UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 5, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20022
POMEROY COMPUTER RESOURCES, INC.
________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 31-1227808
________ __________
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1020 Petersburg Road Hebron, KY 41048
______________________________________
(Address of principal executive offices)
(606) 586-0600
______________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES ___X___NO___
The number of shares of common stock outstanding as of July 31,
1997 was 7,519,958.
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements: Page
____
Consolidated Balance 3
Sheets as of January 5,
1997 and July 5, 1997
Consolidated Statements of 4
Income for the Quarters
Ended July 5, 1996 and
1997
Consolidated Statements of 5
Income for the Six Months
Ended July 5, 1996 and
1997
Consolidated Statements of 6
Cash Flows for the Six
Months Ended July 5, 1996
and 1997
Notes to Consolidated 7
Financial Statements
Item 2. Management's Discussion 9
and Analysis of Financial
Condition and Results of
Operations
Part II. Other Information 12
SIGNATURE 15
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
( In thousands)
<CAPTION> January 5, July 5,
1997 1997
ASSETS __________ __________
<S> <C> <C>
Current assets:
Cash $ 6,809 $ 95
Accounts and note receivable, less
allowance of $509 and $639 at January
5 and July 5, 1997, respectively 68,094 81,921
Inventories 23,426 32,445
Other 739 735
__________ __________
Total current assets 99,068 115,196
__________ __________
Equipment and leasehold improvements 13,076 14,741
Less accumulated depreciation 3,864 5,308
__________ __________
Net equipment and leasehold improvements 9,212 9,433
Other assets 13,100 14,833
__________ __________
Total assets $ 121,380 $ 139,462
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Notes payable $ 907 $ 1,150
Accounts payable 40,343 36,424
Bank notes payable 24,146 12,314
Other current liabilities 6,469 10,117
__________ __________
Total current liabilities 71,865 60,005
Notes payable 2,189 1,978
Deferred income taxes 733 507
Equity:
Preferred stock ( no shares
issued or outstanding)
Common stock ( 6,469 and 7,508 shares
issued and outstanding at January 5
and July 5, 1997, respectively) 65 75
Paid-in capital 34,402 57,844
Retained earnings 12,330 19,257
__________ __________
46,797 77,176
Less treasury stock, at cost
(21 shares at January 5
and July 5, 1997, respectively) 204 204
__________ __________
Total equity 46,593 76,972
__________ __________
Total liabilities and equity $ 121,380 $ 139,462
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
( In thousands, except per share amounts )
<CAPTION>
Quarter Ended
_____________________
July 5, July 5,
1996 1997
__________ __________
<S> <C> <C>
Net sales and revenues $ 77,836 $ 118,218
Cost of sales and service 64,990 99,083
__________ __________
Gross profit 12,846 19,135
__________ __________
Operating expenses:
Selling, general and administrative 8,144 11,297
Rent expense 340 446
Depreciation 442 700
Amortization 171 223
__________ __________
Total operating expenses 9,097 12,666
__________ __________
Income from operations 3,749 6,469
Interest expense 659 99
Other expense (income) (24) 169
Income before income tax 3,114 6,201
Income tax expense 1,261 2,232
__________ __________
Net income $ 1,853 3,969
========== ==========
Weighted average shares outstanding:
Primary 4,346 7,679
Fully diluted 4,354 7,687
Net income per common share:
Primary $ 0.43 $ 0.52
Fully diluted $ 0.43 $ 0.52
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
( In thousands, except per share amounts )
<CAPTION>
Six Months Ended
_____________________
July 5, July 5,
1996 1997
__________ __________
<S> <C> <C>
Net sales and revenues $ 141,060 $ 218,584
Cost of sales and service 118,614 182,545
__________ __________
Gross profit 22,446 36,039
__________ __________
Operating expenses:
Selling, general and administrative 14,580 21,772
Rent expense 631 919
Depreciation 760 1,503
Amortization 269 435
__________ __________
Total operating expenses 16,240 24,629
__________ __________
Income from operations 6,206 11,410
Interest expense 1,094 466
Litigation settlement and related costs 4,392 -
Other expense (income) (117) 121
__________ __________
Income before income tax 837 10,823
Income tax expense 339 3,896
__________ __________
Net income $ 498 $ 6,927
========== ==========
Weighted average shares outstanding:
Primary 4,232 7,391
Fully diluted 4,242 7,395
Net income per common share:
Primary $ 0.12 $ 0.94
Fully diluted $ 0.12 $ 0.94
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( In thousands )
<CAPTION>
Six Months Ended
______________________
July 5 July 5,
1996 1997
__________ __________
<S> <C> <C>
Net cash flows used in operating activities $ (4,433) $ (14,711)
__________ __________
Cash flows used in investing activities:
Capital expenditures (1,475) (1,180)
Acquisition of reseller (4,460) (1,958)
__________ __________
Net investing activities (5,935) (3,138)
__________ __________
Cash flows provided by (used in)
financing activities:
Net payments on bank note (2,943) (11,832)
Payments of notes payable (2,167) (425)
Net proceeds of stock offering 15,221 23,262
Retirement of stock warrants (330) 0
Proceeds from exercise of stock options 213 130
__________ __________
Net financing activities 9,994 11,135
__________ __________
Decrease in cash (374) (6,714)
Cash:
Beginning of period 596 6,809
__________ __________
End of period $ 222 $ 95
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.Basis of Presentation
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Except as
disclosed herein, there has been no material change in the
information disclosed in the notes to consolidated financial
statements included in the Company's Annual Report on Form 10-
K for the year ended January 5, 1997. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the interim
period have been made. The results of operations for the six-
month period ended July 5, 1997 are not necessarily indicative
of the results that may be expected for future interim periods
or for the year ending January 5, 1998.
2.Borrowing Arrangements
The Company's $25.0 million bank revolving credit agreement
( "Credit Facility" ) expired on April 30, 1997 and was
replaced by a temporary $10 million note with interest at 1.0
percentage point below the bank's prime rate. At July 5, 1997,
the outstanding balance, which included $6.3 million of
overdrafts, was $12.3 million at an interest rate of 7.5%. The
overdrafts were subsequently funded through the normal course
of business. The Company expects to complete negotiations for
an amendment of the Credit Facility during the third quarter
of fiscal 1997. The amended Credit Facility will permit the
Company to borrow up to $15.0 million and will expire one year
from its effective date. The amended Credit Facility will
carry a variable interest rate based on (i) Star Bank's prime
rate less an incentive pricing spread (the Incentive Pricing
Spread ) based on certain financial ratios of the Company or
(ii) LIBOR plus the Incentive Pricing Spread, at the Company's
election. The Incentive Pricing Spread will be adjusted
quarterly. The amended Credit Facility will be collateralized
by substantially all of the assets of the Company, except
those assets that collateralize certain other financing
arrangements. Under the terms of the amended Credit Facility,
the Company will be subject to various financial covenants.
3.Supplemental Cash Flow Disclosures
Supplemental disclosures with respect to cash flow information
and non-cash investing and financing
activities are as follows:
(In thousands) Six Months Ended
______________________
July 5 July 5,
1996 1997
__________ __________
Interest paid $ 1,051 $ 579
========== ==========
Income taxes paid $ 589 $ 1,494
========== ==========
Business combination accounted for
as purchase:
Assets acquired $ 14,830 $ 3,746
Liabilities assumed (6,395) (1,246)
Note payable (2,700) (542)
Stock issued (1,275) -
__________ __________
Net cash paid $ 4,460 $ 1,958
========== ==========
Note issued and accrued
liabilities for litigation
settlement $ 1,650
==========
<PAGE>
4.Stockholders' Equity
On February 28, 1997, the Company completed a secondary public
offering of 1.02 million shares of its common stock. The net
proceeds of $23.3 million were used to reduce amounts
outstanding under the Company's line of credit. If this
secondary offering had been completed as of January 6, 1997,
pro forma primary and fully diluted earnings per share would
have been $0.92 for the first half of fiscal 1997. This
computation assumes no interest expense related to the credit
line and the issuance of only a sufficient number of shares to
eliminate the credit line at the beginning of fiscal 1997.
5.Income Taxes
The Company's effective tax rate was 36.0% in the second
quarter and first half of 1997 compared to 40.5% in the second
quarter and first half of 1996. This decrease was attributable
to state tax credits earned as a result of the move to the new
headquarters and distribution center in fiscal 1996.
6. Acquisition
On June 26, 1997, the Company acquired substantially all of
the assets and assumed certain of the liabilities of Magic
Box, Inc. ( "Magic Box" ), a privately held network integrator
located in Miami, Florida. The purchase price consisted of
$2.0 million in cash, $1.2 million of assumed liabilities and
$0.5 million of subordinated notes. Interest on the
subordinated notes, which is calculated at the prime rate as
of the date of closing, is payable quarterly and principal is
payable in two equal annual installments. The acquisition was
accounted for as a purchase, accordingly the purchase price
was allocated to assets and liabilities based on their
estimated value as of the date of acquisition. The results of
Magic Box's operations were included in the consolidated
statement of income from the date of acquisition. Had Magic
Box been acquired at the beginning of fiscal 1996, the pro-
forma inclusion of its operating results would not have had a
significant effect on the reported consolidated net income for
the six months ended July 5, 1996 and 1997, respectively.
7.New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board
( "FASB" ) issued Statement of Financial Accounting Standards
No. 128, Earnings Per Share ( "Statement 128" ). Statement 128
supersedes APB Opinion No. 15, Earnings Per Share and
specifies the computation, presentation and disclosure
requirements for earnings per share (``EPS'') for entities with
publicly held common stock or potential common stock.
Statement 128 replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted
EPS. Statement 128 is effective for financial statements for
both interim and annual periods ending after December 15,
1997. The Company has determined the impact of the
implementation of Statement 128 on its financial statements
and related disclosures will not be material.
8.Litigation
There are various legal actions arising in the normal course
of business that have been brought against the Company.
Management believes these matters will not have a material
adverse effect on the Company's financial position or results
of operations.
9.Subsequent Event
On July 24, 1997, the Company acquired certain assets and
assumed certain liabilities of Micro Care, Inc. ( "Micro
Care" ), a privately held systems integrator located in
Indianapolis, Indiana. The purchase price consisted of $1.0
million in cash, a subordinated note for $0.8 million and
12,002 unregistered shares of the Company's common stock with
an approximate value of $0.3 million. Interest on the
subordinated note, which is calculated at the prime rate as of
the date of closing, is payable quarterly and principal is
payable in three equal annual installments. The acquisition
will be accounted for as a purchase, accordingly the purchase
price will be allocated to assets and liabilities based on
their estimated value as of the date of acquisition. The
results of Micro Care's operations will be included in the
consolidated statement of income from the date of acquisition.
<PAGE>
Special Cautionary Notice Regarding Forward-Looking Statements
______________________________________________________________
Certain of the matters discussed under the caption
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" may constitute forward-looking
statements for purposes of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended, and as such may
involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from
future results, performance or achievements expressed or
implied by such forward-looking statements. Important factors
that could cause the actual results, performance or
achievements of the Company to differ materially from the
Company's expectations are disclosed in this document
including, without limitation, those statements made in
conjunction with the forward-looking statements under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations". All written or oral forward-
looking statements attributable to the Company are expressly
qualified in their entirety by such factors.
POMEROY COMPUTER RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TOTAL NET SALES AND REVENUES. Total net sales and revenues
increased $40.4 million, or 51.9%, to $118.2 million in the
second quarter of 1997 from $77.8 million in the second quarter
of 1996. This increase was attributable to acquisitions completed
in 1996 and 1997, new regional offices, an increase in sales to
existing and new customers. Excluding acquisitions completed in
1996 and 1997 and new regional offices, total net sales and
revenues increased 32.0%. Sales of equipment and supplies
increased $35.6 million, or 50.2%, to $106.6 million in the
second quarter of 1997 from $71.0 million in the second quarter
of 1996. Excluding acquisitions completed in 1996 and 1997 and
new regional offices, sales of equipment and supplies increased
30.5%. Service revenues increased $4.8 million, or 70.6%, to
$11.6 million in the second quarter of 1997 from $6.8 million in
the second quarter of 1996. Excluding acquisitions completed in
1996 and 1997 and new regional offices, service revenues
increased 48.6%.
Total net sales and revenues increased $77.5 million, or 54.9%,
to $218.6 million in the first half of 1997 from $141.1 million
in the first half of 1996. On a comparable basis, as described
above, total net sales and revenues increased 29.6%. Sales of
equipment and supplies increased $68.6 million, or 53.4%, to
$196.9 million in the first half of 1997 from $128.3 million in
the first half of 1996. On a comparable basis, as described
above, sales of equipment and supplies increased 27.8%. Service
and other revenues increased $8.9 million, or 69.5%, to $21.7
million in the first half of 1997 from $12.8 million in the first
half of 1996. On a comparable basis, as described above, service
and other revenues increased 48.0%.
GROSS MARGIN. Gross margin was 16.2 % in the second quarter of
1997 compared to 16.5% in the second quarter of 1996. This
decrease in the second quarter of 1997 can be attributed to an
increase in the percentage of equipment sales with lower-margin
customers. This strategy was undertaken to generate additional
service revenues and increase market share. Service revenues as a
percentage of total net sales increased to 9.8% in the second
quarter of 1997 compared to 8.8% in the second quarter of 1996.
However, the increase in the higher-margin service revenues was
not enough to offset the lower-margin equipment sales. It is not
expected that this trend in decreasing gross margin will continue
during the third and fourth quarters of fiscal 1997. Factors that
could have an impact on this trend include the percentage of
equipment sales with lower-margin customers and the ratio of
service revenues to total net sales and revenues.
Gross profit as a percentage of sales was 16.5% in the first half
of 1997 compared to 15.9% in the first half of 1996. This
increase is attributed to the increase in higher-margin service
revenues, the increase in gross margin for services and the
increase in the gross margin for equipment sales during the first
<PAGE>
quarter of 1997. The increase in gross margin for equipment sales
in the first quarter of 1997 compared to the first quarter of
1996 resulted from better pricing through volume purchases with
major manufacturers.
OPERATING EXPENSES. Selling, general and administrative expenses
(including rent expense) expressed as a percentage of total net
sales and revenues decreased to 9.9% and 10.4% for the second
quarter and first half of 1997 from 10.9% and 10.8% in the second
quarter and first half of 1996. This decrease is primarily
attributable to a slowing in the rate of increase of expenses
relative to the increase in total net sales and revenues. Total
operating expenses expressed as a percentage of total net sales
and revenues decreased to 10.7% and 11.3% in the second quarter
and first half of 1997 from 11.7% and 11.5% in the second quarter
and first half of 1996 due to the slowing in the rate of increase
of expenses relative to total net sales and revenues.
INCOME FROM OPERATIONS. Income from operations increased $2.7
million, or 72.6%, to $6.5 million in the second quarter of 1997
from $3.7 million in the second quarter of 1996. The Company's
operating margin increased to 5.5% in the second quarter of 1997
as compared to 4.8% in 1996 as the decrease in gross margin was
more than offset by the decrease in operating expenses as a
percent of total net sales and revenues.
Income from operations increased $5.2 million, or 83.9%, to $11.4
million in the first half of 1997 from $6.2 million in the first
half of 1996. Operating margin increased to 5.2% in the first
half of 1997 as compared to 4.4% in 1996 due to the increase in
gross margin and the decrease in operating expenses as a percent
of net sales and revenues.
INTEREST EXPENSE. Interest expense was $0.1 million and $0.5
million in the second quarter and first half of 1997 compared
with $0.7 million and $1.1 million in the second quarter and
first half of 1996. This decrease in the second quarter and first
half of 1997 from the comparable periods in 1996 is due to lower
average debt outstanding as the proceeds from the secondary
public offering in February 1997 were used to pay outstanding
balances.
INCOME TAXES. The Company's effective tax rate was 36.0% in the
second quarter and first half of 1997 compared to 40.5% in the
second quarter and first half of 1996. This decrease was
attributable to state tax credits earned as a result of the move
to the new headquarters and distribution center in fiscal 1996.
The Company has been approved for state tax credits of
approximately $4.0 million over 10 years by the Kentucky Economic
Development Finance Authority.
NET INCOME. Net income increased $2.1 million, or 114.2%, to $4.0
million in the second quarter of 1997 from $1.9 million in the
second quarter of 1996. This increase was a result of the factors
described previously. Net income, excluding the impact of the
Vanstar settlement, increased $3.8 million, or 122.7%, to $6.9
million in the first half of 1997 from $3.1 million in the first
half of 1996. This increase was a result of the factors described
previously.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities was $14.7 million in the first
half of 1997. Cash used in investing activities included $2.0
million for an acquisition and $1.2 million for capital
expenditures. Cash provided by financing activities included
$23.3 million of net proceeds from a secondary stock offering of
1.02 million shares less $11.8 million of net repayments on bank
notes payable and $0.4 million of repayments on various notes
payable.
A significant part of the Company's inventories is financed by
floor plan arrangements with third parties. At July 5, 1997,
these lines of credit totaled $37.0 million, including $12.0
million with IBM Credit Corporation ( "ICC" ) and $25.0 million
with Deutsche Financial Services ( "DFS" ). Borrowings under the
ICC floor plan arrangement are made on sixty day notes, with one-
half of the note amount due in thirty days. Borrowings under the
DFS floor plan arrangement are made on thirty day notes. All such
borrowings are secured by the related inventory. Financing on
substantially all of the arrangements is interest free due to
subsidies by manufacturers. The average interest rate on the
plans overall is less than 1.0%. The Company classifies amounts
outstanding under the floor plan arrangements as accounts
payable.
<PAGE>
The Company's $25.0 million bank revolving credit agreement
( "Credit Facility" ) , which expired on April 30, 1997, was
replaced by a temporary $10 million note with interest at 1.0
percentage point below the bank's prime rate. At July 5, 1997,
the amount outstanding, which included $6.3 million of overdrafts
in accounts at Star Bank, was $12.3 million at an interest rate
of 7.5%. The overdrafts were subsequently funded through the
normal course of business. The Company expects to complete its
negotiations for an amendment of the Credit Facility during the
third quarter of fiscal 1997. The amended Credit Facility will
permit the Company to borrow up to $15.0 million and will expire
one year from its effective date. The Company has elected to
reduce the amended Credit Facility in order to eliminate the fees
charged for unused portions of the credit line. The amended
Credit Facility will carry a variable interest rate based on (i)
Star Bank's prime rate less an incentive pricing spread (the
"Incentive Pricing Spread" ) based on certain financial ratios
of the Company or (ii) LIBOR plus the Incentive Pricing Spread,
at the Company's election. The Incentive Pricing Spread will be
adjusted quarterly. The amended Credit Facility will be
collateralized by substantially all of the assets of the Company,
except those assets that collateralize certain other financing
arrangements. Under the terms of the amended Credit Facility, the
Company will be subject to various financial covenants.
At the beginning of the third quarter of 1997, the Company hired
a president for Pomeroy Computer Leasing Company, Inc. ( "PCL" ),
a wholly-owned subsidiary of the Company, in an effort to
increase its leasing business. Through PCL, the Company can
directly provide its customers with leasing alternatives.
Although the Company has not completed projections for PCL,
management expects that the leasing operations of PCL will
increase in the third and fourth quarters of 1997 over the
relatively minimal levels of leasing activity to date. Increased
leasing operations could impact one or more of total net sales
and revenues, gross margin, operating income, net income, total
debt and liquidity, depending on the amount of leasing activity
and the types of leasing transactions. However, the impact of any
increased leasing operations for the balance of 1997 is not
expected to be material.
The Company believes that the anticipated cash flow from
operations and current financing arrangements will be sufficient
to satisfy the Company's capital requirements for the next 12
months.
<PAGE>
PART II - OTHER INFORMATION
Items 1 to 3 None
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
On June 25, 1997 the Company held its annual meeting of
stockholders for the following purposes:
1. To elect six directors;
2. To amend Article Fourth of the Certificate of
Incorporation of the Company to increase the number of
authorized shares of common stock, $0.01 par value, from
10,000,000 to 15,000,000 and;
3. To approve an increase in the number of shares of
common stock reserved for issuance under the Company's
1992 Outside Directors' Stock Option Plan from 123,750
shares to 175,000 shares.
The voting on the above matters by the stockholders was as
follows:
Matter For Withheld
______ ___ ________
Election of Directors:
______________________
David B. Pomeroy 6,901,015 25,349
Edwin S. Weinstein 6,902,477 23,887
Michael E. Rohrkemper 6,903,327 23,037
James H. Smith 6,901,409 24,955
David W. Rosenthal 6,902,527 23,837
Kenneth R. Waters 6,902,762 23,602
For Withheld
___ ________
Amend Article Fourth of the
Certificate of
Incorporation of the
Company to increase the
number of authorized shares
of common stock, $0.01 par
value, from 10,000,000 to
15,000,000 6,780,636 125,206
Approve an increase in the
number of shares of common
stock reserved for issuance
under the Company's 1992
Outside Directors' Stock
Option Plan from 123,750
shares to 175,000 shares 6,160,026 745,604
Item 5 None
<PAGE>
Item 6 Exhibits
Filed Herewith
(page #) or
Incorporated
Exhibit by Reference to:
_______ ________________
10(i) Material Contracts
(a)(24) Promissory Note dated E-1 to E-2
April 30, 1997 by and
among Star Bank, N.A.,
the Company, Pomeroy
Computer Leasing
Company, Inc. and Xenas
Communications Corp.
(t)(1) Asset Purchase E-3 to E-63
Agreement among the
Company and Magic Box,
Inc. dated June 26,
1997
(t)(2) Employment Agreement E-64 to E-75
between the Company and
Israel Fintz, dated
June 26, 1997
(t)(3) Incentive Deferred E-76 to E-78
Compensation Agreement
between the Company and
Israel Fintz, dated
June 26, 1997
(t)(4) Employment Agreement E-79 to E-90
between the Company and
Allison Sokol, dated
June 26, 1997
(t)(5) Incentive Deferred E-91 to E-93
Compensation Agreement
between the Company and
Allison Sokol, dated
June 26, 1997
(t)(6) Power of Attorney given E-94 to E-96
to the Company by Magic
Box, Inc. for the
collection of Accounts
Receivable, dated June
26, 1997
(t)(7) Agreement for the E-97 to E-100
Assumption of
Liabilities between the
Company and Magic Box,
Inc.
(t)(8) Subordination Agreement E-101 to E-118
by and among the
Company, Magic Box,
Inc. and Star Bank,
N.A., dated June 26,
1997
(t)(9) Subordinated Promissory E-119 to E-123
Note between the
Company and Israel
Fintz, dated June 26,
1997
(t)(10) Subordinated Promissory E-124 to E-128
Note between the
Company and Allison
Sokol, dated June 26,
1997
(t)(11) Subordinated Promissory E-129 to E-133
Note between the
Company and Marvin
Rosen, dated June 26,
1997
(t)(12) Subordinated Promissory E-134 to E-138
Note between the
Company and M. Ronald
Krongold, dated June
26, 1997
(t)(13) General Bill of Sale E-139 to E-141
between the Company and
Magic Box, Inc., dated
June 26, 1997
(t)(14) Non Compete Agreement E-142 to E146
between the Company and
Israel Fintz, dated
June 26, 1997
(t)(15) Non Compete Agreement E-147 to E-151
between the Company and
Allison Sokol, dated
June 26, 1997
(t)(16) Non Compete Agreement E-152 to E-155
between the Company and
Marvin Rosen, dated
June 26, 1997
(t)(17) Non Compete Agreement E-156 to E-159
between the Company and
M. Ronald Krongold,
dated June 26, 1997
(t)(18) Non Compete Agreement E-160 to E-164
between the Company and
Magic Box, Inc., dated
June 26, 1997
(v)(1) Promissory Note dated E-165 to E-169
May 30, 1997 by and
among Star Bank, N.A.,
the Company and Pomeroy
Computer Leasing
Company, Inc.
10(iii) (c)(1) Employment Agreement E-170 to E-194
between the Company and
Victor Eilau dated July
6, 1997
(c)(2) Performance Share Right E-195 to E-202
Agreement between the
Company and Victor
Eilau dated July 6,
1997
11 Computation of Per
Share Earnings
27 Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
POMEROY COMPUTER RESOURCES, INC.
________________________________
(Registrant)
Date: August 11, 1997 By: /s/ Edwin S. Weinstein
__________________________
Edwin S. Weinstein,
Vice President of Finance and
Principal Financial and
Accounting Officer
<PAGE>
PROMISSORY NOTE
Borrower: POMEROY COMPUTER RESOURCES, INC.; ET. AL.
1020 PETERSBURG RD.
HEBRON, KY 41048
Lender: STAR BANK, NATIONAL ASSOCIATION
REGIONAL DIVISION
425 WALNUT STREET
CINCINNATI, OH 45202
Principal Amount: $10,000,000.00
Initial Rate: 7.500% Date of Note: April 30, 1997
PROMISE TO PAY. POMEROY COMPUTER RESOURCES, INC., C & N CORP.,
XENAS COMMUNICATIONS CORP. and POMEROY COMPUTER LEASING COMPANY,
INC. (referred to in this Note individually and collectively as
'Borrower') jointly and severally promise to pay to STAR BANK,
NATIONAL ASSOCIATION (-Lender'), or order, in lawful money of the
United States of America,
the principal amount of Ten Million & 00/100 Dollars ($10,000,000.00)
or so much as may be outstanding, together with interest on the unpaid
outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on July 31, 1997.
on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied first to
accrued unpaid interest, then to principal, and any remaining amount to
any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an index which is Lender's
Prime Rate (the 'Index'). This is the rate Lender charges, or would
charge, on 90-day unsecured loans to the most creditworthy corporate
customers. This rate may or may not be the lowest rate available from
Lender at any given time. Lender will tell Borrower the current Index
rate upon Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate change will
not occur more often than each DAY. The Index currently is 8.500% per
annum. The interest rate to be applied to the unpaid principal balance
of this Note will be at a rate of 1.000 percentage point under the
Index, resulting in an initial rate of 7.500% per annum. NOTICE: Under
no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full
prepayment of this Note, Borrower understands that Lender is entitled
to a minimum interest charge of $50.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be
charged 5.000% of the regularly scheduled payment or $50.00, whichever
is greater.
DEFAULT- Borrower. will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply
with or to perform when due any other term, obligation, covenant, or
condition contained in this Note or any agreement related to this Note,
or in any other agreement or loan Borrower has with Lender. (c) Any
representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect
either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under
any bankruptcy or insolvency laws. (e) Any creditor tries to take any
of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts
with Lender. (f) Any guarantor dies or any of the other events
described in this default section occurs with respect to any guarantor
of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired. (h) Lender in good faith
deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Upon default, including failure to pay upon final maturity,
Lender, at its option, may also, if permitted under applicable law,
increase the variable interest rate on this Note 3.000 percentage
points. The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted
by Lender in the State of Ohio. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of
HAMILTON County, the State of Ohio. Lender and Borrower hereby waive
the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This Note
shall be governed by and construed in accordance with the laws of the
State of Ohio.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and
empowers any attorney-at-law, including an attorney hired by Lender, to
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<PAGE>
appear in any court of record and to confess judgment against Borrower
for the unpaid amount of this Note as evidenced by an affidavit signed
by an officer of Lender setting forth the amount then due, plus
attorneys' fees as provided in this Note, plus costs of suit, and to
release all errors,. and waive all rights of appeal. If a copy of this
Note, verified by an affidavit, shall have been filed in the
proceeding, it will not be necessary to file the original as a warrant
of attorney. Borrower waives the right to any stay of execution and
the benefit of all exemption laws now or hereafter in effect. No
single exercise of the foregoing warrant and power to confess judgment
will be deemed to exhaust the power, whether or not any such exercise
shall be held by any court to be invalid, voidable, or void; but the
p6wer -will'c6ntinu'd undiminished and may be exercised from time to
time as Lender may elect until all amounts owing on this Note have been
paid in full. Borrower waives any conflict of interest that an
attorney hired by Lender may have in acting on behalf of Borrower in
confessing judgment against Borrower while such attorney is retained by
Lender. Borrower expressly consents to such attorney acting for
Borrower in confessing judgment.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if
Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers, pledges,
and transfers to Lender all Borrower's right, title and interest in and
to, Borrower's accounts with Lender (whether checking, savings, or some
other account), including without limitation all accounts held jointly
with someone else and all accounts Borrower may open in the future,
excluding however all IRA and Keogh accounts, and all trust accounts
for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all
such accounts.
COLLATERAL. This Note is secured by SECURITY AGREEMENT COVERING ALL
ASSETS IN THE NAMES OF POMEROY COMPUTER RESOURCES, INC., C & N CORP.,
XENAS COMMUNICATIONS CORP., AND POMEROY COMPUTER LEASING COMPANY, INC.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested orally by Borrower or as
provided in this paragraph. Lender may, but need not, require that all
oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to
be directed to Lender's office shown above. ADVANCES UNDER THIS NOTE
MAY BE REQUESTED IN AMOUNTS OF $25,000.00 OR GREATER. ANY REQUEST FOR
ADVANCES OF LESS THAN $25,000.00 WILL NOT BE
HONORED. Borrower agrees to be liable for all sums either: (a) advanced
in accordance with the instructions of an authorized person or (b))
credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including
daily computer print-outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection
with the signing of this Note; (b)) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee
of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those
authorized by Lender; or (e) Lender in good faith deems itself insecure
under this Note or any other agreement between Lender and Borrower.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this
fact will not affect the rest of the Note. In particular, this section
means (among other things) that Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for, charge,
collect, take, reserve or receive (collectively referred to herein as
'charge or collect'), any amount in the nature of interest or in the
nature of a fee for this loan, which would in any way or event
(including demand, prepayment, or acceleration) cause Lender to charge
or collect more for this loan than the maximum Lender would be permitted
to charge or collect by federal law or the law of the State of Ohio (as
applicable). Any such excess interest or unauthorized fee shall,
instead of anything stated to the contrary, be applied first to reduce
the principal balance of this loan, and when the principal has been paid
in full, be refunded to Borrower. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Each
Borrower understands and agrees that, with or without notice to
Borrower, Lender may with respect to any other Borrower (a) make one or
more additional secured or unsecured loans or otherwise extend
additional credit; (b) after, compromise, renew, extend, accelerate, or
otherwise change one or more times the time for payment or other terms
any indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate,
fail or decide not to perfect, and release any security, with or without
the substitution of new collateral-, (d) apply such security and direct
the order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security
agreements, as Lender in its discretion may determine; (e) release,
substitute, agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any manner
Lender may choose; and (f) determine how, when and what application of
payments and credits shall be made on any other indebtedness owing by
such other borrower. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon
any change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and
several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE
VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF
THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
NOTICE: FOR THIS NOTICE "YOU' MEANS THE BORROWER AND 'HIS' MEANS
LENDER.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE
TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY
GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER
CAUSE.
BORROWER:
POMEROY COMPUTER RESOURCES INC.
C & N CORP.
XENAS COMMUNICATIONS CORPORATION, INC
By:
EDWIN S. WEINSTEIN, TREASURER
POMEROY COMPUTER LEASING COMPANY, INC., Co-Borrower
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<PAGE>
ASSET PURCHASE AGREEMENT
________________________
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is
entered into this 30th day of May, 1997, by, between and among
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation, (the
"Purchaser"), MAGIC BOX, INC., a Florida corporation (the
"Seller'') and ISRAEL FINTZ ( "I. Fintz" ), M. RONALD KRONGOLD
( "R. Krongold"'), MARVIN ROSEN ("M. Rosen") and ALLISON SOKOL
("A. Sokol") (I. Fintz, R. Krongold, M. Rosen and A. Sokol
hereinafter referred to collectively as "Shareholders" and
individually as "Shareholder").
W I T N E S S E T H :
WHEREAS, Seller is a provider of micro computer products and
computer integration and networking services to customers in
Southern Florida (the "Business").
WHEREAS, all the issued and outstanding stock of Seller is owned
in the following proportions:
I. Fintz - 40%
R. Krongold - 25%
M. Rosen - 25%
A. Sokol - 10%
WHEREAS, Purchaser desires to purchase substantially all of the
assets of the Seller used in the Business and assume certain of
the liabilities of Seller in connection with the Business, and
Seller desires to sell substantially all of such assets, subject
to such liabilities, but only (i) upon the terms and subject to
the conditions set forth in this Agreement, (ii) the
representations, warranties, covenants, indemnifications,
assurances and undertakings of Seller, Shareholders and Purchaser
contained in this Agreement and (iii) the agreements of Seller,
R. Krongold and M. Rosen to refrain from competition with
Purchaser for three (3) years from the closing of this
transaction and (iv) the agreements of I. Fintz and A. Sokol to
refrain from competition with Purchaser for the later of three
(3) years from the Closing Date, or one (1) year after the
termination of I. Fintz and/or A. Sokol's employment with
Purchaser pursuant to, and in accordance with, the terms of their
respective Employment Agreements to be executed upon the Closing.
WHEREAS, Purchaser shall have the right, at its sole option, to
elect to effectuate the transactions contemplated hereby, through
a first tier subsidiary of Purchaser ("Acquisition Sub"), and
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<PAGE>
have all ancillary documents described herein (e.g. employment
agreements, promissory notes, etc.) executed by such Acquisition
Sub, provided Purchaser shall guarantee all of the obligations of
Acquisition Sub contained in this Agreement and in such ancillary
documents.
NOW, THEREFORE, in consideration of the above premises and the
mutual promises, covenants, agreements, representations and
warranties herein contained, the parties hereto agree as follows:
1
DEFINITIONS
___________
1Affiliate. "Affiliate" shall mean (i) in the case of an
entity, any person (the term "person" for these purposes
means an individual, partnership, firm, corporation or other
entity) who or which, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is
under common control with, any specified person (the term
"control" for these purposes means the ability, whether by
ownership of shares or other equity interests, by contract
or otherwise, to elect a majority of the directors of a
corporation, to select the managing or general partner of a
partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons
exercising governing authority over an entity) or (ii) in
the case of an individual, such individual's spouse,
descendants or parents or a trust primarily for the benefit
of such individual or any of the foregoing.
2Assumed Liabilities.
The "Assumed Liabilities" are the
liabilities of the Seller assumed or paid at Closing by the
Purchaser pursuant to this Agreement.
3Balance Sheet
The "Balance Sheet" is the unaudited
balance sheet of the Seller as of April 30, 1997, included
as part of the Financial Statements.
4Closing. The "Closing" shall be the consummation of the
transactions contemplated under this Asset Purchase
Agreement.
5Closing Date. The "Closing Date" shall be July 1, 1997,
and shall commence at 9:00 a.m. E.D.T.
6Code. The "Code" is the Internal Revenue Code of 1986, as
amended, 26 U.S.C. S1 et seq.
7Court. A "Court" is any federal, state, municipal,
domestic, foreign or other governmental tribunal or an
arbitrator or person with similar power or authority.
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<PAGE>
8Disclosure Schedule. The "Disclosure Schedule" is the
Disclosure Schedule effective May 31, 1997 and supplemented
as necessary to reflect the operations of the Business, as
provided herein, through the Closing Date, and delivered by
Seller to Purchaser by June 16, 1997.
9Encumbrance. An "Encumbrance" is any security interest,
lien, charge, encumbrance or restriction, whether imposed by
agreement, understanding, law or otherwise, on any Purchased
Asset (as defined herein).
10Excluded Assets. "Excluded Assets" are any assets set
forth on Exhibit A attached hereto.
11Financial Statements. The "Financial Statements" are the
unaudited financial statements of the Seller for the years
ended December 31, 1996 and December 31, 1995 (original and
restated) and the unaudited interim balance sheets as of
April 30, 1997, including any and all notes thereto.
12Governmental Entity. A "Governmental Entity" is any Court
or any federal, state, municipal, domestic, foreign or other
administrative agency, department, commission, board, bureau
or other governmental authority or instrumentality having
jurisdiction over the applicable matter.
13Knowledge. "knowledge" of Seller and Shareholders shall
mean the actual knowledge of any of the Shareholders, and
for all purposes "knowledge" shall mean actual knowledge of
the applicable party without any duty of inquiry.
14Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is
the unaudited balance sheet adjusted for Excluded Assets per
Section 2.3 and Exhibit A and Excluded Liabilities of the
Seller per Section 3.3 as of April 30, 1997, included as
part of the Financial Statements. The Pro Forma Balance
Sheet shall be updated by Seller dated as of June 15, 1997,
as more particularly described at Section 4.1(c) below.
15Purchase Price. The "Purchase Price" is the total
consideration paid by Purchaser to Seller for the Purchased
Assets as set forth in Section 4.1.
16Purchased Assets. The "Purchased Assets" are the assets
of the Seller, used in the Business, acquired by the
Purchaser pursuant to the terms of this Agreement set forth
on Exhibit E. Any asset of Seller which is not an Excluded
Asset shall be a Purchased Asset.
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<PAGE>
17Taxes. "Taxes" means all taxes, charges, fees, levies or
other assessments, including, without limitation, income,
gross receipts, excise, property, sales, use, license,
payroll and franchise taxes, imposed by any Governmental
Entity and includes any estimated tax, interest and
penalties or additions to tax.
18Tax Return. A "Tax Return" is a report, return or other
information required to be supplied to a Governmental Entity
in connection with Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes the Seller.
2.
TERMS
_____
1 Agreement.
_________
Seller agrees to sell and convey to Purchaser the Purchased
Assets as hereinafter set forth in Paragraph 2.2. Purchaser
agrees to purchase said Purchased Assets. The agreements of
Purchaser and Seller are expressly conditioned upon the
terms, conditions, covenants, representations and warranties
as hereinafter set forth.
2 Assets to be Sold and Purchased.
________________________________
At the Closing of this Agreement, Purchaser shall purchase
and Seller shall sell all the Purchased Assets owned by the
Seller, used in the Business, except for the Excluded
Assets. The Purchased Assets shall include, but not be
limited to:
(a) The tangible personal property and assets owned by the
Seller of every kind and description, real, personal or
mixed, wherever located, used in the Business of
Seller, including without limitation, all of such
assets as reflected on the Pro Forma Balance Sheet
(excepting those assets disposed of, and including
those assets acquired, in the ordinary course of
business since the date of the Pro Forma Balance
Sheet);
(b) All intangible assets owned by the Seller which are
used in the Business of Seller, including without
limitation, all purchase orders, contract rights and
agreements, work in process, customer lists, supplier
arrangements, patents, trademarks and service marks
(including the goodwill associated with the marks),
office supplies, computer programs, claims of Seller
known by Seller as of the Closing Date, the right to
use the corporate and trade name of or used by the
Seller, or any derivative thereof, as all or part of a
corporate or trade name;
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<PAGE>
(c) All investment securities, cash and cash equivalents
(except investment securities, cash and cash
equivalents that are Excluded Assets as defined in
Section 2.3) and customer notes receivable relating to
the Business;
(d) All inventory of the Business which shall be valued on
a moving average basis at the cost of acquisition;
(e) All accounts receivable and vendor receivables relating
to the Business;
(f) All prepaid expenses applicable to the Business;
(g) All of Seller's service, installation and networking
contracts;
(h) All vendor rebates, spiff money, retainage amounts
under any contracts, and any other customer deposits;
(i) Distribution agreements and authorizations of Seller;
(j) All base artwork, photo materials, plates (if owned by
Seller), separations and other materials that are used
by Seller for printing brochures and promotional
materials;
(k) The assignment of any telephone numbers used in the
Business;
(l) The covenant not to compete agreements with Seller, I.
