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 April 5, 1998
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 (IRS 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 April 21,
1998 was 11,457,104.
<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,
1998 and April 5, 1998
Consolidated Statements of 4
Income for the Quarters
Ended April 5, 1997 and
1998
Consolidated Statements of 5
Cash Flows for the
Quarters Ended April 5,
1997 and 1998
Notes to Consolidated 6
Financial Statements
Item 2. Management's Discussion 8
and Analysis of Financial
Condition and Results of
Operations
Part II. Other Information 10
SIGNATURE 14
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
( In thousands )
<CAPTION>
January 5, April 5,
1998 1998
________ ________
<S> <C> <C>
ASSETS
Current assets:
Cash $380 $932
Accounts and note receivable, less
allowance of $578 and $649 at January 5,
and April 5, 1998, respectively 99,707 124,718
Inventories 39,160 50,897
Other 816 1,031
________ ________
Total current assets 140,063 177,578
________ ________
Equipment and leasehold improvements 17,316 20,255
Less accumulated depreciation 6,770 7,611
________ ________
Net equipment and leasehold improvements 10,546 12,644
Other assets 16,655 26,895
________ ________
Total assets $167,264 $217,117
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Notes payable $2,077 $2,380
Accounts payable 40,038 60,535
Bank notes payable 22,611 47,051
Other current liabilities 12,309 9,359
________ ________
Total current liabilities 77,035 119,325
________ ________
Notes payable 1,434 3,939
Deferred income taxes 18 372
Equity:
Preferred stock ( no shares issued
or outstanding) - -
Common stock ( 11,402 and 11,438 shares
issued and outstanding at January 5
and April 5, 1998, respectively 114 114
Paid-in capital 60,226 60,653
Retained earnings 28,641 32,918
________ ________
88,981 93,685
Less treasury stock, at cost (21 shares at
January 5 and April 5, 1998, respectively) 204 204
________ ________
Total equity 88,777 93,481
________ ________
Total liabilities and equity $167,264 $217,117
<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
_____________________________
April 5, April 5,
1997 1998
__________ ________
<S> <C> <C>
Net sales and revenues $100,366 $135,198
Cost of sales and service 83,462 111,966
__________ ________
Gross profit 16,904 23,232
Operating expenses:
Selling, general and administrati 10,475 14,320
Rent 473 562
Depreciation 803 852
Amortization 212 309
__________ ________
Total operating expenses 11,963 16,043
__________ ________
Income from operations 4,941 7,189
Interest expense 367 423
Other income 48 23
__________ ________
Income before income tax 4,622 6,789
Income tax expense 1,664 2,512
__________ ________
Net income $2,958 $4,277
========== ========
Weighted average shares outstanding
Basic 10,336 11,392
Diluted 10,649 11,711
Earnings per common share
Basic $0.29 $0.38
Diluted $0.28 $0.37
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
POMEROY COMPUTER RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
( In thousands )
<CAPTION>
Quarter Ended
___________________________
April 5, April 5,
1997 1998
__________ __________
<S> <C> <C>
Net cash flows used in operating activities ($9,692) ($11,253)
__________ __________
Cash flows used in investing activities:
Capital expenditures (954) (1,409)
Acquisition of resellers - (11,229)
__________ __________
Net investing activities (954) (12,638)
Cash flows provided by (used in)
financing activities:
Net borrowings (payments) on bank note (18,884) 24,441
Payments on notes payable (425) (425)
Proceeds from secondary offering 23,293 0
Proceeds from exercise of stock options 130 427
__________ __________
Net financing activities 4,114 24,443
__________ __________
Increase (decrease) in cash (6,532) 552
Cash:
Beginning of period 6,809 380
__________ __________
End of period $277 $932
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
1.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, 1998. 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
three-month period ended April 5, 1998 are not necessarily
indicative of the results that may be expected for future
interim periods or for the year ending January 5, 1999.
2. Borrowing Arrangements
At January 5 and April 5, 1998, bank notes payable include
$6.5 million and $12.1 million, respectively, of overdrafts in
accounts with the Company's primary lender. These amounts were
subsequently funded through the normal course of business.
3. Earnings per Common Share
The following is a reconciliation of the number of shares used
in the basic EPS and diluted EPS computations:
(in thousands, except per share data)
Quarter ended April
__________________________________________
1997 1998
____________________ ____________________
Per Share Per Share
Shares Amount Shares Amount
________ _________ ________ _________
Basic EPS 10,336 $ 0.29 11,392 $ 0.38
Effect of dilutive
stock options 313 (0.01) 319 (0.01)
Contingent shares- - -
________ _________ ________ _________
Diluted EPS 10,649 $ 0.28 11,711 $ 0.37
======== ========= ======== ========
<PAGE>
4.Supplemental Cash Flow Disclosures
Supplemental disclosures with respect to cash flow information
and non-cash investing and financing activities are as
follows:
Quarter Ended
____________________________
April 5, 1997 April 5, 1998
_____________ _____________
Interest paid $470 $425
==== ====
Income taxes paid $251 $4,112
==== ======
Business combinations
accounted for as purchases:
Assets acquired $31,804
Liabilities assumed 18,505
Notes payable 2,000
_______
Net cash paid $11,299
=======
5.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.
6.Subsequent Event
<PAGE>
In April 1998, the Company amended its revolving credit
agreement under the same terms as its prior agreement. The
amended agreement provides for borrowings up to $45.0 million
at the bank's prime rate minus 1.25%.
<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" contain certain forward looking statements regarding
future financial results of the Company. The words "expect,"
"estimate," "anticipate," "predict," and similar expressions are
intended to identify forward-looking statements. Such
statements are forward-looking statements for the
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 $34.8 million, or 34.7%, to $135.2 million in the first
quarter of 1998 from $100.4 million in the first quarter of 1997.
This increase was attributable to an increase in sales to
existing and new customers and to acquisitions completed in
fiscal years 1998 and 1997. Excluding acquisitions completed in
fiscal years 1998 and 1997, total net sales and revenues
increased 26.9%. Sales of equipment and supplies increased $28.3
million, or 31.4%, to $118.5 million in the first quarter of
fiscal 1998 from $90.2 million in the first quarter of fiscal
1997. Excluding acquisitions completed in fiscal 1998 and 1997,
sales of equipment and supplies increased 24.0%. Service revenues
increased $6.5 million, or 63.7%, to $16.7 million in the first
quarter of fiscal 1998 from $10.2 million in the first quarter of
fiscal 1997. Excluding acquisitions completed in fiscal 1998 and
1997, service revenues increased 52.7%.
GROSS MARGINS. Gross margin was 17.2% in the first quarter of
fiscal 1998 compared to 16.8% in the first quarter of 1997. The
Company improved its gross margin by increasing the volume of
higher-margin service revenues which offset a decrease in
hardware gross margins and the growth in equipment sales. Service
and other revenues increased to 11.7% of total net sales and
revenues in the first quarter of fiscal 1998 compared to 10.1% of
total net sales and revenues in the first quarter of fiscal 1997.
Factors that may have an impact on gross margin in the future
include the percentage of equipment sales with lower-margin
customers and the ratio of service revenues to total net sales
and revenues.
<PAGE>
OPERATING EXPENSES. Selling, general and administrative
expenses (including rent expense) expressed as a percentage of
total net sales and revenues increased to 11.0% in the first
quarter of fiscal 1998 from 10.9% in the first quarter of fiscal
1997. Excluding acquisitions completed in fiscal 1998 and 1997,
selling, general and administrative expenses expressed as a
percentage of total net sales and revenues would have been 10.1%.
Total operating expenses expressed as a percentage of total net
sales and revenues remained at 11.9% in the first quarter of
fiscal 1998 and 1997. Excluding acquisitions completed in fiscal
1998 and 1997, total operating expenses expressed as a percentage
of total net sales and revenues in the first quarter of fiscal
1998 would have been 11.4%
INCOME FROM OPERATIONS. Income from operations increased $2.3
million, or 46.9%, to $7.2 million in the first quarter of fiscal
1998 from $4.9 million in the first quarter of fiscal 1997. The
Company's operating margin increased to 5.3% in the first quarter
of fiscal 1998 from 4.9% in the first quarter of fiscal 1997
because of the increase in gross margin.
INTEREST EXPENSE. Interest expense was approximately $0.4
million in the first quarter of 1998 and 1997.
INCOME TAXES. The Company's effective tax rate was 37.0% in
the first quarter of fiscal 1998 compared to 36.0% in the first
quarter of fiscal 1997.
NET INCOME. Net income increased $1.3 million, or 44.6%, to
$4.3 million in the first quarter of fiscal 1998 from $3.0
million in the first quarter of fiscal 1997 due to the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities was $11.3 million in the
first quarter of 1998. Cash used in investing activities was
$11.2 million for the acquisition of resellers and $1.4 million
for capital expenditures. Cash provided by financing activities
included $24.4 million of net borrowings on bank notes payable,
$0.4 million from the exercise of stock options less $0.4 million
for a note repayment.
A significant part of the Company's inventories is financed by
floor plan arrangements with third parties. At April 5, 1998,
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
many of the arrangements is interest free due to subsidies by
manufacturers. The average rate on the plans overall is less than
<PAGE>
1.0% per annum. The Company classifies amounts outstanding under
the floor plan arrangements as accounts payable.
The Company's financing of receivables is provided through its
Credit Facility, which was revised in January 1998, and permits
the Company to borrow up to the lesser of $40.0 million or an
amount based upon a formula of eligible trade receivables. The
revised Credit Facility, which expires May 31, 1998, carries a
variable interest rate based solely on the prime rate of Star
Bank less 125 basis points. At April 5, 1998, the amount
outstanding, which included $12.1 million of overdrafts in
accounts with the Company's primary lender, was $47.1 million at
an interest rate of 7.25%. Under the terms of the Credit
Facility, the Company is prohibited from paying any cash
dividends and is subject to various restrictive covenants.
Further, the Company expects to finalize a $120.0 million line of
credit during the second quarter of 1998, under terms similar to
the revised Credit Facility, with DFS including a participation
interest by Star Bank in the new Credit Facility. When finalized
this line of credit will replace the $40.0 million Credit
Facility with Star Bank and the $25.0 million line of credit with
DFS.
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.
OTHER
The Company is heavily dependent upon complex computer systems
for all phases of its operations, which include sales and
distribution. The Company began addressing the affect of the Year
2000 compliance issue in 1996.The Year 2000 date issue arises
from the fact that many computer programs use only two digits to
identify a year in a date field. The Company has completed an
assessment of its own systems and determined that its principle
systems are Year 2000 compliant. Management does not expect that
any costs associated with the Company becoming Year 2000
compliant will have a material adverse impact on the Company's
financial position, results of operations or cash flows. The
Company is continuing to assess the Year 2000 issue with respect
to its customers and suppliers. The Company could be adversely
impacted by the Year 2000 date issue if its suppliers, customers
and other businesses do not address this issue successfully.
Management continues to assess these risks in order to be able to
respond in a manner which would reduce any impact on the Company.
POMEROY COMPUTER RESOURCES, INC.
PART II - OTHER INFORMATION
Items 1 to 5
None
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a)
___
Exhibits
________
10(i) Material Agreements
(dd)(1) Asset Purchase
Agreement dated March
6, 1998 between the
Company and Commercial
Business Systems, Inc.
(dd)(2) Employment Agreement
dated March 6, 1998
between the Company and
Thomas Clayton
(dd)(3) Employment Agreement
dated March 6, 1998
between the Company and
Steven Shapiro
(dd)(4) Subordinated Promissory
Note dated March 6,
1998 between the
Company and Commercial
Business System, Inc.
(dd)(5) Subordination Agreement
dated March 6, 1998
between the Company and
Commercial Business
System, Inc.
(dd)(6) General Bill of Sales
and Assignment dated
March 6, 1998 between
the Company and
Commercial Business
System, Inc.
(dd)(7) Assumption of
Liabilities dated March
6, 1998 between the
Company and Commercial
Business System, Inc.PAGE>
(dd)(8) Power of Attorney
dated March 6, 1998
between the Company and
Commercial Business
System, Inc.
(dd)(9) Assignment and
Assumption Agreement
dated March 6, 1998
between the Company and
Commercial Business
System, Inc.
(dd)(10) Agreement dated March
6, 1998 between the
Company and Commercial
Business System, Inc.
(dd)(11) Assignment and
Assumption of Lease
Agreement dated March
6, 1998 between the
Company and Commercial
Business System, Inc.
(dd)(12) Assignment and
Assumption of Lease
Agreement dated March
6, 1998 between the
Company and Commercial
Business System, Inc.
(dd)(13) Covenant Not to Compete
Agreement dated March
6, 1998 between the
Company and Steve
Shapiro
(dd)(14) Covenant Not to Compete
Agreement dated March
6, 1998 between the
Company and Thomas
Clayton
(dd)(15) Covenant Not to Compete
Agreement dated March
6, 1998 between the
Company and Commercial
Business Systems, Inc.
<PAGE>
(dd)(16) Consent for use of
Similar Name Agreement
dated March 6, 1998
between the Company and
Commercial Business
Systems, Inc.
(dd)(17) Agreement dated March
6, 1998 between the
Company and Commercial
Business Systems, Inc.
(ee)(1) Stock Purchase
Agreement dated
February 26, 1998
between J. Walter
Duncan Jr. , Nicholas
Duncan, James B. Kite,
O. Dean Higganbotham,
and Dale Higganbotham
and Pomeroy Computer
Resources, Inc.
(ee)(2) Non-Compete Agreement
dated February 26, 1998
between O. Dean
Higganbotham and
Pomeroy Computer
Resources, Inc.
(ee)(3) Non-Compete Agreement
dated February 26, 1998
between Dale
Higganbotham and
Pomeroy Computer
Resources, Inc.
(ee)(4) Non-Compete Agreement
dated February 26, 1998
between J. Walter
Duncan Jr. and Pomeroy
Computer Resources,
Inc.
(ee)(5) Non-Compete Agreement
dated February 26, 1998
between Nicholas V.
Duncan and Pomeroy
Computer Resources,
Inc.
(ee)(6) Non-Compete Agreement
dated February 26, 1998
between James B. Kite
and Pomeroy Computer
Resources, Inc.
<PAGE>
(ee)(7) Employment Agreement
dated February 26, 1998
between O. Dean
Higganbotham, Global
Combined Technologies,
Inc. and Pomeroy
Computer Resources,
Inc.
(ee)(8) Employment Agreement
dated February 26, 1998
between Dale
Higganbotham, Global
Combined Technologies,
Inc. and Pomeroy
Computer Resources,
Inc.
(ee)(9) Termination of
Employment Agreement
dated March 17, 1998
between Nicholas V.
Duncan and Global
Combined Technologies,
Inc.
(ee)(10) Termination of
Employment Agreement
dated March 17, 1998
between O. Dean
Higganbotham and Global
Combined Technologies,
Inc.
(ee)(11) Termination of
Employment Agreement
dated March 17, 1998
between Dale
Higganbotham and Global
Combined Technologies,
Inc.
(ee)(12) Purchaser's Certificate
Dated March 17, 1998
between the Company and
Global Combined
Technologies, Inc.
(ee)(13) Incentive Deferred
Compensation Agreement
dated March 17, 1998
between Dale
Higganbotham and Global
Combined Technologies,
Inc.
<PAGE>
(ee)(14) Subordination Agreement
dated March 17, 1998
between the Company,
Nicholas V. Duncan, and
Star Bank, N.A.
(ee)(15) Subordination Agreement
dated March 17, 1998
between the Company,
James B, Kite, and Star
Bank, N.A.
(ee)(16) Subordination Agreement
dated March 17, 1998
between the Company, O.
Dean Higganbotham, and
Star Bank, N.A.
(ee)(17) Subordination Agreement
dated March 17, 1998
between the Company,
Dale Higganbotham, and
Star Bank, N.A.
(ee)(18) Subordination Agreement
dated March 17, 1998
between the Company, J.
Walter Duncan Jr., and
Star Bank, N.A.
(ee)(19) Subordinated Promissary
Note dated March 17,
1998 between the
Company and James B,
Kite.
(ee)(20) Subordinated Promissary
Note dated March 17,
1998 between the
Company and Dean
Higganbotham
(ee)(21) Subordinated Promissary
Note dated March 17,
1998 between the
Company and Dale
Higganbotham
(ee)(22) Subordinated Promissary
Note dated March 17,
1998 between the
Company and , J.
Walter Duncan Jr
<PAGE>
10(iii) Material Employment Contracts
(a)(13) Seventh Amendment to
the Employment Agreement
between the Company and
David B. Pomeroy
effective January 6,
1998.
