000 and an annual cash bonus potential
of $100,000 and options to acquire up to 45,000 shares of Common Stock in the
event the Company met certain performance-related goals in fiscal 2006. For the
2006 fiscal year, Mr. Gregory earned a cash bonus of $15,000. The Gregory
Employment Agreement also provides for certain fringe benefits, including a
moving allowance, a communications allowance, an automobile allowance, a
membership in a country club established in the name of the Company for the
benefit of Mr. Gregory, disability benefits and life insurance.

In connection with entering into the Gregory Employment Agreement, Mr.
Gregory received a bonus in the form of a fully vested stock option for 50,000
shares of Common Stock. So long as Mr. Gregory remains employed by the Company,
the Gregory Employment Agreement provides that he shall be awarded (a) an option
to acquire 25,000 shares of Common Stock at the end of the first year of the
initial term of the Gregory Employment Agreement; and (b) an option to acquire
25,000 shares of Common Stock at the end of the second year of the initial term
of the Gregory Employment Agreement. Such stock options shall be subject to a
three year vesting schedule and any other conditions contained in the Company's
Non-Qualified and Incentive Stock Option Plan and the related award agreement.
Mr. Gregory received a restricted stock grant of 11,250 shares of Common Stock
on February 16, 2007 under the Company's Stock Program for Management for
performance in fiscal year 2006. In the event of termination without cause, Mr.
Gregory will be entitled to receive six months' severance.

The 2007 pay plan for Mr. Gregory has not been finalized. The
Compensation Committee is working with Mr. Gregory to complete his 2007 pay plan
as soon as possible.

P. Hope Griffith, Senior Vice President of Service Delivery

Ms. P. Hope Griffith's initial Employment Agreement (the "Griffith
Employment Agreement") with the Company was entered into effective September 5,
2005 and provided for a term of three years. Under the Griffith Employment
Agreement and pay plan for fiscal 2006, Ms. Griffith's base salary was $225,000
for fiscal 2006. The Griffith Employment Agreement provided for (1) quarterly
cash bonuses of up to $45,000 and (2) an annual cash bonus potential of $100,000
plus options to acquire up to 15,000 shares of Common Stock in the event the
Company met certain performance-related goals in fiscal 2006. The stock options
and 50% of the year end cash bonus were subject to three year vesting. For the
2006 fiscal year, Ms. Griffith earned a cash bonus of $22,500. The Griffith
Employment Agreement also provides for certain fringe benefits, including an
entertainment allowance, a home-office/communications allowance, an automobile
allowance, disability benefits and life insurance.

In connection with entering into the Griffith Employment Agreement, Ms.
Griffith received a bonus in the form of 20,000 fully vested stock options. So
long as Ms. Griffith remains employed by the Company, the Griffith Employment
Agreement provides that she shall be awarded (a) an option to acquire 20,000
shares of Common Stock at the end of the first year of the initial term of the
Griffith Employment Agreement; and (b) an option to acquire 20,000 shares of
Common Stock at the end of the second year of the initial term of the Griffith
Employment Agreement. These annual stock options are subject to a three year
vesting schedule and any other conditions contained in the Company's
Non-Qualified and Incentive Stock Option Plan and the related award agreement.
In lieu of granting the stock options in 2006, Ms. Griffith and the Company
agreed to a restricted stock grant of 5,000 shares of common stock that vest
over three years. The stock options to be granted in 2007 have been replaced
with restricted stock grants in the Amended Griffith Employment Agreement
described below.

In connection with the agreement of Ms. Griffith to relocate to the
Company's headquarters in Hebron, Kentucky, the Griffith Employment Agreement
was amended to provide for a new three year term

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commencing April 17, 2007 (the "Amended Griffith Employment Agreement"). Under
the Amended Griffith Employment Agreement, Ms. Griffith will receive a bonus in
the form of 5,000 shares of restricted stock. So long as Ms. Griffith remains
employed by the Company, the Amended Griffith Employment Agreement provides that
she shall be awarded: (a) 5,000 shares of restricted stock at the end of the
first year of the new 3-year term; (b) 5,000 shares of restricted stock at the
end of the second year of the new 3-year term; (c) $45,000 cash subject to
forfeiture on a pro rata basis if Ms. Griffith voluntarily terminates her
employment or is terminated for cause during the entire 3-year term; and (d) a
relocation allowance of up to $50,000. The foregoing restricted stock grants are
subject to a four year vesting schedule and any other conditions contained in
the Company's Non-Qualified and Incentive Stock Option Plan and the related
award agreement. Ms. Griffith's pay plan approved for fiscal 2007 provides for a
base salary of $235,000, quarterly cash bonuses of up to $45,000 and an annual
cash bonus potential of $100,000 plus options to acquire up to 15,000 shares of
Common Stock in the event the Company meets certain performance-related goals in
fiscal 2007. The stock options and 50% of the cash portion of the year-end bonus
are subject to three year vesting. The Amended Griffith Employment Agreement
continues to provide for fringe benefits as described above. In addition, if at
least the second of three thresholds for the Company's year-end performance is
reached, the base salary for Ms. Griffith for fiscal year 2008 will be increased
to $250,000. In the event Ms. Griffith's employment is terminated without cause,
she will be entitled to receive nine months' severance and all stock options and
restricted share grants will vest immediately.

John E. McKenzie, Senior Vice President - Alliance and CPSG Sales

Mr. John E. McKenzie's current Employment Agreement (the "McKenzie
Employment Agreement") with the Company was entered into effective March 7, 2006
and provides for a term of three years, which replaced his employment agreement
dated October 1, 2004 (the 2004 Agreement"). Under the McKenzie Employment
Agreement and pay plan for fiscal 2006, Mr. McKenzie's base salary was $225,000
for fiscal 2006. The McKenzie Employment Agreement provided for quarterly cash
bonuses of up to $45,000 and an annual cash bonus potential of $100,000 plus
options to acquire up to 30,000 shares of Common Stock of the Company in the
event the Company met certain performance-related goals in fiscal 2006. The
stock options and 50% of the cash portion of the year-end bonus are subject to
three year vesting. In addition Mr. McKenzie was eligible for a one-time bonus
of stock options for 10,000 shares in connection with the successful transition
of specific customer agreements. For the 2006 fiscal year, Mr. McKenzie earned a
cash bonus of $27,500 and an award of options for 10,000 shares of Common Stock.
The Employment Agreement also provides for certain fringe benefits, including an
automobile allowance, a communication allowance, disability benefits and life
insurance.