Fintz, A. Sokol, R. Krongold and M. Rosen; set forth on
Exhibits "B", "B-1", "B-2", "B-3" and "B-4" attached
hereto and made a part hereof; and
(m) All other fees, assets, property, and business of
Seller (including the rights under covenants or
agreements not to disclose confidential information or
not to compete, if any), and all other assets of Seller
not specifically excluded pursuant to the terms of this
Agreement.
3Excluded Assets. _______________
The Excluded Assets are set forth on Exhibit "A" hereto.
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<PAGE>
4Lease Agreements ________________
(a) Seller is the lessee under certain lease agreements
providing for payments of more than $5,000.00 per year
covering the following real and personal properties and
leased personal:
(i) 16698 NW 54th Avenue, Miami, Florida 33014
(the other leases of Seller shall be set forth in
(ii)
the Disclosure Schedule)
(iii)
(iv)
(v)
(b) Seller is the lessor under certain master lease
agreements for equipment providing for payments of more
than $5,000.00 per year as follows:
(i) (the other leases of Seller shall be set forth in
the Disclosure Schedule)
(ii)
(iii)
(iv)
(v)
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<PAGE>
(c) Seller is the lessor under certain operating lease
agreements for equipment providing for payments of more
than $5,000.00 per year as follows:
(i)(the other leases of Seller shall be set forth in
the Disclosure Schedule)
(ii)
(iii)
(iv)
(v)
At the Closing, Seller and Purchaser shall execute necessary
documentation for the assignment of these leases and all of
Seller's right and interest thereunder to Purchaser and, at
the Closing, Seller shall assign all its rights and
interests in said leases to Purchaser. Purchaser agrees to
indemnify and hold Seller harmless from any liability with
respect to the aforementioned leases occurring after the
Closing Date. To the extent that the assignment of any
lease shall require the consent of other parties hereto,
this Agreement shall not constitute an assignment thereof
and Seller shall obtain any such necessary consents or
assignments by the Closing. Purchaser shall cooperate with
Seller in the obtaining of such consents.
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<PAGE>
5Instruments of Transfer
_______________________
At Closing, the Seller will deliver to the Purchaser such
bills of sale, endorsements, assignments and other good and
sufficient instruments of transfer and assignment customary
for transfers in Dade County, Florida as shall be effective
to vest in Purchaser good and marketable title and interest
in and to the Purchased Assets subject to any liens that may
exist with respect to the IBM loan, the Deutsch loan, and
any other disclosed recorded liens which obligation secured
by such liens shall be assumed or paid by Purchaser at the
Closing. Seller shall cooperate with Purchaser in obtaining
termination of such liens upon payment by Purchaser. At or
after the Closing, and without further consideration, the
Seller will execute and deliver to Purchaser such further
reasonable and appropriate instruments of conveyance and
transfer and take such other action as Purchaser may
reasonably request in order to more effectively convey and
transfer to Purchaser any of the Purchased Assets or for
aiding and assisting and collecting and reducing to
possession and exercising rights with respect thereto.
Seller, agrees to use its best efforts to obtain and deliver
to Purchaser such consents, approvals, assurances and
statements from third parties as Purchaser may reasonably
require in a form reasonably satisfactory to Purchaser,
provided Seller's best efforts shall not require Seller to
bring any legal action or expend any of its funds. In
addition to the foregoing, Seller will deliver to Purchaser
or otherwise put Purchaser in possession of the originals or
copies of all of the Seller's books, records and other data
relating to the Purchased Assets; and simultaneously with
such delivery, the Seller shall take all such acts as may be
reasonably necessary to put Purchaser in actual possession,
and operating control of the Purchased Assets. To the
extent Seller delivers to Purchaser originals of its books
and records, Purchaser shall allow Seller and the
Shareholders access, upon prior notice, to such books and
records, as they relate to the period prior to the Closing
Date, if Seller or the Shareholders have a need to access
such books and records. Seller shall cooperate with
Purchaser to permit Purchaser, if reasonably possible, to
enjoy Seller's ratings and benefits under workmen's
compensation laws and unemployment compensation laws to the
extent permitted by such laws.
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<PAGE>
6Instruments Giving Certain Additional Powers and Rights.
_______________________________________________________
At the Closing, Seller shall, by appropriate instrument,
constitute and appoint Purchaser, its successors and
permitted assigns, the true and lawful limited attorney of
Seller with full power of substitution, in the name of
Purchaser, or the name of Seller, on behalf of and for the
benefit of Purchaser, for the limited purpose of collecting
all receivables and other items being transferred and
assigned to Purchaser as provided herein, to endorse,
without recourse, any and all checks in the name of Seller
the proceeds of which Purchaser is entitled to hereunder, to
collect, assert or enforce any claim, right or title of any
kind in or to the Purchased Assets. Seller agrees that the
foregoing powers are coupled with an interest and shall be
irrevocable by Seller, directly or indirectly, by the
dissolution of Seller or in any manner or for any reason.
Seller further agrees that Purchaser shall retain for its
own account any amounts collected pursuant to the foregoing
powers, and Seller shall pay or transfer to Purchaser, if
and when received, any amounts which shall be received by
Seller after the Closing in respect of any receivables or
other assets, properties, rights or business to be
transferred and assigned to Purchaser as provided herein.
Seller further agrees that, for up to 180 days after the
Closing Date, it will, upon the reasonable request of
Purchaser and at Seller's reasonable expense, do, execute,
acknowledge and deliver, or will cause to be done, executed,
acknowledged or delivered, all such further reasonable acts,
assignments, transfers, powers of attorney or assurances as
may be reasonably required in order to further transfer,
assign, grant, assure and confirm to Purchaser, or to aid
and assist in the collection or granting of possession by
Purchaser of, any of the Purchased Assets, or to vest in
Purchaser good and marketable title to the Purchased Assets.
Notwithstanding the preceding sentence or any other
provision herein to the contrary, Seller shall only have an
obligation to use its best efforts with respect to the
actions described in the preceding sentence, which will not
include any obligation to engage counsel, or bring any form
of action, at law or at equity, to enforce Purchaser's
rights to the Purchased Assets or to collect the accounts
receivable transferred hereunder.
3.
ASSIGNMENT OF LIABILITIES
_________________________
1Liabilities to be Paid Off at Closing or Assumed.
________________________________________________
A. At the Closing, Purchaser shall pay off (and secure the
release of Seller and all Shareholders from any
personal guaranty or liability with respect to such
obligations), the following:
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(i) Seller's obligation to (i) IBM Credit Corporation
("IBM") under a certain working capital credit line
which provides for a maximum principal amount of
One Million, Fifty Thousand Dollars ($1,050,000)
dated ________________, the outstanding amount of
which is approximately Three Hundred Ten Thousand
Dollars ($310,000.00) as of the execution of this
Agreement and the outstanding amount of which on
the Closing Date will be subject to satisfaction of
the expected Net Assets Amount, which line is
collateralized by a security interest in the
Seller's receivables and certain inventory, and
(ii) Deutsch Financial Services, Inc. under a
certain inventory credit account which allows for
up to a maximum of Three Hundred Fifty Thousand
Dollars ($350,000), the outstanding balance of
which is approximately One Hundred Fifty Thousand
Dollars ($150,000.00) as of the execution of this
Agreement, and the outstanding amount of which on
the Closing Date will be subject to satisfaction of
the expected Net Assets Amount, which is
collateralized by a security interest in the
Seller's receivables and certain inventory; and
(ii) The Assumed Liabilities to be paid off as set forth
in Section 3.1 A (i), as may have been incurred,
increased or decreased since the Pro Forma Balance
Sheet for operations in the ordinary course of
business or any other transaction permitted by this
Agreement are subject to the satisfaction of the
minimum worth requirements set forth in Section
4.1(c) as of June 15, 1997. Any incurrence of, or
increase or decrease in the amount of, the Assumed
Liabilities set forth above for the period
commencing on June 15, 1997, through the Closing
Date, shall be subject to the provisions of Section
9.
B. Notwithstanding anything to the contrary in this
Agreement, at the Closing, Purchaser shall assume and
pay or discharge when due (and secure the release of
Seller and all Shareholders from any and all personal
liability or guarantee with respect to such assumed
obligations), all non-contingent liabilities of the
Seller existing as of the Closing Date, incurred by
Seller in the operation of the Business and excluding
the Excluded Liabilities. These Assumed Liabilities
shall include, but not be limited to, the following:
(i) All of the trade accounts payable, accrued expenses,
accrued payroll, accrued payroll taxes, accrued sales
taxes, accrued pension contributions (if any), and
accrued vacation to non stockholders and non officers
of Seller, capital lease and unearned service and other
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contracts of the Seller relating to the Business, of
the same or similar nature as such items as set forth
on the Disclosure Schedule, the Pro Forma Balance
Sheet, the Financial Statements, or any notes thereto;
and
(ii) All other liabilities of Seller set forth as an Assumed
Liability on the Disclosure Schedule.
It is the parties' mutual intent to include as Assumed
Liabilities on the Disclosure Schedule all known liabilities of
Seller incurred in the operation of the Business. The Assumed
Liabilities to be assumed as set forth in Sections 3.1.B.(i) and
(ii) as may have been incurred, increased or decreased since the
Balance Sheet to the Pro Forma Balance Sheet for operations in
the ordinary course of business or any other transaction
permitted by this Agreement are subject to the satisfaction of
the minimum net worth requirements set forth in Section 4.1(c) as
of June 15, 1997. Any incurrence of or increase or decrease in
the amount of, the liabilities set forth above to be assumed at
Closing for the period commencing on the date first written
above, and continuing through the Closing Date, shall be subject
to the provisions of Section 9.
C. It is the parties' intent that Purchaser shall pay off
at Closing, or assume and pay off or discharge when
due, all obligations of Seller set forth in Sections
3.1 A and B above, respectively, for which any of the
Shareholders have personal liability, and Purchaser
agrees to use its best efforts to secure the release of
Shareholders from such personal guaranty within 60 days
after Closing if such releases are not secured prior to
Closing. The obligations of Seller that are personally
guaranteed by any Shareholder are set forth on
Exhibit L. If Shareholders are not so released within
60 days after Closing Date, Purchaser shall (i) place
in escrow with the Escrow Agents the full amount of
such liabilities, (ii) agree not to allow such
liabilities to be increased, and (iii) indemnify Seller
and the Shareholders from any amount any of them may
have to pay as a result of such liabilities (including
reasonable attorneys' fees, if any). If Shareholders
are not so released within six (6) months after the
Closing, then notwithstanding anything in this
Agreement to the contrary, Purchaser shall not have the
right to make any claims against Shareholders or Seller
hereunder, including claims, for breach of any
representations or warranties, failure to comply with
covenants, for indemnification, or otherwise. Prior to
the expiration of the initial 60 day period, Seller
shall provide to Purchaser letters from all creditors
to whom such personal guaranties apply, which letters
will provide that such personal guaranties will be
released upon payment by Purchaser of such underlying
obligations.
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<PAGE>
2 Executory Contracts.
___________________
At the Closing, Purchaser shall assume Seller's obligations
and pay or discharge when due the following:
(i) All obligations, to the extent they are assumable,
under contracts, leases or agreements of the Seller as
set forth on the Disclosure Schedule under Section 6.8;
and
(ii) All future liabilities for merchandise in transit
F.O.B. shipping point which has not been received by
Seller as of the Closing and for which no bill has been
issued by the supplier at such time.
3 Excluded Liabilities.
____________________
Notwithstanding anything contained in this Agreement to the
contrary, Purchaser shall not assume or become responsible
for any claim, liability or obligation whatsoever, whether
known or unknown, accrued, absolute, contingent or otherwise
( "Liability" ) except the Assumed Liabilities (the
"Excluded Liabilities"). Without limiting the generality of
foregoing, the following are included among the Excluded
Liabilities of Seller which Purchaser shall not assume or
become responsible for (unless specifically included on the
list of Assumed Liabilities):
(i) Without in any way effecting the obligations of
Purchaser to reimburse Seller pursuant to
Section 4.1(d) below, all Liabilities for local, state,
federal, franchise, and income and other taxes
(including but not limited to, any taxes attributable
to any gain under Section 1377 of the Code) whether
deferred or which have accrued or may accrue or become
due and payable by Seller and/or Shareholders either
prior to, on or after the Closing Date, including,
without limitation, all taxes and fees of a similar
nature arising from the sale and transfer of the
Purchased Assets to Purchaser;
(ii) All Liabilities and obligations to directors and
officers of Seller, including, without limitation, all
Liabilities and obligations for wages, salary, bonuses,
commissions, vacation (except to the extent Purchaser
agrees to assume such item) or severance pay, profit
sharing or pension benefits, and all Liabilities and
obligations arising under any bonus, commission, salary
or compensation plans or arrangements, whether accruing
prior to, or on or after the Closing Date;
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<PAGE>
(iii) All Liabilities and obligations with respect to
unemployment compensation claims and workmen's
compensation claims and claims for race, age and sex
discrimination or sexual harassment or for unfair labor
practice which occurred prior to the Closing Date and
for which any claim may be asserted by any of the
Seller's employees, prior to, on or after the Closing
Date;
(iv) All Liabilities of Seller to third parties for
personal injury or damage to property based on or
arising from occurrences, circumstances or events, or
exposure to conditions, existing or occurring prior to
the Closing Date and for which any claim may be
asserted by any third party prior to, on or after the
Closing Date;
(v) All Liabilities and obligations of Seller arising
under or by virtue of environmental laws accruing prior
to, or on the Closing Date;
(vi) All Liabilities of Seller, including any costs of
attorneys' fees incurred in connection therewith, for
litigation, claims, demands or governmental proceedings
arising from occurrences, circumstances or events, or
exposure to conditions occurring or existing prior to,
or on the Closing Date;
(vii) All Liabilities of Seller based on any theory of
liability or product warranty with respect to any
product manufactured or sold prior to the Closing Date
and for which any claim may be asserted by any third
party, prior to, on or after the Closing Date;
(viii) All attorneys' fees, accountants or auditors' fees,
and other costs and expenses incurred by Seller and/or
the Shareholders in connection with the negotiation,
preparation and performance of this Agreement;
(ix) All Liabilities of the Seller in connection with the
Excluded Assets, unless such Liabilities are
specifically designated as Assumed Liabilities in the
Agreement or in the Disclosure Schedule;
(x) Any Liabilities of Seller with respect to any options,
warrants, agreements or convertible or other rights to
acquire shares of its capital stock of any class;
(xi) Any Liabilities of Seller relating to the shareholder
loans reflected on the Financial Statements; and
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<PAGE>
(xii) All other debts, Liabilities, obligations, contracts
and commitments (whether direct or indirect, known or
unknown, contingent or fixed, liquidated or
unliquidated, and whether now or hereinafter arising)
arising out of or relating to the ownership, operation
or use of any of the Purchased Assets on or prior to
the Closing Date or the conduct of the Business of
Seller whether prior to, on or after the Closing Date,
except only for the liabilities and obligations to be
performed by Purchaser constituting the Assumed
Liabilities, provided, it is the parties' intent to
include as Assumed Liabilities on the Disclosure
Schedule, all known liabilities (that are not an
Excluded Liability) that arose from the operations of
the Business by Seller prior to the Closing Date. It
shall be Seller's responsibility to disclose such
liabilities on the Disclosure Schedule.
It is the intent of the parties that upon Closing, all
employees and leased employees of Seller will be terminated
by it and Purchaser will extend offers of employment to such
individuals at such time or assume the existing lease
agreement for personnel with Paychex Business Solutions,
Inc. dated October, 1992, as Purchaser in its sole
discretion shall determine.
4. CONSIDERATION FOR PURCHASED ASSETS
__________________________________
1Purchase Price ______________
Subject to the other terms of this Agreement, the Purchase
Price for the Purchased Assets shall be the sum of:
(a) Two Million Five Hundred Thousand Dollars
($2,500,000.00); and
(b) The Assumed Liabilities assumed or paid off under
Sections 3.1 A. and 3.1 B.
(c) The amount in Section 4.1(a) above shall be either
adjusted upward or downward by the amount determined
under this Section 4.1(c). Prior to the Closing,
Seller shall prepare and deliver to Purchaser the
updated Pro Forma Balance Sheet which shall set forth
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<PAGE>
the Purchased Assets (including, for this purpose only,
any Excess Cash) and the Assumed Liabilities as of June
15, 1997. The June 15, 1997 Pro Forma Balance Sheet
shall be prepared using the same accounting methods,
assumptions, policies, practices and procedures, with
consistent classifications, judgments, and estimation
methodologies as used in the preparation of the April
30, 1997 Pro Forma Balance Sheet, adjusted only for
operations of Seller commencing May 1, 1997 through and
including June 15, 1997, based solely on information
known on June 15, 1997, and without taking into account
any changes in circumstances or events occurring after
June 15, 1997.
If the Net Assets Amount (as defined below) shown on
the June 15, 1997 Pro Forma Balance Sheet is less than
$876,999.00, the Purchase Price shall be decreased on a
dollar for dollar basis for the difference. Any such
reduction shall reduce the principal amount of the
Note(s) and shall be first applied against the final
payment under promissory note portion of the Purchase
Price as set forth in Section 4.2(c) below.
If the Net Assets Amount shown on the Pro Forma Balance
Sheet exceeds $876,999.00, Seller shall be entitled to
retain cash, cash equivalents and investment
securities, if any, up to the amount of such excess
(the "Excess Cash") and such Excess Cash shall be an
Excluded Asset. If cash, cash equivalents and
investment securities do not exist in an amount that is
equal to the Excess Cash, then any difference in the
increase in the Purchase Price shall be reflected, at
Seller's option, either (i) in additional cash
consideration paid by Purchaser to Seller within 10
days after the Closing Date or (ii) by Seller
increasing the outstanding principal amount of the
Assumed Liability IBM credit line.
The Net Assets Amount shall mean the total of the
Purchased Assets (including, for this purpose only, any
Excess Cash) less the total of the Assumed Liabilities,
in each case as shown on the June 15, 1997 Pro Forma
Balance Sheet.
Seller shall provide the June 15, 1997 Pro Forma
Balance Sheet at least seven (7) days prior to the
Closing Date. Purchaser shall review the Pro Forma
Balance Sheet prior to Closing and shall contact Seller
prior to the Closing with any of Purchaser's requested
adjustments to the Purchase Price based on such Pro
Forma Balance Sheet. If Seller delivers the Pro Forma
Balance Sheet within seven (7) days of the Closing
Date, the Purchaser's time period within which to
provide its requested adjustments shall be extended by
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<PAGE>
the number of days by which Seller is delinquent in
such delivery. The preceding sentence shall not in any
way affect the Closing Date.
In the event that there is Excess Cash as of June 15,
1997, Seller shall be entitled to distribute such
Excess Cash prior to Closing, and such distribution
shall be deemed as having been undertaken in the
ordinary course of business.
(d) In addition, Seller shall be entitled to be reimbursed
by Purchaser for all corporate and individual income or
corporate franchise taxes which will become payable by
Seller or Shareholders as a result of the operation of
the Business in the ordinary course during the period
from the date of the June 15, 1997 Pro Forma Balance
Sheet to the Closing Date. This reimbursement will be
based on taxable income for such period and utilizing
an effective income tax rate of 40%. Purchaser shall
agree to reimburse Seller for such taxes, if any, as
determined by Seller, not later than 30 days after
Closing. The determination of the taxable income for
such period shall be made in accordance with Seller's
internally-generated financial statements consistent
with prior periods. Such taxable income shall not
include any income attributable to the sale of the
Purchased Assets being effectuated hereunder or any
gain from the sale of certain marketable securities,
the gain from which is an Excluded Asset as set forth
in Exhibit A.
The Purchase Price has been determined based upon Purchaser's
understanding of the net assets acquired hereunder and the
operations of the Business prior to the date hereof. Commencing
on the date first written above and ending on June 16, 1997 (the
"Inspection Period"), Purchaser shall perform due diligence upon
Seller, as more particularly described at Section 12 below, to
confirm, at its sole discretion, the adequacy of Seller's net
assets and operating results. The purchase price is subject to
potential adjustments as set forth in Sections 4.1(c), 4.4 and
6.12 below.
2Payment of the Purchase Price.
_____________________________
Subject to the conditions, covenants, representations and
warranties hereof, (except for 4.2(a) below) at Closing,
Purchaser shall deliver:
(a) Upon the execution of this Agreement, Purchaser shall
deposit with McDermott, Will & Emery and James H.
Smith, III as co-escrow agents (the "Escrow Agents"),
an earnest money deposit of Fifty Thousand Dollars
($50,000) (the "Deposit"). In the event that this
transaction does not close because of failure to
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<PAGE>
satisfy any of the conditions precedent set forth in
Section 12 or 13.2 or Seller's failure to close, other
than as a result of Purchaser's breach of this
Agreement, such amount shall be returned to Purchaser.
In the event that this transaction closes, or fails to
close because of Purchaser's breach or refusal to close
(other than a refusal to close because of Seller's
breach), such amount shall be applied against the
Purchase Price at Closing, or be payable to Seller, all
as more specifically described at Section 12 below.
(b) By wire transfer to Seller in the amount of One Million
Nine Hundred and Eight Thousand Dollars
($1,908,000.00), such amount subject to a dollar for
dollar reduction to the extent the Deposit exceeds
Fifty Thousand Dollars ($50,000), as provided herein.
(c) The Purchaser's four Subordinated Promissory Notes in
the aggregate principal amount of Five Hundred Forty-
Two Thousand Dollars ($542,000.00) in the form attached
hereto as Exhibit "C" (the "Notes"). Each of the four
(4) Notes shall be issued in amounts equal to the pro
rata proportion of the aggregate principal (i.e.,
$542,000) that each of the respective Shareholders owns
of the stock of Seller (i.e., $216,800 [40%], $135,500
[25%], $135,500 [25%], and $54,200 [10%]) and each Note
shall be transferrable to the Shareholder whose
percentage ownership interest in Seller corresponds to
the amount of the principal on the applicable Note.
Such Notes shall be subordinate to Purchaser's lender,
pursuant to the terms of a Subordination Agreement in
the form attached hereto as Exhibit "D". The
Subordination Agreement shall not serve to reduce the
remaining principal balance under the Notes.
(d) The assumption or payment of the Assumed Liabilities
assumed by Purchaser pursuant to Section 3.1 A. and
Section 3.1 B.
3Allocation of Purchase Price
____________________________
The Purchase Price to be paid to Seller hereunder, including
Assumed Liabilities assumed or paid by Seller pursuant to
Section 3.1 A. and Section 3.1 B., shall be allocated as set
forth on Exhibit "F" attached hereto. Seller, Shareholders
and Purchaser agree that each shall act in a manner
consistent with such allocation in (a) filing Internal
Revenue Form 8594 which shall be completed as soon as
possible after the Closing; and (b) in paying sales and
other transfer taxes in connection with the purchase and
sale of assets pursuant to this Agreement. The Purchase
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<PAGE>
Price for the Purchased Assets shall be allocated in the
manner set forth on Exhibit "F" attached hereto.
4Potential Adjustment to Purchase Price.
______________________________________
If, during the Calendar year 1997, the sum of (i) Seller's
Pro forma EBIT from January 1, 1997 to July 1, 1997
(adjusted as mutually agreed upon for non-recurring costs
and excluding gains from marketable securities), and (ii)
Purchaser's EBIT from the operation's of the Business, as
its "Magic Box Division", from July 1, 1997 to December 31,
1997 (adjusted as mutually agreed upon for non-recurring
costs) (a) exceeds $420,000, then 50% of such excess, not to
exceed a $250,000 adjustment, shall be paid in one lump sum
by Purchaser to Seller, by bank check or by wiring within 45
days after the end of such 12 month period (unless extended
as provided below due to a dispute by Seller) in the form of
additional Purchase Price which will be added to the
goodwill allocation of the Purchase Price, or (b) is less
than $420,000, then 50% of such deficiency, not to exceed a
$125,000 adjustment, shall serve as a reduction to the
Purchase Price, which will reduce the principal amount of
the Notes and offset against the final payment under the
Notes, and will be reduced from the goodwill allocation of
the Purchase Price. For purposes of this Section 4.4,
"EBIT" shall mean the earnings of Purchaser from the
operations of the Business, before interest and taxes, and
without incorporating any gains or losses realized or the
disposition of assets, other than in the ordinary course of
business. For purposes of determining Purchaser's EBIT for
the period from the Closing Date to December 31, 1997, no
overhead allocation of Purchaser's other operations will be
charged by Purchaser to such EBIT. In addition, no
deduction shall be taken for any inventory purchased from
Seller that is subsequently written down by Purchaser. No
sale shall be made by Purchaser's "Magic Box" division for
below cost of any inventory purchased hereunder without the
express written consent of Purchaser's home office.
Purchaser's "Magic Box" division's EBIT will be calculated
on a basis consistent with Seller's financial statements
determining EBIT for the period January 1, 1997 to the
Closing Date, using the same methodologies, judgments,
variances, assumptions, adjustments and estimates employed
by Seller in preparing such financial statements.
Within forty-five (45) days after December 31, 1997,
Purchaser will deliver to Seller a copy of the report of
EBIT prepared by the Purchaser's Certified Public
Accountants for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty
(30) days following delivery to Seller of such report,
Seller shall have the right to object in writing to the
results contained in such determination. If timely
objection is not made by the Seller to such determination,
such determination shall become final and binding for
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<PAGE>
purposes of this Agreement. If timely objection is made by
Seller to Purchaser and Seller and Purchaser are able to
resolve their differences in writing within thirty (30) days
following the expiration of the thirty (30) day period, then
such determination shall become final and binding as it
regards to this Agreement. If timely objection is made by
Seller to Purchaser and Seller and Purchaser are unable to
resolve their differences in writing within thirty (30) days
following the expiration of the thirty (30) day period, then
all disputed matters pertaining to the report shall be
submitted to and reviewed by an arbitrator (the
"Arbitrator") which shall be an independent accounting firm
selected by Purchaser and Seller. If Purchaser and Seller
are unable to agree promptly on an accounting firm to serve
as the Arbitrator, each shall select by no later than the
thirtieth (30th) day following the expiration of the sixty
(60) day period, an accounting firm, and the selected
accounting firm shall be instructed to select promptly
another accounting firm, such newly selected firm to serve
as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall
act promptly to resolve all disputed matters and its
decision with respect to all disputed matters shall be final
and binding upon the Seller and Purchaser. Expenses of the
arbitration (including reasonable attorney and accounting
fees) shall be borne equally by Seller and Purchaser, unless
the arbitration panel determines that the determination of
EBIT is greater by Fifty Thousand ($50,000.00) Dollars or
more than the determination made by Purchaser's accounting
firm, in which case the expense of the arbitration
(including reasonable attorney and accounting fees) shall be
borne by Purchaser.
5Certain Closing Expenses
________________________
Seller shall be liable and shall pay all federal, state and
local income taxes (if any), and all other duties, or other
like charges properly payable upon and in connection with
the conveyance and transfer of the Purchased Assets by
Seller to Purchaser. Purchaser shall be responsible for
required documentary stamp taxes on the Notes.
5.
EMPLOYMENT AGREEMENTS
_____________________
1Employment Agreement of Shareholders
____________________________________
At the Closing, Purchaser shall enter into Employment
Agreements with I. Fintz, and A. Sokol. Copies of said
Employment Agreements are attached hereto and made a part
hereof as Exhibits "G-1" and "G-2".
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6.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
____________________________________________
AND THE SHAREHOLDERS
____________________
Except as set forth in the Disclosure Schedule attached
hereto, Seller and Shareholders jointly and severally,
represent and warrant to Purchaser that the following
statements are materially true and correct as of the date
hereof and shall remain materially true and correct as of
the Closing as if made again at and as of that time:
1Organization, Good Standing, Qualification and Power of
_______________________________________________________
Seller.
______
Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Florida
and has the corporate power and authority to own, lease and
operate the Purchased Assets and to conduct the Business
currently being conducted by it. The Seller is duly
qualified and in good standing in each of the jurisdictions
in which it is required by the nature of its business or the
ownership of its properties to so qualify. Seller has no
subsidiaries, other than its 50% interest in Ace Education,
Inc. as disclosed on the Disclosure Schedule. The
Disclosure Schedule correctly lists, with respect to the
Seller, each jurisdiction in which it is qualified to do
business as a foreign corporation.
2Capitalization.
______________
The authorized capitalization of the Seller consists solely
of 1000 shares of $1.00 par common stock, of which 200
shares representing one hundred percent (100%) of the issued
stock are currently owned in the manner set forth in the
second recital on page 1 of this Agreement, are fully paid
and nonassessable and have not been issued in violation of
the preemptive rights of any person. Seller is not
obligated to issue or acquire any of its securities, nor has
it granted options or any similar rights with respect to any
of its securities.
3Authority to Make Agreement
___________________________
Seller and each Shareholder have the full legal power and
authority to enter into, execute, deliver and perform their
respective material obligations under this Agreement and
each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller
Documents"). This Agreement and the Other Seller Documents
have been (or will be at the Closing) duly and validly
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executed and delivered by Seller and each Shareholder, and
are the legal and binding obligation of each of them,
enforceable in accordance with their respective terms,
subject to principles of equity, bankruptcy laws, and laws
affecting creditors' rights generally. Seller has taken all
necessary action (including action of its Board of Directors
and Shareholders) to authorize and approve the execution and
delivery of this Agreement and the Other Seller Documents,
the performance of its obligations thereunder and the
consummation of the transactions contemplated thereby.
4Existing Agreements, Governmental Approvals and Permits.
_______________________________________________________
(a) The execution, delivery and performance of this
Agreement and the Other Seller Documents by Seller, the
sale, transfer, conveyance, assignment and delivery of
the Purchased Assets to Purchaser as contemplated in
this Agreement, to the best of Seller's and
Shareholders' knowledge: (i) do not materially violate
any provisions of law, statute, ordinance or regulation
applicable to Seller, the Shareholders or the Purchased
Assets which would result in a material adverse affect
on Purchaser or the Purchased Assets, (ii) (except for
Seller's secured creditors set forth in Section 3.1,
whose consent shall be obtained prior to Closing) will
not materially conflict with, or result in the material
breach or termination of any provision of, or
constitute a material default under (in each case
whether with or without the giving of notice or the
lapse of time or both) the Articles of Incorporation or
Bylaws of Seller or any security agreement relating to
the Purchased Assets, lease, contract or agreement or
any license, permit, approval, authority, or any order,
judgment, arbitration award, or decree to which Seller
or any Shareholder is a party or by which Seller or any
Shareholder or any of its assets and properties are
bound (including, without limitation, the Purchased
Assets), and (iii) will not result in the creation of
any material encumbrance upon any of the properties,
assets, or Business of Seller or any Shareholder. To
the best of Seller's and Shareholders' knowledge,
neither Seller, nor any Shareholder, nor any of its
assets or properties (including, without limitation,
the Purchased Assets) is subject to any mortgage,
lease, contract, agreement, instrument, license,
permit, approval, authority, order, judgment,
arbitration award or decree, or to any law, rule,
ordinance, or regulation, or any other restriction of
any kind or character, which would prevent Seller or
any Shareholder from entering into this Agreement or
any of the Other Seller Documents or from consummating
the transactions contemplated thereby.
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(b) To the best of Seller's and Shareholders' knowledge,
neither Seller nor any Shareholder is a party to,
subject to or bound by any agreement, judgment, award,
order, writ, injunction or decree of any court,
governmental body or arbitrator which would prevent the
use by Purchaser of the Purchased Assets in accordance
with the present practices of Seller after the Closing
Date or which, by operation of law, or pursuant to its
terms, would be materially breached, terminated, lapse
or be subject to termination or default under (in each
case whether with or without notice, the passage of
time or both) upon the consummation of the transactions
contemplated in this Agreement.
(c) To the best of Seller's and Shareholders' knowledge, no
approval, authority or consent of, or filing by Seller
with, or notification to, any foreign, federal, state
or local court, authority or governmental or regulatory
body or agency or any person is necessary to authorize
the execution and delivery of this Agreement or the
Other Seller Documents by Seller or any Shareholder,
the sale, transfer, conveyance, assignment and delivery
of the Purchased Assets to Purchaser, or the
consummation of the other transactions contemplated
thereby, or to continue the use and operation of the
Purchased Assets by Purchaser after the Closing Date in
materially the same way as utilized prior to the
Closing Date.
5 Financial Statements.
____________________
A. Copies of the Financial Statements are attached to the
Disclosure Schedule. Each of the Financial Statements
are true and complete in all material respects and were
prepared in accordance with methods applied on a
consistent basis throughout the periods indicated
(except as noted on such Financial Statements) and
fairly present in all material respects the financial
position and condition of the Seller as of the
respective dates thereof and the results of its
operation and changes in financial position for the
respective periods then ended.
B. Except to the extent reflected, reserved against, or
disclosed on the Pro Forma Balance Sheet, the Financial
Statements, or the Disclosure Schedule, the Seller had,
as of such date, no material liabilities or obligations
of any nature, whether accrued, absolute, contingent,
or otherwise, including without limitation, unfunded
pension or other retirement plan liabilities and tax
liabilities whether or not incurred in respect of or
measured by the Seller's income, for any period prior
to the date of said Financial Statements, or arising
out of transactions entered into or any set of facts
existing prior thereto. Except to the extent disclosed
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<PAGE>
on the Disclosure Schedule, there exists no basis for
the assertion against Seller, as of the date of the
Financial Statements or the Pro Forma Balance Sheet, of
any material liability of any nature or in any amount
not fully reflected, reserved against, or disclosed in
said Financial Statements or Pro Forma Balance Sheet.
6 [Intentionally Omitted].
7 Intangible Property.
___________________
To the best of Seller's and Shareholders' knowledge, the
Disclosure Schedule includes a materially accurate list and
summary description of all patents, franchises,
distributorship, registered and unregistered trademarks,
trade names and service marks, licenses, brand names and
company lists and all applications for the foregoing,
presently owned and/or held (as a licensee or otherwise) by
the Seller. The Seller is not a licensor in respect to any
patents, trade secrets, inventions, shop rights, know-how,
trademarks, trade names, copyrights, or applications
therefor. Seller acknowledges that Purchaser shall have all
of Seller's right to utilize the name "Magic Box", but
Seller makes no representations nor warranties regarding its
entitlement to the name "Magic Box", and Purchaser agrees
that if at any time in the future Purchaser is no longer
using the name "Magic Box", Seller shall have the right to
utilize the name "Magic Box"; subject to applicable non-
competition agreements. The Disclosure Schedule contains a
materially accurate and complete description of such
intangible property and the items of all licenses and other
agreements relating thereto. All of the above-mentioned
intangibles used in the Seller's Business are the sole
property of the Seller, do not require the consent of or
consent to any other person as a condition to their use or
the transaction provided for herein and do not infringe upon
the rights of others.
8 Significant Agreements
______________________
The Disclosure Schedule contains a materially accurate and
complete list of all written contracts, agreements,
licenses, instruments and understandings (whether or not in
writing) to which the Seller is a party or is bound and that
are material to the Business, assets, financial condition or
results of operations of the Seller. Without limiting the
generality of the foregoing, such list includes all such
contracts, agreements, licenses and instruments:
(a) Providing for payments of more than Five Thousand
($5,000.00) per year;
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(b) Providing for the extension of credit other than
consistent with normal credit terms described in the
Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct its
Business or any other business or to otherwise compete
in its or any other business, including as to manner or
place;
(d) Providing for a guarantee or indemnity by the Seller;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association
connected with Seller's Business;
(g) For the employment or retention of any director,
officer, employee, shareholder, consultant, broker or
advisor of Seller or any other contract between Seller
and any director, officer, employee, shareholder,
consultant or advisor which does not provide for
termination at will by the Seller without further cost
or other liability to the Seller as of or at any time
after the Closing.
(h) In the nature of a profit sharing, bonus stock option,
stock purchase, pension, deferred compensation,
retirement, severance, hospitalization, insurance or
other plan or contract providing benefit to any person
or former director, officer, employee, shareholder,
consultant, broker or advisor of Seller, or such
person's dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory
note, loan or credit agreement or other contract
relating to the borrowing of money or a line of credit
by the Seller or relating to the direct or indirect
guarantee or assumption by the Seller of obligations of
others; and
(j) Leases or subleases with respect to any property, real,
personal or mixed, in which the Seller is involved, as
lessor or lessee.
True and correct copies of all items so disclosed in the
Disclosure Schedule shall be provided or made available to
Purchaser within the time period required by Section 9.5.
To the best of Seller's and Shareholders' knowledge, each of
such items listed, or required to be listed, is a valid and
binding obligation of the parties thereto enforceable in
accordance with its terms, subject to principles of equity,
bankruptcy laws, and laws affecting creditors' rights
generally, and there have been no known material defaults or
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<PAGE>
material claims of material default by the Seller, which
would have a material adverse effect on Purchaser, and there
are no material facts or conditions that have occurred or
that are anticipated to occur which, through the passage of
time or the giving of notice, or both, would constitute a
material default by the Seller, or would cause the
acceleration of any a material obligation of any party
thereto or the creation of a material Encumbrance upon any
asset of the Seller, which would have a material adverse
effect on Purchaser. To the best of Seller's and
Shareholders' knowledge, there are no material oral
contracts, agreements or understandings made by any
Shareholder, whether or not binding, material to the Seller,
except such as have been disclosed in the Disclosure
Schedule and for which a materially accurate summary
description has been provided. At the Closing, Purchaser
will assume all of such contracts, oral or written,
including all rights and obligations therein, that were
disclosed on the Disclosure Schedule.
9Taxes.
_____
Except as to taxes not yet due and payable, and except for
taxes the payment of which is being diligently contested in
good faith and for which adequate reserves have been
established in accordance with generally accepted accounting
principles, to the best of Seller's and Shareholders'
knowledge, Seller has filed all returns and reports that are
now required to be filed by it in connection with any
federal, state or local tax, duty or charge levied, assessed
or imposed upon it, or its property, including unemployment,
social security and similar taxes; and to the best of
Seller's and Shareholders' knowledge, all of such taxes have
been either paid or materially adequate reserves or other
provision has been made therefor. To the best of Seller's
and Shareholders' knowledge, Seller and Shareholders shall
pay, without right of reimbursement from Purchaser, except
as set forth herein including at Section 4.1(d), all of
Seller and Shareholders' income Taxes, including but not
limited to any taxes attributable to any gain under Section
1374 of the Code, including any interest and penalties
thereon, that relate to the activities of Seller through the
Closing, including this transaction, as due.
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10 Title to Properties; Encumbrances.