(a)(14) Collateral Assignment
Split Dollar Agreement
between the Company,
James H. Smith III as
Trustee, and David B.
Pomeroy dated January
6, 1998.
11 (a)(23) Computation of Earnings
per Share
27 Financial Date
Schedules, Quarter
ended April 5, 1998 and
restated for quarters
ending April 5, 1997
and April 5, 1996.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated February 26, 1998
reporting the signing of a definitive agreement, subject to
regulatory approval, to purchase all of the stock of Global
Combined Technologies, Inc.
The Company filed a Form 8-K dated March 2, 1998 reporting a
Stockholders' Rights Agreement.
The Company filed a Form 8-K dated March 16, 1998 reporting
the signing on March 6, 1998 of a definitive agreement,
subject to regulatory approval, to purchase certain assets
and assume certain liabilities of Combined Business Systems,
Inc.
The Company filed a Form 8-K dated April 7, 1998 reporting
the completion of the acquisition of Global Combined
Technologies, Inc. on March 18, 1998.
<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: May 5, 1998 By: /s/ Stephen E. Pomeroy
Stephen E. Pomeroy
Chief Financial Officer and
Chief
Accounting Officer
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is
entered into this ____ day of March, 1998, by, between and among
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation, (the
"Purchaser"), COMMERCIAL BUSINESS SYSTEMS, INC., a Virginia
corporation (_Seller"), THOMAS M. CLAYTON (_T. Clayton_) and
STEVEN SHAPIRO (_S. Shapiro_) (T. Clayton and S. Shapiro
hereinafter referred to collectively as the _Shareholders_ and
individually as _Shareholder_).
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of
computer service and support solutions to large and medium size
commercial, governmental and other professional customers
throughout the States of Virginia and West Virginia (the
_Business_); and
WHEREAS, Seller also operates a depot repair and refurbishing of
products business for the telephone industry which is not being
sold pursuant to this Agreement;
WHEREAS, T. Clayton is the owner of forty-five (45) shares of the
outstanding stock of Seller and S. Shapiro is the owner of five
(5) shares of the outstanding stock of Seller, which stock, in
the aggregate, constitute 100% of the outstanding stock of
Seller; and
WHEREAS, Purchaser desires to purchase certain of the assets of
Seller used in its Business and assume certain of the liabilities
of Seller in connection with the Business, and Seller desires to
sell certain 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 of Purchaser contained in this
Agreement, (iii) the agreements of Seller to refrain from
competition with Purchaser for five (5) years from the closing of
this transaction and (iv) the agreement of each Shareholder to
refrain from competition for the later of five (5) years from the
Closing date or one (1) year after the termination of the
Shareholders' employment with Purchaser pursuant to and in
accordance with, the terms of their respective Employment
Agreements to be executed upon Closing.
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
<PAGE>
1.1
Affiliate. "Affiliate" shall have the meaning ascribed to
such term in Rule 405 promulgated under the Securities Act
of 1933, as amended.
1.2
Assumed Liabilities. The "Assumed Liabilities" are the
liabilities of Seller assumed or paid at Closing by the
Purchaser pursuant to Sections 3.1 and 3.2 of this
Agreement.
1.3
Balance Sheet. The "Balance Sheet" is the audited balance
sheet of Seller as of October 31,1997, included as part of
the Financial Statements.
1.4
Closing. The "Closing" shall be the consummation of the
transactions contemplated under this Asset Purchase
Agreement.
1.5
Closing Date. The "Closing Date" shall be as of 10:00 a.m.,
E.D.T., March 6, 1998.
1.6
Code. The "Code" is the Internal Revenue Code of 1986, as
amended, 26 U.S.C. S1
et seq.
1.7
Court. A "Court" is any federal, state, municipal,
domestic, foreign or other governmental tribunal or an
arbitrator or person with similar power or authority.
1.8
Disclosure Schedule. The "Disclosure Schedule" is the
Disclosure Schedule dated the date of this Agreement and
delivered by Seller to Purchaser.
1.9
Encumbrance. An "Encumbrance" is any security interest,
lien, or encumbrance whether imposed by agreement,
understanding, law or otherwise, on any Purchased Assets (as
defined herein).
1.10
Excluded Assets. An "Excluded Asset" is any asset set forth
in Section 2.3.
1.11
Financial Statements. The "Financial Statements" are the
audited financial statements of Seller for the year ended
October 31, 1997 and the unaudited financial statements for
the years ended October 31, 1996 and October 31, 1995,
including any and all notes thereto.
1.12
Governmental 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.
1.13
Knowledge. _Knowledge of Seller and Shareholder_ shall mean
the actual knowledge of any of the Shareholders.
1.14
Net Asset Amount. _Net Asset Amount_ shall have the meaning
set forth in Section 5.2.
<PAGE>
1.15
October 31, 1997 Pro Forma Balance Sheet. The _October 31,
1997 Pro Forma Balance Sheet is the audited balance sheet of
Seller relating to the Business adjusted for Excluded Assets
of Seller and Excluded Liabilities of Seller as of such
date.
1.16
Person. Any natural person, firm, partnership, association,
corporation, company, limited liability company, limited
partnership, trust, business trust, governmental authority
or other entity.
1.17
Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is
the unaudited balance sheet of Seller prepared as described
in Section 5.2(c) and adjusted for Excluded Assets of Seller
and Excluded Liabilities of Seller as of the Closing Date.
1.18 Pro Forma EBIT
. The earnings of Seller's Business before
interest and taxes, and without incorporating gains or
losses realized on the disposition of assets other than in
the ordinary course of business for Seller's fiscal year
ending October 31, 1997. EBIT from Seller's Business for
such period shall be determined in accordance with GAAP and
in the manner set forth in Section 5.1.
1.19 Purchase Price
. The "Purchase Price" is the total
consideration paid by Purchaser to Seller for the Purchased
Assets as set forth in Section 4.1.
1.20 Purchased Assets
. The "Purchased Assets" are the assets of
Seller used in the Business, acquired by the Purchaser
pursuant to the terms of this Agreement.
1.21 Tax or Taxes
: Any federal, state, provincial, local,
foreign or other income, alternative, minimum, any taxes
under Section 1374 of the Code, any taxes under Section 1375
of the Code, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits,
windfall profits, gross receipts, value added, sales, use,
goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental, including
taxes under Section 59A of the Code), real property,
personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance,
social security, disability, workers' compensation, payroll,
health care, withholding, estimated or other similar tax,
duty or other governmental charge or assessment or
deficiencies thereof (including all interest and penalties
thereon and additions thereto whether disputed or not).
1.22
Tax Return. A "Tax Return" is a report, return or other
information required to be supplied to a Governmental Entity
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in connection with Taxes including, where permitted or
required, combined or consolidated returns for any group of
entities that includes Seller.
2.
TERMS
2.1 Agreement
.
Seller agrees to sell and convey to Purchaser the Purchased
Assets as hereinafter set forth in Section 2.2. The
agreements of Purchaser and Seller are expressly conditioned
upon the terms, conditions, covenants, representations and
warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser
.
At the Closing of this Agreement, Purchaser shall purchase
and Seller shall sell the following assets of Seller used in
the Business:
(a) 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 customers notes receivable relating to
the Business;
(b) Certain inventory of computers, related equipment and
service parts held by Seller as set forth on Exhibit A
attached hereto;
(c) Accounts Receivable held by Seller as set forth on
Exhibit B attached hereto;
(d) Certain vehicles of Seller set forth on attached
Exhibit C;
(e) The tangible personal property and assets of Seller of
every kind and description, real, personal or mixed,
wherever located, used in the Business including
without limitation, all such assets as reflected on the
October 31, 1997 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 October 31, 1997 Pro Forma Balance Sheet).
Such fixed assets and equipment of Seller are set
forth on attached Exhibit D;
(f) All of Seller fixed rate contracts and time and
material contracts with the organizations set forth on
attached Exhibit E;
(g) All of Seller service contracts which are set forth on
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attached Exhibit F;
(h) All intangible assets of Seller which are used in the
Business, including, without limitation, all purchase
orders, contracts, rights and agreements, work in
process, customers lists, supplier agreements, patents,
trademarks and service marks (including the goodwill
associated with the marks), computer programs, the
right to the use of the corporate and trade names of or
used by Seller in the manner set forth in Section 9.19,
or derivative thereof, as all or a part of a corporate
or trade name (excepting the intangible assets to be
retained by Seller as set forth in Section 2.3);
(i) All distribution contracts and authorizations of Seller
related to the Business;
(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 including all intellectual property rights
therein;
(k) The assignment of any telephone numbers used in the
Business of Seller;
(l) The covenant not to compete agreements with Seller, T.
Clayton and S. Shapiro as set forth on Exhibits L,L-1
and L-2 attached hereto and made a part hereof; and
(m) All other fees, assets, property, business and going
concern value, and rights 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.
2.3 Excluded Assets
.
The Excluded Assets are set forth on Exhibit _G_ hereto.
2.4
Lease Agreements.
Seller is the lessee under certain lease agreements calling
for payments of more than $5,000.00 per year covering the
following real and personal properties:
(i) 2,600 square feet located in Mountaineer Mall,
Morgantown, West Virginia, pursuant to a Lease
Agreement with First Union Management, Inc., as Lessor,
dated April 17, 1995, as amended by a First Amendment
Subsequent to Lease dated June 2, 1997;
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(ii) Office/warehouse space located at 300 Roxalana Business
Road, Dunbar, West Virginia 25064 pursuant to a Lease
Agreement with Carmal, Inc., as Lessor, dated December
10, 1996;
(iii) Tangible personal property lease agreements for
the Dunbar and Morgantown, West Virginia offices and
Justice Road, Virginia offices dated July 22, 1997 with
Golden Eagle Credit Corporation as Lessor; and
(iv) Lease Agreements with GTE Corporation for tangible
personal property dated August 22, 1997 and July 7,
1998, respectively.
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 interest
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 thereto, this Agreement
shall not constitute an assignment thereof and Seller shall
obtain any such necessary consents or assignments by the
Closing.
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2.5 Instruments
of Transfer.
Except as otherwise provided herein, at Closing, Seller will
deliver to Purchaser such bills of sale, endorsements,
assignments and other good and sufficient instruments of
transfer and assignment as shall be effective to vest in
Purchaser good and marketable title and interest in and to
the Purchased Assets. At or after the Closing, and without
further consideration, Seller will execute and deliver to
Purchaser such further 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 and the Shareholders agree to use their 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. In addition to the foregoing, Seller will
deliver to Purchaser the originals or copies of all of
Seller's books, records and other data relating to the
Purchased Assets; and simultaneously with such delivery,
Seller shall take all such acts as may be necessary to put
Purchaser in actual possession, and operating control of the
Purchased Assets. Seller shall cooperate with Purchaser to
permit Purchaser, if 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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2.6
Instruments Giving Certain Powers and Rights.
At the Closing, Seller shall, by appropriate instrument,
constitute and appoint 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
receivables or other assets, properties, rights or business
to be transferred and assigned to Purchaser as provided
herein. Seller further agrees that, at any time or from
time to time after the Closing, it will, upon the request of
Purchaser and at Seller's 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 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.
To the extent that any assignment does not result in a
complete transfer of the contracts to Purchaser because of a
provision in any contract against Seller's assignment of any
its right thereunder, Seller shall cooperate with Purchaser
in any reasonable manner proposed by Purchaser to complete
the acquisition of the contracts and Seller's rights,
benefits and privileges thereunder in order to fulfill and
carry out Seller's obligations under this Agreement. Such
additional action may include, but is not limited to: (i)
entering into a subcontract between Seller and Purchaser
which allows Purchaser to perform Seller's duties under such
contracts and to enforce Seller's rights thereunder; (ii)
the sale of Seller's stock owned by Shareholders to
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Purchaser on terms to which the parties may mutually agree
to allow Purchaser to operate Seller as a wholly-owned
subsidiary to enforce the contracts; or (iii) entering into
a new multi-party agreement with such customers which allows
Purchaser to perform Seller's obligations and enforce
Seller's rights under the contracts.
3.
ASSUMPTION OF LIABILITIES
3.1 Liabilities
to be Paid Off at Closing or Assumed.
(a) At the Closing, Purchaser shall assume and pay off or
discharge when due (and secure the release of Seller
and all Shareholders from any and all personal
liability or guaranty with respect to such obligations)
the following:
(i) Accounts payable incurred in the ordinary course
of the Business, which accounts payable totaled
$196,919.07 on January 31, 1998;
(ii) A sales tax payable in the amount of
$9,272.26 as of January 31, 1998; and
(iii) Long term notes payable to Jefferson Bank in
the approximate amount of $35,103.00 relating to
various vehicle loans as of January 31, 1998; and
(iv) Accrued vacation pay which totalled approximately
$20,000.00 on January 31, 1998.
The Assumed Liabilities to be assumed as set forth in
Section 3.1(i) through (iv) as may be incurred,
increased or decreased since January 31, 1998 to the
Pro Forma Balance Sheet for operations in the ordinary
course of business or any other transaction permitted
by this Agreement, and subject to the satisfaction of
the Net Asset Amount requirement set forth in Section
4.1(d) as of the Closing Date.
(b) 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 Section
3.1(a) above for which any Shareholder has personal
liability and Purchaser agrees to use its best efforts
to secure the release of any Shareholder from such
personal guaranty after the Closing if such releases
are not secured prior to Closing.
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3.2
Executory Contracts.
At the Closing, Purchaser shall assume and pay, perform and
discharge when due the following:
(a) All the obligations and liabilities of Seller arising
after the Closing under the contracts described in
Section 2.4; and
(b) All future liabilities for merchandise in transit
F.O.B. shipping point which has not been received
and/or entered into inventory by Seller as of the
Closing and for which no bill has been posted by Seller
as of the Closing.
3.3 Excluded Liabilities
.
Notwithstanding anything in this Agreement to the contrary,
Purchaser shall not assume or become responsible for any
claim, liability or obligation of any nature whatsoever,
whether known or unknown, accrued, absolute, contingent or
otherwise (a "Liability") of Seller except the Assumed
Liabilities. Without limiting the generality of the
foregoing, the following are included among the Liabilities
of Seller which Purchaser shall not assume or become
responsible for (unless specifically included as Assumed
Liabilities):
(a) any indebtedness or Liabilities relating to the depot
repair and refurbishing business of Seller being
retained by it;
(b) all Liabilities for any Taxes whether deferred or which
have accrued or may accrue or become due and payable by
Seller 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;
(c) all Liabilities and obligations to directors, officers,
employees or agents of Seller, including, without
limitation, all Liabilities and obligations for wages,
salary, bonuses, commissions, vacation (except as set
forth in Section 3.1(a)(iv)) 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, on or after the Closing Date;
(d) 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
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practice 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 of Seller's
employees, prior to, on or after the Closing Date;
(e) 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;
(f) all Liabilities and obligations of Seller arising under
or by virtue of federal or state environmental laws
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 prior to, on or after the Closing
Date;
(g) 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
the Closing Date;
(h) all Liabilities 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;
(i) all attorneys' fees, accountants or auditors' fees, and
other costs and expenses incurred by Seller and/or
Shareholders in connection with the negotiation,
preparation and performance of this Agreement or any of
the transactions contemplated hereby;
(j) all Liabilities of Seller in connection with the
Excluded Assets;
(k) 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; and
(l) 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
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the Closing Date or the conduct of the Business of
Seller prior to the Closing Date, except only for the
liabilities and obligations to be assumed or paid,
performed or discharged by Purchaser constituting the
Assumed Liabilities.
Seller shall pay all of its respective liabilities not being
assumed hereunder by Purchaser within the customary time for
payment of such liabilities.
It is the intent of the parties that upon Closing, all
employees of Seller involved in the Business will be
terminated by Seller and Purchaser will extend offers of
employment to such individuals.
4.
CONSIDERATION FOR
THE PURCHASED ASSETS
4.1 Purchase
Price for the Purchased Assets.
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 liabilities assumed or paid off at Closing under
Section 3.1.
The sum of the items contained in Sections 4.1(a) and (b)
above shall be adjusted by the amounts determined under
Sections 4.1(c), (d) and (e).
(c) If Seller's Pro Forma EBIT for the period November 1,
1996 through October 31, 1997 relating to the Business
is less than $500,000.00, the Purchase Price shall be
decreased on a dollar-for-dollar basis to the extent of
such deficit. The determination of Sellers' Pro Forma
EBIT for the applicable period shall be made in the
manner provided for in Section 5.1.
