SUBORDINATED PROMISSORY NOTE
$1,003,100.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) August ___, 1999
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 THOMAS F. SCHNEIDER ("Lender"), the sum of One Million Three
Thousand One Hundred Dollars ($1,003,100.00) (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, One Million Three Thousand One
Hundred Dollars ($1,003,100.00) shall be adjusted downward by any decrease
required by Sections 3.01 and 3.02 of the Stock Purchase Agreement. Such
adjustment and the manner in which it is to be made shall be done in accordance
with 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 the decrease made as a result of any
adjustment contained in Sections 3.01 and 3.02 of the Stock Purchase Agreement.
3. Interest shall accrue at the prime rate of Chase Manhattan Bank 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 20th day of each successive quarter
thereafter. Principal shall be paid in two (2) annual installments of Five
Hundred One Thousand Five Hundred Fifty Dollars ($501,550.00) with the first
principal payment commencing on the First Anniversary Date and the remaining
principal payment being due on the Second Anniversary Date, with such principal
payments being adjusted pursuant to the provisions of paragraph 2 of this Note.
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 Deutsche Financial Services Company, 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.
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7. This Note is issued pursuant and subject to the terms and conditions of
the Stock Purchase Agreement. This Note is subject to all terms and conditions
set forth in the Stock 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 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
declare the maturity hereof, or to exercise any other rights under any of the
covenants or conditions contained in the Stock 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 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, 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 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 Borrower
hereunder shall in all respects be governed by and interpreted and determined in
accordance with the internal laws of the State of Ohio.
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) "First Anniversary Date" - August ___, 2000.
(b) Second Anniversary Date - August ___, 2001.
(c) "Stock Purchase Agreement" - The Stock Purchase Agreement by and
between the Borrower and the Lender dated August ___, 1999.
(d) "Stock Purchase Documents" - The Stock Purchase Agreement and all
Exhibits thereto (except for any employment agreements and all noncompetition
agreements, other than the one provided by Lender) by and between the parties to
the Stock Purchase Agreement.
(e) "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.
(f) "Senior Debt" - The Debt of the Borrower to Deutsche Financial
Services Company, as set forth in the Subordination Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources, Inc.
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By:
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- --------------------------------- Its:
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THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A
SUBORDINATION AGREEMENT DATED AUGUST ___, 1999 IN FAVOR OF DEUTSCHE FINANCIAL
SERVICES COMPANY, 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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