_________________________________
(a) With respect to all Purchased Assets sold at the
Closing Seller shall have good and marketable title to
the Purchased Assets being acquired by Purchaser, free
and clear of all liens, security interests,
encumbrances, leases and charges whatsoever other than
as set forth herein and, immediately after the transfer
of all the Purchased Assets being acquired by Purchaser
from Seller, Purchaser will own all of said Purchased
Assets free and clear of all liens, claims,
encumbrances and charges whatsoever, whether perfected
or unperfected; and, by way of illustration but not
limitation, there are not any material known
undisclosed unpaid taxes, assessments or charges due or
payable by Seller to any federal, state or local
agency, or any material obligations or liabilities or
any unsatisfied judgments against, or, to the best of
Seller's knowledge, any litigation or proceedings
pending or threatened against Seller by Seller's
employees, clients, customers, creditors, suppliers, or
any other party (nor known state of facts for any such
obligation, liability, litigation or proceeding), that
could become a claim, obligation, liability, lien or
other charge of or against Purchaser or the Purchased
Assets and which would have a material adverse effect
on the Business.
(b) Except as otherwise specifically set forth herein, to
the best of Seller's and Shareholders' knowledge,
Seller is not a party to any material contract,
agreement, lease or commitment that would result in any
claim, obligation, liability, lien or other material
charge against Purchaser or the Purchased Assets, and
which would have a material adverse effect on the
Business, and to the best of Seller's and Shareholders'
knowledge, Purchaser is not obligated to assume the
obligations under any contract, agreement, lease or
commitment of Seller, except as specifically set forth
herein.
11Pending Actions.
_______________
To the best of Seller's and Shareholders' knowledge, Seller
has not been served with or received notice of any actions,
suits, arbitrations, OSHA, EPA or other governmental
violations, or any other proceedings or investigations,
either administrative or judicial, strikes, lockouts or NLRB
charges or complaints ("Actions and Disputes"), which could
have a materially adverse impact on Purchaser, the Purchased
Assets or the Business. To the best of Seller's and
Shareholders' knowledge, there are no Actions or Disputes
pending or threatened against or materially affecting
(directly or indirectly) the Seller or its property or
assets, nor are there any known facts or conditions which
exist which would give rise to any such Actions or Disputes
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<PAGE>
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
12 Insurance.
_________
To the best of Seller's and Shareholders' knowledge, the
Disclosure Schedule contains a materially accurate and
complete listing (showing type of insurance, amount,
insurance company, annual premium and special exclusions) of
all policies of fire, liability, worker's compensation and
other forms of insurance owned or held by the Seller. To
the best of Seller's and Shareholders' knowledge, all such
policies are in full force and effect; are materially
sufficient for compliance with all requirements of law and
of all agreements to which the Seller is a party; are valid,
outstanding and enforceable policies; provide materially
adequate insurance coverage for the assets and operations of
the Seller and will remain in full force and effect through
the Closing. To the best of Seller's and Shareholders'
knowledge, there are no outstanding requirements or
recommendations by any insurance company that issued a
policy with respect to any of the properties and assets of
the Seller by any Board of Fire Underwriters or other body
exercising similar functions or by any Governmental Entity
requiring or recommending any repairs or other work to be
done on or with respect to any of the properties and assets
of the Seller or requiring or recommending any equipment or
facilities to be installed on or in connection with any of
the properties or assets of the Seller.
Seller and Purchaser agree that Seller shall procure, at
Purchaser's cost by a payment made by Purchaser (which shall
be made at the Closing or Purchaser shall deliver a check to
Seller made payable to the insurance company), "Tail"
insurance insuring Seller (and Purchaser, if Purchaser
desires) for a period of two (2) years after the Closing
from liabilities arising from the operation of the Business
by Seller prior to the Closing Date. The Purchase Price
shall be reduced by 50% of the cost to Purchaser of such
tail insurance, which shall reduce the principal amount of
the Notes and be deducted from the final payments under the
Notes.
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<PAGE>
13Inventory.
The Disclosure Schedule contains a copy of Seller's
inventory as of April 30, 1997. To the best of Seller's and
Shareholders' knowledge, no item included in the Inventory
of Seller is held by Seller on consignment from others. To
the best of Seller's and Shareholders' knowledge and without
investigation, obsolete or discontinued items do not
constitute a material part of such inventory. The value at
which items of inventory are carried on the books of Seller
reflect the cost of such item. Solely for purposes of
Purchaser's information, Seller will provide copies of its
certified inventory dated December 31, 1996, which was
performed by an independent outside inventory service.
14Accounts Receivable.
All accounts receivable and notes receivable of the Seller,
as reflected on the Balance Sheet, to the best of Seller's
and Shareholders' knowledge, represent sales actually made
in the ordinary course of business and are valid obligations
of the respective debtors without any known material claims
or defenses, other than as set forth on the Disclosure
Schedule or the Balance Sheet. Purchaser acknowledges that
for any accounts receivable that are over 90 days old, the
applicable debtor on such accounts will likely make a claim
for offset or other claim of reduction.
15Status of Business
(a) Since December 31, 1996, the Business of the Seller has
in all material respects been operated only in the
ordinary course, and, except as set forth in the
Disclosure Schedule, elsewhere in this Agreement, or
permitted under Exhibit A dealing with Excluded Assets,
there has not been with respect to the Business, except
as same may occur in the ordinary course of Seller's
Business:
(i) Any material change in its condition (financial or
other), assets, liabilities, obligations, business
or earnings, except changes in the ordinary course
of business, none of which in the aggregate has
been materially adverse;
(ii) Any material liability or obligation incurred or
assumed, or any material contract, agreement,
arrangement, lease (as lessor or lessee), or other
commitment entered into or assumed, on behalf of
the Business, whether written or oral, except in
the ordinary course of business;
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<PAGE>
(iii) Any purchase or sale of material assets in
anticipation of this Agreement, or any purchase,
lease, sale, abandonment or other disposition of
material assets, except in the ordinary course of
business;
(iv) Any waiver or release of any material rights,
except for rights of nominal value;
(v) Any material damage or destruction to or loss of
any physical assets or property of Seller which
materially adversely affects the Business or any of
the properties of the Seller (whether or not
covered by insurance);
(vi) Any material changes in the accounting practices,
depreciation or amortization policy or rates
theretofore adopted by the Seller, or any material
revaluation or write-up or write-down of any of its
assets;
(vii) Any material increase in the compensation levels or
in the method of determining the compensation of
any of the Seller's officers, directors, agents or
employees, or any bonus payment or similar
arrangement with or for the benefit of any such
person, any material increase in benefits expense
to the Seller, any payments made or declared into
any profit-sharing, pension, or other retirement
plan for the benefit of employees of the Seller,
except in the ordinary course of business;
(viii) Any material contract cancelled or the terms
thereof materially amended or any notice received
with respect to any such contract terminating or
threatening termination or material amendment of
any such contract;
(ix) Any transfer or grant of any material rights under
any leases, licenses, agreements, or with respect
to any trade secrets or know-how; or
(x) Any labor trouble or employee controversy
materially adversely affecting its Business or
assets.
(b) To the best of Seller's and Shareholders' knowledge,
Seller is not
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<PAGE>
(i)in violation of any outstanding judgment, order,
injunction, award or decree specifically relating
to the Business, or
(ii) in violation of any federal, state or local
law, ordinance or regulation which is applicable to
the Business, except where such violation does not
have a materially adverse effect on the Business.
To the best of Seller's and Shareholders' knowledge,
Seller has all required permits, licenses, orders,
approvals, authorizations, concessions and franchises
of any federal, state or local governmental or
regulatory body that are material to or necessary in
the conduct of the Business, except where failure to
have such required permit, license, order, approval,
authorization, concession or franchise does not have a
materially adverse effect on the Business. All such
permits, licenses, orders, approvals, concessions and
franchises are, to the best of Seller's and
Shareholders' knowledge, set forth on the Disclosure
Schedule and to the best of Seller's and Shareholders'
knowledge, are in full force and effect and there is no
proceeding, or to the knowledge of Seller, threatened
to revoke or limit any of them.
(c) To the best of Seller's and Shareholders' knowledge, no
claim, litigation, action, investigation or proceeding
is pending or, to the knowledge of Seller, threatened
which could have a material adverse impact on the
Business, and to the best of Seller's and Shareholders'
knowledge, no order, injunction or decree is
outstanding, against or relating to the Business or its
assets which could have a material adverse impact on
the Business, and Seller does not know of any
information which could result in such a material
claim, litigation, action, investigation or proceeding,
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
(d) To the best of Seller's and Shareholders' knowledge,
Seller has accrued or paid in full, to all employees of
the Business, in the normal course of its operations,
all wages, salaries, commissions, bonuses, vacations
and other direct compensation for all services
performed by them, subject to Purchaser's agreement
herein to assume such items which are set forth on the
Disclosure Schedule and which are incurred in the
ordinary course of business. To the best of Seller's
knowledge, Seller is in compliance with all applicable
federal, state and local laws, ordinances and
regulations relating to employment and employment
practices at the Business, and all applicable employee
benefit plans and tax laws relating to employment at
the Business, except where such non-compliance would
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<PAGE>
not have a materially adverse effect on the Business.
To the best of Seller's and Shareholders' knowledge,
there is no unfair labor practice complaint against
Seller relating to the Business pending before the
National Labor Relations Board or similar agency or
body and, to Seller's Knowledge, no condition exists
that could give rise to any unfair labor practice
complaint. There is no labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of
Seller, threatened against or involving the Business.
16 Environmental
(a) To the best of Seller's knowledge, the real estate
located at 16698 N.W. 54th Avenue, Miami, Florida 33014
("Real Estate") has not been used or operated in any
fashion involving producing, handling and disposing of
chemicals, toxic substances, wastes and effluent
materials, x-rays or other materials or devices in
material violation of any laws, rules, regulations or
orders, and to the best of Seller's knowledge, the Real
Estate is in material compliance with applicable laws,
regulations, ordinances, decrees and orders arising
under or relating to health, safety, and environmental
laws and regulations, including without limitation the
Federal Occupation and Safety Health Act, 29 U.S.C.
S651, et seq.; Federal Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. S6901, et seq.;
Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.
S9601, et seq.; the Federal Clean Air Act, 42 U.S.C.
S2401, et seq.; the Federal Clean Water Act, 33 U.S.C.
S1251, et seq.; and all state and local laws that
correspond therewith or supplement such laws.
(b) To the best of Seller's knowledge, the Real Estate has
not been operated, in violation of any laws, rules,
regulations or orders, so as to involve or create any
surface impoundments, incinerators, land fills, waste
storage tanks, waste piles, or deep well injection
systems or for the purpose of storage, treatment or
disposal of a hazardous waste as defined by RCRA or
hazardous substance, pollutant or contaminate as
defined by CERCLA and, to the best of Seller's
knowledge, no acts have been committed that would make
the Real Estate or any part thereof subject to remedial
action under RCRA or CERCLA or corresponding state or
local laws.
(c) To the best of Seller's knowledge, there have not been,
are not now and as of the Closing Date, there will be
no solid waste, hazardous waste, hazardous substance,
toxic substance, toxic chemicals, pollutants or
contaminants, underground storage tanks, purposeful
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<PAGE>
dumps, or accidental spills in, on or about the Real
Estate or any of the assets of the Seller, whether real
or personal, owned or leased, or stored on any real
property owned or leased by the Seller or by the
Seller's lessees, licensees, invites, or predecessors.
(d) To the best of Seller's knowledge, Seller is not
engaged in, and to the best of Seller's knowledge and
belief, is not threatened with any litigation, or
governmental or other proceeding which may give rise to
any claim against the Real Estate. Specifically, there
are no pending suits, charges, actions, governmental
investigations, or other proceedings, involving,
directly or indirectly without limitation, the laws,
statutes and regulations set forth in subsection (a),
above, whether initiated by a third party or by Seller
and there are none, to the best of Seller's knowledge,
threatened against or relating to or involving the Real
Estate or the transactions contemplated by this
Agreement. Seller is not in default with respect to any
order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or
instrumentality.
(e) To the best of Seller's knowledge, Seller has obtained
all permits, and licenses and other authorizations
required by all environmental laws; and all of such
permits, licenses and other authorizations are in full
force and effect as of the date hereof. To the best of
Seller's knowledge, a true and correct list of all such
permits, licenses and other authorizations is set forth
in the Disclosure Schedule.
17Certain Employees
(a) Each of the following is included in the list of
agreements set forth in the Disclosure Schedule: all
collective bargaining agreements, employment and
consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or
retirement plans, employee profit-sharing plans,
employee stock purchase and stock option plans,
hospitalization insurance, and other plans and
arrangements providing for employee benefits of
employees of the Seller.
(b) Essentially all of the employees of Seller are leased
employees who are leased from Paychecks, Inc. To the
best of Seller's and Shareholders' knowledge, the
Disclosures Schedule contains a materially true,
complete and accurate list of the following: the
names, positions, and compensation of the present
employees and leased employees of the Seller, together
with a statement of the current annual salary payable
to such salaried employees and leased employees and a
summary of the bonuses and description of agreements
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<PAGE>
for additional compensation and other like benefits, if
any, paid or payable to such persons for the period set
forth in the Disclosure Schedule. Except as listed in
the Disclosure Schedule, to the best of Seller's
knowledge, all employees and leased employees of Seller
are employees-at-will, may be terminated at any time
for any lawful reason or for no reason and have no
known entitlement to employment by virtue of any oral
or written contract or employer policy.
(c) to the best of Seller's and Shareholders' knowledge,
Seller has no retired employees who are receiving or
are entitled to receive any payments, health or other
benefits from Seller.
18Payments to Employees.
All accrued obligations of Seller relating to employees,
leased employees, and agents of Seller, whether arising by
operation of law, by contract, or by past service, for
payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his
heirs, legatees, or legal representatives) with respect to
unemployment compensation benefits, profit sharing or
retirement benefits, or social security benefits to the best
of Seller's and Shareholders' knowledge, have been paid or
accrued by Seller. To the best of Seller's and
Shareholders' knowledge, all material obligations of Seller
as an employer or principal relating to employees or agents,
whether arising by operation of law, by contract, or by past
practice, for vacation and holiday pay, bonuses, and other
forms of compensation which are or may become payable to
such employees or agents, have been paid, will be paid, or
are set forth on the Disclosure Schedule. Purchaser has
agreed herein to assume all such accrued and unpaid
salaries, bonuses, vacations, and other compensation which
are set forth on the June 15, 1997 Pro Forma Balance Sheet
or as incurred in the ordinary course of business thereafter
as set forth on Disclosure Schedule, and Seller shall not be
responsible for such Assumed Liabilities.
19Change of Corporate Name
Within five (5) business days after the Closing, Seller, if
requested by Purchaser, will adopt and file with the
Secretary of State of Florida an amendment to the Articles
of Incorporation of Seller changing the name of Seller to a
name substantially dissimilar to "Magic Box, Inc.''
and
Seller shall also execute a Consent for Use of Similar Name
form, as set forth in the Disclosure Schedule granting to
Purchaser the use of the name "Magic Box, Inc."
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<PAGE>
20Brokers and Finders.
Except as set forth in the Disclosure Schedule, no broker,
finder or other person or entity acting in a similar
capacity has participated on behalf of Seller in bringing
about the transaction herein contemplated, or rendered any
service with respect thereto or been in any way involved
therewith.
21 [Intentionally Omitted].
22 Absence of Certain Payments.
To the best of Seller's knowledge, neither Seller, nor any
director, officer, agent, Affiliate, employee or other
person associated with or acting on behalf of any of them,
have used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to
political activity, or made any direct or indirect unlawful
payments to foreign or domestic government officials or
employees from corporate funds, or made or received any
payment, whether direct or indirect, to or from any supplier
or customer of the Seller, for purposes other than the
satisfaction of lawful obligations, or established or
maintained any unlawful or unrecorded funds.
23 [Intentionally Omitted].
24 Product Liability Claims
To the best of Seller's knowledge, there are no material
product liability claims pending against the Seller, which
are not covered by product liability insurance coverage,
which, if determined adversely to Seller, would have a
material adverse effect upon Seller's Business.
25Employee Benefit Plans.
For the purposes of this Section 6.25, "Seller" shall
include all persons who are members of a controlled group, a
group of trades or businesses under common control, or an
affiliated service group (within the meanings of Sections
414(b), (c) or (m) of the Code), of which the Seller is a
member.
(a) To the best of Seller's and Shareholders' knowledge,
the Employee Benefit Plans presently maintained by the
Seller or to which the Seller has contributed within
the past six (6) years, including any terminated or
frozen plans which have not yet distributed all plan
assets, are fully set forth in the Disclosure
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<PAGE>
Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
A Welfare Benefit Plan as defined in Section 3(1)
(i)
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") established for the
purpose of providing for its participants or their
beneficiaries, through the purchase of insurance or
otherwise, medical, surgical, or hospital care or
benefits, or benefits in the event of sickness,
accident, disability, death or unemployment
(including any plan or program of severance pay),
or vacation benefits, apprenticeship or other
training programs, or day care centers, scholarship
funds, or prepaid legal services, or any benefit
described in Section 302(c) of the Labor Management
Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined
in Section 3(2) of ERISA established or maintained
by the Seller for the purpose of providing
retirement income to employees or for the purpose
of providing deferral of income by employees for
periods extending to the termination of covered
employment or beyond; and
(iii) Any other plan or arrangement not covered by
ERISA but which provides benefits to employees or
former employees and results in an accrued
liability on the part of the Seller either by
contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the
Seller represents and warrants that, to the best of
Seller's knowledge:
The Seller has not, with respect to any Employee
(i)
Benefit Plans, engaged in any prohibited
transaction, as such term is defined in Section
4975 of the Code or Section 406 of ERISA, the
performance of which would have a material adverse
effect on Purchaser.
(ii) The Seller has, with respect to any Employee
Benefit Plans, materially complied with all
reporting and disclosure requirements required by
Title I, Subtitle B, Part 1 of ERISA.
(iii) There was no accumulated funding deficiency
(as defined in section 302 of ERISA and Section 412
of the Code) with respect to any Employee Pension
Benefit Plan which is a defined benefit pension
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plan, whether or not waived, as of the last day of
the most recent fiscal year of the plans ending
prior to the date of this Agreement.
(iv) There are no material contributions due to
any Employee Pension Benefit Plan for the most
recent fiscal year of the plans ending prior to the
date of this Agreement and the Seller's Financial
Statements reflect any liability of the Seller to
make contributions to the Employee Pension Benefit
Plans.
(v)No material liability to the Pension Benefit
Guaranty Corporation ("PBGC") has been asserted
with respect to any Employee Pension Benefit Plan
which is a defined benefit pension plan, which
would have a material adverse effect on Purchaser.
(vi) There has been no reportable event as
described in Section 4043(b) of ERISA since the
effective date of Section 4043 of ERISA with
respect to any Employee Pension Benefit Plan which
is a defined benefit plan, which would have a
material adverse effect on Purchaser.
(vii) Except for claims for benefits by
participants and beneficiaries in the normal course
of events, to the best of Seller's knowledge, there
are no claims, pending or threatened, by any
individual or Governmental Entity, which, if
decided adversely, would have a material adverse
effect upon the financial condition of any Employee
Benefit Plan, the plan administrator of any
Employee Benefit Plan, or the Seller.
(viii) The Seller has made available for inspection
all annual reports for the Seller filed on Internal
Revenue Service ("IRS") Form 5500 or 5500C, all
reports for the Seller prepared by an actuary for
the last three plan years, the plan and trust
documents and the Summary Plan Description, as
amended, for each Employee Benefit Plan and the
last filed PBGC1 Form (if applicable) for each
Employee Benefit Plan, with respect to any Employee
Benefit Plans other than multi-employer plans
(within the meaning of Section 3(37) of ERISA), and
other reports filed with the PBGC during the last
three plan years.
(ix) All Employee Pension Benefit Plans are
intended to be qualified retirements plans under
the Code. The IRS has issued, and the Seller has
made available for inspection, one or more
favorable determination letters with respect to the
qualification of all Employee Pension Benefit Plans
stating that from the inception of each such plan,
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such plan has been qualified under Section 401(a)
of the Code and each trust maintained in connection
with such plan has been and is exempt under Section
501(a) if the Code. The time for adoption of any
amendments required by changes in the Code since
such determination letters were issued, or changes
required by the IRS as a condition for continued
qualification of such plans has not expired, or did
not expire without such amendments being made.
Such plans are now, and always have been,
established in writing and maintained and operated
in accordance with the plan documents, ERISA, the
Code, and all other applicable laws.
(x)There is no material liability arising from the
termination or partial termination of any Employee
Benefit Plan, except for liabilities as to which
adequate reserves are reflected on the Financial
Statements, and there exists no condition
presenting a material risk of such liability.
(xi) The Seller has timely made any contributions
it is obligated to make to any multi-employer plan
within the meaning of Section 3(37) of ERISA. The
Seller has no material liability arising as a
result of withdrawal from any multi-employer plan,
no such material withdrawal liability has been
asserted and no such material withdrawal liability
will be asserted with regard to any withdrawal or
partial withdrawal on or before the date of this
Agreement.
26Full Disclosure.
None of the representations and warranties made by the
Seller and Shareholders herein, or made on its behalf,
including any disclosures made in the Disclosure Schedule,
contains or will contain, to Shareholders' and Seller's
knowledge, any untrue statement of material fact or omits or
will omit any material fact.
7.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
___________________________________________
Purchaser hereby represents and warrants to Seller and
Shareholders that the following statements are true and correct
as of the date hereof and shall remain true and correct as of the
Closing as if made again at and as of that time.
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1Organization, Good Standing and Power of Purchaser.
(a) Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware and has full corporate power and
lawful authority to execute, deliver and perform this
Agreement and conduct the business of Seller currently
conducted by Seller in each of the jurisdictions in
which Seller currently conducts its Business, which are
the only jurisdictions where the failure to be so
qualified by Purchaser will have a material adverse
effect on the business prospects or financial condition
of Purchaser.
2Status of Agreements
(a) All requisite corporate action (including action of its
Board of Directors) to approve, execute, deliver and
perform this Agreement and each of the other
agreements, instruments and other documents to be
delivered by and on behalf of Purchaser ("Other
Purchaser Documents") in connection herewith has been
taken by Purchaser and Purchaser has full legal power
and authority to execute, deliver and perform as
required under this Agreement and the other Purchaser
Documents. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the
valid and binding obligation of Purchaser enforceable
in accordance with its terms. All Other Purchaser
Documents in connection herewith will, when executed
and delivered, constitute the valid and binding
obligation of Purchaser enforceable in accordance with
their respective terms.
(b) No authorization, approval, consent or order of, or
registration, declaration or filing with, any court,
governmental body or agency or other public or private
body, entity or person is required (except for
Purchaser's primary lender, Star Bank, N.A., whose
consent shall be obtained prior to June 16, 1997) in
connection with the execution, delivery or performance
of this Agreement or any Other Purchaser Documents in
connection herewith.
(c) Neither the execution, delivery nor performance of this
Agreement or any of the Other Purchaser Documents in
connection herewith does or will, to the best of
Purchaser's knowledge:
(i) conflict with, violate or result in any
breach of any judgment, decree, order, statute,
ordinance, rule or regulation applicable to
Purchaser;
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(ii) conflict with, violate or result in any
breach, termination, or default (in each case
whether with or without notice or the lapse of time
or both) of any agreement or instrument to which
Purchaser is a party or by which Purchaser or any
of Purchaser's assets or properties is bound, or
constitute a default thereunder or give rise to a
right of acceleration of an obligation of
Purchaser; or
(iii) conflict with or violate any provision of the
Articles of Incorporation or By-Laws of Purchaser.
3Brokers and Finders.
No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Purchaser in
bringing about the transaction herein contemplated, or
rendered any service with respect thereto or been in any way
involved therewith.
4Financial Statements. True and complete copies of the
Purchaser's financial statements for Purchaser's fiscal
years ended 1995 and 1996 and as of April 5, 1997 have been
delivered to the Seller. Such financial statements have
been prepared in accordance with generally accepted
accounting principles consistently applied and accurately
reflect the Purchaser's business, operations, financial
results, financial position, expenses, incomes, assets and
liabilities and are complete in all material respects as of
their respective dates. There has been no material change
to Purchaser's financial position since the financial
statements dated December 31, 1996.
5Compliance. To the best of Purchaser's knowledge, Purchaser has
not failed to comply with any applicable law, statute, rule,
regulation, ordinance, requirement, announcement, decree,
judgment, award, order, injunction, consent or other binding
action of any Governmental Authority or Court which could
result in a material adverse effect to its business,
operations or financial position.
6Litigation. Other than as described in Schedule 7.6, there
is no action, claim, lawsuit, demand, suit, inquiry,
hearing, investigation, notice of violation, litigation,
proceeding, arbitration, or other dispute, whether civil,
criminal, administrative, or otherwise, pending or, to the
best knowledge of the Purchaser, threatened against the
Purchaser which, if adversely determined, would have a
material adverse effect on Purchaser. Nor is there any
decree, judgment, award, order, injunction, consent or other
binding action outstanding against the Purchaser having, or
which, insofar as can reasonably be foreseen, in the future
may have, a material adverse effect on Purchaser.
7No Additional Seller Representations. Purchaser has been
offered, and up to the Closing Date and the time(s) of
transfer of the Purchased Assets shall be offered, the
opportunity to ask questions of, and receive answers from,
Seller and Shareholders, and the Purchaser has been given
full and complete access to all available information and
data relating to the business and assets of Seller, has
obtained such additional information about Seller and the
Purchased Assets which the Purchaser has deemed necessary in
order to evaluate the opportunities, both financial and
otherwise, with respect to Seller and, except as expressly
set forth in this Agreement, Purchaser has not relied on any
representation, warranty or other statement of Seller or
Shareholders concerning Seller or the Purchased Assets, in
its evaluation of the decision to consummate the
transactions contemplated herein. As of the Closing Date,
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Purchaser will have had an opportunity to review and be
familiar with all of the contracts of Seller which have been
provided to Purchaser prior to the Closing Date.
8Tax Matters. Except as to taxes not yet due and payable,
and except for taxes the payment of which is being
diligently contested in good faith and for which adequate
reserves have been established in accordance with generally
accepted accounting principles, to the best of Purchaser's
knowledge, Purchaser has filed all returns and reports that
are now required to be filed by it in connection with any
federal, state or local tax, duty or charge levied, assessed
or imposed upon it, or its property, including unemployment,
social security and similar taxes; and to the best of
Purchaser's knowledge, all of such taxes have been either
paid or materially adequate reserves or other provision has
been made therefor.
9 [Intentionally Omitted].
10No Change in Management Services. To the best of
Purchaser's knowledge, none of the members of Purchaser's
senior management including, but not limited to, its
officers and directors, have expressed a desire to terminate
his or her relationship or affiliation with Purchaser.
11Changes to Purchaser's Business. To the best of
Purchaser's knowledge, there have been no adverse recent
trends in Purchaser's sales, revenues, or earnings and
Purchaser is not aware of any changes to the industry or
Purchaser's business, which could be expected to result in
such decreased sales, revenues, or earnings.
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12Delivery of Purchaser Statements. Purchaser covenants
that, commencing on the Closing Date through and including
the date of the final payments under the Notes, Purchaser
shall deliver to Seller (without the need for Seller to
request such delivery) copies of Purchaser's quarterly and
annual financial statements and all amendments thereto, the
annual financial statement to be audited by independent
public accountants, at such times as such financial
statements are finalized. Purchaser covenants that such
financial statements shall be prepared in accordance with
general accepted accounting principles and will fully and
fairly reflect the Purchaser's financial position and
financial results as of their dates. Purchaser further
covenants to provide to Seller from time to time, after the
Closing Date and until July 15, 1999, such other information
about the Purchaser's business, operations, financial
position and capitalization as Seller shall reasonably
request.
13Full Disclosure. None of the representations and
warranties made by Purchaser herein, or made on its behalf,
including any disclosures made in Schedules and Exhibits
attached hereto, contains or will contain, to Seller's
knowledge, any untrue statement of material fact or omits or
will omit any material fact.
8.
COMPETITION
___________
1 As an inducement for and in consideration of Purchaser
entering into this Agreement, Seller and I. Fintz, A. Sokol,
R. Krongold and M. Rosen agree to enter into a Covenant Not
to Compete Agreement, in the form of Exhibits "B" , "B-1",
"B-2", "B-3" and "B-4", respectively, attached hereto and
made a part hereof.
9.
INTERIM OPERATIONS
__________________
1Seller's Covenants.
From June 15, 1997 the date of the updated Pro Forma Balance
Sheet through and including the Closing Date, except as set
forth on the Disclosure Schedule, or in the ordinary course
of business, Seller shall not:
(i) change its Articles of Incorporation or bylaws or merge
or consolidate with or into any entity, or acquire
control of any entity, or obligate itself to do so;
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(ii) declare, set aside or pay any dividend or other
distribution on or in respect of shares of its capital
stock;
(iii) authorize, guarantee or incur indebtedness for
borrowed money, including but not limited to, borrowing
for the payment of any taxes;
(iv) sell or agree to sell any of the Purchased Assets,
except in the ordinary course of business;
(v) mortgage, pledge or subject to any security interest
any of the Purchased Assets;
(vi) make any capital expenditures or capital additions or
betterments, or commitments therefor, aggregating in
excess of $5,000.00, except in the ordinary course of
business;
(vii) seek other officers to purchase the stock or assets
of Seller and shall refrain and cause its officers,
employees and agents to refrain from seeking other
offers to purchase the stock or assets of Seller;
(viii) enter into any long-term contractual arrangements
or blanket purchase orders which extend past the
Closing Date without the express written consent of
Purchaser except in the ordinary course of business;
(ix) increase the salaries of any existing employees, hire
new managers or employees, pay or award bonuses, make
loans, or permit draws by any individuals without
Purchaser's express written consent except in the
ordinary course of business.
If the Closing Date is extended for any reason by Purchaser
(and Seller consents to such extension), and Purchaser
desires for Seller to continue to comply with the provisions
of this Section 9, Purchaser shall place an additional
$250,000 with the Escrow Agents to hold as additional
Deposit, pursuant to the terms of this Agreement.
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<PAGE>
2 Conduct of Business.
From the date hereof until Closing, Seller will operate the
Business substantially as presently operated and only in the
ordinary course of business and, consistent with such
operation, will use its best efforts to preserve intact for
the benefit of Purchaser, the present business organization
of the Business and the relationships and good will of
suppliers, customers, clients and others having business
relations with the Business. Without limiting the
generality of the foregoing, Seller will not, other than in
the ordinary course of business, take any of the actions
contemplated by, or which would give rise to, a result
contemplated by Section 6.15(a) hereof as set forth in such
section.
3Access to Information.
From the date hereof until Closing, Seller and Purchaser
shall make available or cause to be made available to the
accountants, attorneys or other representatives of the other
of such parties for examination during normal business
hours, upon reasonable prior requests, all properties,
assets, books of accounts, title papers, insurance policies,
contracts, leases, commitments, records and other documents
of every character relating to the Business, all of which
are subject to the terms of the Confidentiality Agreement
executed by and between Seller and Purchaser (the
"Confidentiality Agreement") and provided such access does
not interfere with the ordinary course of Seller's and
Purchaser's respective businesses. Notwithstanding anything
in this Agreement that may imply otherwise, Purchaser shall
not contact employees of Seller, other than Shareholders,
officers and directors, until after the expiration of the
Inspection Period.
4Other Actions.
From the date hereof until Closing, Seller and Purchaser
shall not take any action which shall prevent the
representations, warranties and covenants of Seller or
Purchaser, respectively, set forth herein from being
materially true and correct at the Closing. Seller and
Purchaser shall each use its respective best efforts to
fulfill all conditions precedent set forth herein in order
to consummate the transactions contemplated hereby in a
timely manner.
5Completion of Schedules, Exhibits, and Ancillary Documents
Purchaser and Seller shall endeavor to complete and agree
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<PAGE>
upon all of the terms of the ancillary documents including, but
not limited to, the Notes, the Employment Agreements, the Non-
Competition Agreements, and the Subordination Agreements within 7
days after the date first written above, and to finalize the
Disclosure Schedule and other Exhibits prior to June 9, 1997,
other than those Schedules which cannot by their nature be
completed until a date close to the Closing date.
10.
[INTENTIONALLY OMITTED]
11.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
___________________________________________________________
1Survival of Representations and Warranties
The parties acknowledge and agree that all representations,
warranties and agreements contained in this Agreement or in
any agreement, instrument, exhibit, certificate, schedule or
other document delivered in connection herewith and
referenced herein, shall survive the Closing and continue to
be binding upon the party giving such representation,
warranty or agreement and shall be fully enforceable to the
extent provided for in Sections 11.3 and 11.4 hereof, at law
or in equity, for the period beginning on the Closing Date
and ending one (1) year thereafter, except for (i)
representations in Sections 6.3, 7.2 and 6.10 which shall
survive until the expiration of the statute of limitations
applicable to such representations and (ii) Exhibits "B",
"B-1" " B-2", "B-3" and "B-4", which shall terminate as
provided therein.
2Reliance Upon and Enforcement of Representations, Warran-
ties and Agreements.
(a) Seller hereby agrees that, notwithstanding any right of
Purchaser to fully investigate the affairs of Seller,
and notwithstanding knowledge of facts determined or
determinable by Purchaser pursuant to such
investigation or right of investigation, Purchaser has
the right to rely fully upon the representations,
warranties and agreements of Seller contained in this
Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right
of Seller to fully investigate the affairs of
Purchaser, and notwithstanding knowledge of facts
determined or determinable by Seller pursuant to such
investigation or right of investigation, Seller has the
right to rely fully upon the representations,
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warranties and agreements of Purchaser contained in
this Agreement and upon the accuracy of any document,
certificate or exhibit given or delivered to Seller
pursuant to the provisions of this Agreement.
3 Indemnification by Seller and Shareholders.
Subject to the limitations in Section 11.5(d) below, Seller
and each Shareholder shall indemnify Purchaser against and
hold it harmless from:
(i) any and all material loss, damage, liability or
deficiency resulting from or arising out of any
material inaccuracy in or material breach of any
representation, warranty, covenant, or obligation made
or incurred by Seller herein or in any other agreement,
instrument or document delivered by or on behalf of
Seller in connection herewith and incorporated herein;
(ii) any imposition (including by operation of law) or
attempted imposition by a third party upon Purchaser of
any liability of Seller which Purchaser has not
specifically agreed to assume pursuant to Sections 3.1
and 3.2 of this Agreement; and
(iii) any and all reasonable costs and expenses incurred by
Purchaser (including reasonable legal and accounting
fees) related to any of the foregoing, subject to the
provisions of Section 11.5.
Nothing in this Section 11.3 shall be construed to further
limit the amount to which, or the time by which (except as
described in Sections 11.1 and 11.5(d)), by reason of offset
or otherwise, the Purchaser may recover from Seller or any
Shareholder pursuant to this Agreement resulting from
Seller's and any Shareholder's breach or violation of any
representation, warranty, covenant or agreement contained
herein.
Any amounts to which Purchaser, its successors or assigns,
is entitled to indemnification pursuant to the provisions of
this Section, subject to the provisions of Section 11.5,
shall be offset against the final amounts payable to Seller
under the Notes. Provided, however, the offset in any one
year may not exceed the aggregate amount of principal and
interest due on said promissory note for said year.
Notwithstanding anything in this Agreement to the contrary,
if Purchaser directly causes Seller or Shareholders to
materially breach, default or perform other acts or events
that would give rise to claim by Purchaser for loss, damage,
or liability hereunder, then Purchaser shall have no right
to make a claim for such loss, damage, or liability.
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<PAGE>
4 Indemnification by Purchaser.
Purchaser shall indemnify Seller and the Shareholders
against and hold it and them harmless from any and all loss,
damage, liability or deficiency resulting from or arising
out of: (i) any Assumed Liabilities; (ii) any liability of
Purchaser arising out of Purchaser's operations subsequent
to the Closing (except to the extent such liability is the
result of a material breach of a covenant or warranty of
Seller hereunder); or (iii) any inaccuracy in or breach of
any representation, warranty, covenant or obligation made or
incurred by Purchaser herein; and (iv) any and all related
costs and expenses (including reasonable legal and
accounting fees), subject to the provisions of 11.5. Except
as specifically provided herein, nothing in this Section
11.4 shall be construed to limit the amount to which, or the
time (except as described in Section 11.1) by which, by
reason of offset or otherwise, that Seller may recover from
Purchaser pursuant to this Agreement resulting from its
breach or violation of any representation, warranty,
covenant or agreement contained herein.
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<PAGE>
5Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until written
notice thereof is given to the party from whom
indemnity is sought. Such notice shall be sent within
ten (10) days after the party to be indemnified has
received notification of such claim, but failure to
notify the indemnifying party shall in no event
prejudice the right of the party to be indemnified
under this Agreement, unless the indemnifying party
shall be prejudiced by such failure and then only to
the extent of such prejudice. In the event that any
legal proceeding shall be instituted or any claim or
demand is asserted by any third party in respect of
which Seller/Shareholders on the one hand, or Purchaser
on the other hand, may have an obligation to indemnify
the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to
be given to the party from whom indemnity is sought
(the "Indemnifying Party") written notice thereof and
the Indemnifying Party shall have the right, at its
option and expense, to participate in the defense of
such proceeding, claim or demand, but not to control
the defense, negotiation or settlement thereof, which
control shall at all times rest with the Party to be
Indemnified, unless the Indemnifying Party (i) agrees
to assume the defense, and (ii) does so with reputable
counsel in Dade County, Florida, in which case such
Indemnifying Party may assume such control through
counsel of its choice and at its expense. In the event
the Indemnifying Party assumes control of the defense,
the Indemnifying Party shall not be responsible for the
legal costs and expenses of the Party to be Indemnified
in the event the Party to be Indemnified decides to
join in such defense. The parties hereto agree to
cooperate fully with each other in connection with the
defense, negotiation or settlement of any such third
party legal proceeding, claim or demand. If the
Indemnifying Party assumes the defense, the Party to be
Indemnified shall make available to the Indemnifying
Party all relevant records and take such other actions
as are necessary to defend against the claim. Upon an
Indemnifying Party making any payment hereunder, the
Indemnifying Party shall be subrogated to the rights,
if any, of the Party to be Indemnified.
(b) If the Party to be Indemnified is also the party
controlling the defense, negotiation or settlement of
any matter, and if the Party to be Indemnified
determines to compromise the matter, the Party to be
Indemnified shall immediately advise the Indemnifying
Party of the terms and conditions of the proposed
settlement. If the Indemnifying Party agrees to accept
such proposal, the Party to be Indemnified shall
proceed to conclude the settlement of the matter, and
the Indemnifying Party shall immediately indemnify the
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<PAGE>
Party to be Indemnified pursuant to the terms of
Sections 11.3 and 11.4 hereunder. If the Indemnifying
Party does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on
the first business day following the date such party
receives a complete copy of the settlement proposal),
the Indemnifying Party shall immediately assume control
of the defense, negotiation or settlement thereof, at
that Indemnifying Party's expense. Thereafter, if the
claim validly requires indemnification hereunder, the
Party to be Indemnified shall be indemnified in the
entirety for any liability arising out of the ultimate
defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the
defense, negotiation or settlement of any matter, and
the Indemnifying Party determines to compromise the
matter, the Indemnifying Party shall immediately advise
the Party to be Indemnified of the terms and conditions
of the proposed settlement. If the Party to be
Indemnified agrees to accept such proposal, the
Indemnifying Party shall proceed to conclude the
settlement of the matter and immediately indemnify the
Party to be Indemnified pursuant to the terms of
Sections 11.3 or 11.4 hereunder. If the Party to be
Indemnified does not agree within fourteen (14) days to
accept the settlement (said 14-day period to begin on
the first business day following the date such party
receives a complete copy of the settlement proposal),
the Party to be Indemnified shall immediately assume
control of the defense, negotiation or settlement
thereof, at the Party to be Indemnified's expense. If
the final amount paid to resolve the claim is less than
the amount of the original proposed settlement made by
the Indemnifying Party, then the Party to be
Indemnified shall receive such indemnification pursuant
to Sections 11.3 or 11.4 hereof, including any and all
reasonable expenses incurred by the Party to be
Indemnified incurred in connection with the defense,
negotiation or settlement of such matter. If the
amount finally paid to resolve the claim (including
legal fees incurred by the Party to be Indemnified) is
equal to or greater than the amount of the original
proposed settlement proposed by the Indemnifying Party,
then the Indemnifying Party shall provide
indemnification pursuant to Sections 11.3 and 11.4 for
the amount of the original settlement proposal
submitted by the Indemnifying Party, and the Party to
be Indemnified shall be responsible for all amounts in
excess of the original settlement proposal submitted by
the Indemnifying Party and all costs and expenses
incurred by the Party to be Indemnified in connection
with such defense, negotiation or settlement.