(d) If the Net Asset Amount of Seller as of the Closing
Date as shown on the Pro Forma Balance Sheet is less
than $600,000.00, the Purchase Price shall be decreased
on a dollar-for-dollar basis to the extent of such
deficit. The determination of the Net Asset Amount
shall be made in the manner provided for in Section 5.2
hereof.
(e) If the earnings before interest and taxes (_EBIT_) of
Purchaser's Virginia/West Virginia Service Division in
fiscal years one and two following the closing is less
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than $500,000.00 (prorated to $417,000.00 for the
period commencing with the Closing and ending January
5, 1999, $500,000.00 for the period commencing January
6, 1999 and ending January 5, 2000 and prorated to
$83,000.00 for the period commencing January 6, 2000
and ending March 5, 2000) in any applicable period, the
Purchase Price will be reduced on a dollar-for-dollar
basis to the extent of such deficit in EBIT for such
applicable period(s). The determination of such EBIT
for the applicable period shall be made in the manner
provided for in Section 5.3.
4.2 Payment of the Purchase Price for The Purchased Assets
.
Subject to the conditions, covenants, representations and
warranties hereof, at Closing, Purchaser shall deliver:
(a) By certified or bank cashier's checks or by wire
transfer to Seller, the amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00); and
(b) The Assumed Liabilities assumed or paid off under
Section 3.1; and
(c) The remaining sum of One Million Dollars
($1,000,000.00) as may be adjusted as set forth in
Sections 5.1, 5.2 or 5.3, shall be payable pursuant to
the terms of Purchaser's promissory note. The note
shall bear interest at the prime rate of Purchaser's
primary lender, Star Bank, National Association as of
the date of Closing. The principal of the note shall
be payable in two (2) equal annual installments with
the first principal payment commencing on the first
annual anniversary of the Closing and the remaining
principal payment being due on the second annual
anniversary date of the Closing. Interest on the
unpaid principal balance of the note shall be paid
quarterly with the first interest payment being due and
payable ninety (90) days from Closing. Such note and
all obligations of Purchaser thereunder will be
subordinated and made junior in right of payment to the
extent and in the manner provided in a Subordination
Agreement to be executed between Star Bank, National
Association and Purchaser and Seller. A copy of said
note is attached hereto as Exhibit H. Such note shall
be subordinate to Purchaser's lender pursuant to the
terms of a Subordination Agreement in the form attached
hereto as Exhibit I.
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4.3
Allocation of Purchase Price.
The Purchase Price to be paid to Seller hereunder, including
the liabilities assumed or paid by Purchaser pursuant to
Section 3.1, shall be allocated as set forth on Exhibit J
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; and (b)
in paying sales and other transfer taxes in connection with
the purchase and sale of assets pursuant to this Agreement.
4.4 Certain Closing Expenses
.
Seller shall be responsible for and shall pay all federal,
state and local sales tax (if any), documentary stamp tax
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.
5.
PRE-CLOSING AND POST-CLOSING ADJUSTMENTS
5.1 Upon the issuance of the audited financial statements by
Seller's accountant, Thomas & Thomas, P.C., Seller will
deliver to Purchaser a determination of Company's Pro Forma
EBIT prepared by Company's accountant for the subject period
along with any supporting documentation reasonably requested
by Purchaser. Within ten days following delivery to
Purchaser of such report and prior to Closing, Purchaser
shall have the right to object in writing to the results
contained in such determination. If timely objection is not
made by Purchaser of such determination, such determination
shall become final and binding. If timely objection is made
by Purchaser to Seller, and Purchaser and Seller are able to
resolve their differences in writing within five (5) days
following the expiration of the Pro Forma EBIT objection
period, then such determination as resolved shall become
final and binding as it relates to this Agreement. If
timely objection is made by Purchaser to Seller, and Seller
and Purchaser are unable to resolve their differences in
writing within five (5) days following the expiration of the
Pro Forma EBIT objection period, then all disputed matters
relating to the report shall be submitted to and reviewed by
an arbitrator (the _Arbitrator_) which shall be an
independent accounting firm selected by Seller and
Purchaser. If Purchaser and Seller are unable to agree
promptly on the accounting firm to serve as the Arbitrator,
each shall select, by not later than the seventh day
following the Pro Forma EBIT objection period, an accounting
firm, and each selected accounting firm shall be instructed
to jointly select promptly another accounting firm, such
third accounting firm shall serve as the Arbitrator. The
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Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly and
fairly to resolve all disputed matters and their decision
with respect to all disputed matters shall be final and
binding upon Seller and Purchaser. The expenses of the
arbitration (including reasonable attorney and accounting
fees) shall be borne one-half by Purchaser and one-half by
Seller. Any net reduction in the Purchase Price as a result
of said adjustments shall be made in the manner set forth in
Section 4.1(c) and shall be reflected by decreasing the face
amount of the note set forth in Section 4.2(c).
5.2 Within fifteen (15) days after the Closing, Seller shall
prepare and deliver to Purchaser a Pro Forma Balance Sheet
which shall set forth the Purchased Assets, and the Assumed
Liabilities as of such date. The Pro Forma Balance Sheet
shall be prepared using the same accounting methods,
policies, practices and procedures, with consistent
classifications, judgments, estimations and methodologies as
used in the preparation of the October 31, 1997 Pro Forma
Balance Sheet. If the Net Asset Amount (as defined below)
shown on the Pro Forma Balance Sheet is less than
$600,000.00, the Purchase Price to be paid to Seller shall
be decreased on a dollar-for-dollar basis for such
difference by decreasing the face amount of the note as set
forth in Section 4.2(c) and if the decrease is in excess of
the face amount of the note, such amount equal to the excess
shall be paid immediately by Seller to Purchaser by
certified or cashier's check on the date of the resolution
of this determination. If the Net Asset Amount shown on the
Pro Forma Balance Sheet equals or exceeds $600,000,00,
Purchaser shall be entitled to such excess. The Net Asset
Amount shall mean the total of the Purchased Assets less the
total of the Assumed Liabilities, in each case as shown on
the Pro Forma Balance Sheet.
5.3 Within forty-five (45) days after the end of the applicable
periods set forth in Section 4.1(e), i.e. January 6, 1999,
January 6, 2000 and March 5, 2000, Purchaser will deliver to
Seller a copy of the report of EBIT prepared by Purchaser
for the subject period along with any supporting
documentation reasonably requested by Seller. Within thirty
(30) days of 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
Seller to such determination, such determination shall
become final and binding for purposes of this Agreement. If
timely objection is made by Seller to Purchaser and
Purchaser and Seller are able to resolve their differences
in writing within thirty (30) days following the expiration
of the thirty-day period, then such determination shall
become final and binding as it relates to this Agreement.
If timely objection is made by Seller to Purchaser and
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Seller and Purchaser are unable to resolve their differences
in writing within thirty (30) days following the expiration
of the thirty-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 upon an accounting firm to serve as the Arbitrator,
each shall select by no later than the thirtieth day
following the expiration of the sixty (60) day period, an
accounting firm and the two selected accounting firms 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
Seller and Purchaser. The expenses of the arbitration
(including reasonable attorney and accounting fees) shall be
borne one-half by Seller and one-half by Purchaser.
For purposes of this Section, the term _EBIT_ shall mean the
net income before taxes and interest expense of Purchaser's
Virginia and West Virginia Service Division. The EBIT shall
be determined by the independent accountant regularly
retained by the Purchaser in the manner set forth above in
accordance with generally accepted accounting principles,
subject to verification as described below. For purposes of
determining the EBIT for any particular year, except as
noted above, no item of income or expense will be allocated
by Purchaser to Purchaser's Virginia/West Virginia Service
Division unless such items are reasonably calculated to
contribute to the increased profits of such Division, it
being the intent of the parties that Purchaser shall
exercise the utmost good faith with respect to allocations
of income and expense to Purchaser's Virginia/West Virginia
Service Division. Incident to the determination of EBIT of
Purchaser's Virginia/West Virginia Service Division, no
compensation of any executive or other employee of Purchaser
or its affiliates who does not work directly for Purchaser's
Virginia/West Virginia Service Division shall be allocated
to such Division. In making the determination of EBIT for
the Purchaser's Virginia/West Virginia Service Division for
calendar year 1 following the Closing, a one and one-half
percent (1.5%) MAS royalty fee on gross sales by the
Purchaser's Virginia/West Virginia Service Division shall be
made incident to said determination. A MAS royalty fee is a
fee charged to each branch of the Purchaser for the
following services performed by Purchaser's corporate
headquarters: marketing, advertising, professional,
accounting and other related expenses. For each subsequent
year described above in this paragraph, the parties shall,
in good faith, agree upon an MAS royalty fee to be charged
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hereunder based on the level of services and support being
provided by the Purchaser to its Virginia/West Virginia
Service Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to an
agreement for each subsequent year. For purposes of this
Section, the term _Virginia/West Virginia Service Division_
shall be the Business acquired from Seller. Purchaser's
contract with the State of West Virginia relating to
computer hardware and software and services for educational
purposes for K through 12 shall not be included as part of
the Virginia/West Virginia Service Division.
6.
EMPLOYMENT AGREEMENTS
6.1 Employment Agreements of Shareholders
.
At Closing, Purchaser shall enter into an Employment
Agreements with T. Clayton and S. Shapiro. Copies of said
Employment Agreements are attached hereto and made a part
hereof as Exhibits K and K-1.
7.
COVENANT NOT TO COMPETE AGREEMENTS
7.1
Covenant Not to Compete Agreements of Seller and
Shareholders
.
At Closing, Seller and each Shareholder shall enter into
Covenant Not to Compete Agreements with Purchaser. Copies
of said Covenant Not to Compete Agreements are attached
hereto and made a part hereof as Exhibits L, L-1 and L-2.
8.
LEASE AGREEMENT
8.1
Lease Agreement - 14201 Justice Road, Midlothian, Virginia
23113.
CCS&W, a Virginia general partnership, is the owner of the
real estate located at 14201 Justice Road, Midlothian,
Virginia 23113. As a condition of the Closing of this
Agreement, CCS&W, a Virginia general partnership, shall
have entered into a lease agreement with Purchaser in the
form attached hereto as Exhibit M. Such lease shall be for
a period of five (5) years, the rental rate shall be subject
to verification by an independent appraiser and such lease
shall include a thirty (30) month cancellation (bust-up)
provision.
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9.
REPRESENTATIONS AND WARRANTIES OF SELLER
AND 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 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:
9.1
Organization, Good Standing, Qualification and Power of
Seller.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Virginia 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 validly existing in West Virginia and in good
standing in each of the other 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.
The Disclosure Schedule correctly lists, with respect to the
Seller, each jurisdiction in which it is qualified to do
business as a foreign corporation.
9.2 Capitalization
.
The authorized capitalization of the Seller consists solely
of ten thousand (10,000) shares of no par common stock, of
which fifty (50) shares representing one hundred percent
(100%) of the issued stock are currently owned in the manner
set forth in the third 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.
9.3 Authority to Make Agreement
.
Seller and each Shareholder have the full legal power and
authority to enter into, execute, deliver and perform their
respective 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 duly and
validly 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,
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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.
9.4
Existing 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, and the consummation of the other
transactions contemplated thereby: (i) do not violate
any provisions of law, statute, ordinance or regulation
applicable to Seller, any Shareholder 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 conflict with, or result in
the breach or termination of any provision of, or
constitute a 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 indenture, mortgage, lease, deed of trust, or
other instrument, 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 their assets and properties are
bound (including, without limitation, the Purchased
Assets), and (iii) will not result in the creation of
any encumbrance upon any of the properties, assets, or
Business of Seller or of any Shareholder. Neither
Seller, nor any Shareholder, nor any of their assets or
properties (including, without limitation, the
Purchased Assets) is subject to any provision of 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.
(b) 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 present practices of Seller after the Closing Date
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or which, by operation of law, or pursuant to its
terms, would be breached, terminate, 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) 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.
9.5 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 generally accepted
accounting principles (except for the Pro Forma Balance
Sheet of Seller which will be prepared as set forth in
Section 5.2) 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
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.
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9.6
Customers.
The Disclosure Schedule includes a correct list of the
twenty-five (25) largest customers of the Seller by sales in
dollars for each of the past two (2) years and the amount of
business done by the Seller with each such customer for each
year. Assuming that Purchaser continues to conduct the
Business in the ordinary course consistent with Seller's
prior practices generally and specifically with respect to
Seller's current customers, except for Via Systems, Inc.,
Seller has no knowledge that any of the current customers of
Seller will or intend to (a) cease doing business with the
Seller; or (b) materially alter the amount of business they
are presently doing with the Seller; or (c) not do business
with the Purchaser after the Closing.
9.7 Intangible Property
.
The Disclosure Schedule includes an accurate list and
summary description of all patents, franchises,
distributorships, 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. The Disclosure Schedule contains an 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.
9.8
Significant Agreements.
The Disclosure Schedule contains an accurate and complete
list of all 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;
(b) Providing for the extension of credit other than
consistent with normal credit terms described in the
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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, agent, shareholder, consultant,
broker or advisor (except for Seller's contract with
Robert Mahlum) of Seller or any other contract between
Seller and any director, officer, employee, agent,
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, agent,
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;
(j) Leases or subleases with respect to any property, real,
personal or mixed, in which the Seller is involved, as
lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s)
with respect to any property which Seller has entered
into as licensor.
True and correct copies of all items so disclosed in the
Disclosure Schedule have been provided or made available to
Purchaser. 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
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<PAGE>
creditors' rights generally, and there have been no material
defaults or claims of material default by the Seller and
there are no 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 default
by the Seller, or would cause the acceleration of any
obligation of any party thereto or the creation of an
Encumbrance upon any asset of the Seller. 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 an accurate summary description has
been provided.
9.9 Inventory
.
Except as specifically described on the Disclosure Schedule,
all inventory is reflected on the October 31, 1997 Balance
Sheet and at the Closing Date will consist of items of
quality and quantity which are usable or saleable in the
ordinary course of business of Seller in the conduct of its
Business, and items of below standard quality and items not
usable or saleable in the ordinary course of Seller's
business have been written down in value in accordance with
good business practices to estimated net realizable market
value or adequate reserves have been provided therefor. The
values at which the inventory are carried on the October 31,
1997 Balance Sheet reflect the normal valuation policy of
Seller in setting inventory at the lower of cost or net
realizable market values, all in accordance with generally
accepted accounting principles. Except as set forth on the
Disclosure Schedule, since October 31, 1997, the inventory
of Seller has been maintained at normal and adequate levels
for the continuation of the Business in its normal course.
No change has occurred in such inventory which affects or
will affect the usability or salability thereof, no write-
downs or write-offs of the value of such inventory has
occurred and no additional amounts have been reserved with
respect to such inventories. The Disclosure Schedule lists
the location of all inventory together with a brief
description of the type and amount at each location.
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9.10
Accounts Receivable.
All accounts receivable of Seller which have arisen in
connection with the Business or otherwise and which are
reflected on the Financial Statements and all receivables
which have arisen since October 31, 1997 through the Closing
shall have arisen only from bonafide transactions in the
ordinary course of business and represent valid, collectible
and existing claims. Subject to customer credit, the
payment of each account receivable will not be subject to
any known defense, counterclaim condition (other than
Seller's performance in the ordinary course of business)
whatsoever. The Disclosure Schedule hereto accurately
lists, as of the Closing Date, all receivables arising out
of or relating to the Business, the amount owing and aging
of such accounts receivable, the name and last known address
of the party from whom such account receivable is owing, any
security in favor of Seller for the repayment of such
account receivable which Seller purports to have. Seller
has delivered to Purchaser complete and correct copies of
all instruments, documents and agreements evidencing such
accounts receivable and of all instruments, documents or
agreements (if any) creating security therefor.
9.11 Taxes
.
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 by proper proceedings and for which adequate
reserves have been established in accordance with generally
accepted accounting principles, 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 all of such taxes have been either paid or adequate
reserves or other provision has been made therefor.
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9.12
Title to Purchased Assets.
(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 Encumbrances whatsoever; 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
Encumbrances whatsoever, whether perfected or
unperfected; and, by way of illustration but not
limitation, there are not any unpaid taxes, assessments
or charges due or payable by Seller to any federal,
state or local agency, or any 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 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. To the best of knowledge of
Seller, all of Seller's tangible and other operating
assets used in the Business which are being sold
hereunder to Purchaser are in good operating condition
and repair, free of all structural, material or
mechanical defects and conform with all applicable laws
and regulations.
