SUBORDINATED PROMISSORY NOTE
$216,800.00 Cincinnati
(as may be adjusted as
hereinafter set forth) June 26, 1997
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES,
INC., a Delaware corporation (hereinafter, together with its
successors in title and permitted assigns, called the
"Borrower"), does hereby absolutely and unconditionally promise
to pay to the order of MAGIC BOX, INC., a Florida corporation
("Lender"), or ISRAEL FINTZ if this Note is assigned to him by
written notice to Borrower, the sum of Two Hundred Sixteen
Thousand Eight Hundred Dollars ($216,800.00) (as may be adjusted
downward only in the manner hereinafter set forth), together with
interest on the outstanding principal balance from the date
hereof, at the rate specified below.
2. The initial face amount of this note ($216,800.00) shall
be adjusted downward by any decrease required by Sections 4.1(c),
4.4 and/or 6.12 of the Asset Purchase Agreement. Such
adjustments and the manner in which they are to be made shall be
done in accordance with such Sections of the Asset Purchase
Agreement, which are incorporated herein by reference. If, prior
to such adjustments, Borrower has made any interest payment to
Lender hereunder, the parties agree to adjust any prior payments
to equitably reflect the decrease made as a result of any
adjustments contained in Sections 4.1(c), 4.4 and/or 6.12 of the
Asset Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of
Star Bank, N.A. as of the date of Closing per annum. Interest on
the unpaid principal balance of this Note shall be due and
payable quarterly, with the first interest payment due and
payable ninety (90) days from the date hereof and on the 26th day
of each successive third month thereafter. Principal shall be
paid in two (2) equal annual installments of One Hundred Eight
Thousand Four Hundred Dollars ($108,400.00), as may be adjusted
pursuant to the provisions of paragraph 2, commencing on the
first Anniversary Date of this Note and then on the second
Anniversary Date until paid in full.
4. All payments received hereunder shall be applied
first to interest and then to principal. Subject to the
Subordination Agreement, as defined below, this Note may be
prepaid, in whole or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower
hereunder are subordinated and made junior in right of payment to
the extent and in the manner provided in the Subordination
Agreement of even date herewith (the "Subordination Agreement")
between Star Bank, N.A., the Lender and the Borrower and no
action may be taken by the Lender which conflicts with the terms
of such Subordination Agreement as long as it is in effect.
E-119
6. Upon the occurrence of an Event of Default, the
entire principal amount outstanding under this Note, and accrued
interest thereon, shall at once become due and payable, at the
option of the Lender and the Lender shall have the remedies set
forth in the Asset Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note and all accrued and unpaid
interest (whether for principal or otherwise) shall (to the
extent permitted by applicable law) bear interest at the annual
rate of fifteen percent (15%). The unpaid interest accrued
during the continuation of any Event of Default on the
indebtedness evidenced by this Note (whether for principal or
otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant and subject to the
terms and conditions of the Asset Purchase Agreement. This Note
is subject to all terms and conditions set forth in the Asset
Purchase Documents, which specifically reference this Note,
including, but not limited to, terms of default and rights of
acceleration, if any. The terms and conditions of said Asset
Purchase Documents are incorporated herein by reference. Any
holder of this Note is subject to all claims and defenses which
the Borrower could pursue against Lender under the Asset Purchase
Agreement.
8. When this Note becomes due, by acceleration or
otherwise, the Lender may, at its option, subject to the
Subordination Agreement, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to
property held as security herefor. The failure to exercise any
option to declare the maturity hereof or to exercise any other
rights under any of the covenants or conditions contained in the
Asset Purchase Documents shall not be taken or deemed to be a
waiver of the right to exercise such option or to declare such
maturity after any subsequent violation of any such covenants or
conditions. All remedies provided for herein upon any default by
the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Asset
Purchase Agreement, Lender made certain representations,
warranties, covenants and agreements with and to the Borrower.
Lender agrees that if the Borrower is entitled to indemnification
from the Lender under the Asset Purchase Agreement, the amount of
such indemnification due from Lender may be set off against the
amounts payable hereunder if permitted under and only pursuant to
the terms of the Asset Purchase Agreement (e.g., pro rata set off
against all Lenders under the Asset Purchase Agreement), being
first applied to interest and the withholding all or any part of
payment due hereunder as a result of such a set off shall not be
considered an Event of Default hereunder. Lender agrees that the
E-120
amount to which the Borrower may be entitled to recover from
Lender shall not be limited by either the amount paid or due to
be paid to Lender hereunder or by the terms of this Note but
shall be governed by the specific terms of the Asset Purchase
Documents.