Notwithstanding anything to the contrary herein, if the
Indemnifying Party desires to settle a claim hereunder
and the terms of the settlement provide for a complete
release of the Party to be Indemnified, the Party to be
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<PAGE>
Indemnified must consent to such settlement provided
such release does not contain any provision,
requirement or waiver of rights that are materially
detrimental to such Party to be Indemnified.
(d) Notwithstanding anything to the contrary in this
Agreement, including, but not limited to this Section
11.5, the maximum aggregate amount that Seller and
Shareholders may collectively be required to pay
Purchaser hereunder, or as a result of any other
provision of this Agreement as a result of any and all
breaches, if any, of representations or warranties
hereunder, or as a result of any and all defaults in
any covenants hereunder, or as a result of any and all
unassumed liabilities, whether claimed pursuant to this
indemnification section or otherwise, shall be
$542,000, subject to reduction to, and based upon, the
aggregate then outstanding balance under the Notes,
provided if Purchaser provides Seller with written
notice during the final 60 days of the first year after
the Closing Date that Purchaser is concerned about the
ability of the remaining balance of the Notes to
satisfy potential claims by Purchaser hereunder, then,
even though Purchaser has made a payment under the
Notes, the amount that Purchaser may collectively claim
against Seller and Shareholders shall continue to be
$542,000, provided such claims shall only be made pro-
rata against Shareholders based upon the ownership of
each Shareholder in Seller as set forth in the recitals
first set forth above, (i.e., $216,800 for I. Fintz;
$135,500 for R. Krongold and M. Rosen's and $54,200 for
A. Sokol). In no event shall any Shareholder be liable
to Purchaser for any liabilities described in the first
sentence of this Section 11.5(d), or elsewhere in this
Agreement, for an amount in excess of the applicable
amount set forth in the preceding sentence. The sole
source of recourse for such claims shall be the right
of Purchaser to offset any amounts under the Notes to
the extent such final payment is sufficient to cover
such claim and thereafter if necessary from the next
preceding payment(s) under the Note(s) or from the cash
delivered to the Shareholders if the notice referred to
above has been provided. Any offset against the Notes
shall be made pro-rata against all four (4) Notes,
based upon the initial principal amount of the Notes as
of the date of the Closing and shall be deducted from
the final payments under the Notes. Prior to any off-
set, Purchaser shall send written notice to the holder
of the Notes stating with reasonable specificity the
basis for Purchaser's right to such indemnification
payment. If within 10 days after receipt of such
notice of set-off, the holder contests in writing (sent
to Purchaser) Purchaser's claim of indemnification
under this Section 11, then the amount which Purchaser
would otherwise have paid to the holder but for the
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exercise of such right of set-off shall be paid into an
interest bearing escrow account maintained by a bank
selected by Purchaser, to be held in such account until
Purchaser and the holder have reached agreement as to
the amount, if any, of such indemnification payment and
set-off, or until there has been a judicial resolution
of such matter, at which time the amount held in such
segregated account, together with any interest accrued
thereon, shall be released to the prevailing party, as
appropriate and/or instructed. Purchaser and the
holder agree that they will use their best efforts to
resolve any such dispute within 30 days of receipt of
notice by Purchaser of the holder's objection to the
set-off.
(e) Indemnification Basket. Notwithstanding anything to
the contrary in this Agreement, Seller and Shareholders
shall not have any liability to Purchaser, pursuant to
this indemnification section or elsewhere in this
Agreement, unless and until the aggregate of all
claims, losses, and liabilities that Seller and
Shareholders would be liable to Purchaser hereunder,
exceeds $150,000 (net of any tax benefit Purchaser
obtains as a result of such expenses, losses, and
liabilities) and then such liability shall exist only
to the extent that the aggregate of all losses,
liabilities, and damages exceed $150,000 (net of the
income tax benefit derived by Purchaser).
12.
EXPRESS CONDITIONS
__________________
1Notwithstanding anything herein to the contrary, and
subject to Section 12.2 below, Purchaser's and Seller's
obligations hereunder are subject to the following
conditions:
(a) Purchaser shall have obtained from its primary lender,
Star Bank, N.A., consent to the transaction.
(b) Purchaser shall have acquired all necessary permits
from federal, state and local agencies that are
necessary to conduct cabling operations in the State of
Florida.
(c) Approval of the Board of Directors of Purchaser.
(d) Approval of the Board of Directors of Seller and Seller
completing its due diligence review of Purchaser
satisfactory to Seller at its sole discretion.
(e) The Closing contemplated by this Agreement shall be
expressly contingent upon a due diligence review of
Seller's Business satisfactory to Purchaser in its sole
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discretion. During such period, the Seller will allow
Purchaser and its representatives full and complete
access to the books, records and facilities of the
business and will use its best efforts to keep
Purchaser fully apprised of its business activities,
financial condition and prospects. In addition, the
Seller will make available its officers, counsel and
independent accountants to discuss these matters with
Purchaser's representatives and other financial
employee(s) of Seller designated by Seller, subject to
the time limitations contained in Section 9.3. The
Closing is contingent upon Purchaser being satisfied in
every respect with the results of the Purchaser's due
diligence investigation. If the results of the
investigation are not to the satisfaction of Purchaser,
Purchaser shall notify Seller in writing that this
condition precedent has not been satisfied, and
immediately thereafter, the Escrow Agents shall be
authorized by the Purchaser and Seller to release the
escrow funds to Purchaser. Purchaser will conduct its
due diligence in a manner that will minimize any
interference with the business of Seller and will enter
into the Confidentiality Agreement which will be
customary to transactions of this nature.
Subject to Section 12.2 below, in the event any of the
foregoing contingencies have not been met or waived, by
Purchaser or Seller, where applicable, by June 16, 1997, the
$50,000.00 earnest money shall be returned promptly to
Purchaser. If the conditions set forth in this Section 12.1
that relate to Purchaser have been met or waived, as
described herein or in Section 12.2 below, then Purchaser
shall deposit an additional $100,000 with the Escrow Agents
as an additional Deposit, and, thereafter, if Purchaser does
not close the transactions contemplated hereby on the
Closing Date as may be extended by Seller under
Section 13.4, other than as a result of Seller's or
Shareholders' material breach or the failure of Seller to
materially satisfy the conditions precedent set forth in
Section 13.2 below, then the entire Deposit then held by the
Escrow Agents shall be promptly delivered to Seller as
agreed upon liquidated damages (and not as a penalty)) for
its cost, inconvenience, expense, and damages resulting from
Purchaser's due diligence investigation of its Business and
Seller's time expended. If the transaction does not close
on the Closing Date as a result of Seller's or Shareholders'
material breach or the failure of Seller to materially
satisfy the conditions precedent set forth in Section 13.2
below, then the entire Deposit shall be returned to
Purchaser.
2 The contingencies set forth in Section 12.1 must have all
been met or waived, by Purchaser and Seller, where
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applicable, no later than June 16, 1997. Failure of either
Purchaser or Seller to inform the other in writing on or
before June 16, 1997, that any one or more of the express
conditions set forth in Section 12.1 have not been met,
shall serve conclusively as such non-sending party's notice
and acknowledgment that all of the express conditions
applicable to such party have been met and fully satisfied
or irrevocably waived, and such non-sending party shall have
waived any and all rights to make any claims that any
express condition set forth in Section 12.1 has not been
met, regardless of whether such condition has actually been
met, and the non-sending party shall be obligated to proceed
with the transactions contemplated herein, in accordance
with the terms of this Agreement.
13.
THE CLOSING
___________
1Date, Time and Place of Closing
Consummation of the transactions contemplated hereby (the
"Closing") shall take place on July 1, 1997 (the "Closing
Date"), commencing at 9:00 a.m. EDT at
_________________________________________, or on such other
Closing Date, or at such other time and/or place as the
parties may mutually agree upon.
2Conditions Precedent to Purchaser's Obligations
The obligation of Purchaser to perform in accordance with
this Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) The Seller shall have complied with and materially
performed all of the representations, warranties,
agreements and covenants hereunder required to be
performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
contemplated by this Agreement;
(c) The business, aggregate properties and operations of
Seller shall not have been materially adversely
affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the
public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate
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properties, or operations of the Seller since the date
of execution of this Agreement;
(d) Seller shall have delivered to Purchaser, at or before
the Closing, the following documents, all of which
shall be in form and substance reasonably acceptable to
the Purchaser and its counsel:
(i) The instruments of transfer and limited powers of
attorney required by Sections 2.5 and 2.6;
(ii) Releases or estoppel letters (or copies thereof) of
all liens, claims, charges, encumbrances, security
interests and restrictions on the Purchased Assets
necessary to provide Purchaser with good,
marketable and indefeasible title to each of the
Purchased Assets at the Closing;
(iii) Certified copies of the corporate actions taken by
the Board of Directors and Shareholders of Seller,
authorizing the execution, delivery and performance
of this Agreement;
(iv) Certificate of Good Standing for Seller from the
Secretary of State of Florida dated no earlier than
fifteen (15) days prior to Closing;
(v) Opinion letter of McDermott, Will & Emery, counsel
for Seller, addressed to Purchaser and dated the
Closing Date, containing the opinion set forth on
Exhibit "J".
(vi) Seller shall have entered into the Subordination
Agreement in the form attached hereto as Exhibit
"D".
(vii) Seller I. Fintz, A. Sokol, R. Krongold and M. Rosen
shall have entered into the non-competition
agreements set forth in Exhibits "B" "B-1", "B-2",
"B-3" and "B-4".
(viii) The express conditions set forth in Section 12 have
been satisfied or waived, as provided in such
Section 12.
(e) Seller will adopt and file with the Secretary of State
of Florida within five (5) business days after the
Closing Date an amendment to the Articles of
Incorporation of Seller changing the name of Seller to
a name substantially dissimilar to Magic Box, Inc.
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Seller shall execute a Consent for Use of Similar Name
form, as set forth on Exhibit "M", granting to
Purchaser the use of the name Magic Box, Inc.
3Conditions Precedent to Seller's Obligations.
The obligation of Seller to perform in accordance with this
Agreement and to consummate the transactions herein
contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) Performance by Purchaser of all of the representations,
warranties, agreements and covenants to be performed by
it at or before the Closing;
(b) There shall be no pending or threatened legal action
which, if successful, would prohibit consummation or
require substantial rescission of the transactions
contemplated by this Agreement;
(c) The business, aggregate properties and operations of
Purchaser shall not have been materially adversely
affected as a result of any fire, accident or other
casualty or any labor disturbance or act of God or the
public enemy, and there shall otherwise have been no
material adverse change to the business, aggregate
properties, or operations of the Purchaser since the
date of execution of this Agreement;
(d) Purchaser shall deliver to Seller at or before the
Closing the following documents, all of which shall be
in form and substance acceptable to Seller and its
counsel:
(i) A wire transfer or bank or cashiers check for the
aggregate amount to be paid to Seller at the
Closing pursuant to Section 4.2(b) hereof;
(ii) A wire transfer or bank or cashiers check from the
Escrow Agents for the amount set forth in Section
4.2(a) hereof;
(iii) Assumption of Liabilities Agreement under which
Purchaser assumes the Liabilities set forth in
Sections 3.1 and 3.2;
(iv) Subordinated promissory notes as set forth in
Section 4.2(c);
(v) Certified copies of the corporate actions taken by
Purchaser authorizing the execution, delivery and
performance of this Agreement;
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(vi) Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier
than fifteen (15) days prior to the date of
Closing;
(vii) Opinion letter of Lindhorst & Dreidame Co., L.P.A.,
counsel for Purchaser, addressed to Seller and
dated the Closing Date, containing the opinions set
forth on Exhibit "N"; and
(viii) All of the express conditions set forth in Section
12 have been satisfied or waived.
(e) Purchaser shall have entered into the Employment
Agreements set forth in Exhibits "G" and "G-1" .
4 Potential Extension of Closing Date. Notwithstanding the
definition of the Closing Date contained herein, if Seller
provides Purchaser with written notice of its knowledge of a
potential decrease in the federal capital gains tax rate, then as
part of such notice Seller may extend the Closing Date for up to
30 days after the date set forth herein.
14.
GENERAL PROVISIONS
__________________
1Publicity. All public announcements relating
to this Agreement or the
transactions contemplated hereby will be made by mutual
agreement of by Purchaser and Seller, which mutual agreement
will not be reasonably withheld by either party. For any
disclosure which may be required because of Purchaser's
being a publicly-traded corporation on the over-the-counter
market, Seller's consent will not be required, but Purchaser
will first inform Seller of such disclosure.
2Expenses. Purchaser will bear and pay all of its expenses
incident to
the transactions contemplated by this Agreement which are
incurred by Purchaser or its representatives, and Seller
shall bear and pay all of the expenses incident to the
transactions contemplated by this Agreement which are
incurred by Seller or its representatives.
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3Notices.
All notices and other communications required by this
Agreement shall be in writing and shall be deemed given (i)
upon delivery if delivered by hand, (ii) the next business
day if sent by nationally reputable overnight carrier, or
(iii) three days after mailing if mailed by registered mail
or certified mail, return receipt requested; to the
appropriate party at the following address (or at such other
address for a party as shall be specified by notice pursuant
hereto):
(a) If to Purchaser, to:
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Attn: Stephen Pomeroy
With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
(b) If to Seller, to:
Magic Box, Inc.
16698 N.W. 54th Avenue
Miami, Florida 33014
Attn: President
With a copy to:
McDermott, Will & Emery
201 S. Biscayne Boulevard
Suite 2200
Miami, Florida 33131
Attention: Jerry J. Sokol, Esq.
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(c) If to Shareholders, to:
Israel Fintz
242 NE 199 Terrace
Miami, Florida 33179
M. Ronald Krongold, Esq.
201 Alhambra Circle
Suite 801
Coral Gables, Florida 33131
Marvin Rosen, Esq.
Greenberg Traurig et al.
1221 Brickell Avenue
Miami, Florida 33131
A. Sokol
555 NE 34 Street
#2503
Miami, Florida 33137
With a copy to:
McDermott, Will & Emery
201 S. Biscayne Boulevard
Suite 2200
Miami, Florida 33131
Attention: Jerry J. Sokol, Esq.
4Binding Effect.
Except as may be otherwise provided herein, this Agreement
and all the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and
permitted assigns.
5Headings.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in
the construction or interpretation of this Agreement.
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6Exhibits.
The Exhibits referred to in this Agreement constitute an
integral part of this Agreement as if fully rewritten
herein.
7Counterparts.
This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which
constitute together one and the same document.
8 Governing Law.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Florida, without regard
to its laws or the laws of any other jurisdiction regarding
conflict of laws.
9Severability
If any provision of this Agreement shall be held
unenforceable, invalid, or void to any extent for any
reason, such provision shall remain in force and effect to
the maximum extent allowable, if any, and the enforceability
or validity of the remaining provisions of this Agreement
shall not be affected thereby.
10 Waivers; Remedies Accumulated.
No waiver of any right or option hereunder by any party
shall operate as a waiver of any other right or option, or
the same right or option with respect to any subsequent
occasion for its exercise, or of any right to damages. No
waiver by any party of any breach of this Agreement or of
any representation or warranty contained herein shall be
held to constitute a waiver of any other breach or a
continuation of the same breach. All remedies provided in
this Agreement are in addition to all of the remedies
provided by law. No waiver of any of the provisions of this
Agreement shall be valid and enforceable unless such waiver
is in writing and signed by the party granting the same.
11 Assignments.
Except as otherwise provided in this Agreement, including
Purchaser's specific right to assign the Agreement to
Acquisition Sub as set forth in the recitals, no party shall
assign its rights or obligations hereunder prior to Closing
and thereafter without the prior written consent of the
other party.
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12 Entire Agreement.
This Agreement and the agreements, instruments and other
documents to be delivered hereunder constitute the entire
understanding and agreement concerning the subject matter
hereof. All negotiations between the parties hereto are
merged into this Agreement, and there are no
representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein and to be
delivered hereunder. Except as otherwise expressly
contemplated by this Agreement, nothing expressed or implied
in this Agreement is intended or shall be construed so as to
grant or confer on any person, firm or corporation other
than the parties hereto any rights or privilege hereunder.
No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by the parties
hereto.
13 Business Records.
Seller and Shareholder shall be permitted to retain copies
of such books and records relating to the Purchased Assets
and relating to the accounting and tax matters of the
Business and to have access to all original copies of
records so delivered to Purchaser at reasonable times, for
any reasonable business purpose, for a period of six (6)
years after the Closing.
14 Attorneys' Fees.
In the event any dispute arises between Purchaser, on the
one hand, and Seller or Shareholders, on the other hand,
whether pursuant to this Agreement or otherwise, the
prevailing party shall be entitled to recover from the non-
prevailing party, the prevailing party's attorneys' fees and
costs, including all costs of appeal. In addition, such
prevailing party shall also be entitled to recover
attorneys' fees and costs incurred in enforcing any judgment
from a suit arising under this Agreement or otherwise. This
post-judgment attorneys' fees and costs provision shall be
severable from the other provisions, shall survive any
judgment on such suit, and shall not be deemed to be merged
into the judgment.
The parties hereto have executed this Agreement as of the
date first above written.
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MAGIC BOX, INC.
________________________________
By:
Israel Fintz, President
POMEROY COMPUTER RESOURCES, INC.
________________________________
By:
Stephen Pomeroy, Chief Financial
Officer
ISRAEL FINTZ
M. RONALD KRONGOLD
MARVIN ROSEN
ALLISON SOKOL
________________________________
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EXHIBIT A
EXCLUDED ASSETS
1. Excess cash as defined in Section 4.1(c)
2. The Purchase Price or any part thereof received by Seller
for the sale of the Purchased Assets
Seller's minute book and stock records
3. Marketable Securities of Seller
4. (This will be supplemented prior to May 31, 1997)
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<PAGE>
POMEROY COMPUTER RESOURCES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 26th day of June, 1997, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
("Company"), and ISRAEL FINTZ ("Employee").
W I T N E S S E T H :
WHEREAS, Company has entered into an Asset Purchase Agreement
("Purchase Agreement") of even date herewith pursuant to which it
bought substantially all the assets of MAGIC BOX, INC. ( "MAGIC
BOX" ); and
WHEREAS, Employee owns forty percent (40%) of the outstanding
stock of MAGIC BOX; and
WHEREAS, as an inducement for and in consideration of Company
entering into the Purchase Agreement with MAGIC BOX and
purchasing substantially all its assets, Employee has agreed to
enter into and execute this Employment Agreement pursuant to
Section 5 thereof; and
WHEREAS, Company desires to engage the services of Employee,
pursuant to the terms, conditions and provisions as hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and
the Employee agrees to be employed by the Company, upon the
following terms and conditions.
2. Term. The initial term of Employee's employment pursuant to
this Agreement shall begin on the 26th day of June, 1997, and
shall continue for a period of three (3) years and nine (9) days
ending July 5, 2000 unless terminated earlier pursuant to the
provisions of Section 10, provided that Sections 8, 9, 10(b) ,
10(c), if applicable, and 11, if applicable, shall survive the
termination of such employment and shall expire in accordance
with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall
automatically renew for additional consecutive renewal terms of
one (1) year unless either party gives written notice of his/its
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intent not to renew the terms of this Agreement ninety (90) days
prior to expiration of the then expiring term. Employee's base
salary for each renewal term shall be determined by Company,
provided, however, Employee's annual base salary for any renewal
term shall not be less than the base salary in effect for the
prior year.
4. Duties. Employee shall serve as Executive Vice-President
for the Company's Southern Florida division. Employee shall be
responsible to and report directly to the corporate officers of
Company. Employee shall devote his reasonable best efforts and
substantially all his time during normal business hours to the
diligent, faithful and loyal discharge of the duties of his
employment and towards the proper, efficient and successful
conduct of the Company's affairs. Employee shall perform such
duties in Dade or Broward Counties, Florida. The duties assigned
to Employee shall not be inconsistent with those typically
assigned to a person holding the position set forth above and
Employee shall at all times have such powers and authority as
shall be reasonably required to discharge such duties in an
efficient manner, together with such facilities and services as
are appropriate to his position. Employee shall have veto power
over the dismissal of employees of Company's South Florida
division, except for employees dismissed for cause. For purposes
of this Section, " for cause " shall be defined in Section
10(a)(iv), except the cure period set forth therein shall not be
applicable. Company agrees to offer employment agreements to all
key employees of Company's South Florida division within sixty
(60) days of closing. Employee further agrees to refrain during
the term of this Agreement from making any sales of competing
services or products which Company or its subsidiaries provide or
from profiting from any transaction involving computer services
or products for his account without the express written consent
of Company, other than any investment that Employee may own in
Ace Education, Inc., a computer training business.
5. Compensation. For all services rendered by the Employee
under this Agreement (in addition to other monetary or other
benefits referred to herein), compensation shall be paid to
Employee as follows:
(a) Base Salary:
(i) During the period June 26, 1997 through July 5,
1997, Employee shall be paid the sum of Two Thousand Nine Hundred
Forty-Two and 30/100 Dollars ($2,942.30) per week. Compensation
due for a period of less than one (1) week shall be prorated for
such period on the basis of a seven-day week.
(ii) Employee shall be paid an annual base salary
of One Hundred Fifty-Three Thousand Dollars ($153,000.00) during
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the first full year (July 6, 1997 through July 5, 1998) of this
Agreement.
(iii) Employee shall be paid an annual base salary
of One Hundred Sixty Thousand Six Hundred Fifty Dollars
($160,650.00) during the second full year (July 6, 1998 through
July 5, 1999) of this Agreement.
(iv) Employee shall be paid an annual base salary
of One Hundred Sixty-Eight Thousand Six Hundred Eighty-Two and
50/100 Dollars ($168,682.50) during the third full year (July 6,
1999 through July 5, 2000) of this Agreement.
(v) Said annual base salary shall be payable in
accordance with the historical payroll practices of the Company.
(b) In addition to Employee's base salary as set forth in
Section 5(a) above, Employee shall be entitled to a bonus and
incentive stock option award in the event Employee satisfies
certain economic criteria pertaining to Company's Southern
Florida division, as follows:
(i) gross sales of Company's Southern Florida division
greater than $9,000,000.00 but less than or equal to
$9,500,000.00 with NPBT greater than 6% = $7,500.00 cash bonus
plus 750 incentive stock options;
(ii) gross sales of Company's Southern Florida
division greater than $9,500,000.00 but less than or equal to
$10,000,000.00 with NPBT greater than 5.5% = $10,000.00 cash
bonus plus 1,000 incentive stock options;
(iii) gross sales of Company's Southern Florida
division greater than $10,000,000.00 but less than or equal to
$12,000,000.00 with NPBT greater than 5% = $12,000.00 cash bonus
plus 1,500 incentive stock options;
(iv) gross sales of Company's Southern Florida
division greater than $12,000,000.00 but less than or equal to
$15,000,000.00 with NPBT greater than 4.5% = $15,000.00 cash
bonus plus 2,500 incentive stock options; and
(v) gross sales of Company's Southern Florida division
greater than $15,000,000.00 with NPBT greater than 4% =
$25,000.00 cash bonus plus 3,500 incentive stock options.
(vi) For purposes of this Section, the term
"gross sales" shall mean the gross sales of equipment, software
and services by Company's Southern Florida division. In making
said gross sales determination, all gains and losses realized on
the sale or other disposition of Company's Southern Florida
division's assets not in the ordinary course of business shall be
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excluded. All refunds or returns which are made during such
period shall be subtracted along with all accounts receivable
derived from sales which are written off during such period in
accordance with Company's accounting system. Such gross sales
and net pre-tax profit margin of Company's Southern Florida
division shall be determined by the independent accountant
regularly retained by the Company in accordance with generally
accepted accounting principles and the determination by the
accountant shall be final, binding and conclusive upon all
parties hereto. Commencing with the earlier of thirty (30) days
after the installation of the Astea accounting system or January
6, 1998, in making said determination of the applicable pre-tax
margin for the Company's Southern Florida division, a 1.5% MAS
royalty fee on gross sales shall be paid to the Company incident
to said determination. For each subsequent year, during the
initial term of this Agreement, the parties shall, in good faith,
agree upon a MAS royalty fee to be charged hereunder based on the
level of services and support being provided by the Company to
its Southern Florida division. Provided, however, such royalty
fee shall be 1.5% if the parties are unable to come to an
agreement for each subsequent year. Fifty percent (50%) of any
amount earned under Section 5(b) above shall be payable to
Employee within thirty (30) days of the determination by the
accountant as a bonus and the remaining fifty percent (50%) will
constitute incentive deferred compensation and will be payable to
Employee according to the terms of Incentive Deferred
Compensation Agreement attached hereto as Exhibit A. Any
incentive deferred compensation shall be fully vested over a
five-year period, vesting 20% percent per year from the effective
date of this Agreement.
(vii) For the year 1997, the economic criteria and
the pay out amount and stock option award set forth in Section
5(b) above shall be prorated to reflect the closing date of the
transaction with Magic Box.
(viii) Any award of an incentive stock option to
acquire common stock of the Company earned hereunder shall be the
fair market value of such stock as of January 5, 1998 and shall
be subject to all conditions contained in the Company's Non-
Qualified and Incentive Stock Option Plan.
(ix) The parties agree that in January of 1998,
1999 and 2000 (for the remaining portion of the initial term of
this Agreement), they will negotiate in good faith the
implementation of an annual bonus and incentive deferred
compensation plan for Employee for the remaining fiscal years of
this Agreement which will be predicated upon the attainment by
Company's Southern Florida division of certain economic criteria
established at the outset of such calendar year. Such bonus and
incentive deferred compensation plan for the remaining term of
this Agreement shall be consistent with other of Company's
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management personnel holding positions similar to that of
Employee.
(x) For purposes of this Agreement, the term
Company's Southern Florida division shall mean the business
generated and emanating out of the acquisition of substantially
all the assets of Magic Box, Inc.
6. Fringe Benefits. During the term of this Agreement,
Employee shall be entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with
the standard family medical health and insurance coverage
maintained by Company on its employees. Company and Employee
shall each pay fifty percent (50%) of the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a
vacation of three (3) weeks during any time of the year which
Employee selects, during which time his compensation will be paid
in full. Provided, however, such weeks may not be taken
consecutively without the written consent of Company.
(c) Retirement Plan - Employee shall be entitled to
participate, after meeting eligibility requirements, in any
qualified retirement plans and/or welfare plans maintained by the
Company during the term of this Agreement.
(d) Other Company Programs - Employee shall be eligible
to participate in any other plans or programs implemented by the
Company for all of its employees with duties and responsibilities
similar to Employee.
(e) Automobile Allowance - Company shall provide Employee
with an automobile allowance of $700.00 per month during the term
of this Agreement. Employee shall be responsible for all
insurance premiums, maintenance and repair to any vehicle owned
or leased by him and for all expenses for gasoline or other items
related to the upkeep of such vehicle.
(f) Cellular Telephone - Company shall reimburse Employee
for all reasonable business expenses related to Employee's use of
his cellular telephone in the furtherance of Company's business.
Such expenses shall be accounted for in accordance with the
reasonable policies and procedures established by the Company.
(g) Employee shall be responsible for any and all taxes
owed, if any, on the fringe benefits provided to him pursuant to
this Section 6.
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7. Expenses. During the term of Employee's employment
hereunder, Employee shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses
incurred by Employee in fulfilling the Employee's duties and
responsibilities hereunder, including, all expenses of travel and
living expenses while away from home on business or at the
request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the
reasonable policies and procedures established by the Company.
8. Non-Competition. Employee expressly acknowledges the
provisions of Section 8 of the Purchase Agreement relating to
Employee's Covenant Not to Compete with Company. Accordingly,
such provisions of Section 8 are incorporated herein by reference
to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee
acknowledges that as a shareholder of MAGIC BOX, he has received
substantial consideration pursuant to such Purchase Agreement and
that as an inducement for, and in consideration of Company
entering into this Agreement, Employee has agreed to be bound by
such provisions of Section 8 of the Purchase Agreement.
Accordingly, such provisions of Section 8 and Exhibit B-1 and the
restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information
The Employee acknowledges that the Company's trade secrets and
confidential and proprietary information, including without
limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including
unpublished information concerning revenues, profits and profit
margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is
used for purposes of the Securities Exchange Act of 1934, as
amended;
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all constitute valuable, special and unique proprietary and trade
secret information of the Company. In recognition of this fact,
the Employee agrees that the Employee will not disclose any such
trade secrets or confidential or proprietary information (except
(i) information which becomes publicly available without
violation of this Employment Agreement or is known by Employee
other than by reason of employment by Company, (ii) information
of which the Employee did not know and should not have known was
disclosed to the Employee in violation of any other person's
confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make
use of any such information for the benefit of any person, firm,
operation or other entity except the Company and its subsidiaries
or affiliates. The Employee's obligation to keep all of such
information confidential shall be in effect during and for a
period of three (3) years after the termination of his employment
in those states where Company has business offices; provided,
however, that the Employee will keep confidential and will not
disclose any trade secret or similar information protected under
law as intangible property (subject to the same exceptions set
forth in the parenthetical clause above) for so long as such
protection under law is extended.
10. Termination
(a) The Employee's employment with the Company may be
terminated at any time as follows:
(i) By the Employee at his discretion, upon sixty (60)
days written notice to Company;
(ii) By Employee's death;
(iii) By Employee's physical or mental disability which
renders Employee unable to perform his duties hereunder for a
consecutive period of one hundred twenty (120) days or for an
aggregate of one hundred fifty (150) days or more during any
twelve-month period.
(iv) By the Company, for cause upon fifteen (15) day's
written notice to Employee. For purposes of this paragraph
10(a)(iv), the term "cause" shall mean termination upon: (i) the
continuous failure by Employee to substantially perform his
material duties with the Company (other than any such failure
resulting from his incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered
to him by the Company, which demand specifically identifies the
manner in which the Company believes that he has not continuously
substantially performed his duties and setting forth a detailed
mechanism for curing such conduct; (ii) the engaging by Employee
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in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise, including but not limited to
any material misrepresentation related to the performance of his
duties; (iii) the conviction of Employee of a felony (other than
driving related) or other crime involving theft or fraud, (iv)
Employee's gross neglect or gross misconduct in carrying out his
duties hereunder resulting, in either case, in material harm to
the Company; or (v) any material breach by Employee of any
material provision of this Agreement. Notwithstanding the
foregoing, Employee shall not be deemed to have been terminated
for cause unless and until there shall have been delivered to him
a copy of a resolution of the Board of Directors of the Company
or any appropriately designated committee of the Board, finding
that he has engaged in the conduct set forth above in this
Section 10(a)(iv), specifying the particulars thereof in detail,
and setting forth a detailed mechanism for curing such conduct
and Employee shall not have cured such conduct to the reasonable
satisfaction of the Board within thirty (30) days of receipt of
such resolution.
(v) Commencing January 6, 1998, by the Company at its
discretion, without cause, upon thirty (30) days written notice
to Employee; provided that Company complies with the provisions
of Section 10(c).
(vi) By the Employee for Good Reason. For purposes of
this Agreement, Good Reason shall mean, without Employee's
express consent, the occurrence of any of the following
circumstances:
(A) a substantial diminution in Employee's
duties, responsibilities or authority after written demand has
been made upon Company by Employee and Company has had a thirty-
day period to correct such matter (except during any period when
the Employee is unable to perform all or substantially all of the
Employee's duties and/or responsibilities as a result of the
Employee's illness (either physical or mental) or other
incapacity);
(B) the relocation of Employee's place of
employment to outside Dade or Broward Counties, Florida;
(C) any material breach by Company of the
Agreement but only after written demand has been made upon
Company by Employee setting forth such material breach and
setting forth a detailed mechanism for curing such conduct and
Company has failed to cure such breach within thirty (30) days;
or
(D) a change in control as hereinafter defined,
unless Employee has accepted employment with the successor entity
and such successor entity has assumed this Employment Agreement
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pursuant to the provisions of Section 17. For purposes of this
Agreement, a ``change in control shall occur: (i) upon the
sale or other disposition to a person, entity or group (as such
term is used in Rule 13 d-5 promulgated under the Securities
Exchange Act of 1934, as amended), such person, entity or group
being referred to as an ``outside party'' of fifty percent (50%)
or more of the consolidated assets of the Company taken as a
whole, or (ii) in the event shares representing a majority of the
voting power of Company are acquired by a person or group (as
such term is used in Rule 13 d-5) of persons other than the
holders of the common stock of Company on June 26, 1997.
(b)Compensation upon Termination: In the event of
termination of employment, the Employee or his estate, in the
event of death, shall be entitled to his annual base salary and
other benefits provided hereunder to the date of his termination.
In addition, Employee shall be entitled to receive any bonus
accrued to the date of his termination of employment as provided
in Sections 5(b) and (c). In addition, Employee shall be
entitled to any vested incentive deferred compensation that may
be due Employee pursuant to the provisions of Exhibit A, which
shall be payable (if applicable) pursuant to the terms thereof.
(c)In the event that Company would terminate Employee's
employment hereunder without cause pursuant to Section 10(a)(v)
or Employee would terminate his employment for Good Reason
pursuant to Section 10(a)(vi), Company shall be obligated to pay
Employee, as severance pay, Employee's annual base salary for the
remaining term, including the current renewal term, if
applicable, of the Agreement (as set forth in Section 2) as due.
11. Disability. In the event that Employee becomes temporarily
disabled and/or totally and permanently disabled, physically or
mentally, which renders him unable to perform his duties
hereunder, Employee shall receive one hundred percent (100%) of
his base annual salary (in effect at the time of such disability)
for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received
pursuant to disability benefit plans, if any, maintained by the
Company.) Such payments shall be payable in twelve consecutive
equal monthly installments and shall commence thirty (30) days
after the determination by the physicians of such disability as
set forth below.
For purposes of this Agreement, Employee shall be deemed to
be temporarily disabled and/or totally and permanently disabled
if attested to by two qualified physicians, (one to be selected
by Company and the other by Employee) competent to give opinions
in the area of the disabled Employee's physical and/or mental
condition. If the two physicians disagree, they shall select a
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third physician, whose opinion shall control. Employee shall be
deemed to be temporarily disabled and/or totally and permanently
disabled if he shall become disabled as a result of any medically
determinable impairment of mind or body which renders it
impossible for such Employee to perform satisfactorily his duties
hereunder, and the qualified physician(s) referred to above
certify that such disability does, in fact, exist. The opinion
of the qualified physician(s) shall be given by such
physician(s), in writing directed to the Company and to Employee.
The physician(s) decision shall include the date that disability
began, if possible, and the 12th month of such disability, if
possible. The decision of such physician(s) shall be final and
conclusive and the cost of such examination shall be paid by
Employer.
12. Severability. In case any one (1) or more of the provisions
or part of a provision contained in this Agreement shall be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement. In
such a situation, this Agreement shall be reformed and construed
as if such invalid, illegal or unenforceable provision, or part
of a provision, had never been contained herein, and such
provision or part shall be reformed so that it will be valid,
legal and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and
construed under the laws of the State of Florida and shall not be
modified, waived or discharged, in whole or in part, except by an
agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other
communications relating to this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally
or three days after mailing if mailed by certified or registered
mail, return receipt requested, postage prepaid:
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
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With a copy to: Jerry J. Sokol, Esq.
McDermott, Will & Emery
201 South Biscayne Boulevard, Suite 2200
Miami, Florida 33131-4336
15. Enforcement of Rights. The parties expressly recognize that
any breach of this Agreement by either party is likely to result
in irrevocable injury to the other party and agree that such
other party shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction in
Dade County, Florida, either at law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the
specific performance of this Agreement by each party or to enjoin
any party from activities in violation of this Agreement. Should
either party engage in any activities prohibited by this
Agreement, such party agrees to pay over to the other party all
compensation, remuneration, monies or property of any sort
received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or
obligations or liabilities of any breaching party pursuant to
this Agreement or any applicable law.
16. Entire Agreement . This Agreement and the Exhibits hereto
and the Purchase Agreement referred to herein contain the entire
understanding of the parties with respect to the subject matter
contained herein and may be altered, amended or superseded only
by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
17. Parties in Interest
(a) This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or
obligations hereunder without first obtaining the written consent
of the other party hereto; provided, however, that nothing in
this Section 17 shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his
death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any
rights hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding
upon and inure to the benefit of any successor corporation of
Company
(b) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the assets of the Company or the
business with respect to which the duties and responsibilities of
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Employee are principally related, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that Company would have been required to perform it if no
such succession had taken place. As used in this Agreement
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in
this Section 17 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
18. Representations of Employee. Employee represents and
warrants that he is not party to or bound by any agreement or
contract or subject to any restrictions including without
limitation any restriction imposed in connection with previous
employment which prevents Employee from entering into and
performing his obligations under this Agreement.
19. Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an
original part, which together shall constitute one and the same
instrument.
20. Attorneys' Fees. In the event of any dispute arising
between Employee and Company, whether pursuant to this Agreement
or otherwise, the prevailing party shall be entitled to recover
from the non-prevailing party, the prevailing party's reasonable
attorneys' fees and costs.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________
By:_________________________________
__________________________
__________________________
____________________________________
ISRAEL FINTZ
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INCENTIVE DEFERRED COMPENSATION AGREEMENT
This Incentive Deferred Compensation Agreement is made effective
as of the 26th day of June, 1997, by and between POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Company") and
ISRAEL FINTZ ("Fintz").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the
Company and Fintz have entered into an Employment Agreement for
the employment of Fintz by Company;
WHEREAS, pursuant to Section 5(b) of said Employment Agreement,
Fintz may be entitled to incentive deferred compensation in the
event certain economic criteria are satisfied;
WHEREAS, the parties wish to define the terms governing the
incentive deferred compensation in the event the economic
criteria and the terms and conditions of the Employment Agreement
are satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
0.In the event Fintz satisfies the economic criteria set forth in
the Employment Agreement for such year and is entitled to
incentive deferred compensation, the incentive deferred
compensation shall be governed by the terms of this Agreement.