(b) Except as otherwise specifically set forth herein,
Seller is not a party to any contract, agreement, lease
or commitment that would result in any claim,
obligation, liability, lien or other charge against
Purchaser or the Purchased Assets, and Purchaser is not
obligated to assume the obligations under any contract,
agreement, lease or commitment of Seller, except as
specifically set forth herein.
9.13 Pending Actions
.
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"). To the best of Seller's knowledge, there are no
Actions or Disputes pending or threatened against or
affecting (directly or indirectly) the Seller or its
property or assets, nor are there any facts or conditions
which exist which would give rise to any such Actions or
Disputes which, if determined adversely to Seller, would
have a material adverse effect upon Seller's Business.
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<PAGE>
9.14
Insurance.
The Disclosure Schedule contains an 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. All such
policies are in full force and effect; are 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 adequate
insurance coverage for the assets and operations of the
Seller and will remain in full force and effect through the
Closing. 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.
9.15
Status of Business.
(a) Since October 31, 1997, the Business of the Seller has
been operated only in the ordinary course, and, except
as set forth in the Disclosure Schedule or permitted
under Section 2.3 dealing with Excluded Assets, there
has not been with respect to the 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;
(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,
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except for rights of nominal value;
(v) Any cancellation or compromise of any material
debts owed to Seller or material claims known by
Seller against another person or entity, except in
the ordinary course of business;
(vi) Any 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);
(vii) 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;
(viii) Any direct or indirect redemption, purchase or
other acquisition for value by the Seller of its
shares, or any agreement to do so;
(ix) 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 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;
(x) Any loans or advances between the Seller and any
Shareholder, or any family member or any associate
or Affiliate of the Seller or of any Shareholder;
(xi) Any material contract cancelled or the terms
thereof amended or any notice received with
respect to any such contract terminating or
threatening termination or amendment of any such
contract;
(xii) Any transfer or grant of any material rights under
any leases, licenses, agreements, or with respect
to any trade secrets or know-how;
(xiii) Any labor trouble or employee controversy
materially adversely affecting its Business or
assets; or
(xiv) Any dividend or other distribution on or in
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respect of shares of its capital stock.
(b) Seller is not
(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.
Seller has all 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 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 set forth on
the Disclosure Schedule and 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) No claim, litigation, action, investigation or
proceeding is pending or, to the knowledge of Seller,
threatened, and no order, injunction or decree is
outstanding, against or relating to the Business or its
assets, and Seller does not know of any information
which could result in such a claim, litigation, action,
investigation or proceeding, which, if determined
adversely to Seller, would have a material adverse
effect upon Seller's Business.
(d) 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. To the best of Seller's knowledge,
Seller is in compliance with all federal, state and
local laws, ordinances and regulations relating to
employment and employment practices at the Business,
and all employee benefit plans and tax laws relating to
employment at the Business, except where such non-
compliance would not have a materially adverse effect
on the Business. 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 the best of Seller's
knowledge, no condition exists that could give rise to
any unfair labor practice complaint. There is no labor
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strike, dispute, slowdown or stoppage actually pending
or, to the knowledge of Seller, threatened against or
involving the Business. Seller has no labor contracts
or collective bargaining agreements with respect to any
of its employees.
9.16 Environmental Laws
.
(a) To the best of Seller's knowledge, the real estate
located at (i) Mountaineer Mall, Morgantown, WV; (ii)
300 Roxalana Business Road, Dunbar, WV 25064; and
(iii) 14201 Justice Road, Midlothian, VA 23113 (_Real
Estate_) have 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
dumps, or accidental spills in, on or about the Real
Estate or any of the assets of the Seller, whether real
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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) 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) The Disclosure Schedule will list all waste disposal
sites, dump sites and other areas either on the Real
Estate or offsite at which hazardous or toxic waste
generated by the Seller has been disposed (in each case
identifying such waste) and it will specifically
identify each such site or area which is or has been
included in any published federal, state or local
(domestic or foreign) superfund or other list of
hazardous or toxic waste sites or areas.
(f) 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. A true and
correct list of all such permits, licenses and other
authorizations is set forth in the Disclosure Schedule.
9.17 Certain 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) The Disclosures Schedule contains a true, complete and
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accurate list of the following: the names, positions,
and compensation of the present employees of the
Seller, together with a statement of the annual salary
payable to salaried employees and a summary of the
bonuses and description of agreements 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 of Seller are employees-at-will.
(c) Seller has no retired employees who are receiving or
are entitled to receive any payments, health or other
benefits from Seller.
9.18 Payments to Employees
.
All accrued obligations of Seller relating to 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 have been paid or
accrued by Seller. All 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 or will be paid or
accrued by Seller.
9.19
Change of Corporate Name.
At the Closing, Seller, if requested by Purchaser shall
execute a Consent for Use of Similar Name, as set forth in
the Disclosure Schedule, granting to Purchaser the use of
the letters CBS.
9.20 Brokers 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.
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9.21
Preservation of Organization.
Except as set forth on the Disclosure Schedule, since
October 31, 1997, the Seller has kept intact the Business
and organization of the Seller; retained the services of all
the Seller's material employees and agents, retained the
Seller's arrangements with the manufacturers of the products
distributed by Seller in the same manner as conducted prior
to such date, and engaged in no transaction other than in
the ordinary course of Seller's Business.
9.22 Absence of Certain Business Practices
.
Neither Seller, nor any officer, employee or agent of the
Seller, nor any other Person acting on its behalf, has,
directly or indirectly, within the past five years given or
agreed to give any gift, bribe, rebate or kickback or
otherwise provide any similar benefit to any customer,
supplier, governmental employee or any other Person who is
or may be in a position to help or hinder Seller or the
Business (or assist Seller in connection with any actual or
proposed transaction relating to the Business or any other
business previously operated by Company) (i) which subjected
or might have subjected Seller to any damage or penalty in
any civil, criminal or governmental litigation or
proceeding, (ii) which if not given in the past, might have
had a material adverse effect on the Business, (iii) which
if not continued in the future, might have a material
adverse effect on the Business or subject Seller to suit or
penalty in any private or governmental litigation or
proceeding, (iv) for any of the purposes described in
Section 162(c) of the Code or (v) for the purpose of
establishing or maintaining any concealed fund or concealed
bank account.
9.23 Suppliers
.
The Disclosure Statement sets forth the names of and
description of contractual arrangements (whether or not
binding or in writing) with the twenty-five (25) largest
suppliers of the Seller by sales or services in dollars.
Assuming that Purchaser continues to conduct the Business in
the ordinary course consistent with Seller's prior practices
generally and specifically with respect to Seller's current
suppliers, Seller has no direct knowledge that any of the
current suppliers of the Seller will, or intend to, (a)
cease doing business with the Seller; or (b) materially
alter the amount of business they are currently doing with
the Seller; or (c) not do business with the Purchaser after
the Closing.
9.24
Product Liability Claims.
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To the best of Seller's knowledge, there are no material
product liability claims against the Seller, either
potential or existing, which are not fully covered by
product liability insurance coverage with a responsible
company which, if determined adversely to Seller, would have
a material adverse effect upon Seller's Business.
9.25
Employee Benefit Plans.
For the purposes of this Section 9.25, "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) 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
Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1)
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
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Seller represents and warrants that, to the best of
Seller's knowledge;
(i) The Seller has not, with respect to any Employee
Benefit Plans, engaged in any prohibited
transaction, as such term is defined in Section
4975 of the Code or Section 406 of ERISA.
(ii) The Seller has, with respect to any Employee
Benefit Plans, 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 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 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.
(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.
(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
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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, 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 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 liability arising as a result of
withdrawal from any multi-employer plan, no such
withdrawal liability has been asserted and no such
withdrawal liability will be asserted with regard
to any withdrawal or partial withdrawal on or
before the date of this Agreement.
9.26
Assets Necessary to the Business.
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The Seller owns all assets and properties (tangible and
intangible) necessary to carry on its Business and
operations as presently conducted and as shown on the
Financial Statements. Such assets and properties are all of
the assets and properties necessary to carry on Seller's
Business as presently conducted and none of the Shareholders
(other than through their ownership of stock in the Seller
and/or as set forth on the Disclosure Schedule) nor any
member of their respective families owns or leases or has
any interest in any assets or properties presently being
used to carry on the Business of Seller.
9.27 Transactions with Affiliates
.
Except as disclosed on the Disclosure Schedule, there is no
lease, sublease, contract, agreement or other arrangement of
any kind whatsoever entered into by Seller and any
Shareholder or affiliate.
9.28 Territorial Restrictions
.
Except as described in the Disclosure Schedule, Seller is
not restricted by any written agreement or understanding
with any other Person from carrying on the Business anywhere
in the world. Neither Purchaser nor any of its affiliates
will, as a result of its acquisition of the Purchased
Assets, become restricted in carrying on the Business
anywhere in the world as a result of any contract or other
agreement to which Seller is a party or by which it is
bound.
9.30 Full Disclosure
.
None of the representations and warranties made by the
Seller herein, or made on its behalf, including any
disclosures made in the Disclosure Schedule, contains or
will contain, to the best of Seller's knowledge, any untrue
statement of material fact or omits or will omit any
material fact.
10.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller 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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10.1
Organization, 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.
10.2 Status 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. 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 Closing) 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:
(i) conflict with, violate or result in any
breach of any judgment, decree, order, statute,
ordinance, rule or regulation applicable to
Purchaser;
(ii) conflict with, violate or result in any
breach of any agreement or instrument to which
Purchaser is a party or by which Purchaser or any
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<PAGE>
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.
10.3
Brokers 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.
11.
BULK SALES ACT
11.1 Compliance
with Bulk Sales Act.
Purchaser waives compliance with the provisions of any
applicable bulk sales law and Seller and Shareholders,
jointly and severally, agree to indemnify and hold harmless
Purchaser from any liability incurred as a result of the
failure to so comply, except to liabilities explicitly
assumed hereunder by Purchaser.
12.
SURVIVAL OF AND RELIANCE UPON
REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION
12.1 Survival 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, 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 12.3 and 12.4 hereof, at law or in equity, for the
period beginning on the date of Closing and ending three (3)
years thereafter, except for the representations, warranties
and agreements designated and identified in Sections 3.1,
3.2, 3.3, 4.2, 9.3, 9.11, 9.12, 9.16 and 10.2 which shall
survive the Closing and shall terminate in accordance with
the statute of limitations governing written contracts in
the State of Virginia and Exhibits K, K-1, L, L-1, L-2 and
M, which shall terminate as provided therein.
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12.2
Reliance Upon and Enforcement of Representations, Warranties
and Agreements
.
(a) Seller hereby agree 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 have
the right to rely fully upon the representations,
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.
12.3 Indemnification by Seller and Shareholders
.
Provided Purchaser makes a written claim for indemnification
against Seller and/or Shareholders within any applicable
survival period specified in Section 12.1, Seller and
Shareholders (jointly and severally, shall indemnify
Purchaser against and hold it harmless from:
(i) any and all loss, damage, liability or deficiency
resulting from or arising out of any inaccuracy in or
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 pursuant to the provisions of the
Agreement;
(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;
(iii) any liability (except for any Assumed Liabilities
described in Section 3.1 and 3.2) or other obligation
incurred by or imposed upon Purchaser resulting from
the failure of the parties to comply with the
provisions of any law relating to bulk transfers which
may be applicable to the transaction herein
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<PAGE>
contemplated;
(iv) any and all costs and expenses (including reasonable
legal and accounting fees) related to any of the
foregoing, subject to the provisions of Section 12.5.
Except as otherwise provided in this Agreement, nothing in
this Section 12.3 shall be construed to limit the amount to
which, or the time by which, by reason of offset or
otherwise, the Purchaser may recover from Seller or the
Shareholders pursuant to this Agreement resulting from
Seller's or the Shareholders' 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 12.5,
shall first be offset against the amount payable to Seller
under the promissory note. 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. Prior to any setoff, Purchaser shall send written
notice to the holder of the Promissory Note (the _Holder_)
stating with reasonable specificity the basis for
Purchaser's right to such indemnification payment. If
within fifteen (15) days after receipt of such notice of
setoff, the Holder contests in writing sent to Purchaser,
Purchaser's claim of indemnification under this Section 12,
then the amount which Purchaser could otherwise have paid to
the holder but for the exercise of such right of setoff
shall be paid into an interest bearing escrow account
maintained by a bank selected by Purchaser pursuant to a
written escrow agreement signed by the parties to this
Agreement or a bank account under the joint control of the
parties to this Agreement, 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 setoff,
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
thirty (30) days of receipt of notice by Purchaser of the
Holder's objections to the setoff.
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12.4
Indemnification by Purchaser.
Provided Shareholders and Seller make a written claim for
indemnification against Purchaser within any applicable
survival period specified in Section 12.1, Purchaser shall
indemnify Seller and Shareholders against and hold it
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 breach of a
covenant or warranty of Seller hereunder); (iii) any
inaccuracy in or breach of any representation, warranty,
covenant or obligation made or incurred by Purchaser herein
or in any other agreement, instrument, or document delivered
by or on behalf of Purchaser pursuant to the provisions of
this Agreement; and (iv) any and all related costs and
expenses (including reasonable legal and accounting fees),
subject to the provisions of 12.5. Except as otherwise
provided herein, nothing in this Section 12.4 shall be
construed to limit the amount to which, or the time 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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12.5
Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until 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 and 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. The
Indemnifying Party may elect, within thirty (30) days
after receipt of such notice, or five (5) days before
the return date required by any citation, claim or
other statute, whichever occurs earlier, to contest or
defend against such claim at the Indemnifying Party's
expense, and shall give written notice to the Party to
be Indemnified of the commencement of such defense with
reasonable promptness after giving of the written
notice of the claim by the Party to be Indemnified.
The Party to be Indemnified shall be entitled to
participate with the Indemnifying Party in such event
(at the cost and expense of the Party to be
Indemnified) but shall not be entitled in any way to
release, waive, settle, modify, or pay such claim
without the consent of the Indemnifying Party if the
Indemnifying Party has assumed such defense. In the
event that the Party to be Indemnified determines to
settle any such claim without such prior consent of the
Indemnifying Party, the Indemnifying Party shall have
no further indemnification obligations under this
Section 12 with respect to such claim. In the event
that the Indemnifying Party does not elect to contest,
defend, settle or pay the claim as provided above, the
Party to be Indemnified shall have the exclusive right
to prosecute, defend, compromise, settle or pay the
claim in its sole discretion and pursue its rights
under this Agreement. In the event the Indemnifying
Party shall assume the defense, the Indemnifying Party
and the Party to be Indemnified shall cooperate in the
defense of such action and the records of each shall be
available to the other with respect to such defense.
12.6
Limitation on Liability
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Notwithstanding anything expressed or implied to the
contrary in this Agreement:
Each Shareholder and Seller shall have no liability under
Section 12.3 until the aggregate amount of all claims under
Section 12.3 exceed a deductible of Ten Thousand Dollars
($10,000); provided, however, that if such claims exceed Ten
Thousand Dollars ($10,000), then the indemnification
provided for in Section 12.3 shall apply to claims in excess
of the Ten Thousand Dollars ($10,000) deductible provided
for above.
13.
EXPRESS CONDITIONS
13.1 Notwithstanding anything herein to the contrary, Purchaser'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 business in the States of Virginia
and West Virginia.
(c) Approval of the Board of Directors of Purchaser.
(d) Purchaser has completed its due diligence investigation
of the books and records and business prospects of
Seller to its satisfaction.
The contingencies set forth in this Section shall have all
been met, or rejected in writing, by Purchaser and Seller,
where applicable, no later than March 6, 1998.
14.
THE CLOSING
14.1 Date, Time and Place of Closing
.
Consummation of the transactions contemplated hereby (the
"Closing") shall take place on March 6, 1998 (the "Closing
Date"), at 10:00 a.m. EST at the offices of Lindhorst &
Dreidame, 312 Walnut Street, Suite 2300, Cincinnati, Ohio
45202, or on such other Closing Date, or at such other time
and/or place as the parties may mutually agree upon.
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14.2
Conditions 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) Seller shall have complied with and 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
properties, or operations of Seller since December 31,
1997;
(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 required by Sections
2.5 and 2.6;
(ii) Releases (or copies thereof) of all liens, claims,
charges, encumbrances, security interests and
restrictions on 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) Certificates of Existence for Seller from the
Secretary of State of Virginia dated no earlier
than fifteen (15) days prior to Closing;
(v) Opinion letter of Saunders, Cary and Patterson,
Richmond, VA for Seller containing the opinion set
forth in Exhibit _N_;
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(vi) Seller shall have entered into the Subordination
Agreement in the form attached hereto as Exhibit
"I";
(vii) Seller and the Shareholders shall have entered
into the non-competition agreements set forth in
Exhibits _L_, _L-1" and _L-2";
(viii) Shareholders shall have entered into the
Employment Agreements set forth in Exhibits _K_
and _K-1";
(ix) The express conditions set forth in Section 13
have been satisfied or waived.
