SUBORDINATED PROMISSORY NOTE
$287,560.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of O.
DEAN HIGGANBOTHAM ("Lender"), the sum of Two Hundred Eighty-Seven
Thousand Five Hundred Sixty and 00/100 Dollars ($287,560.00)
(adjusted upward or downward 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 ($287,560.00) shall be
adjusted either downward or upward by any increase or decrease
required by Section 2.02(b) of the Stock Purchase Agreement.
Such adjustments and the manner in which they are to be made
shall be done in accordance with Section 3.02 of the Stock
Purchase Agreement. If, prior to such adjustment, Borrower has
made any interest payment to Lender hereunder, the parties agree
to adjust any prior payments to equitably reflect either the
increase or decrease made as a result of any adjustments
contained in Section 2.02(b) of the Stock Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of Star
Bank, National Association, Cincinnati, Ohio as of the date of
Closing (as defined in the Stock Purchase Agreement) 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 18th
day of each successive third month thereafter. Principal shall
be paid in two (2) equal annual installments of One Hundred
Forty Three Thousand Seven Hundred Eighty and 00/100 Dollars
($143,780.00), 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,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
such Subordination Agreement as long as it is in effect.
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 Stock Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). 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 to and subject to the terms and
conditions of the Stock Purchase Agreement. Any holder of this
Note is subject to all claims and defenses which the Borrower
could pursue against Lender under the Stock 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
accelerate the maturity hereof shall not be taken or deemed to be
a waiver of the right to exercise such option or to accelerate
such maturity. All remedies provided for herein upon any default
by the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Stock 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 Stock Purchase Agreement or any other of the
Stock Purchase Documents and Borrower has complied with the
notice provisions of section 11.06 of the Stock Purchase
Agreement, the amount of such indemnification due from Lender may
be set off against the amounts payable hereunder if permitted
under the Stock Purchase Agreement, being first applied to
interest and the withholding of 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 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 terms of the Stock Purchase Documents.
10. The provisions of this Note and the obligations of the
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Borrower hereunder shall in all respects be governed by and
interpreted and determined in accordance with the internal laws
of the State of Oklahoma.
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 of 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 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:
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(a) "Anniversary Date" - March 18, 1999 and each March 18
thereafter.
(b) "Stock Purchase Agreement" - The Stock Purchase
Agreement between and among the Borrower and the Sellers as that
term is defined in the Stock Purchase Agreement dated February
25, 1998.
(c) "Stock Purchase Documents" - The Stock Purchase
Agreement and any employment agreements, non-competition
agreements or subordination agreements referred to or made a part
of the Stock Purchase Agreement.
(d) "Event of Default" - Shall include (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 receipt of written
notice from the Lender to the Borrower that such installment has
not been paid; or (ii) a default under any of the other
subordinated promissory notes issued to the other Sellers under
the Stock Purchase Agreement; or (iii) an event of 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.
(e) _Senior Debt_ - The debt of the Borrower to Star
Bank, National Association as set forth in the Subordination
Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 18, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION 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.
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