In connection with entering into the 2004 Agreement, Mr. McKenzie
received a bonus in the form of a fully vested stock option for 20,000 shares of
Common Stock. So long as Mr. McKenzie remains employed by the Company, the 2004
Agreement, as amended by the McKenzie Employment Agreement provided that he
shall be awarded (a) an option to acquire 20,000 shares of Common Stock at
October 1, 2005; (b) an option to acquire 35,000 shares of Common Stock at March
7, 2006; (c) an option to acquire 25,000 shares of Common Stock at March 7,
2007; and (d) an option to acquire 25,000 shares of Common Stock at March 7,
2008;. Except for the stock option for 35,000 shares of Common Stock which was
fully vested on March 7, 2006, these annual stock options are subject to a three
year vesting schedule from the date of grant and any other conditions contained
in the Company's Non-Qualified and Incentive Stock Option Plan and the related
award agreement. In addition, the Company may grant shares of restricted stock
in lieu of the stock options based upon an exchange ratio approved by the Board.

Mr. McKenzie's pay plan approved for fiscal 2007 provides that so long
as Mr. McKenzie remains employed by the Company, the McKenzie Employment
Agreement provides that he shall be awarded: (a) 6,250 shares of restricted
stock on the first anniversary of the plan; end of the first year of the new
3-year term; and (b) 6,250 shares of restricted stock on the second anniversary
of the plan. The foregoing restricted stock grants are subject to a four year
vesting schedule and any other conditions contained in the Company's
Non-Qualified and Incentive Stock Option Plan and the related award agreement.
Mr. McKenzie's pay plan approved for fiscal 2007 provides for a base salary of
$210,000, quarterly cash bonuses of up to $55,000 and an annual cash bonus
potential of $110,000 and options to acquire up to 30,000 shares of Common Stock
in the event the Company meets

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certain performance-related goals in fiscal 2007. Of the year-end bonus
potential, $35,000 is tied to Company performance criteria related to Mr.
McKenzie's responsibilities and $75,000 is related to overall Company
performance. The stock options and 50% of the $75,000 year-end bonus are subject
to three year vesting. In the event Mr. McKenzie's employment is terminated
without cause, he will be entitled to receive six months' severance.

Mr. Keith Blachowiak, Chief Information Officer and Senior Vice President of IT

Mr. Blachowiak entered into a three-year Employment Agreement with the
Company on February 13, 2006 (the "Blachowiak Employment Agreement") to serve as
Senior Vice President of Information Technology and Chief Information Officer of
the Company, effective March 1, 2006. The Blachowiak Employment Agreement
provides Mr. Blachowiak with a base salary of $225,000 for fiscal 2006. The
Blachowiak Employment Agreement provided for quarterly cash bonuses of up to
$50,000 and an annual cash bonus potential of $75,000 (50% of which vests over a
3-year period) and options to acquire up to 40,000 shares of Common Stock
(subject to vesting over a 3-year period) in the event the Company met certain
performance-related goals in fiscal 2006. For the 2006 fiscal year, Mr.
Blachowiak earned a cash bonus of $111,000. The Blachowiak Employment Agreement
also provides for certain fringe benefits, including a moving allowance, a
communication allowance, an apartment rental allowance, a health club
membership, and certain life and disability insurance.

In connection with entering into the Blachowiak Employment Agreement,
Mr. Blachowiak received a bonus in the form of a fully vested stock option for
50,000 shares of Common Stock. So long as Mr. Blachowiak remains employed by the
Company, the Blachowiak Employment Agreement provides that he shall be awarded
(a) an option to acquire 25,000 shares of Common Stock at the end of the first
year of the initial term of the Blachowiak Employment Agreement; and (b) an
option to acquire 25,000 shares of Common Stock at the end of the second year of
the initial term of the Blachowiak Employment Agreement. These annual stock
options are subject to a three year vesting schedule and any other conditions
contained in the Company's Non-Qualified and Incentive Stock Option Plan and the
related award agreement.

Mr. Blachowiak's pay plan approved for fiscal 2007 provides for a base
salary of $235,000, quarterly cash bonuses of up to $25,000 and an annual cash
bonus potential of up to $175,000 and options to acquire up to 40,000 shares of
Common Stock. The annual cash bonus is based upon individual and Company
performance criteria; $100,000 of the cash bonus potential is based upon
individual performance criteria related to the Company's IT systems and $75,000
of the cash bonus potential plus the stock options are payable in the event the
Company meets certain performance-related goals in fiscal 2007. The stock
options and 50% of the $75,000 year-end bonus are subject to three year vesting.
In addition, if at least the second of three thresholds for the Company's
year-end performance is reached, the base salary for Mr. Blachowiak for fiscal
year 2008 will be increased to $250,000. The pay plan for fiscal 2007 amends the
annual stock option grants described above. In lieu of stock options to acquire
25,000 shares of common stock, so long as Mr. Blachowiak remains employed by the
Company, he shall be awarded: (a) 5,000 shares of restricted stock at May 3,
2008; and (b) 5,000 shares of restricted stock May 3, 2009. The foregoing
restricted stock grants are subject to a four year vesting schedule and any
other conditions contained in the Company's Non-Qualified and Incentive Stock
Option Plan and the related award agreement. Mr. Blachowiak will also be
reimbursed for customary and reasonable expenses for the rental of an apartment
in the Hebron, Kentucky area and, in the event of termination without cause, he
will be entitled to receive nine months' severance and all stock options and
restricted share grants will vest immediately.

Rick Windon, Senior Vice President of Sales-- Enterprise Accounts

Mr. Rick Windon joined the Company in August of 2006 and was promoted
to Senior Vice President of Sales--Enterprise Accounts, effective May 3, 2007.
The Company and Mr. Windon are in the process of amending his current employment
agreement to reflect this promotion but a pay plan for 2007 has been agreed upon
by the parties. Under his play plan for fiscal 2007, Mr. Windon will receive a
base salary of $210,000. The pay plan also provides for quarterly bonuses of up
to $65,000, an annual cash potential of $75,000 and options to acquire up to
30,000 shares of Common Stock and a bonus based on strategic deals. In addition,
Mr. Windon may earn a bonus in connection with procuring customer contacts with
terms of 2 years or more. The annual cash bonus is based

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upon Company performance criteria. The stock options and 50% of the cash portion
of the $75,000 year-end bonus are subject to three year vesting. In addition, if
at least the second threshold for the Company's year-end performance is reached,
the base salary for Mr. Windon for fiscal year 2008 will be increased to
$225,000. So long as Mr. Windon remains employed by the Company, he shall be
awarded: (a) 6,500 shares of restricted stock as of May 3, 2007; (b) 6,500
shares of restricted stock at May 3, 2008; (c) 6,500 shares of restricted stock
at May 3, 2009 and (d) $36,000 cash subject to forfeiture on a pro rata basis if
Mr. Windon voluntarily terminates his employment within the three year term. The
foregoing restricted stock grants are subject to a four year vesting schedule
and any other conditions contained in the Company's Non-Qualified and Incentive
Stock Option Plan and the related award agreement. In the event of Mr. Windon's
termination without cause, he will be entitled to receive nine months'
severance. It is expected that the amended Employment Agreement will also
provides for certain fringe benefits, including an automobile allowance, a home
office allowance, disability benefits and life insurance.