(e) Seller will execute the Consent for Use of Similar Name
as set forth in Section 9.19.
(f) CCS&W, a Virginia general partnership, shall enter into
a lease agreement with Purchaser for the Richmond,
Virginia location as set forth in Exhibit _M_.
(g) Purchaser shall have received assurances in form and
substance satisfactory to it (that may include
insurance certificates) that Seller has made all
provisions necessary under applicable law, with regard
to an employer's obligation to provide for a
continuation of health insurance and other benefits of
any employee, who is not employed by Seller following
termination of employment.
(h) On or before the Closing Date, if reasonably
obtainable, or promptly thereafter, Seller shall
provide to Purchaser copies of certificates from the
appropriate taxing authority stating that no Taxes are
due to any state or other taxing authority with respect
to the Business of Seller.
14.3 Conditions 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
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contemplated by this Agreement;
(c) 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 certified or bank cashier's check or wire
transfer for the aggregate amount to be paid to
Seller at the Closing pursuant to Section 4.2(a)
hereof;
(ii) Assumption of Liabilities Agreement under which
Purchaser assumes the Liabilities set forth in
Sections 3.1 and 3.2;
(iii) A subordinated promissory note as set forth in
Section 4.2(c);
(iv) Certified copies of the corporate actions taken by
Purchaser authorizing the execution, delivery and
performance of this Agreement;
(v) 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;
(vi) 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 "O";
(vii) All of the express conditions set forth in Section
14 have been satisfied or waived.
(d) Purchaser shall have entered into the Employment
Agreements set forth in Exhibit _K_ and _K-1".
15.
GENERAL PROVISIONS
15.1
Publicity.
All public announcements relating to this Agreement or the
transactions contemplated hereby will be made by Purchaser
with the consent of Seller, which consent will not be
unreasonably withheld, except for any disclosure which may
be required because of Purchaser's being a publicly-traded
corporation on the over-the-counter market.
- 46 -
<PAGE>
15.2
Expenses.
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 their respective representatives.
15.3 Notices
.
All notices and other communications required by this
Agreement shall be in writing and shall be deemed given if
delivered by hand or 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
With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45202
(b) If to Seller, to:
Commercial Business Systems, Inc.
14321 Sommerville Court, Suite 103
Midlothian, VA 23113
With a copy to:
Saunders, Cary & Patterson
9100 Arboretum Parkway, Suite 300
Richmond, Virginia 23236
Attention: Edwin Gadberry, III
(c) If to Shareholders, to:
Thomas M. Clayton
14321 Sommerville Court, Suite 103
Midlothian, VA 23113
15.4
Binding 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
assigns.
- 47 -
<PAGE>
15.5
Headings.
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.
15.6
Exhibits.
The Exhibits referred to in this Agreement constitute an
integral part of this Agreement as if fully rewritten
herein.
15.7 Counterparts
.
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.
15.8 Governing Law
.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Virginia, without
regard to its laws regarding conflict of laws.
15.9
Severability.
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.
- 48 -
<PAGE>
15.10
Waivers; Remedies Exclusive.
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. 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. Except as otherwise provided in the note
issued pursuant to Section 4.2(c), the Employment Agreements
and the Covenant Not to Compete Agreements, the
indemnification provided for by Section 12 herein shall
constitute the exclusive remedy of any party with respect to
(i) the matters for which such indemnification is provided
and (ii) any other matters arising out of, relating to or
connected with this Agreement or the transactions
contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought
in contract, tort or other legal theory whatsoever.
15.11
Assignments.
Except as otherwise provided in this Agreement, no party
shall assign its rights or obligations hereunder prior to
Closing without the prior written consent of the other
party.
15.12 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.
- 49 -
<PAGE>
15.13
Business Records.
Seller and Shareholders 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.
The parties hereto have executed this Agreement as of the
date first above written.
WITNESSES: COMMERCIAL BUSINESS SYSTEMS,
INC.
___________________________
___________________________
By:________________________________
___________________________ POMEROY COMPUTER RESOURCES, INC.
___________________________
By:________________________________
___________________________
___________________________
__________________________________
THOMAS M. CLAYTON
___________________________
___________________________
__________________________________
STEVEN SHAPIRO
- 50 -
<PAGE>
EXHIBIT _G_
EXCLUDED ASSETS
1. Any income tax refunds
2. The Purchase Price or any part thereof received by Seller
for the sale of the Purchased Assets
3. Any tangible or intangible assets related to the depot
repair and refurbishing business of Seller
4. Seller's minute book and stock records
<PAGE>
EXHIBIT J
ALLOCATION OF PURCHASE PRICE
Asset
Purchase Price Allocation
Cash or Cash Equivalent Book Value at Time of Sale
Accounts Receivable Book Value at Time of Sale
Inventory Book Value at Time of Sale
Prepaid Expenses Book Value at Time of Sale
Equipment, Furniture & Fixtures Book Value at Time of Sale
Leasehold Improvements Book Value at Time of Sale
Other Assets Book Value at Time of Sale
Goodwill Book Value at Time of Sale
<PAGE>
EXHIBIT _1"
LIABILITIES BEING ASSUMED
(i) Accounts payable incurred in the ordinary course of the
Business, which accounts payable totaled $196,919.07 on
January 31, 1998;
(ii) A sales tax payable in the amount of $9,272.26 as
of January 31, 1998; and
(iii) Long term notes payable to Jefferson Bank in the
approximate amount of $35,103.00 relating to various
vehicle loans as of January 31, 1998; and
(iv) Accrued vacation pay which totalled approximately
$20,000.00 on January 31, 1998.
The Assumed Liabilities to be assumed as set forth
in Section 3.1(i) through (iv) as may be incurred,
increased or decreased since January 31, 1998 to
the Pro Forma Balance Sheet for operations in the
ordinary course of business or any other
transaction permitted by this Agreement, and
subject to the satisfaction of the Net Asset
Amount requirement set forth in Section 4.1(d) as
of the Closing Date.
<PAGE>
EXHIBIT A
Permitted Increase - $50,000,000
$40,000,000.00 - Senior Debt
+ $50,000,000.00
- Permitted Increase
$90,000,000.00 - Total Subordinated Debt
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the ____ day of _____, 1998, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
("Company"), and THOMAS M. CLAYTON ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement
("Purchase Agreement") of even date pursuant to which it
purchased certain of the assets of Commercial Business Systems,
Inc. (_CBS_); and
WHEREAS, Employee owns ninety percent (90%) of the outstanding
stock of CBS; and
WHEREAS, Employee, as an inducement for and in consideration of
Company entering into the Purchase Agreement, has agreed to enter
into and execute this Employment Agreement pursuant to Section 6
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 6th day of March, 1998,
and shall continue for a period of five (5) years ending
March 5, 2003 unless terminated earlier pursuant to the
provisions of Section 10, provided that Sections 8, 9,
10(b) 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 intent not to renew the terms of this Agreement
sixty (60) days prior to expiration of the then expiring
term.
4. Duties
. Employee shall serve as Regional Vice President
for the Company's Virginia/West Virginia Service Division.
May 1, 1998 (9:33AM)
<PAGE>
Employee shall be responsible to and report directly to the
officers of Company. 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 fur-
ther agrees to refrain during the term of this Agreement
from making any sales 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) Base Salary: During each year of the initial term
of this Agreement, Employee shall be paid an annual
base salary of One Hundred Twenty-Five Thousand
Dollars ($125,000.00). Said base salary shall be
payable in accordance with the historical payroll
practices of the Company.
(b) Annual Cash Bonus: In addition to Employee's base
compensation as set forth in paragraph 5(a) above,
Employee shall be entitled (in the event certain
criteria as defined below is satisfied) to an annual
cash bonus to be determined as follows:
(i) If the earnings before interest and taxes (_EBIT_)
of Company's Virginia/West Virginia Service
Division for each year (or portion thereof as set
forth below) of the initial term of this Agreement
exceeds the following: March 6, 1998 to January
5, 1999 - $417,000.00; January 6, 1999 to January
5, 2000 - $550,000.00; January 6, 2000 to January
5, 2001 - $600,000.00; January 6, 2001 to January
5, 2002 - $650,000.00; January 6, 2002 to January
5, 2003 - $700,000.00; and January 6, 2003 to
March 5, 2003 - $83,000.00, Company shall pay to
Employee by check or wire transfer within ninety
(90) days following the end of such year, an
amount equal to fifty percent (50%) of fifty
percent (50%) of the EBIT of Company's
Virginia/West Virginia Service Division in excess
of the EBIT threshold for the applicable year or
portion thereof, subject to a cumulative
limitation of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000.00) during such
aggregate period.
(ii) For purposes of this Section, the term _EBIT_
<PAGE>
shall mean the net income before taxes and before
interest expense of Company's Virginia/West
Virginia Service Division (and before deduction of
the payments to be made pursuant to this Section)
during the applicable period. In making said
determination, all gains or losses realized by the
Virginia/West Virginia Service Division of Company
on the sale or other disposition of its assets
(other than in the ordinary course) shall be
excluded. The EBIT shall be determined by Company
in the manner set forth below, in accordance with
general accepted accounting principles, subject to
verification as described below. Commencing in
the year 1998, in making the determination of EBIT
for the Company's Virginia/West Virginia Service
Division, a one and one-half percent (1.5%) MAS
royalty fee on gross sales by such division
[discus State of West Virginia contract] **shall
be made incident to such determination. An MAS
royalty fee is a fee charged to each branch of the
Company for the following services performed by
Company's corporate headquarters: marketing,
advertising, professional, accounting and other
related expenses. For each subsequent year during
the term of this Agreement for which Company may
be required to pay additional bonus hereunder, the
parties shall, in good faith, agree upon an MAS
royalty fee to be charged hereunder based on the
level of services and support being provided by
Company to its Virginia/West Virginia Service
Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to
any agreement for each subsequent year. For
purposes of this Section, the term _Virginia/West
Virginia Service Division_ shall be the business
acquired by Company from CBS under the Purchase
Agreement. Company's contract with the State of
West Virginia relating to computer hardware and
software and services for educational purposes for
K through 12 shall not be included as part of the
Virginia/West Virginia Service Division.
(iii) For purposes of determining the EBIT for any
particular year, except as noted above, no item of
income or expense will be allocated by Company to
Company's Virginia/West Virginia Service Division
unless such items are reasonably calculated to
contribute to the increased profits of such
division, it being the intent of the parties that
the Company shall exercise the utmost good faith
with respect to allocations of income and expense
to Company's Virginia/West Virginia Service
Division. Incident to the determination of EBIT
- 3 -
<PAGE>
of Company's Virginia/West Virginia Service
Division, no compensation of any executive or
other employee of Company or its affiliates who do
not work directly for Company's Virginia/West
Virginia Service Division shall be allocated to
such division. Any bonus paid to Employee
pursuant to this Section 5(b) shall not be charged
against EBIT for any year.
(iv) Within sixty (60) days after the end of each
period described herein, Company will deliver to
Employee copies of the report of EBIT prepared by
Company for the subject period along with any
supporting documentation reasonably requested by
Employee. Within thirty (30) days following
delivery to Employee of such report, Employee
shall have the right to object in writing to the
results contained in such determination. If
timely objection is not made by Employee to such
determination, such determination shall become
final and binding for purposes of this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are able to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then such determination shall become
final and binding as it regards to this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are unable to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then all disputed matters pertaining
to the report shall be submitted and reviewed by
the arbitrator (the _Arbitrator_) which shall be
an independent accounting firm selected by Company
and Employee. If Company and Employee are unable
to agree promptly on the accounting firm to serve
as the Arbitrator, each shall select, by not later
than thirty (30) days day following the expiration
of the sixty-day period, an accounting firm, and
the two selected accounting firms shall be
instructed to select promptly another accounting
firm, such newly selected accounting 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 Company and Employee. The expenses of the
arbitration (including reasonable attorney and
accounting fees) shall be borne one-half (1/2) by
Employee and one-half (1/2) by Company.
6.
Fringe Benefits. During the term of this Agreement,
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<PAGE>
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 four (4) 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) Insurance - During the term of this Agreement,
Company shall maintain on the life of Employee,
provided he is insurable at standard rates, a
declining term life insurance policy in the amount
set forth on Exhibit A attached hereto. Employee
shall be the owner of such policy and shall designate
the beneficiary thereof. Employee agrees to take any
and all physicals that are necessary incident to the
issuance and/or renewal of said policy. In addition,
Employee agrees to take any and all physicals that
are necessary incident to the procurement of key-
person insurance upon his life by Company. In the
event that Employee is not insurable at standard
rates during the term of this Agreement, but Employee
is able to procure rated coverage, Employee shall
have the right to procure coverage for a lower amount
of insurance, the cost of which is equivalent to the
standard term rate cost of the coverage set forth on
Exhibit A or to contribute to the cost of insurance
to maintain the applicable coverage. Said
determination shall be at Employee's sole discretion.
In the event Employee is not insurable, then Company
shall pay Employee an amount equal to the projected
cost of the contemplated term insurance coverage set
forth on Exhibit A at standard rates. The cost of
this insurance coverage shall be a charge against the
EBIT of Company's Virginia/West Virginia Service
Division for purposes of Section 5(b). In the event
that Employee should die prior to the insurance being
obtained hereunder or in the event insurance cannot
be obtained for medical reasons, Company shall have
no obligation to Employee or his beneficiary for
payment of any of the amounts set forth on Exhibit A
upon Employee's death.
- 5 -
<PAGE>
(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.
(r) 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.
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 7 of the Purchase Agreement relating
to Employee's Covenant Not to Compete with Company.
Accordingly, such provisions of Section 7 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 one of the two
owners of the common stock of CBS, he has received
substantial consideration pursuant to such Purchase
Agreement and that as an inducement for, and in
consideration of, Company entering into the Purchase
Agreement and Company entering into this Agreement, Employee
has agreed to be bound by such provisions of Section 7 of
the Purchase Agreement. Accordingly, such provisions of
Section 7 and Exhibit L-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;
- 6 -
<PAGE>
(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
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 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 five (5) 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 Employee's death;
(ii) By Employee's physical or mental disability
which renders Employee unable to perform his
duties hereunder.
(iii) By the Company, for cause upon three (3) day's
written notice to Employee. For purposes of this
Agreement, the term "cause" shall mean termination
upon: (i) 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; (ii) the
conviction of Employee of a felony or other crime
- 7 -
<PAGE>
involving theft or fraud, (iii) Employee's gross
neglect or gross misconduct in carrying out his
duties hereunder resulting, in either case, in
material harm to the Company; or (iv) any material
breach by Employee of this Agreement.
(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
Section 5(b), which shall be payable (if applicable)
pursuant to the terms thereof. In the event of
Employee's death, Employee's designated beneficiary
shall also be entitled to all life insurance benefits
as referenced in paragraph 6(d).
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 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.
- 8 -
<PAGE>
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 Kentucky and shall
not be modified 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 mailed by certified or registered
mail, return receipt requested, postage prepaid to the
following addresses (or to such other address for a party as
shall be specified by notice pursuant hereto):
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
With a copy to: Saunders, Cary and Patterson
9100 Arboretum Parkway, Suite 300
Richmond, Virginia 23236
Attn: Edwin Gadberry, III
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 Chesterfield County, Virginia,
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
- 9 -
<PAGE>
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 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 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
- 10 -
<PAGE>
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.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________
By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
EMPLOYEE:
__________________________
__________________________
____________________________________
THOMAS M. CLAYTON
- 11 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the ____ day of _____, 1998, by and
between POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
("Company"), and STEVEN SHAPIRO ("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement
("Purchase Agreement") of even date pursuant to which it
purchased certain of the assets of Commercial Business Systems,
Inc. (_CBS_); and
WHEREAS, Employee owns ten percent (10%) of the outstanding stock
of CBS; and
WHEREAS, Employee, as an inducement for and in consideration of
Company entering into the Purchase Agreement, has agreed to enter
into and execute this Employment Agreement pursuant to Section 6
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 6th day of March, 1998,
and shall continue for a period of five (5) years ending
March 5, 2003 unless terminated earlier pursuant to the
provisions of Section 10, provided that Sections 8, 9,
10(b) 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 intent not to renew the terms of this Agreement
sixty (60) days prior to expiration of the then expiring
term.