1.In the event Fintz should die or become disabled during the
term of the Employment Agreement, or if the Employment Agreement
is not renewed by Company at the expiration of the initial term
or any renewal term, or in the event Company would terminate
Employee's employment without cause pursuant to Section 10(a)(v)
of the Employment Agreement or Fintz would terminate his
employment for Good Reason pursuant to Section 10(a)(vi) of the
Employment Agreement, all incentive deferred compensation earned
shall be vested in full and shall be payable to Fintz and/or his
designated beneficiary at that time. For purposes of this
Paragraph, the term "disabled" shall have the meaning set forth
in said Employment Agreement.
2.In the event Fintz discontinues employment with the Company
during the initial term or any renewal term of this Employment
Agreement or if Fintz does not renew the Employment Agreement at
the expiration of the initial term or any renewal term and such
discontinuation of employment is not a result of Fintz becoming
disabled, the vested portion of his deferred compensation account
will be paid to him at said time and all non-vested amounts will
be forfeited. Provided, however, if Fintz would violate the terms
of his covenant not to compete and confidentiality agreement as
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<PAGE>
set forth in Sections 8 and 9 of his Employment Agreement, the
vested portion of his deferred compensation account will likewise
be forfeited. The incentive deferred compensation shall vest
according to the following schedule:
Years of Service With Company or its Percentage of Vested
Subsidiaries from the Effective Date Interest
of This Agreement
Less than 1 year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years 100%
This vesting schedule shall apply separately to each year that
incentive deferred compensation is earned by Fintz upon the
satisfaction of the economic criteria set forth in the Employment
Agreement. Provided, however, Fintz shall be vested fully in all
amounts hereunder on June 26, 2002 and all amounts due hereunder
shall be paid to him on such date, notwithstanding the fact that
Fintz continues to be employed by the Company.
By way of illustration, if Fintz satisfied the economic criteria
for years 1 and 2 of the Agreement, at the end of year 2, Fintz
would be 40% vested as to the incentive deferred compensation
credited in year 1 and 20% vested as to the incentive deferred
compensation credited in year 2.
3. No deferred compensation shall be paid under the terms of this
Agreement in the event Fintz is discharged from the service of
the Company for cause. For purposes of this Paragraph, the term
"cause" shall have the meaning set forth in Section 10(a)(iv) of
said Employment Agreement
4. Fintz shall not have the right to commute, sell, transfer,
assign or otherwise convey the right to receive any payments
under the terms of this Agreement. Any such attempted assignment
or transfer shall terminate this Agreement and the Company shall
have no further liability hereunder.
5 It is the intention of the parties that the incentive deferred
compensation to be payable to Fintz hereunder (if applicable)
shall be includable for Federal Income Tax purposes in his, or
such beneficiary's gross income only in the taxable year in which
he or the beneficiary actually receives the payment and Company
shall be entitled to deduct such incentive deferred compensation
as a business expense in its Federal Income Tax return in the
taxable year in which such payment is made to Fintz or his
beneficiary.
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6. Nothing contained in this Agreement shall in any way affect or
interfere with the right of Fintz to share or participate in a
retirement plan of the Company or any profit sharing, bonus or
similar plan in which he may be entitled to share or participate
as an employee of the Company.
7.This Agreement shall be binding upon the heirs, administrators,
executors, successors and assigns of Fintz and the successors and
assigns of Company. This Agreement shall not be modified or
amended except in writing signed by both parties.
8.
This Agreement shall be subject to and construed under the laws
of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.
By:__________________________________
____________________________________
ISRAEL FINTZ
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POMEROY COMPUTER RESOURCES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 26th day of June, 1997, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
("Company"), and ALLISON SOKOL ("Employee").
W I T N E S S E T H :
WHEREAS, Company has entered into an Asset Purchase Agreement
("Purchase Agreement") of even date herewith pursuant to which it
bought substantially all the assets of MAGIC BOX, INC. (" MAGIC
BOX" ); and
WHEREAS, Employee owns ten percent (10%) of the outstanding stock
of MAGIC BOX; and
WHEREAS, as an inducement for and in consideration of Company
entering into the Purchase Agreement with MAGIC BOX and
purchasing substantially all its assets, Employee has agreed to
enter into and execute this Employment Agreement pursuant to
Section 5 thereof; and
WHEREAS, Company desires to engage the services of Employee,
pursuant to the terms, conditions and provisions as hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and
the Employee agrees to be employed by the Company, upon the
following terms and conditions.
2. Term. The initial term of Employee's employment pursuant to
this Agreement shall begin on the 26th day of June, 1997, and
shall continue for a period of three (3) years and nine (9) days
ending July 5, 2000 unless terminated earlier pursuant to the
provisions of Section 10, provided that Sections 8, 9, 10(b) ,
10(c), if applicable, and 11, if applicable, shall survive the
termination of such employment and shall expire in accordance
with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall
automatically renew for additional consecutive renewal terms of
one (1) year unless either party gives written notice of his/its
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<PAGE>
intent not to renew the terms of this Agreement ninety (90) days
prior to expiration of the then expiring term. Employee's base
salary for each renewal term shall be determined by Company,
provided, however, Employee's annual base salary for any renewal
term shall not be less than the base salary in effect for the
prior year.
4. Duties. Employee shall serve as Vice-President for the
Company's Southern Florida division. Employee shall be
responsible to and report directly to the corporate officers of
Company. Employee shall devote her reasonable best efforts and
substantially all her time during normal business hours to the
diligent, faithful and loyal discharge of the duties of her
employment and towards the proper, efficient and successful
conduct of the Company's affairs. Employee shall perform such
duties in Dade or Broward Counties, Florida. The duties assigned
to Employee shall not be inconsistent with those typically
assigned to a person holding the position set forth above and
Employee shall at all times have such powers and authority as
shall be reasonably required to discharge such duties in an
efficient manner, together with such facilities and services as
are appropriate to her position. Employee further agrees to
refrain during the term of this Agreement from making any sales
of competing services or computer products which Company or its
subsidiaries provide or from profiting from any transaction
involving computer services or products for her account without
the express written consent of Company, other than any investment
that Employee may own in Ace Education, Inc., a computer training
business.
5. Compensation. For all services rendered by the Employee
under this Agreement (in addition to other monetary or other
benefits referred to herein), compensation shall be paid to
Employee as follows:
(a) Base Salary:
(i) During the period June 26, 1997 through July 5,
1997, Employee shall be paid the sum of One Thousand Four Hundred
Seventy-One and 16/100 Dollars ($1,471.16) per week.
Compensation due for a period of less than one (1) week shall be
prorated for such period on the basis of a seven-day week.
(ii) Employee shall be paid an annual base salary
of Seventy-Six Thousand Five Hundred Dollars ($76,500.00) during
the first full year (July 6, 1997 through July 5, 1998) of this
Agreement.
(iii) Employee shall be paid an annual base salary
of Eighty Thousand Three Hundred Twenty-Five Dollars ($80,325.00)
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during the second full year (July 6, 1998 through July 5, 1999)
of this Agreement.
(iv) Employee shall be paid an annual base salary
of Eighty-Four Thousand Three Hundred Forty-One and 25/100
Dollars ($84,341.25) during the third full year (July 6, 1999
through July 5, 2000) of this Agreement.
(v) Said annual base salary shall be payable in
accordance with the historical payroll practices of the Company.
(b) In addition to Employee's base salary as set forth in
Section 5(a) above, Employee shall be entitled to a bonus and
incentive stock option award in the event Employee satisfies
certain economic criteria pertaining to Company's Southern
Florida division, as follows:
(i) gross sales of Company's Southern Florida division
greater than $9,000,000.00 but less than or equal to
$9,500,000.00 with NPBT greater than 6% = $5,000.00 cash bonus
plus 500 incentive stock options;
(ii) gross sales of Company's Southern Florida
division greater than $9,500,000.00 but less than or equal to
$10,000,000.00 with NPBT greater than 5.5% = $6,000.00 cash bonus
plus 600 incentive stock options;
(iii) gross sales of Company's Southern Florida
division greater than $10,000,000.00 but less than or equal to
$12,000,000.00 with NPBT greater than 5% = $7,500.00 cash bonus
plus 750 incentive stock options;
(iv) gross sales of Company's Southern Florida
division greater than $12,000,000.00 but less than or equal to
$15,000,000.00 with NPBT greater than 4.5% = $10,000.00 cash
bonus plus 1,000 incentive stock options; and
(v) gross sales of Company's Southern Florida division
greater than $15,000,000.00 with NPBT greater than 4% =
$15,000.00 cash bonus plus 1,500 incentive stock options.
(vi) For purposes of this Section, the term
gross sales shall mean the gross sales of equipment, software
and services by Company's Southern Florida division. In making
said gross sales determination, all gains and losses realized on
the sale or other disposition of Company's Southern Florida
division's assets not in the ordinary course of business shall be
excluded. All refunds or returns which are made during such
period shall be subtracted along with all accounts receivable
derived from sales which are written off during such period in
accordance with Company's accounting system. Such gross sales
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and net pre-tax profit margin of Company's Southern Florida
division shall be determined by the independent accountant
regularly retained by the Company in accordance with generally
accepted accounting principles and the determination by the
accountant shall be final, binding and conclusive upon all
parties hereto. Commencing with the earlier of thirty (30) days
after the installation of the Astea accounting system or January
6, 1998, in making said determination of the applicable pre-tax
margin for the Company's Southern Florida division, a 1.5% MAS
royalty fee on gross sales shall be paid to the Company incident
to said determination. For each subsequent year, during the
initial term of this Agreement, the parties shall, in good faith,
agree upon a MAS royalty fee to be charged hereunder based on the
level of services and support being provided by the Company to
its Southern Florida division. Provided, however, such royalty
fee shall be 1.5% if the parties are unable to come to an
agreement for each subsequent year. Fifty percent (50%) of any
amount earned under Section 5(b) above shall be payable to
Employee within thirty (30) days of the determination by the
accountant as a bonus and the remaining fifty percent (50%) will
constitute incentive deferred compensation and will be payable to
Employee according to the terms of Incentive Deferred
Compensation Agreement attached hereto as Exhibit A. Any
incentive deferred compensation shall be fully vested over a
five-year period, vesting 20% percent per year from the effective
date of this Agreement.
(vii) For the year 1997, the economic criteria and
the pay out amount and stock option award set forth in Section
5(b) above shall be prorated to reflect the closing date of the
transaction with Magic Box.
(viii) Any award of an incentive stock option to
acquire common stock of the Company earned hereunder shall be the
fair market value of such stock as of January 5, 1998 and shall
be subject to all conditions contained in the Company's Non-
Qualified and Incentive Stock Option Plan.
(ix) The parties agree that in January of 1998,
1999 and 2000 (for the remaining portion of the initial term of
this Agreement), they will negotiate in good faith the
implementation of an annual bonus and incentive deferred
compensation plan for Employee for the remaining fiscal years of
this Agreement which will be predicated upon the attainment by
Company's Southern Florida division of certain economic criteria
established at the outset of such calendar year. Such bonus and
incentive deferred compensation plan for the remaining term of
this Agreement shall be consistent with other of Company's
management personnel holding positions similar to that of
Employee.
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(x) For purposes of this Agreement, the term
"Company's Southern Florida division" shall mean the business
generated and emanating out of the acquisition of substantially
all the assets of Magic Box, Inc.
6. Fringe Benefits. During the term of this Agreement,
Employee shall be entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with
the standard family medical health and insurance coverage
maintained by Company on its employees. Company and Employee
shall each pay fifty percent (50%) of the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a
vacation of three (3) weeks during any time of the year which
Employee selects, during which time her compensation will be paid
in full. Provided, however, such weeks may not be taken
consecutively without the written consent of Company.
(c) Retirement Plan - Employee shall be entitled to
participate, after meeting eligibility requirements, in any
qualified retirement plans and/or welfare plans maintained by the
Company during the term of this Agreement.
(d) Other Company Programs - Employee shall be eligible
to participate in any other plans or programs implemented by the
Company for all of its employees with duties and responsibilities
similar to Employee.
(e) Automobile Allowance - Company shall provide Employee
with an automobile allowance of $700.00 per month during the term
of this Agreement. Employee shall be responsible for all
insurance premiums, maintenance and repair to any vehicle owned
or leased by her and for all expenses for gasoline or other items
related to the upkeep of such vehicle.
(f) Cellular Telephone - Company shall reimburse Employee
for all reasonable business expenses related to Employee's use of
her cellular telephone in the furtherance of Company's business.
Such expenses shall be accounted for in accordance with the
reasonable policies and procedures established by the Company.
(g) Employee shall be responsible for any and all taxes
owed, if any, on the fringe benefits provided to her pursuant to
this Section 6.
7. Expenses. During the term of Employee's employment
hereunder, Employee shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and
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entertainment expenses or other out-of-pocket business expenses
incurred by Employee in fulfilling the Employee's duties and
responsibilities hereunder, including, all expenses of travel and
living expenses while away from home on business or at the
request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the
reasonable policies and procedures established by the Company.
8. Non-Competition. Employee expressly acknowledges the
provisions of Section 8 of the Purchase Agreement relating to
Employee's Covenant Not to Compete with Company. Accordingly,
such provisions of Section 8 are incorporated herein by reference
to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee
acknowledges that as a shareholder of MAGIC BOX, she has received
substantial consideration pursuant to such Purchase Agreement and
that as an inducement for, and in consideration of Company
entering into this Agreement, Employee has agreed to be bound by
such provisions of Section 8 of the Purchase Agreement.
Accordingly, such provisions of Section 8 and Exhibit B-2 and the
restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information
The Employee acknowledges that the Company's trade secrets and
confidential and proprietary information, including without
limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including
unpublished information concerning revenues, profits and profit
margins;
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is
used for purposes of the Securities Exchange Act of 1934, as
amended;
all constitute valuable, special and unique proprietary and trade
secret information of the Company. In recognition of this fact,
the Employee agrees that the Employee will not disclose any such
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trade secrets or confidential or proprietary information (except
(i) information which becomes publicly available without
violation of this Employment Agreement or is known by Employee
other than by reason of employment by Company, (ii) information
of which the Employee did not know and should not have known was
disclosed to the Employee in violation of any other person's
confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make
use of any such information for the benefit of any person, firm,
operation or other entity except the Company and its subsidiaries
or affiliates. The Employee's obligation to keep all of such
information confidential shall be in effect during and for a
period of three (3) years after the termination of her employment
in those states where Company has business offices; provided,
however, that the Employee will keep confidential and will not
disclose any trade secret or similar information protected under
law as intangible property (subject to the same exceptions set
forth in the parenthetical clause above) for so long as such
protection under law is extended.
10.
Termination.
(a) The Employee's employment with the Company may be
terminated at any time as follows:
(i) By the Employee at her discretion, upon sixty (60)
days written notice to Company;
(ii) By Employee's death;
(iii) By Employee's physical or mental disability which
renders Employee unable to perform her duties hereunder for a
consecutive period of one hundred twenty (120) days or for an
aggregate of one hundred fifty (150) days or more during any
twelve-month period.
(iv) By the Company, for cause upon fifteen (15) day's
written notice to Employee. For purposes of this paragraph
10(a)(iv), the term "cause" shall mean termination upon: (i) the
continuous failure by Employee to substantially perform her
material duties with the Company (other than any such failure
resulting from her incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered
to her by the Company, which demand specifically identifies the
manner in which the Company believes that she has not
continuously substantially performed her duties and setting forth
a detailed mechanism for curing such conduct; (ii) the engaging
by Employee in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise, including but
not limited to any material misrepresentation related to the
performance of her duties; (iii) the conviction of Employee of a
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felony (other than driving related) or other crime involving
theft or fraud, (iv) Employee's gross neglect or gross misconduct
in carrying out her duties hereunder resulting, in either case,
in material harm to the Company; or (v) any material breach by
Employee of any material provision of this Agreement.
Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated for cause unless and until there shall have
been delivered to her a copy of a resolution of the Board of
Directors of the Company or any appropriately designated
committee of the Board, finding that she has engaged in the
conduct set forth above in this Section 10(a)(iv), specifying the
particulars thereof in detail, and setting forth a detailed
mechanism for curing such conduct and Employee shall not have
cured such conduct to the reasonable satisfaction of the Board
within thirty (30) days of receipt of such resolution.
(v) Commencing January 6, 1998, by the Company at its
discretion, without cause, upon thirty (30) days written notice
to Employee; provided that Company complies with the provisions
of Section 10(c).
(vi) By the Employee for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean, without Employee's
express consent, the occurrence of any of the following
circumstances:
(A) a substantial diminution in Employee's
duties, responsibilities or authority after written demand has
been made upon Company by Employee and Company has had a thirty-
day period to correct such matter (except during any period when
the Employee is unable to perform all or substantially all of the
Employee's duties and/or responsibilities as a result of the
Employee's illness (either physical or mental) or other
incapacity);
(B) the relocation of Employee's place of
employment to outside Dade or Broward Counties, Florida;
(C) any material breach by Company of the
Agreement but only after written demand has been made upon
Company by Employee setting forth such material breach and
setting forth a detailed mechanism for curing such conduct and
Company has failed to cure such breach within thirty (30) days;
or
(D) a change in control as hereinafter defined,
unless Employee has accepted employment with the successor entity
and such successor entity has assumed this Employment Agreement
pursuant to the provisions of Section 17. For purposes of this
Agreement, a "change in control" shall occur: (i) upon the
sale or other disposition to a person, entity or group (as such
term is used in Rule 13 d-5 promulgated under the Securities
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Exchange Act of 1934, as amended), such person, entity or group
being referred to as an ``outside party'' of fifty percent (50%)
or more of the consolidated assets of the Company taken as a
whole, or (ii) in the event shares representing a majority of the
voting power of Company are acquired by a person or group (as
such term is used in Rule 13 d-5) of persons other than the
holders of the common stock of Company on June 26, 1997.
(b)Compensation upon Termination: In the event of
termination of employment, the Employee or her estate, in the
event of death, shall be entitled to her annual base salary and
other benefits provided hereunder to the date of her termination.
In addition, Employee shall be entitled to receive any bonus
accrued to the date of her termination of employment as provided
in Sections 5(b) and (c). In addition, Employee shall be
entitled to any vested incentive deferred compensation that may
be due Employee pursuant to the provisions of Exhibit A, which
shall be payable (if applicable) pursuant to the terms thereof.
(c)In the event that Company would terminate Employee's
employment hereunder without cause pursuant to Section 10(a)(v)
or Employee would terminate her employment for Good Reason
pursuant to Section 10(a)(vi), Company shall be obligated to pay
Employee, as severance pay, Employee's annual base salary for the
remaining term, including the current renewal term, if
applicable, of the Agreement (as set forth in Section 2) as due.
11. Disability In the event that Employee becomes temporarily
disabled and/or totally and permanently disabled, physically or
mentally, which renders her unable to perform her duties
hereunder, Employee shall receive one hundred percent (100%) of
her base annual salary (in effect at the time of such disability)
for a period of one (1) year following the initial date of such
disability (offset by any payments to the Employee received
pursuant to disability benefit plans, if any, maintained by the
Company.) Such payments shall be payable in twelve consecutive
equal monthly installments and shall commence thirty (30) days
after the determination by the physicians of such disability as
set forth below.
For purposes of this Agreement, Employee shall be deemed to
be temporarily disabled and/or totally and permanently disabled
if attested to by two qualified physicians, (one to be selected
by Company and the other by Employee) competent to give opinions
in the area of the disabled Employee's physical and/or mental
condition. If the two physicians disagree, they shall select a
third physician, whose opinion shall control. Employee shall be
deemed to be temporarily disabled and/or totally and permanently
disabled if she shall become disabled as a result of any
medically determinable impairment of mind or body which renders
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it impossible for such Employee to perform satisfactorily her
duties hereunder, and the qualified physician(s) referred to
above certify that such disability does, in fact, exist. The
opinion of the qualified physician(s) shall be given by such
physician(s), in writing directed to the Company and to Employee.
The physician(s) decision shall include the date that disability
began, if possible, and the 12th month of such disability, if
possible. The decision of such physician(s) shall be final and
conclusive and the cost of such examination shall be paid by
Employer.
12. Severability. In case any one (1) or more of the provisions
or part of a provision contained in this Agreement shall be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement. In
such a situation, this Agreement shall be reformed and construed
as if such invalid, illegal or unenforceable provision, or part
of a provision, had never been contained herein, and such
provision or part shall be reformed so that it will be valid,
legal and enforceable to the maximum extent possible.
13. Governing Law. This Agreement shall be governed and
construed under the laws of the State of Florida and shall not be
modified, waived or discharged, in whole or in part, except by an
agreement in writing signed by the parties.
14. Notices. All notices, requests, demands and other
communications relating to this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally
or three days after mailing if mailed by certified or registered
mail, return receipt requested, postage prepaid:
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
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With a copy to: Jerry J. Sokol, Esq.
McDermott, Will & Emery
201 South Biscayne Boulevard, Suite 2200
Miami, Florida 33131-4336
15. Enforcement of Rights. The parties expressly recognize that
any breach of this Agreement by either party is likely to result
in irrevocable injury to the other party and agree that such
other party shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction in
Dade County, Florida, either at law or in equity, to obtain
damages for any breach of this Agreement, or to enforce the
specific performance of this Agreement by each party or to enjoin
any party from activities in violation of this Agreement. Should
either party engage in any activities prohibited by this
Agreement, such party agrees to pay over to the other party all
compensation, remuneration, monies or property of any sort
received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or
obligations or liabilities of any breaching party pursuant to
this Agreement or any applicable law.
16. Entire Agreement.
This Agreement and the Exhibits hereto
and the Purchase Agreement referred to herein contain the entire
understanding of the parties with respect to the subject matter
contained herein and may be altered, amended or superseded only
by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
17. Parties in Interest.
(a) This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or
obligations hereunder without first obtaining the written consent
of the other party hereto; provided, however, that nothing in
this Section 17 shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon her
death, or (ii) executors, administrators, or legal
representatives of Employee or her estate from assigning any
rights hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding
upon and inure to the benefit of any successor corporation of
Company
(b) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the assets of the Company or the
business with respect to which the duties and responsibilities of
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Employee are principally related, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that Company would have been required to perform it if no
such succession had taken place. As used in this Agreement
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in
this Section 17 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
18. Representations of Employee.
Employee represents and
warrants that she is not party to or bound by any agreement or
contract or subject to any restrictions including without
limitation any restriction imposed in connection with previous
employment which prevents Employee from entering into and
performing her obligations under this Agreement.
19. Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an
original part, which together shall constitute one and the same
instrument.
20. Attorneys' Fees. In the event of any dispute arising
between Employee and Company, whether pursuant to this Agreement
or otherwise, the prevailing party shall be entitled to recover
from the non-prevailing party, the prevailing party's reasonable
attorneys' fees and costs.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________
By:_________________________________
__________________________
__________________________
____________________________________
ALLISON SOKOL
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INCENTIVE DEFERRED COMPENSATION AGREEMENT
This Incentive Deferred Compensation Agreement is made effective
as of the 26th day of June, 1997, by and between POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Company") and
ALLISON SOKOL ("Sokol").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the
Company and Sokol have entered into an Employment Agreement for
the employment of Sokol by Company;
WHEREAS, pursuant to Section 5(b) of said Employment Agreement,
Sokol may be entitled to incentive deferred compensation in the
event certain economic criteria are satisfied;
WHEREAS, the parties wish to define the terms governing the
incentive deferred compensation in the event the economic
criteria and the terms and conditions of the Employment Agreement
are satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
0.
In the event Sokol satisfies the economic criteria set forth in
the Employment Agreement for such year and is entitled to
incentive deferred compensation, the incentive deferred
compensation shall be governed by the terms of this Agreement.
1.
In the event Sokol should die or become disabled during the
term of the Employment Agreement, or if the Employment Agreement
is not renewed by Company at the expiration of the initial term
or any renewal term, or in the event Company would terminate
Employee's employment without cause pursuant to Section 10(a)(v)
of the Employment Agreement or in the event Sokol would terminate
her employment with Company for Good Reason as defined in Section
10(a)(vi) of the Employment Agreement, all incentive deferred
compensation earned shall be vested in full and shall be payable
to Sokol and/or her designated beneficiary at that time. For
purposes of this Paragraph, the term "disabled" shall have the
meaning set forth in said Employment Agreement.
2.
In the event Sokol discontinues employment with the Company
during the initial term or any renewal term of this Employment
Agreement or if Sokol does not renew the Employment Agreement at
the expiration of the initial term or any renewal term and such
discontinuation of employment is not a result of Sokol becoming
disabled, the vested portion of her deferred compensation account
will be paid to her at said time and all non-vested amounts will
be forfeited. Provided, however, if Sokol would violate the terms
of her covenant not to compete and confidentiality agreement as
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set forth in Sections 8 and 9 of her Employment Agreement, the
vested portion of her deferred compensation account will likewise
be forfeited. The incentive deferred compensation shall vest
according to the following schedule:
____________________________________
Years of Service With Company or its
Subsidiaries from the Effective Date Interest
of This Agreement
Less than 1 year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years 100%
This vesting schedule shall apply separately to each year that
incentive deferred compensation is earned by Sokol upon the
satisfaction of the economic criteria set forth in the Employment
Agreement. Provided, however, Sokol shall be vested fully in all
amounts hereunder on June 26, 2002 and all amounts due hereunder
shall be paid to her on such date, notwithstanding the fact that
Sokol continues to be employed by the Company.
By way of illustration, if Sokol satisfied the economic criteria
for years 1 and 2 of the Agreement, at the end of year 2, Sokol
would be 40% vested as to the incentive deferred compensation
credited in year 1 and 20% vested as to the incentive deferred
compensation credited in year 2.
3.
No deferred compensation shall be paid under the terms of this
Agreement in the event Sokol is discharged from the service of
the Company for cause. For purposes of this Paragraph, the term
"cause" shall have the meaning set forth in Section 10(a)(iv) of
said Employment Agreement
4.
Sokol shall not have the right to commute, sell, transfer,
assign or otherwise convey the right to receive any payments
under the terms of this Agreement. Any such attempted assignment
or transfer shall terminate this Agreement and the Company shall
have no further liability hereunder.
5.
It is the intention of the parties that the incentive deferred
compensation to be payable to Sokol hereunder (if applicable)
shall be includable for Federal Income Tax purposes in her, or
such beneficiary's gross income only in the taxable year in which
she or the beneficiary actually receives the payment and Company
shall be entitled to deduct such incentive deferred compensation
as a business expense in its Federal Income Tax return in the
taxable year in which such payment is made to Sokol or her
beneficiary.
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6.
Nothing contained in this Agreement shall in any way affect or
interfere with the right of Sokol to share or participate in a
retirement plan of the Company or any profit sharing, bonus or
similar plan in which she may be entitled to share or participate
as an employee of the Company.
7.
This Agreement shall be binding upon the heirs, administrators,
executors, successors and assigns of Sokol and the successors and
assigns of Company. This Agreement shall not be modified or
amended except in writing signed by both parties.
8.
This Agreement shall be subject to and construed under the laws
of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.
By:__________________________________
____________________________________
ALLISON SOKOL
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT MAGIC BOX, INC. ("Seller") hereby constitutes and appoints
POMEROY COMPUTER RESOURCES, INC. ("Purchaser"), its successors
and assigns, the true and lawful attorney of Seller with full
power of substitution, in the name of Purchaser, or the name of
Seller, on behalf of and for the benefit of Purchaser, to collect
all receivables and other items being transferred and assigned to
Purchaser as provided herein, to endorse, without recourse, any
and all checks in the name of Seller the proceeds of which
Purchaser is entitled to hereunder, to institute and prosecute,
in the name of Seller or otherwise, all proceedings which
Purchaser may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the Purchased
Assets, to defend and compromise any and all actions suits and
proceedings in respect of any of the Purchased Assets, and to do
all such acts and things in relation thereto as Purchaser may
deem advisable. Seller agrees that the foregoing powers are
coupled with an interest and shall be irrevocable by Seller,
directly or indirectly, by the dissolution of Seller or in any
manner or for any reason. Seller further agrees that Purchaser
shall retain for its own account any amounts collected pursuant
to the foregoing powers, and Seller shall pay or transfer to
Purchaser, if and when received, any amounts which shall be
received by Seller after the Closing in respect of any
Page 1 of 2 Pages
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<PAGE>
receivables or other assets, properties, rights or business to be
transferred and assigned to Purchaser as provided herein.
Seller hereby gives unto Purchaser full power to do and perform
any, all and every act requisite, necessary or proper to be done
in carrying out the purposes for which this power is granted as
might or could be done if personally present, with full power of
substitution or revocation.
This power shall survive the liquidation or dissolution of
Seller.
IN WITNESS WHEREOF, Magic Box, Inc. has caused this instrument to
be executed by its officer thereunto duly authorized as of this
____ day of _______, 1997.
MAGIC BOX, INC.,
Witnesses: a Florida corporation
______________________________
BY:_______________________________
______________________________
STATE OF FLORIDA
COUNTY OF DADE, ss
BE IT REMEMBERED, that on this ______ day of _____________,
1997, before me, the undersigned, a Notary Public in and for said
County, personally appeared ______________________________, who
acknowledged himself to be the ___________ of Magic Box, Inc., a
Florida corporation, and that he, as such ______________ being
authorized to do so, executed the foregoing instrument for the
purposes therein contained, by signing the name of the
corporation by himself as ____________.
Page 2 of 2 Pages
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<PAGE>
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my notarial seal on the day and year last above written.
________________________________________
NOTARY PUBLIC
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<PAGE>
ASSUMPTION OF LIABILITIES
_________________________
THIS ASSUMPTION OF LIABILITIES is made this 26th day of June, 1997
by and between Magic Box, Inc., a Florida corporation ("Seller"), and
Pomeroy Computer Resources,Inc., a Delaware corporation ("Purchaser").
WHEREAS, pursuant to an Asset Purchase Agreement dated May 30, 1997
(the "Agreement") by, between and among Purchaser, Seller, and Israel
Fintz, M. Ronald Krongold, Marvin Rosen and Allison Sokol, Purchaser has
agreed to assume certain obligations of Seller;
NOW, THEREFORE, pursuant to the Agreement and in consideration of the
premises, and for good and valuable consideration, the receipt of which
is hereby acknowledged;
1. Assumption of Liabilities of Seller
Purchaser hereby accepts, assumes and agrees to pay and perform the
obligations of Seller as set forth on Exhibit "1" attached hereto and
made a part hereof. Purchaser agrees to indemnify and hold Seller
harmless from any liability with respect to such assumed obligations.
2. Excluded Liabilities
Notwithstanding anything to the contrary in the Agreement or in this
Assumption of Liabilities, Purchaser shall not assume or be liable for
any liabilities of Seller not listed on Exhibit "1" attached hereto and
made part hereof.
3. The Agreement
Nothing contained in this Assumption of Liabilities shall be deemed to
supersede, restrict, impair, diminish, enlarge or expand in any respect
any of the obligations, agreements, covenants or warranties of Seller or
Purchaser contained in the Agreement, including Purchaser's obligation to
indemnify Seller and its Shareholders from Assumed Liabilities and
Seller's and Shareholders' obligation to indemnify Purchaser for Excluded
Liabilities to the extent set forth in the Agreement. All terms used in
this Assumption of Liabilities shall have the meaning defined in the
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Assumption of
Liabilities to be executed in their names on the date first above written.
SELLER:
MAGIC BOX, INC., a Florida corporation
By: __________________________________
PURCHASER:
POMEROY COMPUTER RESOURCES, INC.,
a Delaware corporation
By: __________________________________
STATE OF FLORIDA
COUNTY OF DADE, ss:
The foregoing instrument was acknowledged before me this ________ day of
______________, 1997 by _______________________, the _______________ of
Magic Box, Inc., a Florida corporation, on behalf of the corporation.
_____________________________________
NOTARY PUBLIC
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<PAGE>
STATE OF OHIO
COUNTY OF HAMILTON, ss:
The foregoing instrument was acknowledged before me this _______ day
of _____________, 1997 by ________________________, the __________________
of Pomeroy Computer Resources Inc., a Delaware corporation, on behalf of
the corporation.
_____________________________________
NOTARY PUBLIC
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<PAGE>
EXHIBIT "1"
ASSUMED LIABILITIES OF
MAGIC BOX, INC.
1. Seller's obligation to IBM Credit Corporation under a certain working
capital credit line which provides for a maximum principal amount of
$1,050,000.00, the outstanding amount of which is $501,301.09 as of the
execution of this Agreement, and the outstanding amount of which will be
subject to the satisfaction of the expected Net Assets Amount pursuant to
the terms of the Agreement.
2. Seller's obligation to Deutsche Financial Services, Inc. under a certain
inventory credit account which allows for up to a maximum of $350,000.00,
the outstanding balance of which is $213,307.46 as of the execution of this
Agreement, and the outstanding amount of which will be subject to the
satisfaction of the expected Net Assets Amount pursuant to the terms of the
Agreement.
3. All of the trade accounts payable, accrued expenses, accrued payroll,
accrued payroll taxes, accrued sales taxes, accrued pension contributions
(if any) and accrued vacation to non-stockholders and non-officers of
Seller, and capital lease and unearned service and other contracts of the
Seller relating to the Business, of the same or similar nature as such items
are set forth on the disclosure schedule attached to the Agreement, the Pro
Forma Balance Sheet and the Financial Statements, as such terms are defined
in the Agreement, or any notes thereto, including but not limited to any such
items incurred in the ordinary course of business from the date of the June
15th Pro Forma Balance Sheet to the Closing Date.
4. Such other liabilities, to the extent they are assumable, under contracts,
leases or agreements of the Seller, as set forth as an Assumed Liability
on the Disclosure Schedule attached to the Agreement.
5. In no event shall the liabilities assumed by Purchaser include the
Excluded Liabilities set forth in Section 3.3 of the Agreement, but in all
events shall include the Assumed Liabilities as defined in the Agreement.
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SUBORDINATION AGREEMENT
_______________________
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of ________________, 1997, among (i) POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (the
"Borrower"), (ii) MAGIC BOX, INC., a Florida corporation, its
successors and assigns (the "Subordinated Creditor"), and (iii)
STAR BANK, N.A., an Ohio banking corporation, its successors or
assigns (the "Senior Creditor").
R E C I T A L S
_______________
WHEREAS, pursuant to an Amended and Restated Loan Agreement,
dated as of March 14, 199 6, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997 (the "Senior Loan Agreement"), between the
Borrower and the Senior Creditor, the Senior Creditor has
extended a commitment to make available to Borrower certain
revolving credit and term loans in the aggregate principal amount
of Fifteen Million ($15,000,000.00) Dollars (the "Senior Loans");
and
WHEREAS, the Senior Loans are to be evidenced by a revolving
credit note (together with all substitutions and replacements
therefor and all amendments and supplements thereof in accordance
with the terms of this Agreement (the "Senior Notes") in the
maximum aggregate principal amount not to exceed Fifteen Million
($15,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loans to purchase substantially all the assets of
Subordinated Creditor; and
WHEREAS, in connection with the acquisition of substantially all
the assets of Subordinated Creditor, the Subordinated Creditor
will take back four promissory notes in the aggregate principal
amount of $542,000.00 plus interest, fees, costs and other
amounts payable in respect thereof ("Acquisition Debt") in
partial consideration of the payment of the purchase price for
such assets; and
WHEREAS, a condition under the Senior Loans is the execution and
delivery of this Subordination Agreement;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties agree as follows:
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ARTICLE 1
DEFINITIONS
1.1 Certain Terms. The following terms, when used in this
Agreement, including the introductory paragraph and Recitals
hereto, shall, except where the context otherwise requires, have
the following meanings:
1.1.01 "Acquisition Debt" has the meaning specified in
the fourth paragraph of the recitals hereto.
1.1.02 "Acquisition Note" collectively means the
promissory notes issued by Borrower to the Subordinated Creditor
which evidences the Acquisition Debt.
1.1.03 "Agreement" means this Subordination Agreement.
1.1.04 "Applicable Law" means and includes statutes and
rules and regulations thereunder and interpretations thereof by
any governmental agency charged with the administration or the
interpretation thereof, and orders, requests, directives,
instructions and notices of any governmental authority.
1.1.05 "Bankruptcy or Insolvency Proceeding" means any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization, assignment for the benefit of
creditors or other similar case or proceeding for the liquida-
tion, dissolution, reorganization or winding up of the Borrower,
or of all or any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.06 "Borrower" has the meaning specified in the
introductory paragraph hereto.
1.1.07 "Enforcement Action" means
(a) the acceleration of any Subordinated Debt,
(b) any realization or foreclosure upon any collateral
securing the Subordinated Debt,
(c) any demand by the Subordinated Creditor for
payment of the Subordinated Debt, or
(d) subject always to the provisions contained in the
next sentence, the enforcement of any of the rights or remedies
of the Subordinated Creditor against the Borrower, whether under
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the Subordinated Debt Documents or otherwise, and whether by
action at law, suit in equity, arbitration proceedings or
otherwise.
The term "Enforcement Action" shall not include or be
deemed to include the giving of notices (including, without
limitation, notices of default, notices of Events of Default,
notices of demand for payment, notices of breaches of covenants,
etc.), the making of requests or the delivery of other
communications pursuant to and upon the terms permitted or
otherwise contemplated by any of the Subordinated Debt Documents,
it being understood and agreed that any action of the kind
described above in the foregoing sentence may be taken by the
Subordinated Creditor at any time and from time to time after the
date hereof without any limitation or restriction.
1.1.08 "Enforcement Action Notice" has the meaning
specified in Section 3.2(b).
1.1.09 "Event of Default" has, in connection with
permitted payments under Section 2.6 hereof, the meaning
specified in the Senior Loan Agreement and, with respect to
Standstill Events as defined herein and as used in Section 3, has
the meaning specified in the Acquisition Note.
1.1.10 "Extension of Credit" means any loan, letter of
credit or other extension of credit of any kind or character and
in the case of revolving credit facilities, includes lending and
relending up to the maximum amount thereof, the substitution of
term notes for portions of the revolving credit notes and any
Permitted Increase.
1.1.11 "Instrument" means any contract, agreement,
indenture, mortgage or other document or writing (whether a
formal agreement, letter or otherwise) under which any obligation
is evidenced, assumed or undertaken, or any right to any lien is
granted or perfected.
1.1.12 "Payment in Full" and "Paid in Full" mean payment
in full in cash.
1.1.13 "Payment or Distribution on Account of
Subordinated Debt" or "Payment or Distribution" means any payment
or distribution of any kind or character, whether in cash,
securities or other property or any combination thereof, and
whether voluntary or involuntary, on account of principal of, or
interest on any Subordinated Debt, or on account of any
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redemption, retirement, repurchase or other acquisition for value
of any Subordinated Debt.
1.1.14 "Permitted Increase" means any increase in the
principal amount of the Senior Debt effected by Senior Lender,
except the aggregate amounts of any such increases outstanding at
any one time shall not exceed the amount set forth on Exhibit A
attached hereto.
1.1.15 "Proceeds" shall have the meaning
(a) ascribed to that term under the U.C.C. and shall
in any event include any and all payments or distributions of any
kind or character received by way of exercise of rights of set-
off, counterclaim or cross-claim, or enforcement of any claim,
against the Borrower,
(b) any and all proceeds of any insurance, indemnity,
warranty, guaranty of letter of credit payable to the Borrower
with respect to any collateral securing the Subordinated Debt or
Senior Debt, or
(c) any and all other amounts from time to time paid
or payable or distributable under or with respect to any
collateral securing the Subordinated Debt or Senior Debt.