Change-of-Control and Severance Provisions

Each of the employment agreements for the Named Executive Officers
provides for certain payments in connection with the termination of the
executive's employment. In addition, Mr. Pomeroy's Agreement includes provisions
relating to a change-of-control.

Under the Pomeroy Employment Agreement, if Mr. Pomeroy's employment
agreement is terminated by the Company in breach of the agreement or by Mr.
Pomeroy for Good Reason (as defined in the agreement), then the Company shall
pay severance to Mr. Pomeroy as follows: (1) his base pay at the time of
termination for the balance of the term of his employment agreement; and (2) any
bonus (which shall not be less than the average bonuses for the prior two years)
and other compensation that he would have received had he not been terminated
and continued participation in the Company's benefit programs for the balance of
the term of his employment. In the event that his employment is terminated
within one year following a change-of-control (including if Mr. Pomeroy
terminates his employment for "Good Reason" as defined in the Pomeroy Employment
Agreement), then Mr. Pomeroy shall receive the foregoing severance payment plus
all legal fees and expenses incurred by Mr. Pomeroy as a result of the
termination of his employment, and an amount equal to the impact of any tax
imposed by section 4999 of the Internal Revenue Code of 1986, as such that the
net amount retained by Mr. Pomeroy, after deduction of such tax on such
severance payments is the amount of such severance payments. The Pomeroy
Employment Agreement also provides for Mr. Pomeroy's agreement not to compete
with the business of the Company for a period of one year following termination
of his employment. In the case of a termination by Mr. Pomeroy for Good Reason,
he also agrees not to solicit Key Customers (as defined in the agreement) for a
period of three years after the date of termination. The rationale for this
change-of control provision is to provide an incentive to Mr. Pomeroy to
continue his employment with the Company and his continued commitment to and
focus on the Company's business and operations for the benefit of the Company
and its stockholders should the Company become involved in a transaction that
could result in a change-of-control.

The severance provisions for the other named executives are generally
the same except for the period for which the base salary and benefits are paid
("Severance Period") and as otherwise noted above. The Severance Period for each
executive is described in the description of his or her employment agreement.
Generally, in the event of the termination of an executive's employment, the
executive is entitled to the following: (i) through the date of termination, his
or her base salary, accrued benefits, accrued bonuses, and any vested incentive
compensation (except in the case of termination by the Company for cause or in
the event of any breach of any provision of the employment agreement by the
executive); (ii) in the event of termination by the Company not for cause upon
90 days' prior notice, his or her base salary for the Severance Period from the
date of notice of termination, payable in accordance with the Company's ordinary
payroll practices, provided that during such time the executive is not employed
by a competitor or in breach of his or her employment agreement; and (iii) in
the event of termination as a result of permanent disability, his or her base
annual salary in effect as of the date of the physician's determination of his
or her disability, for a period of 12 months following the date of disability
(offset by any payments made pursuant to any disability benefit plans), payable
in 12 equal monthly installments commencing 30 days after the date of
disability. The executive's employment agreements also

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provides for the executive's agreement not to compete with the business of the
Company, not to solicit or divert customers and not to employ employees of the
Company for a period of one year following termination of his or her employment,
provided that these provisions are not applicable in the event the Company
terminates the executive's employment without cause upon 90 days' prior notice
or does not renew his or her agreement upon the expiration of the initial or any
renewal term, unless the Company elects to pay to the executive an amount equal
to his or her base annual salary in effect as of the date of termination for a
period of 12 months following the date of termination, payable in 12 equal
monthly installments commencing 30 days after termination.

COMPENSATION COMMITTEE REPORT

The responsibilities of the Compensation Committee are provided in its
Charter, which has been approved by our Board of Directors. In fulfilling its
oversight responsibilities with respect to the Compensation Disclosure and
Analysis included in this proxy statement, the Compensation Committee has
reviewed and discussed the Compensation Disclosure and Analysis with management,
and following such review, approved the inclusion of such Compensation Analysis
and Disclosure in this proxy statement.

Submitted by the Compensation Committee

Vincent D. Rinaldi and William H. Lomicka

EXECUTIVE COMPENSATION TABLES

The compensation of the Company's executive officers is described in the tables
that follow.

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

CHANGE IN
PENSION
VALUE AND
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
NAME AND SALARY AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
PRINCIPAL POSITION YEAR ($) BONUS ($) ($) (2) ($) (3) ($) (4) ($) ($) (5), (6) ($)
------------------------- ---- --------- --------- --------- --------- ------------ ------------ ------------ ----------

Stephen E. Pomeroy 2006 $ 583,566(1) $ 202,500 $ 136,520 $ 75,000 $ 2,782 $1,000,368
President and Chief
Executive Officer

Kevin Gregory 2006 $ 294,231 $ 15,000 $ 24,328 $ 372 $ 39,809 $ 373,740
Senior Vice President and
Chief Financial Officer

John E. McKenzie 2006 $ 210,289 $ 27,500 $ 16,705 $ 184,035 $ 131,944 $ 6,000 $ 576,473
Senior Vice President of
Sales and Marketing

P. Hope Griffith 2006 $ 216,346 $ 22,500 $ 19,917 $ 21,571 $ 280,334
Senior Vice President of
Services

Keith Blachowiak 2006 $ 184,327 $ 111,000 $ 165,065 $ 10,797 $ 471,189
Senior Vice President of
Information Technologies

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----------

(1) Mr. Pomeroy's 2006 salary compensation includes a one-time payment of
$63,816, reflecting a payroll error in calculating his 2005 and 2006
salary that was discovered, rectified, and paid during 2006.