10. The provisions of this Note and the obligations of
the Borrower hereunder shall in all respects be governed by and
interpreted and determined in accordance with the internal laws
of the State of Florida. BORROWER AND THE LENDER AGREE THAT ANY
ACTION OR PROCEEDING COMMENCED BY OR ON BEHALF OF THE PARTIES
ARISING OUT OF OR RELATING TO THIS NOTE SHALL BE COMMENCED AND
MAINTAINED EXCLUSIVELY IN THE DISTRICT COURT OF THE UNITED STATES
OF THE APPLICABLE DISTRICT OF FLORIDA, OR ANY OTHER COURT OF
APPLICABLE JURISDICTION LOCATED IN DADE COUNTY, FLORIDA.
11. The rights of the Lender hereunder are fully
assignable and transferrable, except that any assignment and/or
transfer made to a competitor of Borrower shall be made only with
the prior written approval of Borrower, which approval shall not
be unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing or selling of
computers and/or computer equipment.
12. The Borrower hereby unconditionally and irrevocably
waives notice of acceptance, presentment, notice of nonpayment
(except as provided herein), protest, notice of protest, suit and
all other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness
represented by this Note be collected by action in law, or in
bankruptcy, insolvency, receivership or other court proceedings,
or should this Note be placed in the hands of attorneys for
collection after the occurrence of an Event of Default, the
Borrower hereby promises to pay to the Lender of this Note, upon
demand by the Lender hereof at any time, in addition to principal
and all (if any) other amounts payable on or in respect of this
Note or the indebtedness evidenced hereby, all court costs and
reasonable attorneys' fees and all other reasonable collection
charges and expenses incurred or sustained by the Lender of this
Note.
14. If for any circumstances whatsoever, the
fulfillment of any provision of this Note involves transcending
the limit of validity prescribed by any applicable usury statute
or any other applicable law with regard to obligations of like
character and amount, then the obligation to be fulfilled will be
reduced to the limit of such validity as provided in such statute
or law, so that in no event shall any exaction of interest be
possible under this Note in excess of the limit of such validity.
In no event shall the Borrower be bound to pay interest of more
than the legal limit for the use, forbearance or detention of
E-121
money, and the right to demand any such excess is hereby
expressly waived by the Lender.
15. No delay or omission of the holder of this Note to
exercise any right or power arising from any default shall impair
any such right or power or be considered to be a waiver of any
such default or any acquiescence therein, nor shall the action or
non-action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the
following meanings, respectively:
(a) "Anniversary Date" - June 26, 1998 and each June
26th thereafter.
(b) "Asset Purchase Agreement" - The Asset Purchase
Agreement by, between and among the Borrower, the Lender, Israel
Fintz, M. Ronald Krongold, Marvin Rosen and Allison Sokol, dated
May 30, 1997.
(c) "Asset Purchase Documents" - The Asset Purchase
Agreement and any employment agreements or subordination
agreement between and among the parties to the Asset Purchase
Agreement.
(d) "Event of Default" -
(i) The failure of Borrower to make any payment of
principal or interest due under this Note for a period of seven
(7) days after its due date; or
(ii) A default under the Senior Debt loan
documentation that has been declared in writing, remains uncured
past any applicable cure period, and results in the declared
acceleration of the Senior Debt; or
(iii) A material default by Borrower of any of
its obligations under the Asset Purchase Agreement which is not
cured within all applicable cure periods set forth therein; or
(iv) A default by Borrower under any other note
payable to Lender pursuant to the Asset Purchase Agreement.
(e) "Senior Debt" - The Debt of the Borrower to Star
Bank, N.A., as set forth in the Subordination Agreement.
BORROWER:
________ Witnesses:
POMEROY COMPUTER RESOURCES,
INC.
E-122
___________________________ By:
_____________________________________
___________________________ Its:
_____________________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED JUNE 26, 1997 IN FAVOR
OF THE STAR BANK, N.A. TO WHICH REFERENCE IS HEREBY MADE,
RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF ANY HOLDER
WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL AND INTEREST
HEREOF.
E-123