4. Duties
. Employee shall serve as Business Manager for the
Company's Virginia/ West Virginia Service Division.
May 1, 1998 (9:35AM)
<PAGE>
Employee shall be responsible to and report directly to the
Regional Vice President of the Company's Virginia/West
Virginia Service Division. 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.
Company acknowledges and agrees that Employee may continue
to be employed by CBS for the purpose of operating its depot
repair and refurbishing of products business for the
telephone industry. Employee further agrees to refrain
during the term of this Agreement from making any sales 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) Base Salary: During the initial year of the initial
term of this Agreement, Employee shall be paid an
annual base salary of Sixty Thousand Dollars
($60,000.00). Said base salary shall be payable in
accordance with the historical payroll practices of
the Company. Within thirty (30) days of the
commencement of years two through five of this
Agreement, Company and Employee shall determine
Employee's base compensation for each subsequent year
of the initial term of this Agreement.
(b) Annual Cash Bonus: In addition to Employee's base
compensation as set forth in paragraph 5(a) above,
Employee shall be entitled (in the event certain
criteria as defined below is satisfied) to an annual
cash bonus to be determined as follows:
(i) If the earnings before interest and taxes (_EBIT_)
of Company's Virginia/West Virginia Service
Division for each year of the initial term of this
Agreement exceeds the following: March 6, 1998 to
January 5, 1999 - $417,000.00; January 6, 1999 to
January 5, 2000 - $550,000.00; January 6, 2000 to
January 5, 2001 - $600,000.00; January 6, 2001 to
January 5, 2002 - $650,000.00; January 6, 2002 to
January 5, 2003 - $700,000.00; and January 6, 2003
to March 5, 2003 - $83,000.00, Company shall pay
to Employee by check or wire transfer within
ninety (90) days following the end of such year,
an amount equal to fifty percent (50%) of fifty
percent (50%) of the EBIT of Company's
Virginia/West Virginia Service Division in excess
<PAGE>
of the EBIT threshold for the applicable year or
portion thereof, subject to a cumulative
limitation of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000.00) during such
aggregate period.
(ii) For purposes of this Section, the term _EBIT_
shall mean the net income before taxes and before
interest expense of Company's Virginia/West
Virginia Service Division (and before deduction of
the payments to be made pursuant to this Section)
during the applicable period. In making said
determination, all gains or losses realized by the
Virginia/West Virginia Service Division of Company
on the sale or other disposition of its assets
(other than in the ordinary course) shall be
excluded. The EBIT shall be determined by Company
in the manner set forth below, in accordance with
general accepted accounting principles, subject to
verification as described below. Commencing in
the year 1998, in making the determination of EBIT
for the Company's Virginia/West Virginia Service
Division, a one and one-half percent (1.5%) MAS
royalty fee on gross sales by such division
[discuss State of West Virginia contract] shall be
made incident to such determination. An MAS
royalty fee is a fee charged to each branch of the
Company for the following services performed by
Company's corporate headquarters: marketing,
advertising, professional, accounting and other
related expenses. For each subsequent year during
the term of this Agreement for which Company may
be required to pay additional bonus hereunder, the
parties shall, in good faith, agree upon an MAS
royalty fee to be charged hereunder based on the
level of services and support being provided by
Company to its Virginia/West Virginia Service
Division. Provided, however, such MAS royalty fee
shall be 1.5% if the parties are unable to come to
any agreement for each subsequent year. For
purposes of this Section, the term _Virginia/West
Virginia Service Division_ shall be the business
acquired by Company from CBS under the Purchase
Agreement. Company's contract with the State of
West Virginia relating to computer hardware and
software and services for educational purposes for
K through 12 shall not be included as part of the
Virginia/West Virginia Service Division.
(iii) For purposes of determining the EBIT for any
particular year, except as noted above, no item of
income or expense will be allocated by Company to
Company's Virginia/West Virginia Service Division
- 3 -
<PAGE>
unless such items are reasonably calculated to
contribute to the increased profits of such
division, it being the intent of the parties that
the Company shall exercise the utmost good faith
with respect to allocations of income and expense
to Company's Virginia/West Virginia Service
Division. Incident to the determination of EBIT
of Company's Virginia/West Virginia Service
Division, no compensation of any executive or
other employee of Company or its affiliates who do
not work directly for Company's Virginia/West
Virginia Service Division shall be allocated to
such division. Any bonus paid to Employee
pursuant to this Section 5(b) shall not be charged
against EBIT for any year.
(iv) Within sixty (60) days after the end of each
period described herein, Company will deliver to
Employee copies of the report of EBIT prepared by
Company for the subject period along with any
supporting documentation reasonably requested by
Employee. Within thirty (30) days following
delivery to Employee of such report, Employee
shall have the right to object in writing to the
results contained in such determination. If
timely objection is not made by Employee to such
determination, such determination shall become
final and binding for purposes of this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are able to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then such determination shall become
final and binding as it regards to this Agreement.
If timely objection is made by Employee to
Company and Employee and Company are unable to
resolve their differences in writing within thirty
(30) days following the expiration of the thirty-
day period, then all disputed matters pertaining
to the report shall be submitted and reviewed by
the arbitrator (the _Arbitrator_) which shall be
an independent accounting firm selected by Company
and Employee. If Company and Employee are unable
to agree promptly on the accounting firm to serve
as the Arbitrator, each shall select, by not later
than thirty (30) days day following the expiration
of the sixty-day period, an accounting firm, and
the two selected accounting firms shall be
instructed to select promptly another accounting
firm, such newly selected accounting firm to serve
as the Arbitrator. The Arbitrator shall consider
only the disputed matters pertaining to the
determination and shall act promptly to resolve
- 4 -
<PAGE>
all disputed matters and its decision with respect
to all disputed matters shall be final and binding
upon Company and Employee. The expenses of the
arbitration (including reasonable attorney and
accounting fees) shall be borne one-half (1/2) by
Employee and one-half (1/2) by Company.
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 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) Insurance - During the term of this Agreement,
Company shall maintain on the life of Employee,
provided he is insurable at standard rates, a
declining term life insurance policy in the amount
set forth on Exhibit A attached hereto. Employee
shall be the owner of such policy and shall designate
the beneficiary thereof. Employee agrees to take any
and all physicals that are necessary incident to the
issuance and/or renewal of said policy. In addition,
Employee agrees to take any and all physicals that
are necessary incident to the procurement of key-
person insurance upon his life by Company. In the
event that Employee is not insurable at standard
rates during the term of this Agreement, but Employee
is able to procure rated coverage, Employee shall
have the right to procure coverage for a lower amount
of insurance, the cost of which is equivalent to the
standard term rate cost of the coverage set forth on
Exhibit A or to contribute to the cost of insurance
to maintain the applicable coverage. Said
determination shall be at Employee's sole discretion.
In the event Employee is not insurable, then Company
shall pay Employee an amount equal to the projected
cost of the contemplated term insurance coverage set
forth on Exhibit A at standard rates. The cost of
this insurance coverage shall be a charge against the
EBIT of Company's Virginia/West Virginia Service
- 5 -
<PAGE>
Division for purposes of Section 5(b). In the event
that Employee should die prior to the insurance being
obtained hereunder or in the event insurance cannot
be obtained for medical reasons, Company shall have
no obligation to Employee or his beneficiary for
payment of any of the amounts set forth on Exhibit A
upon Employee's death.
(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.
(r) 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. 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 7 of the Purchase Agreement relating
to Employee's Covenant Not to Compete with Company.
Accordingly, such provisions of Section 7 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 one of the two
owners of the common stock of CBS, he has received
substantial consideration pursuant to such Purchase
Agreement and that as an inducement for, and in
consideration of, Company entering into the Purchase
Agreement and Company entering into this Agreement, Employee
has agreed to be bound by such provisions of Section 7 of
the Purchase Agreement. Accordingly, such provisions of
Section 7 and Exhibit L-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:
- 6 -
<PAGE>
(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
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 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 five (5) 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 Employee's death;
(ii) By Employee's physical or mental disability
which renders Employee unable to perform his
duties hereunder.
(iii) By the Company, for cause upon three (3) day's
written notice to Employee. For purposes of this
- 7 -
<PAGE>
Agreement, the term "cause" shall mean termination
upon: (i) 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; (ii) the
conviction of Employee of a felony or other crime
involving theft or fraud, (iii) Employee's gross
neglect or gross misconduct in carrying out his
duties hereunder resulting, in either case, in
material harm to the Company; or (iv) any material
breach by Employee of this Agreement.
(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
Section 5(b), which shall be payable (if applicable)
pursuant to the terms thereof. In the event of
Employee's death, Employee's designated beneficiary
shall also be entitled to all life insurance benefits
as referenced in paragraph 6(d).
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 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
- 8 -
<PAGE>
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 Kentucky and shall
not be modified 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 mailed by certified or registered
mail, return receipt requested, postage prepaid to the
following addresses (or to such other address for a party as
shall be specified by notice pursuant hereto):
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
With a copy to: Saunders, Cary and Patterson
9100 Arboretum Parkway, Suite 300
Richmond, Virginia 23236
Attn: Edwin Gadberry, III
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
- 9 -
<PAGE>
that such other party shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of
competent jurisdiction in Chesterfield County, Virginia,
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 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 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
- 10 -
<PAGE>
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.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: COMPANY:
POMEROY COMPUTER RESOURCES, INC.
__________________________
__________________________
By:_________________________________
Stephen E. Pomeroy
Chief Financial Officer
__________________________ EMPLOYEE:
__________________________
____________________________________
STEVEN SHAPIRO
- 11 -
SUBORDINATED PROMISSORY NOTE
$1,000,000.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of
COMMERCIAL BUSINESS SYSTEM, INC., a Virginia Carolina corporation
("Lender"), the sum of One Million Dollars ($1,000,000.00) (as
may be adjusted in the manner hereinafter set forth), together
with interest on the outstanding principal balance from the date
hereof, at the rate specified below.
2. The initial face amount of this note ($1,000,000.00) shall
be adjusted downward by any decrease required by Sections 4.1(c),
(d) or (e) of the Asset Purchase Agreement. Such adjustments and
the manner in which they are to be made shall be done in
accordance with Sections 5.1, 5.2 and 5.3, respectively, of the
Asset Purchase Agreement. If, prior to such adjustment, Borrower
has made any interest payment to Lender hereunder, the parties
agree to adjust any prior payments to equitably reflect the
decrease made as a result of any adjustments contained in
Sections 4.1(c), (d) or (e) of the Asset Purchase Agreement.
3. Interest shall accrue at the prime rate of Star Bank,
National Association, Cincinnati, Ohio as of the date of Closing.
Interest on the unpaid principal balance of this note shall be
due and payable quarterly with the first interest payment due and
payable ninety (90) days from the date hereof and on the ____
day of each successive quarter thereafter. Principal shall be
paid in two (2) equal annual installments of Five Hundred
Thousand Dollars ($500,000.00), as may be adjusted pursuant to
the provisions of paragraph 2, commencing on the first
Anniversary Date of this Note and continuing on the next
successive Anniversary Date until paid in full.
4. All payments received hereunder shall be applied first to
interest and then to principal. Subject to the Subordination
Agreement, as defined below, this Note may be prepaid, in whole
or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are
subordinated and made junior in right of payment to the extent
and in the manner provided in the Subordination Agreement of even
date herewith (the "Subordination Agreement") between Star Bank,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
such Subordination Agreement as long as it is in effect.
6. Upon the occurrence of an Event of Default, the entire
principal amount outstanding under this Note, and accrued
<PAGE>
interest thereon, shall at once become due and payable, at the
option of the Lender and the Lender shall have the remedies set
forth in the Asset Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). The unpaid
interest accrued during the continuation of any Event of Default
on the indebtedness evidenced by this Note (whether for principal
or otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant and subject to the terms and
conditions of the Asset Purchase Agreement. This Note is subject
to all terms and conditions set forth in the Asset Purchase
Documents, including, but not limited to, terms of default and
rights of acceleration, if any. Any holder of this Note is
subject to all claims and defenses which the Borrower could
pursue against Lender under the Asset Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise,
the Lender may, at its option, subject to the Subordination
Agreement, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to property held as
security herefor. The failure to exercise any option to declare
the maturity hereof or to exercise any other rights under any of
the covenants or conditions contained in the Asset Purchase
Documents shall not be taken or deemed to be a waiver of the
right to exercise such option or to declare such maturity after
any subsequent violation of any such covenants or conditions.
All remedies provided for herein upon any default by the Borrower
shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Asset Purchase
Agreement, Lender made certain representations, warranties,
covenants and agreements with and to the Borrower. Lender agrees
that if the Borrower is entitled to indemnification from the
Lender under the Asset Purchase Agreement or any other of the
Asset Purchase Documents, the amount of such indemnification due
from Lender may be set off against the amounts payable hereunder
if permitted under the Asset Purchase Agreement, being first
applied to interest and the withholding all or any part of
payment due hereunder as a result of such a set off shall not be
considered an Event of Default hereunder. Lender agrees that the
amount to which the Borrower may be entitled to recover from
Lender shall not be limited by either the amount paid or due to
be paid to Lender hereunder or by the terms of this Note but
shall be governed by the terms of the Asset Purchase Documents.
10. The provisions of this Note and the obligations of the
Borrower hereunder shall in all respects be governed by and
<PAGE>
interpreted and determined in accordance with the internal laws
of the State of Virginia.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to
a competitor of Borrower shall be made only with the prior
written approval of Borrower, which approval shall not be
unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing, servicing or
selling of computers, computer equipment or computer support
solutions.
12. The Borrower hereby unconditionally and irrevocably waives
notice of acceptance, presentment, notice of nonpayment (except
as provided herein), protest, notice of protest, suit and all
other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness represented by
this Note be collected by action in law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should
this Note be placed in the hands of attorneys for collection
after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the
Lender hereof at any time, in addition to principal and all (if
any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby, all court costs and reasonable
attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any
provision of this Note involves transcending the limit of
validity prescribed by any applicable usury statute or any other
applicable law with regard to obligations of like character and
amount, then the obligation to be fulfilled will be reduced to
the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under
this Note in excess of the limit of such validity. In no event
shall the Borrower be bound to pay interest of more than the
legal limit for the use, forbearance or detention of money, and
the right to demand any such excess is hereby expressly waived by
the Lender.
15. No delay or omission of the holder of this Note to exercise
any right or power arising from any default shall impair any such
right or power or be considered to be a waiver of any such
default or any acquiescence therein, nor shall the action or non-
action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following
meanings, respectively:
(a) "Anniversary Date" - March ____, 1999 and each March
___ thereafter.
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<PAGE>
(b) "Asset Purchase Agreement" - The Asset Purchase
Agreement between and among the Borrower and the Lender dated
March ___, 1998.
(c) "Asset Purchase Documents" - The Asset Purchase
Agreement and any employment agreements or subordination
agreement between and among the parties to the Asset Purchase
Agreement.
(d) "Event of Default" -
(i) The failure of Borrower to make any payment of
principal or interest due under this Note for a period of ten
(10) days after receipt of written notice from the Lender to the
Borrower that such installment has not been paid; or
(ii) A default under the Senior Debt loan documentation
that has been declared in writing, remains uncured past any
applicable cure period, and results in the declared acceleration
of the Senior Debt.
(e) "Senior Debt" - The Debt of the Borrower to Star Bank,
N.A., as set forth in the Subordination Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH ___, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION TO WHICH REFERENCE IS
HEREBY MADE, RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF
ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL
AND INTEREST HEREOF.
- 4 -
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered
into effective as of March ___, 1998, among (i) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii)
COMMERCIAL BUSINESS SYSTEMS, INC., a Virginia corporation, its
successors and assigns (the "Subordinated Creditor") and (iii)
STAR BANK, NATIONAL ASSOCIATION, an Ohio banking corporation, its
successors or assigns (the "Senior Creditor").
RECITALS
WHEREAS, Pursuant to an Amended and Restated Loan Agreement,
dated as of March 14, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a letter agreement
dated June 26, 1997, as further amended by a letter agreement
dated December 1, 1997, and as further amended by a letter
agreement dated January 28, 1998 (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 loan in the principal amount of Forty Million
($40,000,000.00) Dollars (the "Senior Loan"); and
WHEREAS, the Senior Loan is 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 Note") in the
maximum principal amount not to exceed Forty Million
($40,000,000.00) Dollars; and
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase substantially all the assets of
Subordinated Creditor's computer service and support solutions
business; and
WHEREAS, in connection with the acquisition of such assets
of Subordinated Creditor, the Subordinated Creditor will take
back a promissory note in the original principal amount of
$1,000,000.00 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 Loan 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:
<PAGE>
ARTICLE 1
DEFINITIONS
SECTION 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:
"Acquisition Debt
" has the meaning specified in the fourth
paragraph of the recitals hereto.