(2) The stock award values represent the dollar amount of compensation cost
recognized for financial statement reporting purposes for the fiscal
year ended January 5, 2007, in accordance with FAS 123(R).

(3) The option award values represent the dollar amount of compensation
cost recognized for financial statement reporting purposes for the
fiscal year ended January 5, 2007, in accordance with FAS 123(R).

(4) Reflects $100,000 paid to Mr. Pomeroy for previously accrued deferred
compensation. Also includes $100,000 paid and $31,944 accrued for
deferred compensation for Mr. McKenzie.

(5) Does not include amounts for personal use of Company aircraft, because
according to Company policy, all personal use must be reimbursed based
upon the aggregate incremental cost to the Company. For this purpose,
the Company has calculated the aggregate incremental cost based upon
the variable operating costs incurred as a result of personal use of
the aircraft. Mr. Pomeroy reimbursed the Company $6,525 for personal
use of the Company aircraft during 2006.

(6) Amounts reported include car allowance, housing benefits, phone and
entertainment allowance, and club dues.

(i) For Mr. Pomeroy, the amount reported includes $480 in
entertainment allowance and $1,250 in club dues.

(ii) For Mr. Gregory, the amount reported includes $7,718 in
temporary housing allowance prior to relocation; $10,800 in
car allowance; and $20,690 in club dues, including $20,000 for
initiation fee for company-owned club membership and $690 in
monthly dues for said country club membership.

(iii) For Mr. McKenzie, the amount reported includes $6,000 in car
allowance.

(iv) For Ms. Griffith, the amount reported includes (i) $2,400 in
home office allowance; (ii) $1,600 in entertainment allowance;
(iii) $6,000 in car allowance; and (iv) $11,121 in temporary
housing allowance.

(v) For Mr. Blachowiak, the amount reported represents $10,428 in
temporary housing allowance.

2006 GRANTS OF PLAN BASED AWARDS

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ESTIMATED FUTURE
PAYOUTS UNDER NON-EQUITY ESTIMATED FUTURE PAYOUTS UNDER
INCENTIVE PLAN AWARDS EQUITY INCENTIVE PLAN AWARDS
-------------------------------- ------------------------------
GRANT THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM
NAME DATE ($) ($) ($) (#) (#)(1) (#)
------------------------- ----------- --------- ------ ------- ---------- -------- -------

Stephen E. 11/3/2006 50,000
Pomeroy

Kevin Gregory 1/3/2007 25,000

John E. McKenzie 3/28/2006 100,000(3)
3/31/2006 12,500

P. Hope Griffith 8/7/2006 10,000

Keith Blachowiak 3/6/2006 10,000

ALL OTHER ALL OTHER
STOCK OPTION GRANT DATE
AWARDS: AWARDS: FAIR
NUMBER OF NUMBER OF EXERCISE OR VALUE OF
SHARES OF SECURITIES BASE PRICE STOCK AND
STOCK OR UNDERLYING OF OPTION OPTION
UNITS OPTIONS AWARDS AWARDS
NAME (#) (#) ($ / SH) (2)
------------------------- ----------- ------------ ----------- ----------

Stephen E. 50,000 8.34 136,520
Pomeroy

Kevin Gregory 25,000 8.25 74,465

John E. McKenzie 35,000 8.71 111,748
10,000 8.58 44,531

P. Hope Griffith 5,000 35,500

Keith Blachowiak 50,000 9.54 165,065

----------

(1) These amounts represent stock awards to be granted pursuant to the
terms of the respective NEO's employment agreements over a three year
period.

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(2) The grant date fair values are calculated based upon the methodology
set forth in FAS 123(R) as reflected in the Company's financial
statements, Note 2. Shares in the form of restricted stock are valued
at the closing prices of the Company's common stock on the date of the
grant.

(3) This amount reflects (i) a one-time signing bonus of $75,000 issued in
2006 to Mr. McKenzie for completion of a three year employment
agreement, vesting over three years, and (ii) a discretionary
performance bonus of $25,000 issued in 2006 to Mr. McKenzie for
completion of a large customer project, also vesting over three years.

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2006 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

[Enlarge/Download Table]

OPTION AWARDS
---------------------------------------------------------------------
EQUITY
INCENTIVE
PLAN
NUMBER OF NUMBER OF AWARDS:
SECURITIES SECURITIES NUMBER OF
UNDERLYING UNDERLYING SECURITIES
UNEXERCISED UNEXERCISED UNDERLYING
OPTIONS OPTIONS UNEXERCISED OPTION
(#) (1) (#) UNEARNED EXERCISE OPTION
----------- ------------- OPTIONS PRICE EXPIRATION
NAME GRANT DATE EXERCISABLE UNEXERCISABLE (#) ($) DATE
------------------ ----------- ----------- ------------- ----------- ----------- -----------

Stephen E. Pomeroy 1/6/2002 50,000 14.00 1/6/2007
10/4/2002 25,000 9.96 10/4/2007
1/14/2003 50,000 9.75 1/14/2008
11/3/2003 100,000 14.56 11/3/2008
9/16/2004 30,000 12.45 9/16/2009
11/3/2004 100,000 13.72 11/3/2009
1/6/2005 90,750 14.66 1/6/2010
11/3/2005 50,000 11.19 11/3/2010
11/3/2006 50,000 8.34 11/3/2011
10/24/2005
Kevin Gregory 1/3/2006 50,000 8.25 1/3/2011
1/3/2007 25,000 7.58 1/3/2012
12/27/2005
John E. McKenzie 4/16/2002 7,500 15.31 4/16/2007
4/16/2003 3,333 6.74 4/16/2008
4/16/2004 3,333 1,667 14.46 4/16/2009
3/2/2005 6,000 14.91 3/2/2007
5/24/2005 7,500 12.24 5/24/2007
11/19/2005 6,667 13,333 7.90 11/19/2010
3/28/2006 35,000 8.71 3/28/2008
3/31/2006 10,000 8.58 3/31/2011
10/24/2005
P. Hope Griffith 8/7/2005 20,000 12.34 8/7/2007
12/27/2005
8/7/2006
Keith Blachowiak 3/6/2006 50,000 9.54 3/6/2011

STOCK AWARDS
----------------------------------------------------------------------------
EQUITY
INCENTIVE
EQUITY INCENTIVE PLAN AWARDS:
PLAN AWARDS: MARKET OR
NUMBER OF MARKET NUMBER OF PAYOUT VALUE
SHARES OF VALUE OF UNEARNED OF UNEARNED
UNITS OF SHARES OF SHARES, UNITS SHARES, UNITS
STOCK UNITS OF OR OTHER OR OTHER
THAT STOCK THAT RIGHTS THAT RIGHTS THAT
HAVE NOT HAVE NOT HAVE NOT HAVE NOT
VESTED VESTED VESTED VESTED
NAME (#) (2) ($) (3) (#) ($)
------------------ ----------- ------------- ---------------- -------------
Stephen E. Pomeroy

75,000 $ 603,750
Kevin Gregory

11,250 $ 90,563
John E. McKenzie

6,187 $ 49,805
P. Hope Griffith
7,500 $ 60,375
5,000 $ 40,250
Keith Blachowiak

----------

(1) Stock Options vest on a three year ratable vesting schedule, with one third
of each award vesting each year.

