SUBORDINATED PROMISSORY NOTE
$1,000,000.00 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
COMMERCIAL BUSINESS SYSTEM, INC., a Virginia Carolina corporation
("Lender"), the sum of One Million Dollars ($1,000,000.00) (as
may be adjusted 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 ($1,000,000.00) shall
be adjusted downward by any decrease required by Sections 4.1(c),
(d) or (e) of the Asset Purchase Agreement. Such adjustments and
the manner in which they are to be made shall be done in
accordance with Sections 5.1, 5.2 and 5.3, respectively, of the
Asset 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 the
decrease made as a result of any adjustments contained in
Sections 4.1(c), (d) or (e) of the Asset Purchase Agreement.
3. Interest shall accrue at the prime rate of Star Bank,
National Association, Cincinnati, Ohio as of the date of Closing.
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 ____
day of each successive quarter thereafter. Principal shall be
paid in two (2) equal annual installments of Five Hundred
Thousand Dollars ($500,000.00), as may be adjusted pursuant to
the provisions of paragraph 2, commencing on the first
Anniversary Date of this Note and continuing on the next
successive 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 Asset 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 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, including, but not limited to, terms of default and
rights of acceleration, if any. 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 or any other of the
Asset Purchase Documents, the amount of such indemnification due
from Lender may be set off against the amounts payable hereunder
if permitted 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
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 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 Virginia.
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, servicing or
selling of computers, computer equipment or computer support
solutions.
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:
(a) "Anniversary Date" - March ____, 1999 and each March
___ thereafter.
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(b) "Asset Purchase Agreement" - The Asset Purchase
Agreement between and among the Borrower and the Lender dated
March ___, 1998.
(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 ten
(10) days after receipt of written notice from the Lender to the
Borrower that such installment has not been paid; 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.
(e) "Senior Debt" - The Debt of the Borrower to Star Bank,
N.A., 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 ___, 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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