1.1.16 "Star Bank, N.A" as used in the defined terms
"Senior Debt" and "Senior Debt Documents", means and includes
Star Bank, N.A., the party executing this Agreement as Senior
Creditor, and its successors or assigns in title and any so-
called "participants" purchasing any participating interests or
so-called "participants" in any of the rights, title or interest
of Star Bank, N.A. under any of the Senior Debt Documents or in
relation to any of the Senior Debt.
1.1.17 "Reorganization Securities" means securities
issued by the Borrower (or any successor) in exchange for all
Subordinated Debt upon the effectiveness of a plan of
reorganization in bankruptcy of the Borrower that are either (a)
equity securities of the Borrower having no mandatory redemption,
repurchase or dividend obligations, and that are not convertible
into or exchangeable for any securities having mandatory payment,
redemption, repurchase or dividend obligations or (b) debt
securities of the Borrower the payment of which is subordinated,
at least to the extent provided in this Agreement with respect to
the Subordinated Debt, prior to the Payment in Full of the Senior
Debt, provided that no class of Senior Debt is impaired (within
the meaning of Section 1124 of Title 11 of the United States
Code) by such plan of reorganization.
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1.1.18 "Senior Creditor" has the meaning specified in the
introductory paragraph hereto.
1.1.19 "Senior Debt " means all indebtedness and other
obligations of the Borrower, contingent or otherwise, to the
Senior Creditor, now or hereafter existing, under or with respect
to:
(a) extension of Credit by the Senior Creditor under
the Senior Debt Documents in an aggregate outstanding principal
amount not exceeding Fifteen Million Dollars ($15,000,000.00).
(b) interest (including interest accruing at the
contract rate after the commencement of any Bankruptcy or
Insolvency Proceeding, whether or not such interest is an allowed
claim in such proceeding) on Extensions of Credit described in
clause (a) of this definition and on any Permitted Increase
described in clause (c) below, and fees, costs, expenses,
ties, reimbursements and other amounts owing to the Senior
Creditor on Extensions of Credit described in clause (a) of this
definition; and
(c) any Permitted Increase.
1.1.20 "Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Notes (subject
always to the provisions of the defined term "Senior Debt") and
each other Instrument executed in connection with or evidencing,
governing, guaranteeing or securing any indebtedness under any
such document or any Permitted Increase, all as the same may be
amended, modified or supplemented pursuant to the terms thereof
in accordance with the provisions of this Agreement.
1.1.21 "Senior Loans" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.22 "Senior Loan Agreement" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.23 "Standstill Event" means the occurrence of any one
or more of the _________________
Events of Default under the Acquisition Note.
1.1.24 "Standstill Event Notice" shall mean the date the
Subordinated Creditor shall have provided written notice of such
Standstill Event to the Senior Creditor and Borrower.
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1.1.25 "Standstill Period " means, in relation to any
Standstill Event, the period beginning on the date the Standstill
Event in relation to such Standstill Period shall have occurred
and ending on the date determined pursuant to Section 3.1(a).
1.1.26 "Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of the
Acquisition Note.
1.1.27 "Subordinated Debt " means all indebtedness and
other obligations of the Borrower, contingent or otherwise, now
or hereafter existing, under or in respect of the Acquisition
Note, and interest (including interest accruing after the
occurrence of an Event of Default as defined in the Acquisition
Note), fees, costs, expenses, indemnities, reimbursements thereon
and other amounts payable in respect thereof (including any such
obligations to prepay, repurchase, retire, redeem or acquire for
value any such indebtedness).
1.1.28 "Subordinated Debt Documents" means, collectively
the Acquisition Note, and
(a) each Instrument now or hereafter executed in
connection with or evidencing, governing, guarantying or securing
any indebtedness under any such document.
1.1.29 "U.C.C." means the Uniform Commercial Code, as in
effect from time to time in the State of Ohio.
1.2 Senior Loan Agreement Unless otherwise defined herein or
the context otherwise requires, terms used in this Agreement,
including the introductory paragraph and Recitals hereto, that
are defined in the Senior Loan Agreement (as in effect on the
date hereof), have the meanings given to such terms in the Senior
Loan Agreement (as in effect on the date hereof).
1.3 U.C.C. Definitions Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided
in the U.C.C. are used in this Agreement, including the
introductory paragraph and Recitals hereto, with such meanings.
1.4 General Provisions Relating to Definitions Terms for which
meanings are defined in this Agreement shall apply equally to the
singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The term "including" means
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including, without limiting the generality of any description
preceding such term. Except as otherwise expressly provided
herein, each reference herein to any Person shall include a
reference to such Person's successors in title and assigns or (as
the case may be) his successors, assigns, heirs, executors,
administrators and other legal representatives. Except as
otherwise expressly provided herein, references to any Instrument
defined in this Agreement refer to such Instrument as originally
executed, or, if subsequently varied, replaced or supplemented
from time to time, as so varied, replaced or supplemented and in
effect at the relevant time of reference thereto.
ARTICLE 2
DEBT SUBORDINATION ARRANGEMENTS
2.1 Agreement to Subordinate. The Borrower and the Subordinated
Creditor agree with and for the benefit of the Senior Creditor
that all Subordinated Debt is hereby expressly subordinated and
made junior in right of payment, to the extent and in the manner
provided in this Agreement, to the prior Payment in Full of all
Senior Debt.
2.2 Bankruptcy or Insolvency Proceeding. In the event of any
Bankruptcy or Insolvency Proceeding:
(a)The Senior Creditor shall first be entitled to receive
Payment in Full of all Senior Debt before the Subordinated
Creditor shall be entitled to receive any payment or distribution
on account of Subordinated Debt (other than distributions in the
form of Reorganization Securities); and
(b)the Senior Creditor shall be entitled to receive (until
Payment in Full of all Senior Debt) any payment or distribution
on account of Subordinated Debt (other than distributions in the
form of Reorganization Securities) which may be payable or
deliverable to the Subordinated Creditor (including any such
payment or distribution payable or deliverable by virtue of the
provisions of, or any security for, any Instrument governing
indebtedness which is subordinate and junior in right of payment
to the Subordinated Debt).
2.3 Delivery of Prohibited Payments or Distributions on Account
of Subordinated Debt to Senior Creditor. If any Payment or
Distribution on Account of Subordinated Debt (other than
distributions in the form of Reorganization Securities or
distributions authorized by Sections 2.6 and 2.8) is collected or
received by the Subordinated Creditor, then such payment or
distribution shall be paid over or delivered forthwith to the
Senior Creditor.
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2.4 Subrogation. Upon payment in full in cash of all Senior
Debt, the Subordinated Creditor shall be immediately subrogated
to the rights of the Senior Creditor (to the extent of the
payments and distributions previously made to the Senior Creditor
pursuant to the provisions of this Article 2) to receive payments
and distributions of property of the Borrower applicable to
Senior Debt until all amounts owing on Subordinated Debt shall be
paid in full. No payments or distributions applicable to Senior
Debt which the Subordinated Creditor shall receive by reason of
its being subrogated to the rights of the Senior Creditor
pursuant to the provisions of this Section 2.4 shall, as between
the Borrower and its creditors, other than the Senior Creditor
and the Subordinated Creditor, be deemed to be a payment by the
Borrower to or for the account of Subordinated Debt; and, for the
purposes of such subrogation, no payments or distributions to the
Senior Creditor of any property to which the Subordinated
Creditor would be entitled except for the provisions of this
Agreement, and no payment pursuant to provisions of this
Agreement to the Senior Creditor by the Subordinated Creditor,
shall, as between the Borrower and its creditors, if any, other
than the Senior Creditor and the Subordinated Creditor, be deemed
to be a payment by the Borrower to or for the account of Senior
Debt, it being understood that the provisions of this Agreement
are intended solely for the purpose of defining the relative
rights of the Subordinated Creditor, on the one hand, and the
Senior Creditor, on the other hand, and nothing contained in this
Section 2.4 or elsewhere in this Agreement is intended to or
shall impair, as between the Borrower and the Subordinated
Creditor, the obligation of Borrower, which is absolute and
unconditional, to pay to the Subordinated Creditor, subject to
the rights of the Senior Creditor under this Agreement, the
Subordinated Debt as and when the same shall become due and
payable in accordance with its terms.
2.5 Senior Defaults and Acceleration. In any circumstances
where Section 2.2 does not apply, the Subordinated Creditor will
not be entitled to receive or retain any direct or indirect
payment (except any payment previously made by Borrower to the
Subordinated Creditor which complied with Sections 2.6 and 2.8)
(in cash, property, by set-off or otherwise) from the Borrower of
or on account of any Acquisition Debt if:
(a)all or any part of the Senior Debt is due and payable at
stated maturity, by acceleration or otherwise; or
(b)at the time of making such payment and immediately after
giving effect thereto, there shall exist an Event of Default
under the Senior Loan Agreement.
2.6 Permitted Payments. The Subordinated Creditor shall not be
entitled to receive or retain any prepayment (in cash, property,
by set-off or otherwise) of or on account of the Acquisition Note
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until such time as the Senior Debt is paid in full. Provided
that there exists no Event of Default (or event which would
become and Event of Default with notice or the passage of time)
under the Senior Loan Agreement which remains uncured, the
Subordinated Creditor shall be entitled to receive and retain
interest repayment and principal repayment, under the Acquisition
Debt in accordance with the terms of the Acquisition Note.
2.7 Turn-Over of Payments Received If the Subordinated
Creditor shall receive any payment with respect to the
Acquisition Note which the Subordinated Creditor is not permitted
to receive and retain pursuant to this Agreement, such payment
shall be held in trust by the Subordinated Creditor for the
benefit of, and shall be paid over promptly on demand to the
Senior Creditor or its successors and assigns, as their respec-
tive interests may appear, for application to the payment of all
Senior Debt remaining unpaid until the same shall have been paid
in full in cash, after giving effect to any concurrent payment or
distribution to the Senior Creditor. No such payments or
distributions to the Senior Creditor or its successors and
assigns shall be deemed to discharge the Senior Debt until it is
repaid in full.
2.8 Permitted Payments; Right to Retain Payments.
Notwithstanding the foregoing, any payment in respect of the
Acquisition Debt made in compliance with the terms of this
Agreement and received by the Subordinated Creditor shall become
its sole and absolute property and shall not be subject to any
payment over or any distribution to or claim by the Senior
Creditor or any other person, unless at the time of receipt of
such payment (i) an event specified in either Section 2.2, 2.5(a)
or 2.5(b) shall have occurred and be continuing and with respect
to an event specified in Section 2.5(b) only, the Senior Creditor
shall have given Subordinated Creditor notice of such event
within sixty (60) days of the occurrence of such event of
default. In the event that the Subordinated Creditor receives
any payment on the Subordinated Debt made in compliance herewith,
and Senior Creditor has not given any notice as described above,
such payment shall conclusively be determined to be a permitted
payment hereunder, otherwise, upon receipt of such notice within
such sixty (60) day period, Subordinated Creditor shall promptly
remit such payment to Senior Creditor for application in
accordance with Section 2.3 hereof.
2.9 Borrower's Obligations Absolute. The provisions of this
Agreement are solely for the purpose of defining the relative
rights of Senior Creditor as the holder of the Senior Debt,
Borrower and the holder of the Acquisition Note. Nothing herein
shall impair, as between the Borrower and the Senior Creditor,
its successors or assigns, as the holder of any Senior Debt, the
obligations of the Borrower, which are unconditional and
absolute, to pay to the holder thereof the Senior Debt, in
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accordance with the terms of the Senior Loan Agreement. Nothing
herein shall impair, as between the Borrower and the Subordinated
Creditor, the obligations of the Borrower which are unconditional
and absolute to pay Subordinated Creditor in accordance with the
terms of the Acquisition Note, subject to the terms of this
Subordination Agreement.
ARTICLE 3
LIMITATIONS ON CERTAIN ENFORCEMENT ACTIONS
3.1 Imposition of Standstill Period.
(a)Each Standstill Period will commence on the date the
Standstill Event in relation to such Standstill Period shall
have occurred and will terminate upon the earliest to occur of
(i) the date which is 180 days after the later of (a) occurrence
of an Event of Default as defined in the Acquisition Note or (b)
the giving of the Standstill Event Notice; (ii) the date, after
such Standstill Period shall have commenced, such Standstill
Event shall have been cured or waived or shall otherwise have
ceased to exist; or (iii) June 26,1999.
(b)At any time during a Standstill Period, Borrower or
Senior Creditor may cause any Event of Default under the
Acquisition Debt to be cured and, in such event, the Subordinated
Creditor shall not have any right to accelerate the principal
payment of the Acquisition Debt as relates to such Event of
Default that was cured.
3.2 Limitations on Enforcement Actions. The Subordi nated
Creditor will not take any Enforcement Action until such time as:
(a)any Standstill Period is no longer continuing; and
(b)the Subordinated Creditor shall have given to the
Borrower and the Senior Creditor not less than 30 days' prior
written notice (an "Enforcement Action Notice") of the intent of
the Subordinated Creditor to take such Enforcement Action.
3.3 Certain Notices. The Subordinated Creditor shall not take
any action of the kind described in the second sentence of the
defined term "Enforcement Action" until the Subordinated Creditor
shall have given the Senior Creditor at least two (2) days prior
notice to the taking thereof.
3.4 Limitations on Commencement of Bankruptcy or Insolvency
Proceeding. The Subordinated Creditor will not commence or
institute, or join with any other Person or Persons in commencing
or instituting, any Bankruptcy or Insolvency Proceeding.
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3.5 Limitation on Remedies Upon Acceleration of Senior Debt
Notwithstanding any contrary provision of any Subordinated Debt
Document, the acceleration of any Senior Debt by the commencement
of legal proceedings by the Senior Creditor against the Borrower
to enforce payment of any Senior Debt shall entitle the
Subordinated Creditor to accelerate Subordinated Debt or take
other Enforcement Action (subject to the applicable provisions of
Section 2.3 of this Agreement).
ARTICLE 4
WAIVERS
4.1 Waivers of Notice, etc.
Creditor under this Agreement, and the subordination arrangements
contained herein, shall not be to any extent or in any way or
manner whatsoever impaired or otherwise affected by any of the
following, whether or not the Subordinated Creditor shall have
had any notice or knowledge of any thereof:
(a)the dissolution, termination of existence, death,
bankruptcy, liquidation, insolvency, appointment of a receiver
for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any Bankruptcy or
Insolvency Proceeding by or against, the Borrower;
(b)the absorption, merger or consolidation of, or the
effectuation of any other change whatsoever in the name,
membership, constitution or place of formation of, the Borrower;
(c)any extension or postponement of the time for the
payment of any Senior Debt, the acceptance of any partial payment
thereon, any and all other indulgences whatsoever by the Senior
Creditor in respect of any Senior Debt, the taking, addition,
substitution or release, in whole or in part, at any time or
times, of any collateral securing any Senior Debt, or the
addition, substitution or release, in whole or in part, of any
Person or Persons primarily or secondarily liable in respect of
any Senior Debt;
(d)any action or delay in acting or failure to act on the
part of the Senior Creditor under any Senior Debt Documents or in
respect of the Senior Debt or any collateral securing any Senior
Debt or otherwise, including (i) any action by the Senior
Creditor to enforce any of its rights, remedies or claims in
respect of any collateral securing any Senior Debt, (ii) any
failure by the Senior Creditor strictly or diligently to assert
any rights or to pursue any remedies or claims against the
Borrower or any other Person or Persons under any of the Senior
Debt Documents or provided by statute or at law or in equity,
(iii) any failure by the Senior Creditor to perfect or to
preserve the perfection or priority of any of its Liens securing
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any Senior Debt, or (iv) any failure or refusal by the Senior
Creditor to foreclose or to realize upon any collateral securing
any Senior Debt or to take any action to enforce any of its
rights, remedies or claims under any Senior Debt Document;
(e)any modification or amendment of, or any supplement or
addition to, any Senior Debt Document;
(f)any waiver, consent or other action or acquiescence by
the Senior Creditor in respect of any default by the Borrower in
its performance or observance of or compliance with any term,
covenant or condition contained in any Senior Debt Document; or
(g)the declaration that any Senior Debt Document or any
provision thereof is null and void or illegal, invalid,
unenforceable or inadmissible in evidence; or the failure of any
Senior Debt Document to be in full force and effect.
The Subordinated Creditor hereby absolutely, unconditionally
and irrevocably assents to and waives notice of any and all
matters hereinbefore specified in clauses (a) through (g).
ARTICLE 5
AGREEMENT OF SENIOR CREDITOR AND BORROWER
5.1 Agreement of Senior Creditor to Provide Subordinated
Creditor with Notice. Senior Creditor agrees to provide the
Subordinated Creditor with notice of any and all written
notice(s) of an Event of Default that Senior Creditor has
provided to the Borrower declaring an Event of Default under the
Senior Loan Documents within sixty (60) days of such fact. Such
notice shall be provided in writing to the disbursement agent at
the following address:
Magic Box, Inc.
Attention: Israel Fintz
16698 Northwest 54th Avenue
Miami, Florida 33014
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Jerry J. Sokol, Esq.
McDermott, Will & Emery
201 South Biscayne Boulevard, Suite 2200
Miami, Florida 33131-4336
5.2 Representations and Warranty of the Borrower. The Borrower
hereby represents to the Senior Creditor as follows:
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(a)all subordinated debt existing on the date hereof is
Subordinated Debt.
ARTICLE 6
MISCELLANEOUS
6.1 Amendments, Waivers, etc. The provisions of this Agreement
may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to
by the Subordinated Creditor, Borrower and by the Senior
Creditor. No failure or delay on the part of any Person in
exercising any power or right under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice
to or demand hereunder shall entitle any Person to any notice or
demand in similar or other circumstances, unless otherwise
required by this Agreement. The remedies herein provided are
cumulative and not exclusive of any other remedies provided at
law or in equity. No waiver or approval by a Person under this
Agreement shall, except as may be otherwise stated in such waiver
or approval, be applicable to any subsequent transactions. No
waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
6.2 Further Assurances. The Subordinated Creditor and the
Borrower will, from time to time at its own expense, promptly
execute and deliver all such further Instruments, and take all
such further action, as may be reasonably necessary or
appropriate, or as the Senior Creditor may reasonably request, in
order to carry out the intent of this Agreement.
6.3 Specific Performance. Senior Creditor is hereby authorized
to demand specific performance of this Agreement at any time when
the Subordinated Creditor shall have failed to comply with any of
the provisions of this Agreement applicable to them whether or
not Borrower shall have complied with any of the provisions
hereof applicable to it, and the Subordinated Creditor hereby
irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of
specific performance.
6.4 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of any
such provision in any other jurisdiction.
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6.5 Enforcement by Senior Creditor. The Borrower and the
Subordinated Creditor acknowledge and agree that their respective
obligations hereunder are, and are intended to be, an inducement
and consideration to the Senior Creditor to acquire and con tinue
to hold, or to continue to hold, the Senior Debt. The Senior
Creditor shall be deemed conclusively to have relied upon the ob-
ligations hereunder of the Borrower and the Subordinated Creditor
in acquiring and continuing to hold, or in continuing to hold,
the Senior Debt. The Senior Creditor is hereby made an obligee
hereunder and may enforce directly the obligations of the
Borrower and the Subordinated Creditor contained herein. The
Senior Creditor, by accepting the benefits of this Agreement, is
bound by the provisions hereof.
6.6 Continuing Agreement. This Agreement shall in all respects
be a continuing agreement, and this Agreement and the agree ments
and obligations of the Borrower and the Subordinated Creditor
hereunder shall remain in full force and effect until all Senior
Debt is indefeasibly paid in full or all Subordinated Debt is
paid in full in compliance with this Agreement.
6.7 Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of, the Borrower and the
Senior Creditor and the Subordinated Creditor and their
respective successors in title and assigns. The rights and obli-
gations of the Subordinated Creditor under this Agreement shall
be assigned automatically to, and the term "Subordinated
Creditor" as used in this Agreement shall automatically include,
any assignee or successor of such Subordinated Creditor, and such
assignee or successor shall automatically become a party to this
Agreement as a Subordinated Creditor without the need for the
execution of any Instrument or the taking of any other action.
The Subordinated Creditor shall deliver a complete copy of this
Agreement to any potential assignee or successor of the Subordi-
nated Creditor prior to the effectiveness of any such assignment.
At the request of the Senior Creditor, the Subordinated
Creditor shall execute and deliver to the Senior Creditor an
instrument of accession hereto.
6.8 Notices. All notices and other communications provided to a
party hereunder shall (except as otherwise specifically provided
herein) be in writing or by facsimile transmission and addressed
or delivered to it at its address designated for notices set
forth below its signature hereto; at the addresses specified in
Section 5.1 if notice is to the Subordinated Creditor; or at such
other address as may be designated by such party in a notice to
the other parties. Any notice, if mailed and properly addressed
with postage prepaid, and any notice, if transmitted by facsimile
transmission, shall be deemed given when received.
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6.9 Entire Agreement. This Agreement constitutes the entire
agreement among the Borrower, the Senior Creditor and the
Subordinated Creditor with respect to the subject matter hereof
and supersedes any prior or contemporaneous agreements, represen-
tations, warranties or understandings, whether oral, written or
implied, as to the subject matter of the Agreement.
6.10 CHOICE OF LAW . THIS AGREEMENT HAS BEEN EXECUTED AND
DELIVERED IN THE STATE OF OHIO AND SHALL IN ALL RESPECTS BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF
SUCH STATE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE.
6.11 Service of Process. This Subordination Agreement shall be
deemed made in the state in which the principal office of the
Senior Creditor is located, and all documents evidencing same,
and all the rights and obligations of the Subordinated Creditor
and the Senior Creditor hereunder, shall in any respects be
governed by and construed in accordance with the laws of the
state in which the principal office of the Senior Creditor is
located, including all matters of construction, validity and
performance. Without limitation on the Senior Creditor's ability
to exercise all its rights to protect or enforce the Senior Loans
and the Subordinated Obligations, the Subordinated Creditor and
the Senior Creditor agree that in any action or proceeding
commenced by or on behalf of the parties arising out of or
relating to this Subordination Agreement and/or any documents
evidencing same, shall be commenced and maintained exclusively in
the court of applicable general jurisdiction located in the
federal district court of applicable general jurisdiction located
in the federal district in which the principal office of the
Senior Creditor is located or any other courts of applicable
general jurisdiction located in the district where the Senior
Creditor is located. The Subordinated Creditor and the Senior
Creditor also agree that a summons and complaint commencing an
action or proceeding in any such courts by or on behalf of such
parties shall be properly served and shall confer personal
jurisdiction on a party to which said party consents, if (a)
served personally or by certified mail to the party at any of its
addresses noted herein, or (b) as otherwise provided under the
laws of the state in which the principal office of the Senior
Creditor is located. The loan(s) or other financial
accommodation(s) is in part related to the aforesaid provisions
on jurisdiction, which the Senior Creditor deems a vital part of
this subordination arrangement.
6.12 Waiver of Jury Trial. To the extent not prohibited by
Applicable Law which cannot be waived, each of the parties hereto
waives, and covenants that it will not assert (whether as
plaintiff, defendant or otherwise), any right to trial by jury in
any forum in respect of any issue, claim, demand, action or cause
E-115
<PAGE>
of action arising out of or based upon this Agreement or the
subject matter hereof, in each case whether now existing or
hereafter arising and whether in contract or tort or otherwise.
Each of the parties hereto acknowledges that the provisions of
this Section 6.12 constitute a material inducement upon which the
Senior Creditor is relying and will rely in holding Senior Debt.
Any party and the Senior Creditor may file an original
counterpart or a copy of this Section 6.12 with any court as
written evidence of the consent of each of the parties hereto to
the waiver of its right to trial by jury.
6.13 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute but one and the same
Instrument.
6.14 Headings. The descriptive headings in this Agreement are
inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement or any provision
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed under seal by their duly authorized officers as of
the day and in the year first above written.
BORROWER:
________
POMEROY COMPUTER RESOURCES, INC.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
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<PAGE>
SUBORDINATED CREDITOR:
_____________________
MAGIC BOX, INC.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SENIOR CREDITOR:
_______________
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of ______, 1997, before me personally
appeared ____________ _______________, to me known, who, being by
me duly sworn, declared that he is the ______________________ of
POMEROY COMPUTER RESOURCES, INC., a signatory of the foregoing
Subordination Agreement; and that, being duly authorized, he did
execute the foregoing Subordination Agreement on behalf of
POMEROY COMPUTER RESOURCES, INC.; and that the foregoing
Subordination Agreement constitutes the free act and deed of
POMEROY COMPUTER RESOURCES, INC.
E-117
<PAGE>
________________________________________
NOTARY PUBLIC
My Commission Expires:___________________
STATE OF FLORIDA
COUNTY OF DADE, ss:
On this ____ day of ________, 1997, before me personally
appeared ___________ ________________, to me known, who, being by
me duly sworn, declared that he is the _____________________ of
MAGIC BOX, INC., a signatory of the foregoing Subordination
Agreement; and that, being duly authorized, he did execute the
foregoing Subordination Agreement on behalf of MAGIC BOX, INC.,
and that the foregoing Subordination Agreement constitutes the
free act and deed of MAGIC BOX, INC.
________________________________________
NOTARY PUBLIC
My Commission Expires:__________________
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of _____, 1997, before me personally
appeared ______________ ___________________ to me known, who,
being by me duly sworn, declared that he is the
__________________ of STAR BANK, N.A., a signatory of the
foregoing Subordination Agreement; and that, being duly
authorized, he did execute the foregoing Subordination Agreement
on behalf of STAR BANK, N.A.; and that the foregoing
Subordination Agreement constitutes the free act and deed of STAR
BANK, N.A..
________________________________________
NOTARY PUBLIC
My Commission Expires:__________________
E-118
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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<PAGE>
___________________________ 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
<PAGE>
SUBORDINATED PROMISSORY NOTE
$54,200.00 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 ALLISON SOKOL if this Note is assigned to her by
written notice to Borrower, the sum of Fifty Four Thousand Two
Hundred Dollars ($54,200.00) (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 ($54,200.00) 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 Twenty-Seven
Thousand One Hundred Dollars ($27,100.00), 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")
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<PAGE>
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.
6. Upon th e 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
E-125
<PAGE>
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
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
E-126
<PAGE>
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
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:
________
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<PAGE>
Witnesses: POMEROY COMPUTER RESOURCES,
INC.
___________________________ 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.
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<PAGE>
SUBORDINATED PROMISSORY NOTE
$135,500.00 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 MARVIN ROSEN if this Note is assigned to him by
written notice to Borrower, the sum of One Hundred Thirty-Five
Thousand Five Hundred Dollars ($135,500.00) (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 ($135,500.00) 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 Sixty-Seven
Thousand Seven Hundred Fifty Dollars ($67,750.00), 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
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<PAGE>
action may be taken by the Lender which conflicts 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 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
E-130
<PAGE>
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
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
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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" - June 26, 1998 and each June
26th thereafter.
(b) "Asset Purchase Agreement" - T he 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
________
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<PAGE>
Witnesses: POMEROY COMPUTER RESOURCES,
INC.
___________________________ 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.
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<PAGE>
SUBORDINATED PROMISSORY NOTE
$135,500.00 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 M. RONALD KRONGOLD if this Note is assigned to him
by written notice to Borrower, the sum of One Hundred Thirty-Five
Thousand Five Hundred Dollars ($135,500.00) (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 ($135,500.00) 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 Sixty-Seven
Thousand Seven Hundred Fifty Dollars ($67,750.00), 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")
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<PAGE>
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.
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
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<PAGE>
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
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
E-136
<PAGE>
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
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 here in, 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:
________
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<PAGE>
Witnesses: POMEROY COMPUTER RESOURCES,
INC.
___________________________ 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-138
<PAGE>
GENERAL BILL OF SALE AND ASSIGNMENT
___________________________________
KNOW ALL MEN BY THESE PRESENTS:
That Magic Box, Inc., a Florida corporation ("Seller"), for good
and valuable consideration received from Pomeroy Computer
Resources, Inc., a Delaware corporation ("Purchaser"), does
hereby, in accordance with the terms and conditions of the Asset
Purchase Agreement, dated May 30, 1997 (the "Agreement"), by and
between Seller, Purchaser, Israel Fintz, M. Ronald Krongold,
Marvin Rosen, and Allison Sokol, sell, assign, transfer, convey,
deliver and confirm to Purchaser, its successors and assigns, or
its nominee, those certain assets of Purchaser, described in the
Agreement as the Purchased Assets, relating to Purchaser's
Business, which Purchased Assets shall include without
limitation:
The Purchased Assets, but excluding the Excluded Assets as
defined in the Agreement.
TO HAVE AND TO HOLD to Purchaser, its successors and assigns
forever.
Seller hereby represents, warrants and covenants that, at and
until delivery of this General Bill of Sale and Assignment,
Seller has good and marketable title to the Purchased Assets,
free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions, of any nature
whatsoever other than the Assumed Liabilities, as defined in the
Agreement; that from and after the delivery by Seller to
Purchaser of this General Bill of Sale and Assignment, Purchaser
will own the Purchased Assets and have good and marketable title
thereto, free and clear of any imperfections of title, liens,
encumbrances, charges, equities or restrictions of any nature
whatsoever, other than the Assumed Liabilities, as defined in the
Agreement.
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<PAGE>
Seller, for itself and its successors, further covenants and
agrees that, in the event there are any such Purchased Assets
covered by this General Bill of Sale and Assignment which cannot
be transferred or assigned by it without the consent of or notice
to a third party and in respect of which any necessary consent or
notice has not at the date of delivery of this General Bill of
Sale and Assignment been given or obtained, the beneficial
interest in and to the asset/contract shall, in any event, pass
hereby to Purchaser, and Seller, for itself and its successors
and assigns, covenants and agrees (i) to hold and hereby declares
that it holds such Purchased Assets in trust for and for the
benefit of Purchaser, its successors and assigns; (ii) if
requested by Purchaser, Seller will use all reasonable efforts to
obtain and secure such consents to transfer such Purchased
Assets; and (iii) to make or complete such transfer or transfers
as soon as reasonably possible.
Seller hereby further covenants that it will, at any time and
from time to time, at the request of Purchaser and provided the
Seller does not incur material expense, execute and deliver to
Purchaser any new or confirmatory instrument and all other and
further instruments reasonably necessary or convenient, which
Purchaser may reasonably request, to vest in Purchaser Seller's
full right, title and interest in or to any of the Purchased
Assets, or to enable Purchaser to realize upon or otherwise to
enjoy any such property, assets or rights or to carry into effect
the intent or purpose hereof.
This General Bill of Sale and Assignment, being further
documentation of the transfers, conveyances and assignments
provided in the Agreement, does not expand or limit the rights
and obligations provided in said Agreement.
This instrument shall be binding upon, inure to the benefit of
and be enforceable by the Seller and Purchaser and their
respective successors and assigns.
Any capitalized terms used, but not defined herein, shall have
the definition set forth in the Agreement.
IN WITNESS WHEREOF, Magic Box, Inc. has caused this instrument to
be executed by its officer thereunto duly authorized as of this
______ day of ________________, 1997.
Signed and delivered in MAGIC BOX, INC.,
the presence of a Florida corporation
______________________________ By:
__________________________________
______________________________
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<PAGE>
STATE OF FLORIDA
COUNTY OF DADE, ss:
BE IT REMEMBERED, that on this ______ day of _____________,
1997, before me, the undersigned, a Notary Public in and for said
County, personally appeared ___________________________, who
acknowledged himself to be the President of Magic Box, Inc., a
Florida corporation, and that he, as such President being
authorized to do so, executed the foregoing instrument for the
purposes therein contained, by signing the name of the
corporation by himself as President.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my notarial seal on the day and year last above written.
________________________________________
NOTARY PUBLIC
E-141
<PAGE>
AGREEMENT
This Agreement made and entered into this ______ day of
___________, 1997, by and between ISRAEL FINTZ (hereinafter
referred to as "Owner") and POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser entered into an Asset Purchase Agreement ("Asset
Purchase Agreement") with Magic Box, Inc., a Florida corporation
(hereinafter referred to as "Seller" ), for the acquisition of
substantially all of Seller's assets relating to its business of
providing micro-computer products and computer integration and
networking services to customers in southern Florida (the
"Business"); and
WHEREAS, Owner owns forty percent (40%) percent of the
outstanding stock of Seller; and
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Seller without the consent of Owner to enter into
this covenant not to compete agreement; and
WHEREAS, pursuant to Sections 8 and 13.2(d)(vii) of said Asset
Purchase Agreement, Owner agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and in consideration of the execution
and closing of the Asset Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Purchaser to enter into the Asset
Purchase Agreement with Seller (40% of the stock of which is
owned by Owner), Owner covenants and agrees that for a period
equal to the later of (i) three (3) years from the closing of the
Asset Purchase Agreement of even date herewith, or (ii) one (1)
year after the termination of Owner's employment with Purchaser
under an Employment Agreement executed by and between Owner and
Purchaser of even date herewith (except that if Owner is
terminated from employment by the Purchaser without cause during
the term of his Employment Agreement with Purchaser of even date,
or if the Employment Agreement is terminated by the Owner for
Good Reason as defined therein, then the term of this Agreement
shall be for a period equal to three (3) years from the closing
date of the Asset Purchase Agreement), Owner will not, or with
any other person, corporation or entity, directly or indirectly,
by stock or other ownership, investment, management, employment
or otherwise, or in any relationship whatsoever:
(a) Solicit, divert or take away, or attempt to solicit,
divert or take away, any of the business, clients, customers or
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<PAGE>
patronage of Purchaser or any affiliate or subsidiary thereof
relating to the Business of Purchaser, as defined below;
(b) Attempt to seek or cause any clients or customers of
Purchaser or any such affiliate or subsidiary relating thereto to
refrain from continuing their patronage of the Business of
Purchaser;
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries do business during the term
of this Agreement. A list of the states in which Purchaser and
its subsidiaries currently transact business is attached hereto
as Exhibit A;
(d) Knowingly employ or engage, or attempt to employ or
engage, in any capacity, any person in the employ of the
Purchaser or any affiliate or subsidiary;
(e) Nothing in this Agreement shall prohibit Owner from
owning stock in a computer-based training services business known
as Ace Education, Inc.
For purposes of this Section, the "Business of Purchaser"
shall mean any person, corporation, partnership or other legal
entity engaged, directly or indirectly, through subsidiaries or
affiliates, in the following line of business:
(i) Distributing of computer hardware, software, peripheral
devices, and related products and services to other entities or
persons engaged in any manner in the business of the
distribution, sale, resale or servicing, whether at the wolesale
or retail level, or leasing or renting, of computer hardware,
software, peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or retail
level, or leasing or renting, of computer hardware, software,
peripheral devices or related products; and
(iii) Sale or servicing of microcomputer products and
computer integration products, peripheral devices and related
products and the sale of microcomputer products and computer
integration and networking services.
Owner has carefully read all the terms and conditions of
this Paragraph 1 and has given careful consideration to the
covenants and restrictions imposed upon Owner herein, and agrees
that the same are necessary for the reasonable and proper
protection of the Seller's Business acquired by Purchaser and
have been separately bargained for and agrees that Purchaser has
been induced to enter into the Asset Purchase Agreement and pay
the consideration described in Paragraph 2 by the representation
of Owner that he will abide by and be bound by each of the
covenants and restrictions herein; and Owner agrees that
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<PAGE>
Purchaser is entitled to injunctive relief in the event of any
breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner
hereby acknowledges that each and every one of said covenants and
restrictions is reasonable with respect to the subject matter,
the line of business, the length of time and geographic area
embraced therein, and agrees that irrespective of when or in what
manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore
described.
The parties acknowledge that this Agreement is being entered
into to protect a legitimate business interest of Purchaser
including, but not limited to, (i) trade secrets; (ii) valuable
confidential business or professional information that otherwise
does not qualify as trade secrets; (iii) substantial
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an
ongoing business by way of trade name, trademark, service mark,
or trade dress, a specific geographic location, or a specific
marketing or trade area; and (v) extraordinary or specialized
training. In the event that any provision or portion of this
Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1
of this Agreement, but the remaining provisions of Paragraph 1 of
this Agreement shall continue in force and effect; and that if
such invalidity or unenforceability is due to the reasonableness
of the line of business, time or geographical area covered by
certain covenants and restrictions contained in Paragraph 1, said
covenants and restrictions shall nevertheless be effective for
such line of business, period of time and for such area as may be
determined by arbitration or by a Court of competent jurisdiction
to be reasonable.
Notwithstanding anything to the contrary herein, the terms
of this non-competition agreement shall be null, void and of no
force and effect against Owner if there is an uncured Event of
Default under the promissory note executed by Purchaser in favor
of Seller.
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration, including
consideration paid by the Purchaser to Seller pursuant to an
Asset Purchase Agreement to which Owner is a party of even date
herewith.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Purchaser, and their successors, heirs and
assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER
_____
__________________________________
ISRAEL FINTZ
PURCHASER
_________
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
-
E-145
<PAGE>
EXHIBIT A
STATES IN WHICH PURCHASER
AND/OR ITS SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Indiana
4. Iowa
5. Kentucky
6. North Carolina
7. Ohio
8. South Carolina
9. Tennessee
E-146
<PAGE>
AGREEMENT
This Agreement made and entered into this ______ day of
___________, 1997, by and between ALLISON SOKOL (hereinafter
referred to as "Owner") and POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser entered into an Asset Purchase Agreement ("Asset
Purchase Agreement") with Magic Box, Inc., a Florida corporation
(hereinafter referred to as ( "Seller" ), for the acquisition of
substantially all of Seller's assets relating to its business of
providing micro-computer products and computer integration and
networking services to customers in southern Florida (the
"Business"); and
WHEREAS, Owner owns ten percent (10%) percent of the outstanding
stock of Seller; and
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Seller without the consent of Owner to enter into
this covenant not to compete agreement; and
WHEREAS, pursuant to Sections 8 and 13.2(d)(vii) of said Asset
Purchase Agreement, Owner agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and in consideration of the execution
and closing of the Asset Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Purchaser to enter into the Asset
Purchase Agreement with Seller (10% of the stock of which is
owned by Owner), Owner covenants and agrees that for a period
equal to the later of (i) three (3) years from the closing of the
Asset Purchase Agreement of even date herewith, or (ii) one (1)
year after the termination of Owner's employment with Purchaser
under an Employment Agreement executed by and between Owner and
Purchaser of even date herewith (except that if Owner is
terminated from employment by the Purchaser without cause during
the term of her Employment Agreement with Purchaser of even date,
or if the Employment Agreement is terminated by Owner for Good
Reason as defined therein, then the term of this Agreement shall
be for a period equal to three (3) years from the closing date of
the Asset Purchase Agreement), Owner will not,
person, corporation or entity, directly or indirectly, by stock
or other ownership, investment, management, employment or
otherwise, or in any relationship whatsoever:
(a) Solicit, divert or take away, or attempt to solicit,
divert or take away, any of the business, clients, customers or
E-147
<PAGE>
patronage of Purchaser or any affiliate or subsidiary thereof
relating to the Business of Purchaser, as defined below;
(b) Attempt to seek or cause any clients or customers of
Purchaser or any such affiliate or subsidiary relating thereto to
refrain from continuing their patronage of the Business of
Purchaser;
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries do business during the term
of this Agreement. A list of the states in which Purchaser and
its subsidiaries currently transact business is attached hereto
as Exhibit A;
(d) Knowingly employ or engage, or attempt to employ or
engage, in any capacity, any person in the employ of the
Purchaser or any affiliate or subsidiary;
(e) Nothing in this Agreement shall prohibit Owner from
owning stock in a computer based training services business known
as Ace Education, Inc.