(2) Stock Awards vest on the third anniversary of the grant date.

(3) Based on the closing price of $8.05 per share of the Company's common stock
on January 5, 2007.

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2006 OPTION EXERCISES AND STOCK VESTED TABLE

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OPTION AWARDS STOCK AWARDS
------------------------------------------- --------------------------------------
NUMBER OF SHARES VALUE REALIZED NUMBER OF SHARES VALUE REALIZED
ACQUIRED ON EXERCISE ON EXERCISE ACQUIRED ON VESTING ON VESTING
NAME (#) ($) (#) ($)
--------------------- -------------------- -------------------- ------------------- ----------------

Stephen E. Pomeroy 22,500 $ 127,350

Kevin Gregory

John E. McKenzie

P. Hope Griffith

Keith Blachowiak

2006 NONQUALIFIED DEFERRED COMPENSATION TABLE

[Enlarge/Download Table]

EXECUTIVE REGISTRANT
CONTRIBUTIONS CONTRIBUTIONS AGGREGATE
IN LAST FISCAL IN LAST AGGREGATE EARNINGS WITHDRAWALS / AGGREGATE BALANCE AT
YEAR FISCAL YEAR IN LAST FISCAL YEAR DISTRIBUTIONS LAST FISCAL YEAR-END
NAME ($) ($) ($) ($) ($)
--------------------- --------------------- ------------- ------------------- -------------- ---------------------

Stephen E. Pomeroy $ 75,000(2)

Kevin Gregory

John E. McKenzie $ 31,944(1) $ 100,000(3) $ 31,944

P. Hope Griffith

Keith Blachowiak

----------

(1) This amount reflects an accrual of $4,166 in 2006 for a discretionary
performance bonus of $12,500 issued to Mr. McKenzie in 2005, vesting over
three years. It also includes accruals of $27,777 for (i) a one-time
signing bonus of $75,000 issued in 2006 to Mr. McKenzie for completion of a
three year employment agreement, vesting over three years, and (ii) a
discretionary performance bonus of $25,000 issued in 2006 to Mr. McKenzie
for completion of a large customer project, also vesting over three years.

(2) Mr. Pomeroy was issued a bonus for 2000 that vested after five years. This
amount vested in May 2006 and was paid to Mr. Pomeroy at that time.

(3) Mr. McKenzie was issued a bonus for 2000 that vested after five years. This
amount vested in January 2006 and was paid to Mr. McKenzie at that time.

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2006 ALL OTHER COMPENSATION TABLE

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PERQUISITES COMPANY CHANGE
AND OTHER CONTRIBUTIONS SEVERANCE IN CONTROL
PERSONAL TAX INSURANCE TO RETIREMENT AND PAYMENTS / PAYMENTS /
BENEFITS REIMBURSEMENTS PREMIUMS 401(K) PLANS ACCRUALS ACCRUALS
NAME YEAR ($) ($) ($) ($) ($) ($) TOTAL ($)
------------------- ------ ----------- -------------- --------- ----------------- ---------- ----------- ----------

Stephen E. Pomeroy 2006 1,740 1,042 2,782
Kevin Gregory 2006 39,209 600 39,809
John E. McKenzie 2006 6,000 554 883 7,437
P. Hope Griffith 2006 21,121 450 21,571
Keith Blachowiak 2006 10,428 369 10,797

DIRECTOR COMPENSATION

The Board of Directors' adopted a fee schedule, which became effective
January 6, 2005, under which each director who is not an employee of the
Company, except for Mr. Smith, shall receive a quarterly retainer equal to six
thousand dollars ($6,000) and fees for attendance at committee meetings as
follows: $500 for each Board of Directors meeting attended (including as part of
each such meeting any committee meetings held on the same date); $500 for each
Stock Option Committee attended; $1,000 for each Nominating Committee meeting
attended; $1,500 for each Compensation Committee meeting attended; and $2,000
for each Audit Committee meeting attended. Mr. Smith's law firm, Lindhorst &
Dreidame Co., L.P. A., will be compensated for his time in attendance at
directors' meetings based on his hourly rate. Each non-employee director also
receives an annual restricted stock grant as provided in the Company's 2002
Amended and Restated Outside Directors' Stock Incentive Plan.

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2006 DIRECTOR COMPENSATION TABLE

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CHANGE
IN PENSION
VALUE AND
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED
FEES EARNED OR PLAN COMPENSATION ALL OTHER
PAID IN CASH STOCK AWARDS OPTION AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME ($) (1) ($) (2) ($) (2) ($) ($) ($) ($)
---------------- -------------- ------------ ------------- ------------ -------------- ------------ ------------

Boucher, Dave $ 29,500 $ 1,722 $ 31,222
Faber, Edward(3) $ 43,000 $ 43,000
Krieg, Ron $ 44,000 $ 553 $ 44,553
Lomicka, Bill $ 59,500 $ 22,420(4) $ 81,920
Rinaldi, Vincent $ 35,500 $ 1,772 $ 487 $ 37,758
Smith, Jim (5) $ 1,722 $ 214 $ 1,936
Tibey, Debbie $ 61,000 $ 1,118 $ 483 $ 62,601
Waters, Ken $ 36,500 $ 1,702 $ 38,202

----------

(1) All independent, non-employee directors, other than Mr. James H. Smith III,
receive a quarterly retainer of $6,000 and fees for attendance at board and
board committee meetings. See the discussion of Director Compensation and
Fees above. In addition, all independent, non-employee directors received
an annual grant of restricted stock.

(2) The stock awards and option awards represent the amount of compensation
cost recognized for financial statement reporting purposes in accordance
with FAS 123(R) as reflected in the Company's financial statements, Note 2.