"Acquisition Note
" means the promissory note issued by
Borrower to the Subordinated Creditor which evidences the
Acquisition Debt.
"Agreement
" means this Subordination Agreement.
"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.
"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.
"Borrower
" has the meaning specified in the introductory
paragraph hereto.
"
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 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
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<PAGE>
Creditor at any time and from time to time after the date hereof
without any limitation or restriction.
"
Enforcement Action Notice" has the meaning specified in
Section 3.2(b).
"
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.
"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 and any Permitted
Increase.
"
Instrument" means any contract, agreement, indenture,
mortgage or other document or writing (whether a formal agree-
ment, letter or otherwise) under which any obligation is
evidenced, assumed or undertaken, or any right to any lien is
granted or perfected.
"
Payment in Full" and "Paid in Full
" mean payment in full in
cash.
"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 redemption, retirement,
repurchase or other acquisition for value of any Subordinated
Debt.
"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.
"
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
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<PAGE>
distributable under or with respect to any collateral securing
the Subordinated Debt or Senior Debt.
"Star Bank, National Association
", as used in the defined
terms "Senior Debt" and "Senior Debt Documents", means and
includes Star Bank, National Association, 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, National Association
under any of the Senior Debt Documents or in relation to any of
the Senior Debt.
"
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.
"Senior Creditor
" has the meaning specified in the introduc-
tory paragraph hereto.
"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 Forty Million Dollars ($40,000,000.00).
(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,
indemnities, 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.
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<PAGE>
"
Senior Debt Documents" means, collectively, (a) the Senior
Loan Agreement and (b) the Senior Note (
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.
"Senior Loan
" has the meaning specified in the first
paragraph of the Recitals
hereto.
"
Senior Loan Agreement" has the meaning specified in the
first paragraph of the Recitals
hereto.
"Standstill Event
" means the occurrence of any one or more
of the Events of Default
under the Acquisition Note.
"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.
"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).
"Subordinated Creditor
" has the meaning specified in the
introductory paragraph hereto or any holder of the Acquisition
Note.
"
Subordinated Debt" means all indebtedness and other obliga-
tions 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 obliga-
tions to prepay, repurchase, retire, redeem or acquire for value
any such indebtedness).
"
Subordinated Debt Documents" means, collectively, (a) the
Acquisition Note and (b) each Instrument now or hereafter
executed in connection with or evidencing, governing, guarantying
or securing any indebtedness under any such document.
"U.C.C.
" means the Uniform Commercial Code, as in effect
from time to time in the State of Ohio.
- 5 -
<PAGE>
SECTION 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).
SECTION 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.
SECTION 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 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
SECTION 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.
SECTION 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 Subordi-
nated 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
- 6 -
<PAGE>
(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).
SECTION 2.3.
Delivery of Prohibited Payments or Distribu-
tions 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.
SECTION 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 distribu-
tions 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.
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<PAGE>
SECTION 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.
SECTION 2.6. Permitted
Payments. The Subordinated
Creditor shall not be entitled to receive or retain any prepay-
ment (in cash, property, by set-off or otherwise) of or on
account of the Acquisition Note 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.
SECTION 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.
SECTION 2.8. Permitted Payments; Right to Retain Payments
.
Notwith-standing 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)
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<PAGE>
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.
SECTION 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 uncondi-
tional and absolute, to pay to the holder thereof the Senior
Debt, in 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
SECTION 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) March ___, 2000.
(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.
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<PAGE>
SECTION 3.2.
Limitations on Enforcement Actions. The
Subordinated 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 "Enfor
cement Action Notice") of the intent of
the Subordinated Creditor to take such Enforcement Action.
SECTION 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.
SECTION 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.
SECTION 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
SECTION 4.1. Waivers of Notice, etc
. The obligations of
the Subordinated Creditor under this Agreement, and the subordi-
nation 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;
- 10 -
<PAGE>
(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
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 supple-
ment or addition to, any Senior Debt Document;
(f) any waiver, consent or other action or acquies-
cence 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)
,
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<PAGE>
ARTICLE 5
AGREEMENT OF SENIOR CREDITOR AND
BORROWER
SECTION 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 ten (10) business days of such fact.
Such notice shall be provided in writing to the disbursement
agent at the following address:
Commercial Business Systems, Inc.
Attention: Thomas M. Clayton
14321 Sommerville Court
Midlothian, Virginia 23113
or at such other address as may be provided by the Subordinated
Creditor to the Senior Creditor; and
With a copy to: Saunders, Cary & Patterson
9100 Arboretum Parkway, Suite 300
Richmond, Virginia 23236
Attention: Edwin Gadberry, III
Notwithstanding the agreement of Senior Creditor to deliver
notices pursuant to the terms above, Subordinated Creditor and
Borrower hereby acknowledge that the failure to delivery any such
notice shall not (i) affect or be deemed to be a waiver by Senior
Creditor of any of the rights or remedies of Senior Creditor
under this Agreement or (ii) create any liability on behalf of
Senior Creditor with respect to such failure to Subordinated
Creditor.
SECTION 5.2. Representations and Warranty of the Borrower
.
The Borrower hereby represents to the Senior Creditor as
follows:
(a) all subordinated debt existing on the date hereof
is Subordinated Debt.
- 12 -
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 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 transac-
tions. No waiver or approval hereunder shall require any similar
or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 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 Instru-
ments, 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.
SECTION 6.3. Specific Performance
. Senior Creditor is
hereby authorized to demand specific performance of this Agree-
ment 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.
SECTION 6.4. Severability
. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdic-
tion 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.
SECTION 6.5.
Enforcement by Senior Creditor. The Borrower
and the Subordinated Creditor acknowledge and agree that their
- 13 -
<PAGE>
respective obligations hereunder are, and are intended to be, an
inducement and consideration to the Senior Creditor to acquire
and continue to hold, or to continue to hold, the Senior Debt.
The Senior Creditor shall be deemed conclusively to have relied
upon the obligations 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.
SECTION 6.6. Continuing Agreement
. This Agreement shall
in all respects be a continuing agreement, and this Agreement and
the agreements and obligations of the Borrower and the Subordi-
nated 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 Agree-
ment.
SECTION 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.
SECTION 6.8. Notices
. All notices and other communica-
tions 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.
SECTION 6.9.
Entire Agreement. This Agreement constitutes
- 14 -
<PAGE>
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,
representations, warranties or understandings, whether oral,
written or implied, as to the subject matter of this Agreement.
SECTION 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.
SECTION 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 Loan 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.
SECTION 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 of action arising out of or based upon
- 15 -
<PAGE>
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.
SECTION 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.
SECTION 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.
POMEROY COMPUTER RESOURCES, INC.
By:______________________________
Title:___________________________
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
- 16 -
<PAGE>
STAR BANK, NATIONAL ASSOCIATION
By:______________________________
Title:___________________________
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
COMMERCIAL BUSINESS SYSTEMS, INC.
By:______________________________
Title: President
Address: _________________________
_________________________
Fax: _________________________
Attention: _________________________
_________________________
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
On this ____ day of ______________, 19___, 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.
_________________________________
Notary Public
My Commission Expires:
STATE OF OHIO )
- 17 -
<PAGE>
: SS:
COUNTY OF HAMILTON )
On this ____ day of ________, 1998, before me personally
appeared ____ ________, to me known, who, being by me duly sworn,
declared that he is the President of COMMERCIAL BUSINESS SYSTEMS,
INC., a signatory of the foregoing Subordination Agreement; and
that, being duly authorized, he did execute the foregoing
Subordination Agreement on behalf of COMMERCIAL BUSINESS SYSTEMS,
INC., and that the foregoing Subordination Agreement constitutes
the free act and deed of COMMERCIAL BUSINESS SYSTEMS, INC.
________________________________
Notary Public
My Commission Expires:
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
On this ____ day of _________, 1998, before me personally
appeared _______________, to me known, who, being by me duly
sworn, declared that he is the __________ of STAR BANK, NATIONAL
ASSOCIATION, a signatory of the foregoing Subordination
Agreement; and that, being duly authorized, he did execute the
foregoing Subordination Agreement on behalf of STAR BANK,
NATIONAL ASSOCIATION; and that the foregoing Subordination
Agreement constitutes the free act and deed of STAR BANK,
NATIONAL ASSOCIATION.
________________________________
Notary Public
My Commission Expires: __________
- 18 -
GENERAL BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS:
That Commercial Business Systems, Inc., a Virginia corporation,
("Company") 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 March ___, 1998
(the "Agreement"), by and between Company and Purchaser, sell,
assign, transfer, convey, deliver and confirm to Purchaser, its
successors and assigns, or its nominee, those certain assets of
Company ("Purchased Assets") described in the Agreement as the
Purchased Assets, relating to Company'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.
Company hereby represents, warrants and covenants that, at and
until delivery of this General Bill of Sale and Assignment,
Company 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; that from and after the delivery by Company 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.
Company, 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 Company, 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, Company 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.
Company hereby further covenants that it will, at any time and
from time to time, at the request of Purchaser, execute and
<PAGE>
deliver to Purchaser any new or confirmatory instrument and all
other and further instruments necessary or convenient, which
Purchaser may reasonably request, to vest in Purchaser Company'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 Company 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, Commercial Business Systems, Inc. has caused
this instrument to be executed by its officer thereunto duly
authorized as of this ____ day of March, 1998.
Signed and delivered in COMMERCIAL BUSINESS SYSTEMS,
INC.,
the presence of a Virginia corporation
_________________________ By:
_______________________________
Thomas M. Clayton,
President
_________________________
STATE OF OHIO
COUNTY OF HAMILTON, ss
BE IT REMEMBERED, that on this _____ day of March, 1998,
before me, the undersigned, a Notary Public in and for said
County, personally appeared Thomas M. Clayton, who acknowledged
himself to be the President of Commercial Business Systems, Inc.,
a Virginia 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.
____________________________________
<PAGE>
NOTARY PUBLIC
111437
- 3 -
ASSUMPTION OF LIABILITIES
THIS ASSUMPTION OF LIABILITIES is made this ____ day of March,
1998 by and between Commercial Business Systems, Inc., a Virginia
corporation ("Seller") and Pomeroy Computer Resources, Inc., a
Delaware corporation, ("Purchaser").
WHEREAS, pursuant to an Asset Purchase Agreement dated March ___,
1998 (the "Agreement") by and between Purchaser and Seller and
Thoms M. Clayton and Steven Shapiro, Purchaser wishes 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
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. All terms used in this Assumption of
Liabilities shall have the meaning defined in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Assumption of Liabilities to be executed in their names on the
date first above written.
COMMERCIAL BUSINESS SYSTEMS,
INC.
By:
_____________________________
Thomas M. Clayton, President
<PAGE>
POMEROY COMPUTER RESOURCES,
INC.,
a Delaware corporation
By:
________________________________
Stephen E. Pomeroy, Chief
Financial Officer
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this
____ day of March, 1998 by Thomas M. Clayton, President of
Commercial Business Systems, Inc., a Virginia corporation, on
behalf of the corporation.
_________________________________
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me this
____ day of March, 1998 by Stephen E. Pomeroy, Chief Financial
Officer of Pomeroy Computer Resources Inc., a Delaware
corporation, on behalf of the corporation.
_________________________________
NOTARY PUBLIC
- 2 -
<PAGE>
EXHIBIT _1"
LIABILITIES BEING ASSUMED
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT COMMERCIAL BUSINESS SYSTEMS, 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 receivables or other assets, properties, rights or
business to be transferred and assigned to Purchaser as provided
<PAGE>
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, Commercial Business Systems, Inc. has caused
this instrument to be executed by its officer thereunto duly
authorized as of this ____ day of March, 1998.
WITNESSES COMMERCIAL BUSINESS SYSTEMS,
INC., a Virginia corporation
______________________________
______________________________
BY:_____________________________
Thomas M. Clayton,
President
STATE OF OHIO
COUNTY OF HAMILTON, ss
BE IT REMEMBERED, that on this ____ day of March, 1998,
before me, the undersigned, a Notary Public in and for said
County, personally appeared Thomas M. Clayton, who acknowledged
himself to be the President of Commercial Business Systems Inc.,
a Virginia 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.
_________________________________
<PAGE>
NOTARY PUBLIC
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT and Assumption Agreement (_Assignment_) is
made this ____ day of March, 1998 by and between COMMERCIAL
BUSINESS SYSTEMS, INC., a Virginia corporation (_Seller_), and
POMEROY COMPUTER RESOURCES, INC., a Delaware corporation
(_Purchaser_).
WHEREAS, pursuant to an Asset Purchase Agreement, dated
March ___, 1998 (the _Agreement_), by and between Purchaser and
Seller and Thomas M. Clayton and Stephen Shapiro, Purchaser
wishes to assume Seller's rights, benefits and privileges of
certain contracts, and Seller is desirous of assigning to
Purchaser all of its rights, benefits and privileges in certain
contracts;
NOW, THEREFORE, in consideration of the foregoing and the
agreements and covenants herein set forth, and other good and
valuable consideration paid by Purchaser to Seller, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
ASSIGNMENT
:
1. Seller does hereby sell, assign, transfer and convey to
Purchaser, to the extent legally permitted, the contracts
set forth on Exhibit _A_ attached hereto, and all of Sellers
rights, interest, benefits and privileges thereunder.
Page 1 of 4 Pages
<PAGE>
REPRESENTATIONS
:
2. Seller hereby represents, warrants and covenants to
Purchaser that (i) Seller is a party to the contracts listed
on Exhibit _A_ and has not sold, assigned, transferred or
conveyed its interest therein to any other person or entity;
(ii) Seller has complied with and fulfilled all of its
duties and obligations under the contracts, is not in
default, and has not breached any of the terms or provisions
of the contracts and the contracts remain in full force and
effect as of the date hereof; (iii) Seller is not aware of
any facts or circumstances which give rise or could give
rise with the giving of notice or the lapsing of time to a
breach or default under the contracts; and (iv) the other
parties to the contracts set forth on Exhibit _A_ are not in
default and have not breached any of the terms or provisions
of the contracts.
ADDITIONAL ACTION BY SELLER:
3. To the extent this Assignment does not result in a complete
transfer of the contracts to Purchaser because of a
prohibition in the contracts against Seller's assignment of
any of its rights thereunder, Seller shall cooperate with
Purchaser in any reasonable manner proposed by Purchaser to
complete the acquisition of the contracts and Seller's
rights, benefits and privileges thereunder in order to
fulfill and carry out Seller's obligations under the
Page 2 of 4 Pages
<PAGE>
Agreement. Such additional action may include, but is not
limited to: (i) entering into a subcontract between Seller
and Purchaser which allows Purchaser to perform Seller's
duties under the contracts set forth on Exhibit _A_ and to
enforce Seller's rights thereunder; (ii) The sale of
Seller's stock owned by Thomas M. Clayton and Steven Shapiro
to Purchaser to allow Purchaser to operate Seller as a
wholly owned subsidiary to enforce the contracts; or (iii)
entering into a new multi-party agreement with the customers
identified in the contracts set forth on Exhibit _A_ which
allows Purchaser to perform Seller's obligations and enforce
Sellers' rights under the contracts.
ASSUMPTION OF OBLIGATIONS:
4. Purchaser shall be responsible for the performance and
discharge of all the duties and obligations of Seller
contained in the contract set forth on Exhibit _A_ upon the
earlier to occur of: (i) the completion of the assignment of
the contracts and Seller's rights, interest, benefits and
privileges thereunder; or (ii) in accordance with any
proposed transaction contemplated or set forth in Paragraph
3 hereof.
Page 3 of 4 Pages
<PAGE>
MUTUAL INDEMNIFICATION
:
5. Purchaser hereby agrees to indemnify and hold harmless
Seller from and against any and all loss, cost or expense
(including, without limitation, reasonable attorneys' fees),
resulting by reason of Purchaser's failure to perform any of
the obligations of Seller under the Contracts after the date
that Purchaser actually acquires all of the rights,
interest, benefits and privileges of the Seller under each
contract. Seller hereby agrees to indemnify and hold
harmless Purchaser from and against any and all loss, cost
or expense (including, without limitation, reasonable
attorneys' fees) resulting by reason of the failure of
Seller to perform any of the obligations of the Seller under
the contracts on or prior to the date that the rights,
interest, privileges, benefits and any interest in the
contracts are actually assigned to the Purchaser.