For purposes of this Section, the "Business of Purchaser"
shall mean any person, corporation, partnership or other legal
entity engaged, directly or indirectly, through subsidiaries or
affiliates, in the following line of business:
(i) Distributing of computer hardware, software, peripheral
devices, and related products and services to other entities or
persons engaged in any manner in the business of the
distribution, sale, resale or servicing, whether at the wholesale
or retail level, or leasing or renting, of computer hardware,
software, peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or retail
level, or leasing or renting, of computer hardware, software,
peripheral devices or related products; and
(iii) Sale or servicing of microcomputer products and
computer integration products, peripheral devices and related
products and the sale of microcomputer products and computer
integration and networking services.
Owner has carefully read all the terms and conditions of
this Paragraph 1 and has given careful consideration to the
covenants and restrictions imposed upon Owner herein, and agrees
that the same are necessary for the reasonable and proper
protection of the Seller's Business acquired by Purchaser and
have been separately bargained for and agrees that Purchaser has
been induced to enter into the Asset Purchase Agreement and pay
the consideration described in Paragraph 2 by the representation
of Owner that she will abide by and be bound by each of the
E-148
<PAGE>
covenants and restrictions herein; and Owner agrees that
Purchaser is entitled to injunctive relief in the event of any
breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner
hereby acknowledges that each and every one of said covenants and
restrictions is reasonable with respect to the subject matter,
the line of business, the length of time and geographic area
embraced therein, and agrees that irrespective of when or in what
manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore
described.
The parties acknowledge that this Agreement is being entered
into to protect a legitimate business interest of Purchaser
including, but not limited to, (i) trade secrets; (ii) valuable
confidential business or professional information that otherwise
does not qualify as trade secrets; (iii) substantial
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an
ongoing business by way of trade name, trademark, service mark,
or trade dress, a specific geographic location, or a specific
marketing or trade area; and (v) extraordinary or specialized
training. In the event that any provision or portion of this
Pargraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1
of this Agreement, but the remaining provisions of Paragraph 1 of
this Agreement shall continue in force and effect; and that if
such invalidity or unenforceability is due to the reasonableness
of the line of business, time or geographical area covered by
certain covenants and restrictions contained in Paragraph 1, said
covenants and restrictions shall nevertheless be effective for
such line of business, period of time and for such area as may be
determined by arbitration or by a Court of competent jurisdiction
to be reasonable.
Notwithstanding anything to the contrary herein, the terms
of this non-competition agreement shall be null, void and of no
force and effect against Owner if there is an uncured Event of
Default under the promissory note executed by Purchaser in favor
of Seller.
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration, including
consideration paid by the Purchaser to Seller pursuant to an
Asset Purchase Agreement to which Owner is a party of even date
herewith.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Purchaser, and their successors, heirs and
assigns.
E-149
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER
_____
__________________________________
ALLISON SOKOL
_________
PURCHASER
_________
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
-
E-150
<PAGE>
EXHIBIT A
STATES IN WHICH PURCHASER
AND/OR ITS SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Indiana
4. Iowa
5. Kentucky
6. North Carolina
7. Ohio
8. South Carolina
9. Tennessee
E-151
<PAGE>
AGREEMENT
This Agreement made and entered into this ______ day of
___________, 1997, by and between MARVIN ROSEN (hereinafter
referred to as "Owner") and POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser entered into an Asset Purchase Agreement ("Asset
Purchase Agreement") with Magic Box, Inc., a Florida corporation
(hereinafter referred to as ("Seller"'), for the acquisition of
substantially all of Seller's assets relating to its business of
providing micro-computer products and computer integration and
networking services to customers in southern Florida (the
"Business"); and
WHEREAS, Owner owns twenty-five percent (25%) percent of the
outstanding stock of Seller; and
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Seller without the consent of Owner to enter into
this covenant not to compete agreement; and
WHEREAS, pursuant to Sections 8 and 13.2(d)(vii) of said Asset
Purchase Agreement, Owner agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and in consideration of the execution
and closing of the Asset Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Purchaser to enter into the Asset
Purchase Agreement with Seller (25% of the stock of which is
owned by Owner), Owner covenants and agrees that for a period
equal to three (3) years from the closing of the Asset Purchase
Agreement of even date herewith, Owner will not, or with any
other person, corporation or entity, directly or indirectly, by
stock or other ownership, investment, management, employment or
otherwise, or in any relationship whatsoever:
(a) Solicit, divert or take away, or attempt to solicit,
divert or take away, any of the business, clients, customers or
patronage of Purchaser or any affiliate or subsidiary thereof
relating to the Business of Purchaser, as defined below;
(b) Attempt to seek or cause any clients or customers of
Purchaser or any such affiliate or subsidiary relating thereto to
refrain from continuing their patronage of the Business of
Purchaser;
E-152
<PAGE>
(c) Engage in the Business of Purchaser with that carried
on by Purchaser or any subsidiary or affiliate thereof in the
State of Florida;
(d) Knowingly employ or engage, or attempt to employ or
engage, in any capacity, any person in the employ of the
Purchaser or any affiliate or subsidiary (except that Owner may
employ one of other Shareholders of Seller subject to such
Shareholder's compliance with his/her non-competition agreement
with Purchaser).
(e) Nothing in this Agreement shall prohibit Owner from
owning stock in a computer based training services business known
as Ace Education, Inc. In addition, nothing contained herein
shall preclude Owner from entering into a venture involving the
manufacture and marketing of computer chips or any other line of
business which is not substantially similar to the Business of
Purchaser. Finally, the representation by Owner as a lawyer or
his law firm of an entity engaged in a competitive line of
business shall not be a violation of this Agreement.
For purposes of this Section, the Business of Purchaser
shall mean any person, corporation, partnership or other legal
entity engaged, directly or indirectly, through subsidiaries or
affiliates, in computer system integration and networking
services or any other computer related business performed by
Purchaser in Florida which if performed by Owner would
substantially affect the Business of Purchaser in Florida.
Owner has carefully read all the terms and conditions of
this Paragraph 1 and has given careful consideration to the
covenants and restrictions imposed upon Owner herein, and agrees
that the same are necessary for the reasonable and proper
protection of the Seller's Business acquired by Purchaser and
have been separately bargained for and agrees that Purchaser has
been induced to enter into the Asset Purchase Agreement and pay
the consideration described in Paragraph 2 by the representation
of Owner that he will abide by and be bound by each of the
covenants and restrictions herein; and Owner agrees that
Purchaser is entitled to injunctive relief in the event of any
breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner
hereby acknowledges that each and every one of said covenants and
restrictions is reasonable with respect to the subject matter,
the line of business, the length of time and geographic area
embraced therein, and agrees that irrespective of when or in what
manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore
described.
The parties acknowledge that this Agreement is being entered
into to protect a legitimate business interest of Purchaser
E-153
<PAGE>
including, but not limited to, (i) trade secrets; (ii) valuable
confidential business or professional information that otherwise
does not qualify as trade secrets; (iii) substantial
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an
ongoing business by way of trade name, trademark, service mark,
or trade dress, a specific geographic location, or a specific
marketing or trade area; and (v) extraordinary or specialized
training. In the event that any provision or portion of this
Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1
of this Agreement, but the remaining provisions of Paragraph 1 of
this Agreement shall continue in force and effect; and that if
such invalidity or unenforceability is due to the reasonableness
of the line of business, time or geographical area covered by
certain covenants and restrictions contained in Paragraph 1, said
covenants and restrictions shall nevertheless be effective for
such line of business, period of time and for such area as may be
determined by arbitration or by a Court of competent jurisdiction
to be reasonable.
Notwithstanding anything to the contrary herein, the terms
of this non-competition agreement shall be null, void and of no
force and effect against Owner if there is an uncured event of
default under the promissory note executed by Purchaser in favor
of Seller
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration, including
consideration paid by the Purchaser to Seller pursuant to an
Asset Purchase Agreement to which Owner is a party of even date
herewith.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Purchaser, and their successors, heirs and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
E-154
<PAGE>
OWNER
_____ __________________________________
MARVIN ROSEN
By:________________________________
E-155
<PAGE>
AGREEMENT
This Agreement made and entered into this ____ day of _______,
1997, by and between M. RONALD KRONGOLD (hereinafter referred to
as "Owner") and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser entered into an Asset Purchase Agreement ("Asset
Purchase Agreement") with Magic Box, Inc., a Florida corporation
(hereinafter referred to as ( "Seller" ), for the acquisition of
substantially all of Seller's assets relating to its business of
providing micro-computer products and computer integration and
networking services to customers in southern Florida (the
"Business"); and
WHEREAS, Owner owns twenty-five percent (25%) percent of the
outstanding stock of Seller; and
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Seller without the consent of Owner to enter into
this covenant not to compete agreement; and
WHEREAS, pursuant to Sections 8 and 13.2(d)(vii) of said Asset
Purchase Agreement, Owner agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and in consideration of the execution
and closing of the Asset Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Purchaser to enter into the Asset
Purchase Agreement with Seller (25% of the stock of which is
owned by Owner), Owner covenants and agrees that for a period
equal to three (3) years from the closing of the Asset Purchase
Agreement of even date herewith, Owner will not, or with any
other person, corporation or entity, directly or indirectly, by
stock or other ownership, investment, management, employment or
otherwise, or in any relationship whatsoever:
(a) Solicit, divert or take away, or attempt to solicit,
divert or take away, any of the business, clients, customers or
patronage of Purchaser or any affiliate or subsidiary thereof
relating to the Business of Purchaser, as defined below;
(b) Attempt to seek or cause any clients or customers of
Purchaser or any such affiliate or subsidiary relating thereto to
refrain from continuing their patronage of the Business of
Purchaser;
E-156
<PAGE>
(c) Engage in the Business of Purchaser with that carried
on by Purchaser or any subsidiary or affiliate thereof in the
State of Florida;
(d) Knowingly employ or engage, or attempt to employ or
engage, in any capacity, any person in the employ of the
Purchaser or any affiliate or subsidiary (except that Owner may
employ one of other Shareholders of Seller subject to such
Shareholder's compliance with his/her non-competition agreement
with Purchaser).
(e) Nothing in this Agreement shall prohibit Owner from
owning stock in a computer based training services business known
as Ace Education, Inc. In addition, nothing contained herein
shall preclude Owner from entering into a venture involving the
manufacture and marketing of computer chips or any other line of
business which is not substantially similar to the Business of
Purchaser.
For purposes of this Section, the Business of Purchaser
shall mean any person, corporation, partnership or other legal
entity engaged, directly or indirectly, through subsidiaries or
affiliates, in computer system integration and networking
services or any other computer related business performed by
Purchaser in Florida which if performed by Owner would
substantially affect the Business of Purchaser in Florida.
Owner has carefully read all the terms and conditions of
this Paragraph 1 and has given careful consideration to the
covenants and restrictions imposed upon Owner herein, and agrees
that the same are necessary for the reasonable and proper
protection of the Seller's Business acquired by Purchaser and
have been separately bargained for and agrees that Purchaser has
been induced to enter into the Asset Purchase Agreement and pay
the consideration described in Paragraph 2 by the representation
of Owner that he will abide by and be bound by each of the
covenants and restrictions herein; and Owner agrees that
Purchaser is entitled to injunctive relief in the event of any
breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Owner
hereby acknowledges that each and every one of said covenants and
restrictions is reasonable with respect to the subject matter,
the line of business, the length of time and geographic area
embraced therein, and agrees that irrespective of when or in what
manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore
described.
The parties acknowledge that this Agreement is being entered
into to protect a legitimate business interest of Purchaser
including, but not limited to, (i) trade secrets; (ii) valuable
confidential business or professional information that otherwise
does not qualify as trade secrets; (iii) substantial
E-157
<PAGE>
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an
ongoing business by way of trade name, trademark, service mark,
or trade dress, a specific geographic location, or a specific
marketing or trade area; and (v) extraordinary or specialized
training. In the event that any provision or portion of this
Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1
of this Agreement, but the remaining provisions of Paragraph 1 of
this Agreement shall continue in force and effect; and that if
such invalidity or unenforceability is due to the reasonableness
of the line of business, time or geographical area covered by
certain covenants and restrictions contained in Paragraph 1, said
covenants and restrictions shall nevertheless be effective for
such line of business, period of time and for such area as may be
determined by arbitration or by a Court of competent jurisdiction
to be reasonable.
Notwithstanding anything to the contrary herein, the terms
of this non-competition agreement shall be null, void and of no
force and effect against Owner if there is an uncured event of
default under the promissory note executed by Purchaser in favor
of Seller.
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration, including
consideration paid by the Purchaser to Seller pursuant to an
Asset Purchase Agreement to which Owner is a party of even date
herewith.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Purchaser, and their successors, heirs and
assigns.
E-158
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER
_____
__________________________________
M. RONALD KRONGOLD
PURCHASER
_________
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
E-159
<PAGE>
AGREEMENT
This Agreement made and entered into this _______ day of
______________, 1997, by and between MAGIC BOX, INC., a Florida
corporation (hereinafter referred to as "Seller"), and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (hereinafter
referred to as "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is a provider of micro-computer products and
computer integration and networking services to customers in
southern Florida (the " Business "); and
WHEREAS, simultaneously with the execution of this Agreement,
Seller and Purchaser have entered into an Asset Purchase
Agreement ("Asset Purchase Agreement") whereby Seller has sold
to Purchaser substantially all of the assets of Seller relating
to the Business; and
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Seller without the consent of Seller to enter into
this covenant not to compete agreement; and
WHEREAS, pursuant to Sections 8 and 13.2(d)(vii) of said Asset
Purchase Agreement, Seller agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and in consideration of the execution
and closing of the Asset Purchase Agreement, the parties hereto
agree as follows:
1. In consideration of the payments to be made by Purchaser to
Seller for its assets, Seller covenants and agrees that for a
period equal to three (3) years from the closing of the Asset
Purchase Agreement of even date herewith, Seller will not, or
with any other person, corporation or entity, directly or indi-
rectly, by stock or other ownership, investment, management,
employment or otherwise, or in any relationship whatsoever:
(a) Solicit, divert or take away, or attempt to solicit,
divert or take away, any of the business, clients, customers or
patronage of Purchaser or any affiliate or subsidiary thereof
relating to the Business of Purchaser, as defined below;
(b) Attempt to seek or cause any clients or customers of
Purchaser or any such affiliate or subsidiary relating thereto to
refrain from continuing their patronage of the Business of
Purchaser;
E-160
<PAGE>
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries do business during the term
of this Agreement. A list of the states in which Purchaser and
its subsidiaries currently transact business is attached hereto
as Exhibit A;
(d) Knowingly employ or engage, or attempt to employ or
engage, in any capacity, any person in the employ of the
Purchaser or any affiliate or subsidiary.
(e) Nothing in this Agreement shall prohibit Seller from
owning stock in a computer based training services business known
as Ace Education, Inc.
For purposes of this section, the Business of Purchaser
shall mean any person, corporation, partnership or other legal
entity engaged, directly or indirectly, through subsidiaries or
affiliates, in the following line of business:
(i) Distributing of computer hardware, software, peripheral
devices, and related products and services to other entities or
persons engaged in any manner in the business of the
distribution, sale, resale or servicing, whether at the wholesale
or retail level, or leasing or renting, of computer hardware,
software, peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or retail
level, or leasing or renting, of computer hardware, software,
peripheral devices or related products;
(iii) Sale or servicing of microcomputer products and
computer integration products, peripheral devices and related
products and the sale of microcomputer products and computer
integration and networking services.
Seller has carefully read all the terms and conditions of
this Paragraph 1 and has given careful consideration to the
covenants and restrictions imposed upon Seller herein, and agrees
that the same are necessary for the reasonable and proper
protection of the Seller's Business acquired by Purchaser and
have been separately bargained for and agrees that Purchaser has
been induced to enter into the Asset Purchase Agreement and pay
the consideration described in Paragraph 2 by the represen tation
of Seller that it will abide by and be bound by each of the
covenants and restrictions herein; and Seller agrees that
Purchaser is entitled to injunctive relief in the event of any
breach of any covenant or restriction contained herein in
addition to all other remedies provided by law or equity. Seller
hereby acknowledges that each and every one of said covenants and
restrictions is reasonable with respect to the subject matter,
the line of business, the length of time and geographic area
embraced therein, and agrees that irrespective of when or in what
E-161
<PAGE>
manner this agreement may be terminated, said covenants and
restrictions shall be operative during the full period or periods
hereinbefore mentioned and throughout the area hereinbefore
described.
The parties acknowledge that this Agreement is being entered
into to protect a legitimate business interest of Purchaser
including, but not limited to, (i) trade secrets; (ii) valuable
confidential business or professional information that otherwise
does not qualify as trade secrets; (iii) substantial
relationships with specific prospective or existing customers or
clients; (iv) client or customer good will associated with an
ongoing business by way of trade name, trademark, service mark,
or trade dress, a specific geographic location, or a specific
marketing or trade area; and (v) extraordinary or specialized
training. In the event that any provision or portion of this
Paragraph 1 shall for any reason be held invalid or
unenforceable, it is agreed that the same shall not affect the
validity or enforceability of any other provision of Paragraph 1
of this Agreement, but the remaining provisions of Paragraph 1 of
this Agreement shall continue in force and effect; and that if
such invalidity or unenforceability is due to the reasonableness
of the line of business, time or geographical area covered by
certain covenants and restrictions contained in Paragraph 1, said
covenants and restrictions shall nevertheless be effective for
such line of business, period of time and for such area as may be
determined by arbitration or by a Court of competent jurisdiction
to be reasonable.
Notwithstanding anything to the contrary herein, the terms
of this non-competition agreement shall be null, void and of no
force and effect against Seller if there is an uncured event of
default under the promissory note executed by Purchaser in favor
of Seller.
2. The consideration for Seller's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration, including
consideration paid by the Purchaser to Seller pursuant to an
Asset Purchase Agreement to which Seller is a party of even date
herewith.
3. The terms and conditions of this Agreement shall be binding
upon the Seller and Purchaser, and their successors, heirs and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
SELLER
______
E-162
<PAGE>
MAGIC BOX, INC.
BY:__________________________________
PURCHASER
_________
POMEROY COMPUTER RESOURCES, INC.
BY:__________________________________
E-163
<PAGE>
EXHIBIT A
STATES IN WHICH PURCHASER
AND/OR ITS SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Indiana
4. Iowa
5. Kentucky
6. North Carolina
7. Ohio
8. South Carolina
9. Tennessee
E-164
<PAGE>
PROMISSORY NOTE
Borrower: POMEROY COMPUTER LEASING COMPANY, INC.;
1020 PETERSBURG ROAD
HEBRON, KY 41048
Lender: STAR BANK, NATIONAL ASSOCIATION ET. AL.
EQUIPMENT FINANCE DIVISION
425 WALNUT STREET
CINCINNATI, OH 45202
Principal Amount: $ 100,000.00
Initial Rate: 7.750%
Date of Note: May 30, 1997
PROMISE TO PAY. POMEROY COMPUTER LEASING COMPANY, INC. and
POMEROY COMPUTER RESOURCES, INC. (referred to in this Note
individually and collectively as "Borrower') jointly and
severally promise to pay to STAR BANK, NATIONAL ASSOCIATION
('Lender"), or order, in lawful money of the United States of
America, the principal amount of One Hundred Thousand & 00/100
Dollars ($100,000.00), together with interest on the unpaid
principal balance from May 30, 1997, until paid in full.
PAYMENT. Borrower will pay this loan In one principal payment
of $100,000.00 plus interest on May 30, 1998. This payment due
May 30, 1998, will be for all principal and accrued interest not
yet paid. In addition, Borrower will pay regular monthly
payments of all accrued unpaid interest due as of each payment
date, beginning June 30, 1997, with all subsequent interest
payments to be due on the last day of each month after that.
Interest on this Note is computed on a 365/360 simple interest
basis; that is, by applying the ratio of the annual interest
rate over a year of year of 360 days, multiplied by outstanding
principal balance, multiplied by actual number of days the
principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender
may designate in writing. Unless otherwise agreed or required
by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to
any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is
subject to change from time to time based on changes in an index
which is the STAR BANK PRIME (the "Index'). The Index is not
necessarily the lowest rate charged by Lender on its loans and
is set by Lender in its sole discretion. If the Index becomes
unavailable during the term of this loan, Lender may designate a
substitute index after notifying Borrower. Le
ower understands that Lender may make loans based on other
rates as well. The interest rate change will not occur more
often than each month on the first day of the following month
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after the Prime Change. The Index currently is 8.500% per
annum. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate of 0.750 percentage
points under the Index, resulting in an initial rate of 7.750%
per annum. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by
applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon
full prepayment of this Note, Borrower understands that Lender
is entitled to a minimum interest charge of $50.00. Other than
Borrower's obligation to pay any minimum interest charge
Borrower may pay without penalty all -or a portion of the amount
owed earlier than it is due. Early payments will not, unless a
greed to by Lender in writing, relieve Borrower
rule. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late. Borrower
will be charged 5.000% of the regularly scheduled payment or
$50.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect
either now or at the time made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed-for any part of
Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by
Borrower or against Borrower under any bankruptcy or insolvency
laws. (e) Any creditor tries to take any of Borrower's property
on or in which Lender has a lien or security interest. This
includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events
described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect
of payment or performance of the Indebtedness is impaired. (h)
Lender in good in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted
under applicable law, increase the variable interest rate on
this Note 3.000 percentage points. The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may
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hire or pay someone else to help collect this Note if Borrower
does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there
is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by
applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of Ohio.
If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of HAMILTON County, the
State of Ohio. Lender and Borrower hereby waive the right to
any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other. This
Note shall be governed by and construed in accordance with the
laws of the State of Ohio.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes
and empowers any attorney-at-law, including an attorney hired by
Lender, to appear in any court of record and to confess judgment
against Borrower for the unpaid amount of this Note as evidenced
by an affidavit signed by an officer of Lender setting forth the
amount then due, plus attorneys' fees as provided in this Note
plus costs of suit, and to release all errors, and waive all
rights of appeal. If a copy of this Note, verified by an
affidavit, shall have been filed in the proceeding, it will not
be necessary to file the original as a warrant of attorney.
Borrower waives the right to any stay of execution and the
benefit of all exemption laws now or hereafter in effect. No
single exercise of the foregoing warrant and power to confess
judgment will be deemed to exhaust the power, whether or not any
such exercise shall be held by any court to be invalid.
voidable, or void; but the power will continue undiminished and
may be exercised from time to time as Lender may elect until all
amounts owing on this Note have been paid in full. Borrower
waives any conflict of interest that an attorney hired by Lender
may have in acting on behalf of Borrower in confessing judgment
against Borrower while such attorney is retained by Lender.
Borrower expressly consents to such attorney acting for Borrower
DISHONORED ITEM FEE. Borrower will pay a f
$20.00 if Borrower makes a payment on Borrower's loan and the
check or preauthorized charge with which Borrower pays is later
dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's riaht.
title and interest in
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<PAGE>
other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in
the future,
05-30-1997
PROMISSORY NOTE
(Continued)
excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing
on this Note against any and all such accounts.
BUSINESS CHECKING PLUS LINE OF CREDIT. This Note evidences a
revolving Business Checking Plus line of credit.
GENERAL PROVISIONS. If any part of this Note cannot be enforced,
this fact will not affect the rest of the Note. In particular,
this section means (among other things) that Borrower does not
agree or intend to pay, and Lender does not agree or intend to
contract for, charge, collect, take, reserve or receive
(collectively referred to herein as 'charge or collect'), any
amount in the nature of interest or in the nature of a fee for
this loan, which would in any way or event (including demand,
prepayment, or acceleration) cause Lender to charge or collect
more for this loan than the maximum Lender would be permitted to
charge or collect by federal law or the law of the State of Ohio
(as applicable). Any such excess interest or unauthorized fee
shall, instead of anything stated to the contrary, be applied
first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. Lender
may delay or forgo enforcing any of its rights or remedies under
this Note without losing them. Each Borrower understands and
agrees that, with or without notice to Borrower, Lender may with
respect to any other Borrower (a) make one or more additional
secured or unsecured loans or otherwise extend additional credit;
lb) alter, compromise, renew, extend, accelerate, or otherwise
change one or more times the time for payment or other terms any
indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (r-) exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any
security, with or without the substitution of new collateral; (d)
apply such security and direct the order or manner of sale
thereof, including without limitation, any nonjudicial sale
permitted by the terms of the controlling security agreements, as
Lender in its discretion may determine; (a) release, substitute,
agree not to sue, or deal with any one or more of Borrower's
sureties, endorsers, or other guarantors on any terms or in any
manner Lender may choose; and (f) determine how, when and what
application of payments and credits shall be made on any other
indebtedness owing by such other borrower. Borrower and any
other person who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
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accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint
and several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
NOTICE: FOR THIS NOTICE 'YOU' MEANS THE BORROWER AND "HIS'
MEANS LENDER.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE
AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART
TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
BORROWER:
INC., Co-B
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<PAGE>
POMEROY COMPUTER RESOURCES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of the 6th day of July,
1997, by and between POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation ("Company"), and VIC EILAU ("Employee").
W I T N E S S E T H:
WHEREAS, the parties desire to provide for Employee's
employment by the Company and its subsidiary, Pomeroy Computer
Leasing Company, Inc. and to provide him compensation incident
thereto;
NOW, THEREFORE, in consideration of the foregoing premise
and the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
1. Employment. The Company agrees to employ the
Employee, and the Employee agrees to be employed by the Company,
upon the following terms and conditions.
2. Term. The initial term of Employee's employment
pursuant to this Agreement shall begin on the 6th day of July,
1997, and shall continue for a period of three (3) years, to July
5, 2000 unless terminated earlier pursuant to the provisions of
Section 11, provided that Sections 9, 10, 11(b), 11(c), if
applicable, 12, if applicable, and 13, if applicable, shall
survive the termination of such employment and shall expire in
accordance with the terms set forth therein.
3. Renewal Term. The term of Employee'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 terms of the Agreement thirty (30) days
prior to the expiration of the then expiring term. Employee's
base salary for each renewal term shall be determined by the
Board of Directors of Company or by the Compensation Committee of
the Board of Directors, if any, provided, however, Employee's
annual base salary for any renewal term shall not be less than
Employee's base annual salary for the previous year.
4. Duties. Employee shall serve as President of the
Company's wholly-owned subsidiary, Pomeroy Computer Leasing
Company, Inc., a Kentucky corporation (``Leasing Company''
), upon
execution hereof and appropriate action by the Board of
Directors. Employee shall be responsible to and report directly
to the Chief Executive Officer of the Company. The duties
assigned to Employee shall not be inconsistent with those
typically assigned to the president of a corporation, and
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Employee shall at all times have such executive powers and
authorities as shall reasonably be required to discharge such
duties in an efficient manner, together with such facilities and
services as are appropriate to his position. Employee shall
devote his best efforts and substantially all his time during
normal business hours to the diligent, faithful and loyal
discharge of the duties of his employment and towards the proper,
efficient and successful conduct of the Company's affairs.
Employee further agrees to refrain during the term of this
Agreement from making any sales and/or leases of competing
services or products or from profiting from any transaction
involving computer services or products for his account without
the express written consent of Company.
5. Compensation. For all services rendered by the
Employee under this Agreement (in addition to other monetary or
other benefits referred to herein), compensation shall be paid to
Employee as follows:
(a) _____________ Signing Bonus.
On July 6, 1997, the effective date of this
Agreement, Company shall pay Employee the sum of Fifty Thousand
Dollars ($50,000.00) as a signing bonus. In addition, on January
6, 1998, Company shall pay Employee the sum of Fifty Thousand
Dollars ($50,000.00) as a signing bonus. In the event that
Employee terminates employment with the Company prior to the
expiration of the first year of the initial three-year term of
this Agreement (other than because of the death or disability of
Employee or the termination of Employee by Company without cause
pursuant to paragraph 11(a)(v) or the termination by Employee for
Good Reason pursuant to paragraph 11(a)(vi)). Employee shall
repay Company an amount to be determined by multiplying said
signing bonus received by a fraction, the numerator of which
shall be the number of days that Employee was employed by Company
during the first year of the initial term of the Agreement and
the denominator which shall be 365.
For example, if Employee terminated his employment
at the expiration of nine months of the initial term of this
Agreement, Employee would repay Company the sum of $25,000.00
($100,000.00 X 274 , 365 = $75,000.00. $100,000.00 - $75,000.00
= $25,000.00).
In the event that Employee would fail to reimburse
Company for any amount due hereunder, Employee grants Company the
right to offset Employee's obligations hereunder against any
other amounts that may, if any, be owed to Employee pursuant to
the terms of this Agreement.
(b) ___________
Base Salary:
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(i) During the period July 6, 1997 through
January 5, 1998, Employee shall be paid the sum of Ten Thousand
Four Hundred Dollars ($10,400.00) per pay period (12 pay periods)
paid semi-monthly.
(ii) During the period January 6, 1998 through
January 5, 1999, Employee shall be paid an annual base salary of
Two Hundred Ninety-Five Thousand Dollars ($295,000.00), payable
in 24 equal semi-monthly installments.
(iii) During the period January 6, 1999
through January 5, 2000, Employee shall be paid an annual base
salary of Three Hundred Fifty Thousand Dollars ($350,000.00),
payable in 24 equal semi-monthly installments.
(iv) During the period January 6, 2000
through July 5, 2000, Employee shall be paid the sum of Fourteen
Thousand Five Hundred Eighty-Three Dollars (14,583.00) per pay
period (12 pay periods) paid semi-monthly.
Award of Stock Options
(c) : On July 6, 1997, Employee
shall be awarded (pursuant to an Award Agreement, a copy of which
is attached hereto as Exhibit A) the right to acquire 10,000
shares of the common stock, .01 par value, of the Company subject
to any conditions contained in the Pomeroy Computer Resources,
Inc. Non-Qualified and Incentive Stock Option Plan and Award
Agreement. Such award of the stock options to acquire the common
stock of the Company shall be at the fair market value of such
common stock as of the applicable date. On July 6, 1998,
Employee (provided he is employed by Company at such time) shall
be awarded the right to acquire 10,000 shares of the common
stock, .01 par value, of the Company subject to any conditions
contained in the Pomeroy Computer Resources, Inc. Non-Qualified
and Incentive Stock Option Plan and Award Agreement, attached
hereto as Exhibit A. Such award of the stock options to acquire
the common stock of Company shall be at the fair market value of
such common stock as of the applicable date. For purposes of
this Agreement, the fair market value as of the applicable date
shall mean with respect to the common shares, the average between
the high and low bid and ask prices for such shares on the over-
the-counter market on the last business day prior to the date on
which the value is to be determined (or the next preceding date
on which sales occurred if there were no sales on such date).
Annual Bonus Based on Company's
Performance/Incentive Deferred Compensation. In addition to
Employee's base salary as set forth in Section 5(b), for the
periods beginning January 6, 1998 and ending January 5, 1999 and
January 6, 1999 and ending January 5, 2000, Employee shall be
entitled to incentive deferred compensation and a stock option
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award (for the 1/6/99 - 1/5/2000 period) in the event Employee
satisfies certain economic criteria pertaining to the Company's
performance during such year, as follows:
_________________________________
January 6, 1998 - January 5, 1999
(i) Gross sales of Company greater than
$470,000,000.00 but less than or equal to $520,000,000.00 with
NPBT greater than 6% equals $50,000.00 bonus; or
(ii) Gross sales of Company greater than
$520,000,000.00 with NPBT greater than 6% equals $100,000.00
bonus.
_________________________________
January 6, 1999 - January 5, 2000
(i) Gross sales of Company greater than
$600,000,000.00 but less than or equal to $650,000,000.00 with
NPBT greater than 6% equals $100,000.00 bonus plus 10,000
incentive stock options; or
(ii) Gross sales of Company greater than
$650,000,000.00 with NPBT greater than 6% equals $150,000.00
bonus plus 10,000 incentive stock options.
Any award of an incentive stock option to
acquire common stock of the Company hereunder shall be the fair
market value of such common stock as of the applicable date as
such term is defined in Section 5(c) above.
(e) For purposes of this Section, the term ``gross
sales shall mean the gross sales of equipment and software and
services by Company during the applicable period on a
consolidated basis. In making said gross sales determinations,
all gains and losses realized on the sale or other disposition of
Company's assets not in the ordinary course shall be excluded.
Such gross sales and net pre-tax profit margin of Company shall
be based on the audited financial statements contained in the
Company's annual report or form 10-k and shall be determined by
the independent accountant regularly retained by the Company in
accordance with generally accepted accounting principles and the
other factors set forth herein and the determination by the
accountant shall be final, binding and conclusive upon all
parties hereto. One hundred percent (100%) of any amount earned
under Section 5(d) above will constitute incentive deferred
compensation which will be payable to Employee according to the
terms of the Incentive Deferred Compensation Agreement attached
hereto as Exhibit B. Any incentive deferred compensation shall
be fully vested over a five year period, vesting twenty percent
(20%) per year from the effective date of this Agreement.
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(f) The parties agree that in January, 2000, they will
negotiate in good faith the implementation of an incentive
deferred compensation plan and stock option award for Employee
for the final six months of this Agreement which will be
predicated upon the attainment of Company's goals, projections
and budgets established at the outset of such calendar year.
Such incentive deferred compensation plan and stock option awards
for the last six months of this Agreement shall be consistent
with Employee's prior plans.
(g) __________________________________________________
Annual Bonus based on Leasing Company's
__________________________________
Performance/Incentive Stock Option. In addition to Employee's
base salary as set forth in Section 5(b), and any incentive
deferred compensation that Employee may be entitled to as set
forth in Section 5(d) above based on the Company's performance,
for the periods beginning January 6, 1998 and ending January 5,
1999 and January 6, 1999 and ending January 5, 2000, Employee
shall be entitled to an annual cash bonus in the event Employee
satisfies the following economic criteria pertaining to the
Leasing Company's performance during such year, as follows:
_________________________________
January 6, 1998 - January 5, 1999
(i) NPBT of Leasing Company greater than
$1,500,000.00 but less than or equal to $2,000,000.00 equals
$100,000.00 cash bonus;
(ii) NPBT of Leasing Company greater than
$2,000,000.00 equals $150,000.00 cash bonus.
_________________________________
January 6, 1999 - January 5, 2000
(i) NPBT of Leasing Company greater than
$3,000,000.00 but less than or equal to $4,000,000.00 equals
$125,000.00 cash bonus;
(ii) NPBT of Leasing Company greater than
$4,000,000.00 equals $175,000.00 cash bonus.
For purposes of this Section, the term
(h) net profits before taxes shall mean the net pre-tax
profits of Leasing Company during the applicable period set forth
above. In
making said net profits before taxes determination, all gains and
losses realized on the sale or other disposition of Leasing
Company's assets in Leasing Company not in the ordinary course
shall be excluded. Employee's base compensation shall be
deducted in determining the net pre-tax income of Leasing
Company. The annual net profits before taxes of Leasing Company
shall be based on the audited financial statements contained in
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the Company's annual report or form 10-k and shall be determined
by the independent accountant regularly retained by the Company
in accordance with generally accepted accounting principles and
the other factors set forth herein and the determination by the
accountant shall be final, binding and conclusive upon all
parties hereto. Any amount due Employee hereunder shall be paid
within thirty (30) days after the determination by the
accountant.
(i) The parties agree that in January, 2000, they will
negotiate in good faith the implementation of a cash bonus for
Employee for the last six months of this Agreement which will be
predicated upon the attainment of the Leasing Company goals,
projections and budgets established at the outset of such
calendar year and consistent with Employee's prior plans.
6.
Benefits Fringe . During the term of this Agreement,
Employee shall be entitled to the following benefits:
(a) Health Insurance - During the term of this
Agreement, Employee shall be provided with the standard medical
health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent
(50%) of the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to
a vacation of three (3) weeks during which time his compensation
will be paid in full. Provided, however, such weeks may not be
taken consecutively without the written consent of Company.
(c) Retirement Plan - Employee shall participate,
after meeting eligibility requirements, in any qualified
retirement plans and/or welfare plans maintained by the Company
during the term of this Agreement.
(d) Automobile - Company shall provide Employee with
an automobile allowance for the applicable periods and for the
respective amounts set forth below during the term of this
Agreement. Company shall also reimburse Employee for all
standard car insurance premiums paid during such term. Employee
shall be responsible for all maintenance and repairs to such
vehicle and for any deductible under such insurance coverage.
(i) 7/5/97 through 1/5/98 - $500.00 per month
auto allowance;
(ii) 1/6/98 through 1/5/99 - $650.00 per month
auto allowance;
(iii) 1/6/99 through 1/5/2000 - $650.00 per
month auto allowance;
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(iv) 1/6/2000 through 7/5/2000 - $750.00 per month
auto allowance.
(e) Other Company Programs. Employee shall be
eligible to participate in any other plans or programs
implemented by the Company for all of its employees with duties
and responsibilities similar to Employee.
Employee shall be responsible for any and all taxes,
owed, if any, on the fringe benefits provided to him pursuant to
this Section 6.
7. Key Man Insurance. Company shall maintain on the
life of Employee, provided he is insurable at standard rates,
key-man term insurance in the following respective amounts:
(i) 1/6/98 through 1/5/99 - $500,000.00
(iii) 1/6/99 through 1/5/2000 - $1,000,000.00
(iv) 1/6/2000 through 7/5/2000 - $1,000,000.00
Company shall be the owner and sole beneficiary of such
policy. In the event that Employee is not insurable at standard
rates during the term of this Agreement, but Company is able to
procure rated coverage, Company shall have the right to procure
coverage for a lower amount of insurance, the cost of which
equivalent to the standard term rates of the respective amounts
set forth above. In the event Employee is not insurable, then
Company shall not be required to obtain any key-person life
insurance upon Employee's life.
8. Expenses. During the term of Employee's employment
hereunder, Employee shall be entitled to receive prompt
reimbursement for all other reasonable and customary expenses
incurred by Employee in fulfilling Employee's duties and
responsibilities hereunder, provided that such expenses are
incurred and accounted for in accordance with the policies and
procedures established by Company.