(3) Mr. Faber's term as a director ended as of the Company's June 20, 2006
Annual Meeting.

(4) Mr. Lomicka received an option grant under the prior directors plan that
allowed for immediate vesting. As a result, his compensation reflects the
full value of the entire grant at the time made. Under the current
directors plan, grants vest over time and only a pro rata portion is
reflected as fair value.

(5) In lieu of receiving director's fees, Mr. Smith's law firm, Lindhorst &
Dreidame receives legal fees for outside legal services provided to the
Company.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS

The following tables summarizes as of January 5, 2007, information
regarding our equity compensation plans.

[Enlarge/Download Table]

Number of Securities
Number of Securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of outstanding exercise price of equity compensation
options, warrants and outstanding options, plans (excluding securities
rights warrants and rights reflected in column (a))
Plan category (1) (a) (b) (c) (2)
----------------------------------------- ------------------------- -------------------- ---------------------------

Equity compensation plans approved by
security holders 2,409,033 $ 12.70 2,052,896
Equity compensation plans not approved
by security holders - - -
------------------------- -------------------- ---------------------------
Total 2,409,033 $ 12.70 2,052,896
========================= ==================== ===========================

(1) A narrative description of the material terms of equity compensation plans
is set forth in Note 16 to the Consolidated Financial Statements.

(2) Includes 283,877 shares available for future issuance under the 1998
Employees Stock Purchase Plan (1998 Plan). A narrative description of the
material terms of the 1998 Plan is set forth in Note 10 to the Consolidated
Financial Statements

Submitted by Board of Directors

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consists of two members, Messrs. Vincent D. Rinaldi
and William H. Lomicka, both of whom are independent directors and neither of
whom is, or was formerly, an officer or employee of the Company. Mr. Rinaldi is
the President and Chief Executive Officer of National City Commercial Capital
Corporation ("NCCC"). In connection with the sale, in April 2002, of a majority
of the assets of the Company's wholly owned subsidiary - Technology Integration
Financial Services, Inc., the Company and NCCC entered into an exclusive
seven-year vendor agreement whereby NCCC has a right of first refusal for
equipment sales to customers of the Company in order for NCCC to offer financing
for such sales, and the Company receives a referral fee on any equipment
purchases that NCCC agrees to finance, and the Company is appointed as an agent
for remarketing and reselling of the leased equipment sold. See "Certain
Relationships and Related Transactions."

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Mr. Stephen E. Pomeroy, Chief Executive Officer, President and Chief
Operating Officer, failed to timely file a Form 5 with respect to changes in
beneficial ownership of stock in the Company. Mr. Pomeroy also failed to file
one Form 4 with respect to the grant of 50,000 options on November 3, 2006, with
an exercise price of $8.34.

Mr. Kevin G. Gregory, Chief Financial Officer, failed to timely file a
Form 4 related to 25,000 options granted on January 3, 2007 with an exercise
price of $7.58.

Mr. John McKenzie, Senior Vice President of Alliance and CPSG Sales,
failed to timely file a Form 3 related to the initial statement of his
beneficial ownership of stock in the Company.

Ms. P. Hope Griffith, Senior Vice President of Service Delivery, failed
to timely file a Form 4 related to 5,000 restricted shares granted on August 7,
2006 with a stock price of $7.10.

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PROPOSAL NO. 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

RATIFICATION OF APPOINTMENT OF BDO SEIDMAN, LLP

The Audit Committee of the Company engaged BDO Seidman, LLP ("BDO"), as
its independent registered public accounting firm for the fiscal year ended
January 5, 2007. BDO accepted such appointment on July 24, 2006. Prior to the
appointment of BDO, the Company did not consult with BDO on any matters relating
to accounting or the type of opinion they may issue. Representatives of BDO are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE AUDIT
COMMITTEE'S APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY'S 2007 FISCAL YEAR.

FORMER INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Previously, on April 26, 2006, the Company filed a Current Report on
Form 8-K to report under Item 4.01 that on April 20, 2006, Crowe Chizek and
Company LLC ("Crowe Chizek") notified the Company that it would be resigning as
the Company's independent accountant, effective upon completion of the Form 10-Q
for first quarter of fiscal 2006. On May 19, 2006, Pomeroy filed an amendment on
Form 8-K/A to report under Item 4.01 that on May 15, 2006 the Company had filed
its quarterly report on Form 10-Q for the first quarter ended April 5, 2006 and
Crowe Chizek ceased rendering services to the Company on May 16, 2006.

Crowe Chizek's reports on the Company's financial statements since its
engagement did not contain an adverse opinion or disclaimer of opinion and was
not otherwise qualified or modified as to any uncertainty, audit scope or
accounting principles. During the two most recent fiscal years ended January 5,
2007, and during the subsequent period through the date hereof, there was no
disagreement between the Company and Crowe Chizek on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Crowe
Chizek, would have caused it to make a reference to the subject matter of the
disagreement(s) in connection with its report. Also during the two most recent
fiscal years and during the subsequent period through the date hereof, the
Company did not have any reportable events as described under Item 304
(a)(1)(iv) of Regulation S-K except for the existence of material weaknesses in
the Company's internal control over financial reporting as disclosed by the
Company at January 5, 2005 and January 5, 2006 and concurred with by Crowe
Chizek. (See Item 9A in Part II of the Company's Form 10-K/A for the fiscal year
ended January 5, 2005, filed May 5, 2005, and Item 9A in Part II of the
Company's Form 10-K for the fiscal year ended January 5, 2006 for a description
of these material weaknesses, which have been rectified. The Company previously
reported the foregoing on a Form 8-K, filed April 26, 2006, a copy of which was
provided to Crowe Chizek prior to filing. Crowe Chizek provided a letter
addressed to the Securities and Exchange Commission agreeing with the statements
contained in the Form 8-K which was filed as an exhibit to the Form 8-K.

After its engagement on July 24, 2006, representatives of BDO attended
most of the remaining meetings of the audit committee of the Board during fiscal
2006. The audit committee reviews audit and non-audit services performed by the
Company's independent accountants as well as the fees charged by them for such
services. In its review of non-audit service fees, the audit committee
considers, among other things, the possible effect of the performance of such
services on the auditor's independence.

PROPOSALS FOR 2008 ANNUAL MEETING

In order to be eligible for inclusion in the Company's proxy statement
for the 2008 annual meeting of stockholders, stockholder proposals must be
received by the Secretary of the Company at its principal office, 1020
Petersburg Road, Hebron, Kentucky 41048, by _______________ _____, 2008.

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Stockholders who intend to present a proposal at such meeting without
inclusion of such proposal in our proxy materials pursuant to Rule 14a-8 under
the Exchange Act are required to provide advance notice of such proposal to our
Secretary at the aforementioned address not later than __________ _____, 2008.

If we do not receive notice of such a stockholder proposal on or before
__________ _____, 2008, our management will use its discretionary authority to
vote the shares that they represent by proxy in accordance with the
recommendations of the Board.

We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
or other applicable requirements.

IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. THEREFORE, STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO VOTE BY EITHER (A) USING THE
TOLL-FREE TELEPHONE NUMBER SHOWN ON YOUR WHITE PROXY CARD, (B) CASTING YOUR VOTE
ELECTRONICALLY AT THE WEBSITE LISTED ON YOUR WHITE PROXY CARD, OR (C) SIGNING,
DATING AND RETURNING THE ACCOMPANYING WHITE PROXY CARD IN THE ENCLOSED ENVELOP,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

By Order of the Board of Directors

----------------------------------
Kevin Gregory, Secretary

---------------
Date

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APPENDIX A

INFORMATION CONCERNING PARTICIPANTS IN THE SOLICITATION OF
PROXIES BY POMEROY IT SOLUTIONS, INC.

Under applicable SEC rules, members of the Board, and the Board's
nominees, including certain officers who are also directors of the Company, may
be deemed to be "participants" with respect to our solicitation of proxies in
connection with the Company's 2007 annual meeting of stockholders. Certain
information about the persons who may be deemed "participants" is provided
below.

DIRECTORS AND NOMINEES

The name and principal occupations of the Company's director nominees
who may be deemed participants in the Company's solicitation are set forth under
the "Election of Directors" section of this proxy statement. The business
address for the Company's directors and director nominees is c/o Pomeroy IT
Solutions, Inc., 1220 Petersburg Road, Hebron, Kentucky 41048.

OFFICERS

Mr. Stephen Pomeroy, our President and Chief Executive Officer, and Mr.
Kevin Gregory, our Chief Financial Officer, may be deemed "participants" in the
Company's solicitation of proxies. Both of such persons are also directors and
director nominees. Their respective principal occupations are set forth under
the "Election of Directors" section of this proxy statement, and the business
address for both such persons is c/o Pomeroy IT Solutions, Inc., 1020 Petersburg
Road, Hebron, Kentucky 41048.

INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S SECURITIES BY PARTICIPANTS

Except as described in this Appendix A or proxy statement, none of the
person listed above under "Directors and Nominees" and "Officers" owns any
Company securities of record which they do not own beneficially. The number of
shares of Company common stock held by directors, director nominees and the
named executive officers as of the close of business on April 5, 2007 is set
forth under the "Stock Ownership" section of this proxy statement.

Miscellaneous Information Concerning Participants

No participant has purchased or sold securities of the Company within
the past two years other than transactions under the Company's 401(k) plan,
grants and forfeitures of restricted stock and stock options under the Company's
equity based compensation plans, as set forth in the proxy statement, or as
follows:

[Download Table]

PARTICIPANT DATE NO. SHARES TRANSACTION TYPE
----------------------- ---------- ------------- -----------------------

Stephen Pomeroy 5/24/2006 22,500 Purchase
Kevin Gregory 12/29/2006 1,000 *
6/30/2006 1,000 *
Kenneth Waters 6/28/2006 100 Purchase
6/28/2005 1,150 Purchase

*Purchases under Employee Stock Purchase Plan

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No part of the purchase price or market value of any of the shares
specified in the "Information Regarding Ownership of Company Securities by
Participants" section is represented by funds borrowed or otherwise obtained for
the purpose of acquiring or holding such securities by such participant.

Except as described in this proxy statement under the section entitled
"Certain Relationship and Related Transactions", neither any participant, nor
any of their respective associates or affiliates (including a member of the
participant's immediate family, together, the "Participant Affiliates"), is
either a party to any transaction or series of transactions since the beginning
of fiscal year 2006, or has knowledge of any currently proposed transaction or
series of proposed transactions, (1) to which the Company was or is to be a
party, (2) in which the amount involved exceeds $120,000, and (3) in which any
participant or Participant Affiliate had, or will have, a direct or indirect
material interest.

Except as described in this Appendix A or elsewhere in this proxy
statement, no participant or Participant Affiliate is, or within the past year
was, a party to any contract, arrangement or understanding with any person with
respect to any securities of the Company.

Except as described in this proxy statement, no participant or
Participant Affiliate has entered into any agreement or understanding with any
person with respect to any future employment by the Company or any of its
affiliates or with respect to any future transactions to which the Company or
any of its affiliates will or may be a party.

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Appendix B

POMEROY IT SOLUTIONS, INC.

CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------

PURPOSE OF COMMITTEE: The purpose of the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of Pomeroy IT Solutions,
Inc. (the "Company") is to review and approve, on behalf of the Board, all forms
of compensation to be provided to executive officers and Directors of the
Company, to produce an annual report of executive compensation for inclusion in
the Company's proxy statement, and to oversee and advise the Board on adoption
of policies that govern the Company's compensation programs, including stock and
benefit plans. The Committee shall report to the Board on a regular basis and
not less than once a year.

COMMITTEE MEMBERSHIP

The Committee shall consist of at least two Directors, all of whom shall be
"independent Directors," i.e. those Directors who neither are officers or
employees of the Company or its Subsidiaries nor have a relationship which, in
the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a Director, and who are
otherwise "independent" under the rules of the NASDAQ National Market.

Members shall be appointed by the Board after receiving recommendations from the
members of the Board so designated, and shall serve at the pleasure of the Board
and for such term or terms as the Board may determine.

COMMITTEE STRUCTURE AND OPERATIONS

The Board shall designate one member of the Committee as its chairperson (the
"Chairperson"), with the chairperson to be rotated at least once every two
years. The Committee shall meet in person or telephonically at least twice a
year at a time and place determined by the Chairperson, with further meetings to
occur, or actions to be taken by unanimous written consent, when deemed
necessary or desirable by the Committee or the Chairperson.

COMMITTEE DUTIES AND RESPONSIBILITIES

The following are the duties and responsibilities of the Committee:

1. Design, evaluation and approve all compensation plans,
arrangements, policies and programs for the Company's CEO and
executive officers, in consultation with the CEO and
management. The forms of compensation to be approved include
annual base salary, bonuses, cash incentives, equity
compensation, deferred compensation, plans/arrangements,
employment agreements, severance arrangements, change in
control agreements or provisions, and any other benefits.