9. Non-Competition. In connection with the diligent,
faithful and loyal discharge of the duties of Employee's
employment under this Agreement, Employee agrees that so long as
he is employed by the Company (whether or not pursuant to the
provisions of this Agreement) he will not, directly or
indirectly, be employed by, or otherwise give assistance to or be
affiliated with (as an employee, consultant, independent
contractor of any type, director or otherwise) any person, firm,
corporation or entity which is directly or indirectly engaged in
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a competitive business with that carried on by the Company or any
of its subsidiaries. Employee agrees that so long as he is
employed by the Company, he will not own, engage in, conduct,
manage, operate, participate in, be employed by or be connected
in any manner whatsoever with any competitive business with that
carried on by Company or any of its subsidiaries or become
associated with, in any capacity, or solicit or sell to,
customers of the Company or any its subsidiaries or induce any
employee of the Company or of any of its subsidiaries to leave
its employ.
In addition, as an inducement for and as additional
consideration for the Company entering into this Agreement (and
by virtue of Employee's unique and sensitive position and special
background, and in recognition that the employment of the
Employee by a competitor of the Company represents a serious
competitive danger to the Company, and the use of Employee's
talent and knowledge and information about the Company's
business, strategies and plans can and would constitute a
valuable competitive advantage over the Company), Employee agrees
that for a period of one (1) year commencing on the termination
of employment, he will not with any other person, corporation or
entity, directly or indirectly, by stock or other ownership,
investment, employment, or otherwise, or in any relation
whatsoever:
(1) solicit, divert or take away or attempt to
solicit, divert or take away any of the business, customers or
patronage of the Company or of any of its subsidiaries;
(2) attempt to seek or cause any customers of the
Company or any of its subsidiaries thereof, to refrain from
continuing their patronage;
(3) engage in any competitive business with that
carried on by the Company or any of its subsidiaries on the date
of Employee's termination in any state in which Company or its
subsidiaries have an office.
(4) knowingly employ or attempt to employ in any
capacity any employee or agent of Company, or any of its
subsidiaries;
(5) be employed by, attempt to seek employment with,
or act as a consultant to, a customer of the Company for whom
Employee, at any time during the six-month period prior to the
termination of Employee's employment with Company, was providing
direct services on behalf of Company;
(6) perform services for, either as an employee or as
a consultant, any of the companies listed on Exhibit C which is
attached hereto and incorporated herein by reference within any
of the states set forth in Section 9(3) above.
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For purposes of this Section 9, a competitive business shall
mean any person, corporation, partnership or other legal entity
engaged, directly or indirectly, through subsidiaries or
affiliates, in any of the following business activities:
(i) distributing of computer hardware, software,
peripheral devices, and related products and services;
(ii) sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of computer hardware,
software, peripheral devices or related products;
(iii) the leasing of computer hardware, software,
peripheral devices, and any other type of equipment leased by
Leasing Company during Employee's employment; and
(iv) any other business activity which can reasonably
be determined to be competitive with the principal business
activity being engaged in by the Company or any of its
subsidiaries.
This one-year non-competition provision commencing on the
date of Employee's termination of employment shall not be
applicable if the Employee is terminated by the Company without
cause pursuant to Section 11(a)(v), or Employee terminates
employment for Good Reason pursuant to Section 11(a)(vi), or if
Company does not renew this Agreement after the expiration of the
initial term of this Agreement or any renewal term. Provided,
however, such twelve-month non-competition provision shall be
applicable in any of such instances in the event Company elects
in writing to compensate Employee pursuant to Section 12 of this
Agreement.
Employee has carefully read and has given careful considera-
tion to all the terms and conditions of this Agreement and agrees
that they are necessary for the reasonable and proper protection
of the Company's business. The Employee acknowledges that the
Company has entered into this Agreement because of Employee's
promise that he will abide by and be bound by each of the terms
contained in Sections 9 and 10. The Employee agrees that Company
shall be entitled to injunctive relief to enforce these terms in
addition to all other legal remedies. Employee acknowledges that
each and every one of the terms of this provision is reasonable
in all respects including their subject matter, duration, scope
and the geographical area embraced herein and waives any and all
right to compensation and/or benefits herein mentioned or
referred to if Employee violates the provisions of Sections 9 or
10.
Provided, however, that nothing in this Section 9 shall
prohibit Employee from owning or purchasing less than five
percent (5%) of the outstanding common stock of any publicly-
traded corporation.
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10. Non-Disclosure and Assignment of Confidential
Information. The Employee acknowledges that the Company's trade
secrets and confidential and proprietary information, including
without limitation:
unpublished information concerning the Company's:
(a)
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
unpublished financial information, including
(b)
unpublished information concerning revenues, profits and profit
margins;
(c) internal confidential manuals; and
any "material inside information" as such phrase
(d)
is used for purposes of the Securities Exchange Act of 1934, as
amended;
all constitute valuable, special and unique proprietary and trade
secret information of the Company. In recognition of this fact,
the Employee agrees that the Employee will not disclose any such
trade secrets or confidential or proprietary information (except
(i) information which becomes publicly available without
violation of this Employment Agreement, (ii) information of which
the Employee did not know and was disclosed to the Employee in
violation of any other person's confidentiality obligation, and
(iii) disclosure required in connection with any legal or
regulatory process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or
other entity except the Company and its subsidiaries or
affiliates. The Employee's obligation to keep all of such
information confidential shall be in effect during and for a
period of five (5) years after the termination of his employment;
provided, however, that the Employee will keep confidential and
will not disclose any trade secret or similar information
protected under law as intangible property (subject to the same
exceptions set forth in the parenthetical clause above) for so
long as such protection under law is extended.
11. ___________ Termination.
The Employee's employment with the Company may be
(a)
terminated at any time as follows:
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(i) By the Employee at his discretion, upon sixty
(60) days written notice to Company;
(ii) By Employee's death;
(iii) By Employee's physical or mental
disability which renders Employee unable to perform his duties
hereunder.
(iv) By the Company, for cause upon fifteen (15)
day's written notice to Employee. For purposes of this
Agreement, the term "cause" shall mean termination upon: (i) the
continuous failure by Employee to substantially perform his
duties with the Company (other than any such failure resulting
from his incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to his by
the Company, which demand specifically identifies the manner in
which the Company believes that he has not continuously
substantially performed his duties; (ii) the engaging by Employee
in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise, including but not limited to
any material misrepresentation related to the performance of his
duties; (iii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iv) Employee's gross neglect or
gross misconduct in carrying out his duties hereunder resulting,
in either case, in material harm to the Company; or (v) any
material breach by Employee of this Agreement. Notwithstanding
the foregoing, Employee shall not be deemed to have been
terminated for cause unless and until there shall have been
delivered to his a copy of a resolution of the Board of Directors
of the Company or any appropriately designated committee of the
Board, finding that he has engaged in the conduct set forth above
in this Section 10(a)(iv) and specifying the particulars thereof
in detail, and Employee shall not have cured such conduct to the
reasonable satisfaction of the Board within thirty (30) days of
receipt of such resolution.
(v) By the Company at its discretion, without
cause, upon thirty (30) days written notice to Employee; provided
that Company complies with the provisions of Section 11 (c).
(vi) By the Employee for Good Reason. For
purposes of this Agreement,'' Good Reason '' shall mean, without
Employee's express consent, the occurrence of any of the
following circumstances:
(A) a substantial diminution in Employee's
duties, responsibilities or authority after written demand has
been made upon Company by Employee and Company has had a thirty
(30) day period to correct such matter (except during period when
the Employee is unable to perform all or substantially all of the
Employee's duties and/or responsibilities as a result of the
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Employee's illness (either physical or mental) or other
incapacity;
(B) the relocation of Employee's place of
employment to outside the Greater Cincinnati/Northern Kentucky
area without Employee's consent; or
David B. Pomeroy II, the current Chief
(C)
Executive Officer of Company, would terminate employment with the
Company.
(D) Any material breach by Company of the
Agreement but only after written demand has been made upon
Company by Employee setting forth such material breach and
Company has a thirty-day period to correct such matter.
(E) A change in control as hereinafter
defined, unless Employee has accepted employment with the
successor entity and such successor entity has assumed this
Employment Agreement pursuant to the provisions of Section 19.
For purposes of this Agreement, a change in control
shall occur:
(i) upon the sale or other disposition to a person,
entity or group (as such term is used in Rule 13 d-5 promulgated
under the Securities Exchange Act of 1934, as amended), such a
person, entity or group being referred to as an ``outside party''
of fifty percent (50%) or more of the consolidated assets of the
Company taken as a whole, or (ii) in the event shares
representing a majority of the voting power of Company are
acquired by a person or group (as such term is used in Rule 13 d-
5) of persons other than the holders of the common stock of
Company on July 6, 1997.
(b) Compensation upon Termination: In the event of
termination of employment, the Employee or his estate, in the
event of death, shall be entitled to his annual base salary and
other benefits provided hereunder to the date of his termination.
In addition, Employee shall be entitled to receive any bonuses
accrued to the date of his termination of employment as provided
in Section 5(g), and any vested incentive compensation that may
be due Employee pursuant to the provisions of Exhibit B, which
shall be payable (if applicable) pursuant to the terms thereof.
In the event that Company would terminate
(c)
Employee's employment hereunder without cause pursuant to Section
11(a)(v) or Employee would terminate his employment for Good
Reason pursuant to Sections 11(a)(vi)(A), (B), (D) or (E),
Company shall be obligated to pay Employee, as severance pay,
Employee's annual base salary in effect prior to such termination
for the remaining term of the Agreement (as originally set forth
in Section 2, as due) all bonus and incentive deferred
compensation set forth in Section 5(d) and/or 5(g), as due, and
an annual amount of Ten Thousand Dollars ($10,000.00) in lieu of
all fringe benefits under this Agreement. In the event Employee
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would terminate his employment for Good Reason pursuant to
Section 11(a)(vi)(C), Company shall be obligated to pay Employee,
as severance pay, Employee's annual base salary in effect prior
to such termination for the remaining term of this Agreement (as
originally set forth in Section 2, as due). Provided further,
that in the event Employee's employment is terminated by the
Company without cause or by Employee for Good Reason, Employee
shall not be obligated to mitigate his damages and shall be
entitled to the amounts and benefits described above, whether or
not he accepts or seeks alternative employment.
12. ______________________________________________________
Payments to Extend Covenant Not to Compete of Employee.
In the event Company does not renew this Agreement upon the
expiration of the initial term of this Agreement or any renewal
term, Company shall have the option to pay Employee an amount
equal to his base annual salary that was in effect prior to such
non-renewal of his Employment Agreement in twelve (12)
consecutive equal monthly installments commencing thirty (30)
days after the date of termination of employment in consideration
of Employee not competing with Company for a period of twelve
(12) months from the date of the termination of his employment
for any of the reasons set forth above, as applicable.
13. Disability. In the event that Employee becomes
temporarily disabled and/or totally and permanently disabled,
physically or mentally, which renders him unable to perform the
essential functions of his position with or without reasonable
accommodation, Employee shall receive one hundred percent (100%)
of his base annual salary (in effect at the time of such
disability) for a period of one (1) year following the initial
date of such disability (offset by any payments to the Employee
received pursuant to disability benefit plans, if any, maintained
by the Company.) Such payments shall be payable in twelve
consecutive equal monthly installments and shall commence thirty
(30) days after the determination by the physicians of such
disability as set forth below.
For purposes of this Agreement, Employee shall be deemed to
be temporarily disabled and/or totally and permanently disabled
if attested to by two qualified physicians, (one to be selected
by Company and the other by Employee) competent to give opinions
in the area of the disabled Employee's physical and/or mental
condition. If the two physicians disagree, they shall select a
third physician, whose opinion shall control. Employee shall be
deemed to be temporarily disabled and/or totally and permanently
disabled if he shall become disabled as a result of any medically
determinable impairment of mind or body which renders it
impossible for such Employee to perform satisfactorily his duties
hereunder, and the qualified physician(s) referred to above
certify that such disability does, in fact, exist. The opinion
of the qualified physician(s) shall be given by such
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physician(s), in writing directed to the Company and to Employee.
The physician(s) decision shall include the date that disability
began, if possible, and the 12th month of such disability, if
possible. The decision of such physician(s) shall be final and
conclusive and the cost of such examination shall be paid by
Company.
14. Severability. In case any one (1) or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement. In such a situation, this Agreement shall be reformed
and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained
herein, and such provision or part shall be reformed so that it
will be valid, legal and enforceable to the maximum extent
possible.
15. Law
Governing . This Agreement shall be governed and
construed under the laws of the Commonwealth of Kentucky and
shall not be modified or discharged, in whole or in part, except
by an agreement in writing signed by the parties.
16.Notices. All notices, requests, demands and other
communications relating to this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally
or mailed by certified or registered mail, return receipt
requested, postage prepaid:
If to Company, to: Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
With a copy to: James H. Smith III
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
If to Employee, to the Employee's residential address, as
set forth in the Company's records.
17. Enforcement of Rights. The parties expressly recognize
that any breach of this Agreement by either party is likely to
result in irrevocable injury to the other party and agree that
such other party shall be entitled, if it so elects, to institute
and prosecute proceedings in any court of competent jurisdiction,
either in law or in equity, to obtain damages for any breach of
this Agreement, or to enforce the specific performance of this
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Agreement by each party or to enjoin any party from activities in
violation of this Agreement. Should either party engage in any
activities prohibited by this Agreement, such party agrees to pay
over to the other party all compensation, remuneration, monies or
property of any sort received in connection with such activities.
Such payment shall not impair any rights or remedies of any non-
breaching party or obligations or liabilities of any breaching
party pursuant to this Agreement or any applicable law.
18. Entire Agreement. This Agreement and the Exhibits
hereto and the Performance Share Right Agreement executed of even
date contain the entire understanding of the parties with respect
to the subject matter contained herein and may be altered,
amended or superseded only by an agreement in writing, signed by
the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
19. Parties in Interest.
This Agreement is personal to each of the parties
hereto. No party may assign or delegate any rights or
obligations hereunder without first obtaining the written consent
of the other party hereto; provided, however, that nothing in
this Section 19 shall preclude (i) Employee from designating a
beneficiary to receive any benefit payable hereunder upon his
death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any
rights hereunder to person or persons entitled thereto.
Notwithstanding the foregoing, this Agreement shall be binding
upon and inure to the benefit of any successor corporation of the
Company.
(b) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the assets of the
Company or the business with respect to which the duties and
responsibilities of Employee are principally related, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the assumption
agreement provided for in this Section 19 or which otherwise
becomes bound by all the terms and provisions of this Agreement
by operation of law.
20. Prior Agreement. Employee represents and warrants that
he is not party to or bound by any agreement or contract or
subject to any restrictions including without limitation, any
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<PAGE>
restriction imposed in connection with previous employment which
prevents Employee from entering into and performing his
obligations under this Agreement. Company acknowledges that
Employee is subject to a restrictive agreement with his former
employer which precludes him from contacting any customers of
Employee's former employer for a period of one year.
21. Attorneys' Fees. In the event of any dispute arising
between Employee and Company, whether pursuant to this Agreement
or otherwise, the prevailing party shall be entitled to recover
from the non-prevailing party, the prevailing party's reasonable
attorneys' fees and costs.
IN WITNESS WHEREOF, this Agreement has been executed
effective as of the day and year first above written.
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
_________________________
By:____________________________________
Edwin S. Weinstein, Vice
President of Finance
_________________________
_________________________
_________________________________
VIC EILAU, Employee
_________________________
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<PAGE>
_________________________________________
INCENTIVE DEFERRED COMPENSATION AGREEMENT
This Incentive Deferred Compensation Agreement is made effective
as of the sixth day of July, 1997, by and between POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (the "Company")
and VIC EILAU ("Eilau").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the
Company and Eilau have entered into an Employment Agreement for
the employment of Eilau by Pomeroy Computer Leasing Company,
Inc., a wholly-owned subsidiary of Company;
WHEREAS, pursuant to Section 5(d) of said Employment Agreement,
Eilau is entitled to incentive deferred compensation in the
event certain economic criteria are satisfied;
WHEREAS, the parties wish to define the terms governing the
incentive deferred compensation in the event the economic
criteria are satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein set forth, the parties hereby
covenant and agree as follows:
1. In the event Eilau satisfies the economic criteria set
forth in the Employment Agreement for such year and is entitled
to incentive deferred compensation, the incentive deferred
compensation shall be governed by the terms of this Agreement.
2. In the event Eilau should die or become disabled during
the term of the Employment Agreement or any renewal thereof, or
if the Employment Agreement is not renewed at the expiration of
the initial term or any renewal term, or in the event Company
would terminate the Employment Agreement without cause pursuant
to Section 11(a)(v) or Eilau would terminate the Employment
Agreement for Good Reason pursuant to Section 11(a)(vi), all
incentive deferred compensation shall be vested in full and shall
be payable to Eilau and/or his designated beneficiary at that
time.
3. In the event Eilau discontinues employment with the
Company at the expiration of the initial term, or any renewal
thereof, or if Eilau discontinues employment with the Company
during the term of the Employment Agreement, the vested portion
of his deferred compensation account will be paid to him at said
time and all non-vested amounts will be forfeited. The incentive
deferred compensation shall vest according to the following
schedule:
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<PAGE>
Years of Service With Company or its _______________
Percentage of
Vested
Subsidiaries from the Effective Date Interest
of This Agreement
Less than 1 year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years or more 100%
This vesting schedule shall apply separately to each year that
incentive deferred compensation is earned by Eilau upon the
satisfaction of the economic criteria set forth in the Employment
Agreement.
By way of illustration, if Eilau satisfied the economic criteria
for years 1 and 2, at the end of year 2, Eilau would be 40%
vested as to the incentive deferred compensation credited in year
1 and 20% vested as to the incentive deferred compensation
credited in year 2.
4. Notwithstanding anything contained herein to the
contrary, Company may, if its stock is publicly traded at the
time of payment, deliver, in lieu of cash to Eilau, common stock
of Company that is either registered or freely tradable and
having a fair market value equal to one hundred percent (100)% of
the amount due Eilau hereunder. For purposes of this Section,
the fair market value of the stock shall be deemed to be the
average of its bid and asked prices on the date of distribution.
If Company's stock is not publicly traded at the time of
such payment, such payment shall be in cash.
5. No deferred compensation shall be paid under the terms
of this Agreement in the event Eilau is discharged from the
service of the Company for cause pursuant to Section
11(a)(iv)(iii) of the Employment Agreement. In the event Eilau
is discharged from the service of Company for cause pursuant to
any other provision of Section 11(a)(iv) of the Employment
Agreement, the vested portion of his deferred compensation will
be paid to him at said time and all non-vested amounts will be
forfeited.
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<PAGE>
6. Eilau shall not have the right to commute, sell,
transfer, assign or otherwise convey the right to receive any
payments under the terms of this Agreement. Any such attempted
assignment or transfer shall be null and void.
7. It is the intention of the parties that the incentive
deferred compensation to be payable to Eilau hereunder (if
applicable) shall be includable for Federal Income Tax purposes
in his, or such beneficiary's gross income only in the taxable
year in which he or the beneficiary actually receives the payment
and Company shall be entitled to deduct such incentive deferred
compensation as a business expense in its Federal Income Tax
return in the taxable year in which such payment is made to Eilau
or his beneficiary.
8. Nothing contained in this Agreement shall in any way
affect or interfere with the right of Eilau to share or
participate in a retirement plan of the Company or any profit
sharing, bonus or similar plan in which he may be entitled to
share or participate as an employee of the Company.
9. This Agreement shall be binding upon the heirs,
administrators, executors, successors and assigns of Eilau. This
Agreement shall not be modified or amended except in writing
signed by both parties.
10. This Agreement shall be subject to and construed under
the laws of the Commonwealth of Kentucky.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
Edwin S. Weinstein, Vice
President of
Finance
___________________________________
VIC EILAU
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<PAGE>
AWARD AGREEMENT
_______________
(Non-Qualified Stock Option)
This Award Agreement is made effective July 6, 1997, between
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
(hereinafter called the "Company"), and VIC EILAU, an employee of
Pomeroy Computer Leasing Company, Inc., a wholly-owned subsidiary
of the Company (hereinafter called the "Employee").
WHEREAS, the Company has heretofore adopted the 1992 Non-
Qualified and Incentive Stock Option Plan (the "Plan");
WHEREAS, per an Employment Agreement between Company and
Employee effective July 6, 1997, Employee is to be awarded 10,000
stock options under the Plan as of July 6, 1997;
WHEREAS, it is a requirement of the Plan that an Award
Agreement be executed to evidence the Non-Qualified Stock Option
(the "Award") granted to the Employee;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable
consideration, the parties hereto have agreed, and do hereby
agree, as follows:
1. Grant of Award. The Company hereby grants to the
Employee the right and option (hereinafter called the "Option")
to purchase all or any part of an aggregate of Ten Thousand
(10,000) shares of the Common Stock, $.01 par value, of the
Company ("Shares") (such number being subject to adjustment as
set forth herein and in the Plan) on the terms and conditions set
forth herein and in the Plan.
Page 1 of 5 Pages
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<PAGE>
2. Type of Award. The Option granted under this Award
Agreement is a Non-Qualified Stock Option and shall not be
treated by the Company or the Employee as an Incentive Stock
Option for Federal income tax purposes.
3. Purchase Price. The option price of the Shares covered
by the Option is $_____ per Share.
4 Term of Award.
The Term of the Award shall be for a period of
(a)
five (5) years from the effective date hereof, subject to earlier
termination as hereinafter provided; and
(b) prior to its expiration or termination the Award
may be exercised as to any part or all of the Shares originally
subject to the Option.
5. Exercise of Award.
(a) In order to exercise the Award, the person or
persons entitled to exercise it shall deliver to the Treasurer
of the Company written notice of the number of full Shares with
respect to which the Award is to be exercised. The notice shall
be accompanied by payment in full for any Shares being purchased,
which payment will be in cash, or, with the Committee's (as
defined in the Plan) approval, in Shares (as defined in the Plan)
held by the Employee for at least six months valued at Fair
Market Value (as defined in the Plan) at the time of exercise, or
a combination thereof. No fractional Shares will be issued.
Page 2 of 5 Pages
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<PAGE>
(b) No Shares shall be issued until full payment
therefor has been made, and the Employee will have none of the
rights of a stockholder in respect of such Shares until they are
issued.
6. Nontransferability. The Award shall not be
transferable otherwise than: (a) by will or the laws of descent
and distribution, and the Award may be exercised, during the
lifetime of the holder of the Award, only by him or the event of
death, his Successor, as defined in the Plan, or in the event of
disability, his personal representative, or (b) pursuant to a
qualified domestic relations order, as defined in the Code or the
Employee Retirement Income Security Act (ERISA) or the Rules
thereunder.
7.Termination of Employment. In the event that the
employment of the Employee is terminated (otherwise than by
reason of death, disability or retirement), the Award may be
exercised by the Employee (to the extent that he was entitled to
do so at the termination of his employment) at any time within
three (3) months after such termination, but not beyond the
original Term thereof. So long as the Employee shall continue to
be an employee of the Company or one or more of its subsidiaries,
the Award shall not be affected by any change of duties or
position. Nothing in this Award Agreement is intended to confer
upon Employee any right to continue in the employ of the Company
or any of its subsidiaries or interfere in any way with the right
Page of 5 Pages
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<PAGE>
of the Company or any such subsidiary to terminate his employment
at any time. Anything herein contained to the contrary
notwithstanding, in the event of any termination of the
Employee's employment for cause or as set forth in Section
11(a)(iv) of the Employment Agreement or if the Employee
voluntarily terminates his employment without cause pursuant to
Section 11(a)(i) of the Employment Agreement, the Award, to the
extent not theretofore exercised, shall forthwith terminate.
8. Death of Employee. If the Employee dies while he is
employed by the Company or one or more of its subsidiaries or
within three (3) months after the termination of his employment,
the Award may be exercised (to the extent that Employee was
entitled to do so at the time of his death) by a legatee or
legatees of the Employee under his last will, or by his personal
representatives or distributees, at any time within six (6)
months after his death, but not beyond the original Term of the
Award.
9. Disability of Employee. If the employment of the
Employee terminates on account of his having become "disabled,"
as defined in Section 22(e)(3) of the Code, the Award may be
exercised by the Employee (to the extent that he was entitled to
do so at the termination of his employment on account of his
becoming disabled) at any time within six (6) months after the
date on which his employment terminated, but not beyond the
original Term of the Award.
Page 4 of 5 Pages
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<PAGE>
10. Retirement of Employee. If the employment of the
Employee terminates by reason of retirement entitling the
Employee to benefits under the provisions of any retirement plan
of the Company or a subsidiary in which the Employee participates
(or, if no such plans exist, at or after age sixty-five (65)),
the Award may be exercised by the Employee (to the extent that he
was entitled to do so at the time of his retirement) at any time
within ninety (90) days after the date on which his employment
terminated, but not beyond the original Term of the Award.
11 Taxes. The Company shall have the right to require a
person entitled to receive Shares pursuant to the exercise of
this Award under the Plan to pay the Company the amount of any
taxes which the Company is or will be required to withhold with
respect to such Shares before the certificate for such Shares is
delivered pursuant to the Award. Furthermore, the Company may
elect to deduct such taxes from any amounts payable in cash or in
Shares at the time of exercise or from any other amounts payable
any time thereafter in cash to the Employee. If the Employee
disposes of Shares acquired pursuant to an Incentive Stock Option
in any transaction considered to be a disqualifying transaction
under Sections 421 and 422 of the Code, the Employee shall notify
the Company of such transfer and the Company shall have the right
to deduct any taxes required by law to be withheld from any
amounts otherwise payable in cash then or at any time thereafter
to the Employee.
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<PAGE>
Subject to Committee approval, an Employee may satisfy his
tax liability with respect to the exercise of an Option by having
the Company withhold Shares otherwise issuable upon exercise of
the Option; provided, however, if the Employee is subject to
Section 16b of the Securities Exchange Act of 1934, as amended,
he may so elect only if such Employee makes an election to do so
which satisfies the requirements of Rule 16b-3.
12. Changes in Capital Structure. In the event of changes
in all of the outstanding Shares by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of Shares, separations, reorganizations
or liquidations, or similar events or, in the event of
extraordinary cash dividends being declared with respect to the
Shares, or similar transactions, the number and class of Shares
available under the Plan in the aggregate, the number and class
of Shares subject to Awards theretofore granted, applicable
purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by
the Committee (which adjustment may, but need not, include
payment in cash or in Shares in an amount equal to the difference
between the price at which such Award may be exercised and the
then current Fair Market Value of the Shares subject to such
Award as equitably determined by the Committee). The foregoing
adjustment and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination
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<PAGE>
of any fractional share which might otherwise become subject to
an Award.
13. Securities Law Compliance, The Award may not be
exercised and the Company shall not be required to issue any
Shares hereunder if such issuance would, in the judgment of the
Board or the Committee, constitute a violation of any state or
federal law, or of the rules or regulations of any governmental
regulatory body, or any securities exchange. The Company may, in
its sole discretion, require the Employee to furnish the Company
with appropriate representations and a written investment
agreement prior to the exercise of the Award and the delivery of
any Shares pursuant to the Award.
14. Incorporation of Provisions of the Plan. All of the
provisions of the Plan, pursuant to which this Award is granted,
are hereby incorporated by reference and made as part hereof as
if specifically set forth herein, and to the extent of any
conflict between this Award Agreement and the terms contained in
the aforesaid Plan, the Plan shall control. To the extent any
capitalized terms are not otherwise defined herein, they will
have the meaning set forth in paragraph 2 of the Plan.
IN WITNESS WHEREOF, the Company has caused this Award
Agreement to be duly executed by its officer thereunto duly
authorized, and the Employee has hereunto set his hand, all on
the day and year first above written.
POMEROY COMPUTER RESOURCES, INC.,
By
__________________________________
Edwin S. Weinstein, Vice
President of
Finance
_____________________________________
VIC EILAU, Employee
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<PAGE>
PERFORMANCE SHARE RIGHT AGREEMENT
_________________________________
This Performance Share Right Agreement (``Agreement'') is
made this ____ day of _______, 1997, between Pomeroy Computer
Leasing Company, Inc., a Kentucky corporation (``Employer'') and
Vic Eilau (``Employee''), who agree as follows:
1.Recitals. Pursuant to an Employment Agreement dated
___________, 1997 (the ``Employment Agreement ''
), Employee ha s
agreed to serve as President of the Employer. Employer desires
to provide certain additional financial inducements and
incentives to Employee pursuant to this Agreement.
2. Employment Services. The terms of the employment of
the Employee with the Employer are set forth in the Employment
Agreement. Unless otherwise indicated, capitalized terms used
herein shall have the same meanings as in the Employment
Agreement.
3. Performance Share Right.
(a) Employee is hereby granted a performance share
right as more fully described herein (the ``Performance Share
Right'' ) to provide Employee with the ability to participate in,
to the extent herein provided, the growth of the '' Value'' (as
defined herein) of the business of Employer during the term of
his employment with the Employer. The purpose of this
Performance Share Right is to provide Employee with additional
incentive to maintain and improve the financial performance and
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strength of the Employer. As a result of this Performance Share
Right, Employee shall receive, as additional Compensation:
(i) Within ten (10) days of the receipt of the
Proceeds from any Dissolution, Asset Sale, Stock Sale or
Reorganization Transaction '' (as defined herein), which is
consummated before the termination of this Agreement, an amount
equal to the following applicable percentage of the Proceeds:
(A) twenty-five percent (25%) of the
Proceeds if such transaction occurs during the first three years
of this Agreement;
(B) twenty percent (20%) of the Proceeds if
such transaction occurs after the third year but prior to the end
of the eighth year of this Agreement; and
(C) twelve and one-half percent (12.5%) of
the Proceeds if such transaction occurs after the eighth year of
this Agreement;
Such applicable amount of the Proceeds shall
be reduced by the following applicable amount:
(A) twenty-five percent (25%) of the
capitalization of Leasing Company if the transaction occurs
during the first three years of this Agreement; or
(B) twenty percent (20%) of the
capitalization of Leasing Company if the transaction occurs after
the third year but prior to the eighth year of this Agreement; or
(C) twelve and one-half percent (12.5%) of
the capitalization of Leasing Company if the transaction occurs
after the eighth year of this Agreement.
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(ii) Upon a termination of Employee's employment,
other than (A) a termination by Employee before the day which is
three (3) years from the date of this Agreement (except for a
termination caused by the Employee's death or ``Disability'' or
for Good Reason (as defined in the Employment Agreement)) or (B)
a termination of Employee by the Employer for ``Cause (as
defined in the Employment Agreement), Employee shall receive an
amount equal to twenty-five percent (25%) of the Value of the
Employer as of the date of the termination of the employment of
the Employee with the Employer, reduced by an amount equal to
twenty-five percent (25%) of the capitalization of Employer. In
the event that Employee is employed by Employer for longer than
three (3) years but less than eight (8) years, twenty percent
(20%) shall be substituted in lieu of twenty-five percent (25%)
in both respective places above. In the event that Employee is
employed by Employer for longer than eight (8) years, twelve and
one-half percent (12.5%) shall be substituted in lieu of twenty
percent (20%) in both respective places above.
(iii) In the event that the death of Employee
occurs when Employee's performance share right under this
Agreement has no Value , Company shall pay to Employee's
designated beneficiary fifty percent (50%) of any insurance
proceeds received by Company upon Employee's death.
For purposes of this Agreement, the following
(b)
definitions shall apply:
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(i) ` Dissolution'' shall mean statutory
dissolution of the Employer pursuant to the terms of Sections
_______, . of the Kentucky Revised Statutes or any
seqetssor provisions thereof.
(ii) Asset Sale shall mean any sale or other
disposition by Employer of all, or substantially all, of its
assets which would fall within the description of a ``Sale of
Entire Assets provided in Section _______ of the Kentucky
''
Revised Statutes or any successor provisions thereof.
(iii)
Stock Sale shall mean (
'' A) the sale
by Employer's shareholders of record of fifty percent (50%) or
more of the Employer's outstanding shares to any person or
persons who were not already shareholders at the time of the
first of such sales or who are not family members or trusts for
the benefit of family members of a shareholder; or (B) any
issuance of shares by Employer to a person who was not previously
a shareholder followed within sixty (60) days of such issuance by
the redemption of fifty percent (50%) or more of the shares
outstanding before such issuance.
(iv) Reorganization Transaction
`` '' shall mean a
reorganization as such term is defined in (A), (B), (C), or (D)
of Paragraph (1) of Section 368(a) of the Internal Revenue Code
of 1986, as amended from time to time.
(v) Proceeds shall mean (A) when used in
connection with a Dissolution, the total book value of the assets
of the Employer that are available to be distributed to
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Employer's shareholders reduced by all of Employer's liabilities;
(B) when used in connection with an Asset Sale, the total
purchase price paid for the assets sold pursuant to an Asset Sale
reduced by the amount of all of the Employer's liabilities not
assumed by the purchaser in connection with such Asset Sale; (C)
when used in connection with a Stock Sale, the price per share
paid to the shareholder(s) participating in such sale multiplied
by the total number of the outstanding shares as of the day
before such sale (or the day before an issuance followed by a
sale); or (D) when used in connection with a Reorganization
Transaction, the fair market value of the property (whether
stock, securities or other property) received by the shareholders
in exchange for the shareholders' stock or assets; provided that
the term Proceeds'' shall exclude any promissory notes, non-
cash assets or stock received as consideration in connection with
an Asset Sale, Stock Sale or Reorganization Transaction, until
such promissory notes are paid or such assets or stock are sold.
In the event that a Stock Sale or Reorganization
Transaction would occur between the shareholders of Pomeroy
Computer Resources, Inc. and an acquiring entity, the parties
agree that such a transaction shall constitute an Asset Sale or
Reorganization Transaction for purposes of this Agreement and the
parties agree to implement the procedure set forth in item (vi)
to determine the Value of Pomeroy Computer Leasing Company, Inc.
as a part of the total consideration paid in the Stock Sale or
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Reorganization Transaction for Pomeroy Computer Resources, Inc.'s
shares.
(vi) The Value shall be an amount mutually
agreed upon by Employer and Employee within thirty (30) days
after the termination of Employee's employment with Employer. In
the event Employer and Employee are unable between themselves to
agree upon a Value for all the outstanding stock of Employer,
Employer and Employee shall appoint a Big Six accounting firm or
top 25 investment banking firm with at least ten years experience
in valuing leasing companies to determine the fair market value
of 100% of the outstanding stock of Employer. The fair market
value of 100% of the stock Employer as determined by such
appraiser, shall be the Value for purposes of this Agreement.
The cost of such appraiser shall be divided equally between the
parties.
4. ___________ Termination.
In the event the Employee terminates his
employment with the Employer either (A) after the day which is
three (3) years from the date of this Agreement; or (B) as a
result of Employee's death or Disability or termination of
employment for Good Reason, the amount payable pursuant to
Section 3(a)(ii) shall be payable in sixty (60) equal monthly
installments commencing the first day of the month following the
determination of Value as set forth herein. Such payments may be
made in cash or, if the stock of Pomeroy Computer Resources, Inc.
is publicly traded at the time of payment, deliver, in lieu of
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cash, to Employee, registered or freely tradable shares of the
common stock of Pomeroy Computer Resources, Inc., having a fair
market value equal to 100% of the amount due Employee hereunder.
For purposes of this Section, the fair market value of the stock
shall be deemed to be the average of its bid and asked prices on
the date of distribution. If Employee should die prior to or
during such sixty (60) month period, prior to receiving all of
such payments, any remaining payments shall be paid to his
designated beneficiary, as due. Provided, however, in the event
that Employer would receive any insurance proceeds upon the death
of Employee, Employer would use up to 50% of such insurance
proceeds (but not more than the amount due) to apply against the
balance due hereunder and any remaining payments shall be made
over the remaining term, as due.
In the event of termination by the Employee before
(b)
the day which is three (3) years from the date of this Agreement
(except for termination caused by Employee's death or Disability
or termination of employment for Good Reason), Employee shall
forfeit any Performance Share Right otherwise earned and/or
payable pursuant to the terms of this Agreement.
(c) In the event of the termination of the employment
of the Employee for Cause, Employee shall forfeit any Performance
Share Right earned and/or payable pursuant to the terms of this
Agreement.
5. Public Offering. In the event of an initial public
offering of the shares of the Employer, the Employer and Employee
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shall use their best efforts to negotiate the impact of such
initial public offering on the Performance Share Right granted to
Employee hereunder.
6. Withholding. Employer shall withhold all applicable
federal, state and local taxes from every payment of compensation
made pursuant to the terms of this Agreement.
7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Kentucky. Any action arising out of this Agreement or the
claimed breach thereof shall only be brought in a court of
competent jurisdiction in Boone County, Kentucky, and the parties
hereto hereby consent to jurisdiction and venue in such courts.
8. Entire Agreement. This Agreement and Employee's
Employment Agreement with Pomeroy Computer Resources, Inc. and
the Exhibits thereto contain the entire understanding of the
parties hereto with respect to the subject matter contained
herein and may be altered, amended or superseded only by an
amendment in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought.
9. Pomeroy Computer Resources, Inc., the parent company of
Pomeroy Computer Leasing Company, Inc. hereby guarantees all the
obligations of Employer to Employee under the terms and
conditions of this Performance Share Right Agreement.
Signed on the date above.
COMPANY, INC.
By:
________________________________
___________________________________
VIC EILAU
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-05-1997
<PERIOD-END> JUL-05-1997
<CASH> 95
<SECURITIES> 0
<RECEIVABLES> 81921
<ALLOWANCES> 639
<INVENTORY> 32445
<CURRENT-ASSETS> 115196
<PP&E> 9433
<DEPRECIATION> 5308
<TOTAL-ASSETS> 139462
<CURRENT-LIABILITIES> 60005
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 76897
<TOTAL-LIABILITY-AND-EQUITY> 139462
<SALES> 218584
<TOTAL-REVENUES> 218584
<CGS> 182545
<TOTAL-COSTS> 182545
<OTHER-EXPENSES> 121
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 466
<INCOME-PRETAX> 10823
<INCOME-TAX> 3896
<INCOME-CONTINUING> 6927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6927
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
</TABLE>
<TABLE>
Pomeroy Computer Resources, Inc.
Exhibit 11 - Computation of Earnings Per Share
( in thousands, except per share amounts )
Primary Earnings Per Common Share
<CAPTION>
Quarter ended July 5, Six months ended July 5,
_____________________ ________________________
1996 1997 1996 1997
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net income for the period $ 1,853 $ 3,969 $ 498 $ 6,927
======= ======= ======= =======
Weighted common share 4,195 7,487 4,079 7,191
Dilutive effect of
options outstanding
during the period 151 153 192 200
_______ _______ _______ _______
Total common and common
equivalent shares 4,346 7,679 4,232 7,391
======= ======= ======= =======
Earnings per common share $ 0.43 $ 0.52 $ 0.12 $ 0.94
======= ======= ======= =======
Fully Diluted Earnings Per Common Share
Quarter ended July 5, Six months ended July 5,
_____________________ ________________________
1996 1997 1996 1997
____ ____ ____ ____
Net income for the period $ 1,853 $ 3,969 $ 498 $ 6,927
======= ======= ======= =======
Weighted common share 4,195 7,487 4,079 7,191
Dilutive effect of
options outstanding
during the period 159 200 163 204
_______ _______ _______ _______
Total common and common
equivalent shares 4,354 7,687 4,242 7,395
======= ======= ======= =======
Earnings per common share $ 0.43 $ 0.52 $ 0.12 $ 0.94
======= ======= ======= =======
</TABLE>