2. Review and approve corporate goals and objectives relative to
executive compensation and establish incentive goals for the
Company's executive officers.

3. Review and monitor executive performance and incentive-based
compensation, including mid-year review, and adjust
compensation as appropriate based on performance.

4. Review competitive practices and trends to determine the
adequacy of the executive compensation programs and make any
recommendations for change to ensure that the executive
compensation programs for the Company's executives are
designed to encourage high performance and promote
accountability.

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5. Review and approve the compensation plans for the Company's
Directors.

6. Periodically review and reassess the adequacy of this Charter
and make any recommendations for change.

7. Produce an annual report on executive compensation for
inclusion in the Company's proxy materials.

8. Review and monitor management development and succession plans
and activities.

9. To perform any other duties or responsibilities expressly
delegated to the Committee by the Board from time to time.

DELEGATION TO SUBCOMMITTEE

The Committee may, in its discretion, delegate all or a portion of its authority
to a subcommittee of the Committee or one or more designated members of the
Committee.

RESOURCES AND AUTHORITY OF THE COMMITTEE

The Committee shall have the resources and authority appropriate to discharge
its duties and responsibilities, including the authority to select, retain,
terminate, and approve the fees and other retention terms of special counsel or
other experts or consultants, as it deems appropriate, without seeking approval
of the Board or management. With respect to consultants or search firms used to
identify director candidates, this authority shall be vested solely in the
Committee.

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Pomeroy IT Solutions, Inc.

POMEROY IT SOLUTIONS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
___________, 2007

This proxy is Solicited on Behalf of the Board of Directors of the Company

The undersigned hereby constitutes and appoints _____________ and
_________, and each of them, true and lawful agents and proxies ("Proxies"),
with full power of substitution and revocation in each, to attend the Annual
Meeting of Stockholders of Pomeroy IT Solutions, Inc. to be held at ____ a.m.
local time, on _____________, 2007 at _______________ and any adjournment or
postponement thereof, and thereat to vote all shares of common stock, par value
$0.01 per share, of the Company, which the undersigned would be entitled to vote
if personally present, upon the matters set forth on the reverse side and such
other business as may properly come before the meeting or any adjournment or
postponement thereof.

This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder and in accordance with the
judgment of the Proxies as to other matters. If no direction is made with regard
to a certain proposal, such proposal will be voted in the discretion of the
Proxies on such other business as may properly come before the meeting or any
adjournment thereof. The undersigned hereby revokes any proxy or proxies
previously given to vote such shares at said meeting or any adjournments or
postponements thereof.

The undersigned hereby acknowledges prior receipt of a copy of the
Notice of Annual Meeting of Stockholders and proxy statement related to the
________, 2007 Annual Meeting of the Stockholders of Pomeroy IT Solutions, Inc.

(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)

--------------------------------------------------------------------------------

YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSALS LISTED
BELOW

1. Election of Directors

Nominees: (1) David B. Pomeroy, II, (2) Stephen E. Pomeroy,
(3) Kevin G. Gregory, (4) William H. Lomicka,
(5) Vincent D. Rinaldi, (6) Debra E. Tibey,
(7) Kenneth R. Waters, (8) David G. Boucher, and
(9) Ronald E. Krieg

For All Nominees [ ] Withheld From All Nominees [ ]

For all nominees, except vote withheld from the following nominee(s):

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2. Proposal to ratify appointment of BDO Seidman, LLP as independent auditors
for the Company's 2007 fiscal year

For [ ] Against [ ] Abstain [ ]

DATE ________________, 2007

----------------------------------------
Signature

----------------------------------------
Title(s)

Please sign exactly as name is printed hereon. If shares are held jointly, each
holder should sign. If signing as executor or trustee or in similar fiduciary
capacity, please give full title as such. If a corporation, please sign full
corporate name by President or other authorized officer. If a partnership,
please sign partner's name by authorized person.

PLEASE COMPLETE, SIGN, DATE AND RETURN THIS WHITE PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOP PROVIDED.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘PREC14A’ Filing	Date	First	Last	Other Filings

	5/3/09	25	26
	5/3/08	25	26
	3/7/08	24		4
	1/5/08	22		10-K, 10-K/A, 5, NT 10-K
	1/1/08	22
	11/3/07	22
	6/6/07	3	4
Filed on:	5/18/07
	5/3/07	25	26	3
	4/17/07	24
	4/5/07	11	37	10-Q, 3, DFAN14A
	4/3/07	12		3, 8-K
	3/7/07	24		4
	2/16/07	22	23	4
	2/14/07	12		SC 13G/A
	2/12/07	12		SC 13G
	2/9/07	12		SC 13D/A, SC 13G/A
	2/7/07	12		4, SC 13G/A
	2/2/07	12		SC 13G/A
	1/5/07	17	35	10-K, 10-K/A, 4, 5
	1/3/07	12	34	SC 13D
	12/31/06	12
	11/3/06	34		4
	10/1/06	20	22
	8/7/06	34
	7/24/06	35		8-K
	6/20/06	33		DEF 14A
	5/19/06	35		8-K, 8-K/A
	5/16/06	35
	5/15/06	35		10-Q, 8-K
	4/26/06	35		8-K
	4/20/06	35		8-K, 8-K/A
	4/5/06	35		10-Q
	3/7/06	24
	3/1/06	25		8-K
	2/13/06	25		8-K, SC 13G
	1/5/06	35		10-K, NT 10-K
	1/3/06	22		3
	10/13/05	22		8-K
	10/1/05	24
	9/5/05	23
	5/5/05	35		10-K/A, DEF 14A
	1/31/05	16		8-K
	1/6/05	32		4
	1/5/05	16	35	10-K, 10-K/A, NT 10-K
	10/1/04	24
	8/1/04	10
	1/6/04	22		4
	11/3/03	22		4
	4/16/02	16		8-K
				List all Filings

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Filing Submission 0001133796-07-000154 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Pomeroy It Solutions Inc – ‘PREC14A’ on 5/18/07 re: Pomeroy It Solutions Inc

On: Friday, 5/18/07, at 6:08pm ET · Accession #: 1133796-7-154 · File #: 0-20022

Preliminary Proxy Solicitation Material — Contested Solicitation — Schedule 14AFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Preliminary Proxy Solicitation Material — Contested Solicitation — Schedule 14A
Filing Table of Contents