BINDING EFFECT:
6. All of the covenants, terms and conditions set forth herein
shall be binding upon and shall inure to the benefit of the
parties hereof and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this
Assignment as of the date first above written.
Witnesses:
SELLER:
____________________________ COMMERCIAL BUSINESS SYSTEMS, INC.
Page 4 of 4 Pages
<PAGE>
____________________________ BY:_______________________________
Thomas M. Clayton, President
____________________________
____________________________
________________________________________
THOMAS M. CLAYTON, Individually
____________________________
____________________________
________________________________________
STEVEN SHAPIRO, Individually
Witnesses:
PURCHASER:
____________________________ POMEROY COMPUTER RESOURCES, INC.
____________________________
BY:_____________________________________
Stephen E. Pomeroy, Chief
Financial Officer
Page 5 of 4 Pages
March ___, 1998
Pomeroy Computer Resources, Inc.
1020 Petersburg Road
Hebron, Kentucky 41048
Gentlemen:
Reference is made to that certain Asset Purchase Agreement
dated March __, 1998, and an Assignment and Assumption Agreement
of even date herewith pursuant to which the undersigned,
COMMERCIAL BUSINESS SYSTEMS, INC. (_Seller_) sold, assigned,
transferred and conveyed to POMEROY COMPUTER RESOURCES, INC.
(_Pomeroy_) to the extent permitted, its interest in certain
contracts as set forth on Exhibit _A_ attached to said Assignment
and Assumption Agreement. Pursuant to such Assignment and
Assumption Agreement, Seller agreed to take additional action to
carry out the terms of the Asset Purchase Agreement to enable
Pomeroy to perform the obligations of Seller under these
contracts and to allow Pomeroy to enforce Seller's rights under
these contracts.
In order to fulfill this obligation, the undersigned hereby
agrees that until such time as a new contract with these
customers is obtained, or an assignment is approved by them,
Pomeroy is hereby engaged by Seller to perform Seller's
obligations under the contracts in consideration for all
remaining amounts to be paid to Seller under such contracts
and/or any other consideration to be provided to Seller under the
contracts. Seller agrees to cooperate with Purchaser in
performing these contracts and in dealing with the customers,
including such billing procedures, invoicing procedures,
collection procedures and other bookkeeping issues or customer
relations issues as Pomeroy may deem necessary and appropriate to
fulfill its duties under the contracts. To acknowledge your
agreement and acceptance to the foregoing, please execute the
duplicate original enclosed herewith and return it to the
undersigned.
Sincerely,
COMMERCIAL BUSINESS SYSTEMS, INC.
By:
___________________________________
Thomas M. Clayton, President
Agreed and Accepted this ____ day of March, 1998.
POMEROY COMPUTER RESOURCES, INC.
By:
___________________________________
Stephen E. Pomeroy, Chief Financial
Officer
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment of Lease (_Assignment_) entered into as of the
_____ day of March, 1998, by and between COMMERCIAL BUSINESS
SYSTEMS, INC., a Virginia corporation (_Assignor_), and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (_Assignee_).
WHEREAS, Assignor, as tenant, and First Union Management, Inc., a
Delaware Corporation, (_Landlord_), as landlord, entered into a
certain Lease Agreement, dated 17th day of April 1995, amended by
a First Amendment and Supplement to Lease, dated the 2cd day of
June, 1997 (the _Lease_), covering the real property (the
_Property_) consisting of approximately 2625 sq. ft. of space
located in the Mountaineer Mall, Morgantown, West Virginia; and
WHEREAS, Assignee has purchased substantially all of Assignor's
assets relating to its computer service and support solutions
business, and in connection therewith, Assignor desires to assign
to Assignee, and Assignee desires to assume from Assignor, the
Lease and all of the rights, benefits, and privileges of the
tenant thereunder;
NOW, THEREFORE, in consideration of the foregoing and the
agreements and covenants herein set forth and other good and
valuable consideration paid by Assignee to Assignor, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1. Assignment
. Assignor hereby assigns unto Assignee all of
the tenant's interest in the Lease, effective as of
________________, 1998 (the _Effective Date_).
2. Representations
. Assignor hereby warrants and covenants to
Assignee that (i) Assignor is the current holder of the
tenant's interest under the Lease, (ii) a true and correct
copy of the Lease presently in force is attached hereto as
Exhibit _A,_ and (iii) to Assignor's knowledge, no state of
facts currently exists that, with the passage of time or the
giving of a written notice, or both, would constitute an
event of default under the terms of the Lease.
3.
Assumption. Assignor shall not be responsible to the
Landlord under the Lease for the discharge or performance of
any duties or obligations to be performed or discharged by
the tenant thereunder after the Effective Date. By
accepting this assignment, and by its execution, Assignee
hereby assumes and agrees to perform all of the terms,
Page 1 of 3 Pages
<PAGE>
covenants and conditions to be performed by the tenant under
the Lease, from and after the Effective Date.
4. Mutual Indemnification
. Assignee hereby agrees to indemnify
and hold harmless Assignor from and against any and all
loss, cost or expense (including, without limitation,
reasonable attorneys' fees) resulting by reason of
Assignee's failure to perform any of the obligations of
tenant under the Lease after the Effective Date. Assignor
hereby agreements to indemnify and hold harmless Assignee
from and against any and all loss, cost or expense
(including, without limitation, reasonable attorneys' fees)
resulting by reason of the failure of Assignor to perform
any of the obligations of the tenant under the Lease on or
prior to the Effective Date.
5. Condition Precedent
. This Assignment is contingent upon the
written consent of the Landlord.
6.
Binding Effect. All of the covenants, terms and conditions
set forth herein shall be binding upon and shall inure to
the benefit of the parties hereof and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as
of the date first above written.
ASSIGNOR
:
COMMERCIAL BUSINESS SYSTEMS, INC.
BY:_____________________________________
President
ASSIGNEE:
POMEROY COMPUTER RESOURCES, INC.
BY:_____________________________________
Page 2 of 3 Pages
<PAGE>
CONSENT
The undersigned hereby consents to the foregoing Assignment.
LANDLORD
:
FIRST UNION MANAGEMENT, INC.
BY:_____________________________________
Page 3 of 3 Pages
ASSIGNMENT AND ASSUMPTION OF LEASE
This Assignment of Lease (_Assignment_) entered into as of the
_____ day of March, 1998, by and between COMMERCIAL BUSINESS
SYSTEMS, INC., a Virginia corporation (_Assignor_), and POMEROY
COMPUTER RESOURCES, INC., a Delaware corporation (_Assignee_).
WHEREAS, Assignor, as tenant, and Carmel, Inc., a West Virginia
corporation, (_Landlord_), as landlord, entered into a certain
Lease Agreement, dated the 26th day of May 1993, amended by a
Lease Extension, dated the 10th day of December, 1996 (the
_Lease_), covering the real property (the _Property_) located at
300 Roxalana Road, Dunbar, West Virginia; and
WHEREAS, Assignee has purchased substantially all of Assignor's
assets relating to its computer service and support solutions
business, and in connection therewith, Assignor desires to assign
to Assignee, and Assignee desires to assume from Assignor, the
Lease and all of the rights, benefits, and privileges of the
tenant thereunder;
NOW, THEREFORE, in consideration of the foregoing and the
agreements and covenants herein set forth and other good and
valuable consideration paid by Assignee to Assignor, the receipt
and sufficiency of which are hereby acknowledged, the parties
agree as follows:
1.
Assignment. Assignor hereby assigns unto Assignee all of
the tenant's interest in the Lease, effective as of
________________, 1998 (the _Effective Date_).
2. Representations
. Assignor hereby warrants and covenants to
Assignee that (i) Assignor is the current holder of the
tenant's interest under the Lease, (ii) a true and correct
copy of the Lease presently in force is attached hereto as
Exhibit _A,_ and (iii) to Assignor's knowledge, no state of
facts currently exists that, with the passage of time or the
giving of a written notice, or both, would constitute an
event of default under the terms of the Lease.
3.
Assumption. Assignor shall not be responsible to the
Landlord under the Lease for the discharge or performance of
any duties or obligations to be performed or discharged by
the tenant thereunder after the Effective Date. By
accepting this assignment, and by its execution, Assignee
hereby assumes and agrees to perform all of the terms,
covenants and conditions to be performed by the tenant under
Page 1 of 3 Pages
<PAGE>
the Lease, from and after the Effective Date.
4. Mutual Indemnification
. Assignee hereby agrees to indemnify
and hold harmless Assignor from and against any and all
loss, cost or expense (including, without limitation,
reasonable attorneys' fees) resulting by reason of
Assignee's failure to perform any of the obligations of
tenant under the Lease after the Effective Date. Assignor
hereby agreements to indemnify and hold harmless Assignee
from and against any and all loss, cost or expense
(including, without limitation, reasonable attorneys' fees)
resulting by reason of the failure of Assignor to perform
any of the obligations of the tenant under the Lease on or
prior to the Effective Date.
5. Condition Precedent
. This Assignment is contingent upon the
written consent of the Landlord.
6. Binding Effect
. All of the covenants, terms and conditions
set forth herein shall be binding upon and shall inure to
the benefit of the parties hereof and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as
of the date first above written.
ASSIGNOR:
COMMERCIAL BUSINESS SYSTEMS, INC.
BY:_____________________________________
President
ASSIGNEE
:
POMEROY COMPUTER RESOURCES, INC.
BY:_____________________________________
Page 2 of 3 Pages
<PAGE>
CONSENT
The undersigned hereby consents to the foregoing Assignment.
LANDLORD
:
CARMEL, INC.
BY:_____________________________________
Page 3 of 3 Pages
AGREEMENT
This Agreement made and entered into this ____ day of March,
1998, by and between STEVEN SHAPIRO (hereinafter referred to as
"Owner") and POMEROY COMPUTER RESOURCES OF, 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 COMMERCIAL BUSINESS SYSTEMS, INC.
("Company_), for the acquisition of certain of its assets (the
_Business_); and
WHEREAS, Owner owns ten percent (10%) of the outstanding stock of
Company;
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Company without the consent of Owner to enter into
this covenant not to compete agreement;
WHEREAS, pursuant to Sections 7.1 and 14.2(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 Company (10% of the stock of which
is owned by Owner), Owner covenants and agrees that for a
period equal to the later of five (5) years from the closing
of the Asset Purchase Agreement of even date or one year
after the termination of Owner's employment with Purchaser
pursuant to an Employment Agreement of even date, 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; or
(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; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries has an office
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; or
(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 or purchasing less than five percent (5%) of the
outstanding stock of any publicly-traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC bulletin board or from taking any action described
in items 1(b)-(d) above for the benefit of or on behalf
of Purchaser or any of its subsidiaries. In addition,
nothing in this Agreement shall prohibit Owner to
continue to own shares in and to be employed by
Company, which shall continue to engage in its depot
repair and refurbishing of products business for the
telephone industry. In addition, the pursuing of a
potential business relationship with Bell Atlantic by
Company, if effectuated, which will be implemented
through Purchaser, shall not be precluded by 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 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, servicing or supporting of microcomputer
products, microcomputer support solutions and computer
integration products, peripheral devices and related
products and the sale of networking services; and
- 2 -
<PAGE>
(iv) Any other business activity which can reasonably be
determined to be competitive with the principal
business activity being engaged in by Purchaser or any
of its subsidiaries.
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 Owner'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 length of time and
geographic area embraced therein, and agrees that irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Asset Purchase
Agreement, is being entered into to protect the legitimate
business interests 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 on-going
business by way of trade name, trademark, or service mark, 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 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 reason-
ableness 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
- 3 -
<PAGE>
of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be
reasonable.
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration,
including the consideration paid by the Purchaser to Company
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.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
__________________________________
STEVEN SHAPIRO
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial
Officer
- 4 -
<PAGE>
EXHIBIT A
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Georgia
4. Indiana
5. Illinois
6. Iowa
7. Kentucky
8. North Carolina
9. Ohio
10. Oklahoma
11. South Carolina
12. Tennessee
13. Texas
14. Virginia
15 West Virginia
AGREEMENT
This Agreement made and entered into this ____ day of March,
1998, by and between THOMAS M. CLAYTON (hereinafter referred to
as "Owner") and POMEROY COMPUTER RESOURCES OF, 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 COMMERCIAL BUSINESS SYSTEMS, INC.
("Company_), for the acquisition of certain of its assets (the
_Business_); and
WHEREAS, Owner owns ninety percent (90%) of the outstanding stock
of Company;
WHEREAS, Purchaser would not have entered into the Asset Purchase
Agreement with Company without the consent of Owner to enter into
this covenant not to compete agreement;
WHEREAS, pursuant to Sections 7.1 and 14.2(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 Company (90% of the stock of which
is owned by Owner), Owner covenants and agrees that for a
period equal to the later of five (5) years from the closing
of the Asset Purchase Agreement of even date or one (1) year
after the termination of Owner's employment with Purchaser
pursuant to the terms of an Employment Agreement of even
date, 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; or
(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; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries has an office
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; or
(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 or purchasing less than five percent (5%) of the
outstanding stock of any publicly-traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC bulletin board or from taking any action described
in items 1(b)-(d) above for the benefit of or on behalf
of Purchaser or any of its subsidiaries. In addition,
nothing in this Agreement shall prohibit Owner from
continuing to own shares in Company which shall
continue to engage in its depot repair and refurbishing
of products business for the telephone industry. In
addition, the pursuing of a potential business
relationship with Bell Atlantic by Company, which, if
effectuated, will be implemented through Purchaser,
shall not be precluded by 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 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, servicing or supporting of microcomputer
products and microcomputer support solutions and
computer integration products, peripheral devices and
related products, and the sale of networking services;
and
- 2 -
<PAGE>
(iv) Any other business activity which can reasonably be
determined to be competitive with the principal
business activity being engaged in by Purchaser or any
of its subsidiaries.
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 Owner'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 length of time and
geographic area embraced therein, and agrees that irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Asset Purchase
Agreement, is being entered into to protect the legitimate
business interests 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 on-going
business by way of trade name, trademark, or service mark, 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 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 reason-
ableness 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
- 3 -
<PAGE>
of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be
reasonable.
2. The consideration for Owner's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration,
including the consideration paid by the Purchaser to Company
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.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
__________________________________
THOMAS M. CLAYTON
POMEROY COMPUTER RESOURCES , INC.
By:________________________________
STEPHEN E. POMEROY, Chief Financial
Officer
- 4 -
<PAGE>
EXHIBIT A
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Georgia
4. Indiana
5. Illinois
6. Iowa
7. Kentucky
8. North Carolina
9. Ohio
10. Oklahoma
11. South Carolina
12. Tennessee
13. Texas
14. Virginia
15 West Virginia
AGREEMENT
This Agreement made and entered into this ____ day of March,
1998, by and between COMMERCIAL BUSINESS SYSTEMS, INC., a
Virginia 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 full-service provider of a variety of
computer service and support solutions to large and medium size
commercial, governmental and other professional customers; 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, the 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 7.1 and 14.2(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 five (5) years from the closing of the
Asset Purchase Agreement of even date, Seller 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; or
(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; or
<PAGE>
(c) Engage in the Business of Purchaser in any state in
which Purchaser or its subsidiaries has an office
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; or
(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 or purchasing less than five percent (5%) of the
outstanding stock of any publicly-traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC bulletin board or from taking any action described
in items 1(b)-(d) above for the benefit of or on behalf
of Purchaser or any of its subsidiaries. In addition,
nothing in this Agreement shall prohibit Seller from
continuing to engage in its depot repair and
refurbishing of products business for the telephone
industry. In addition, the pursuing of a potential
business relationship with Bell Atlantic by Seller
which, if effectuated, will be implemented by
Purchaser, shall not be precluded by 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 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, servicing, or supporting of microcomputer
products, microcomputer support solutions and computer
integration products, peripheral devices and related
products and the sale of networking services; and
(iv) Any other business activity which can reasonably be
- 2 -
<PAGE>
determined to be competitive with the principal
business activity being engaged in by Purchaser or any
of its subsidiaries.
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 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 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 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, which Agreement
is ancillary to the main thrust of the Asset Purchase
Agreement, is being entered into to protect the legitimate
business interests 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 on-going
business by way of trade name, trademark, or service mark, 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 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 reason-
ableness 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
- 3 -
<PAGE>
arbitration or by a Court of competent jurisdiction to be
reasonable.
2. The consideration for Seller's covenant not to compete shall
be One Dollar ($1.00) and other valuable consideration,
including the consideration paid by the Purchaser to Seller
pursuant to an Asset Purchase Agreement to which Seller and
Purchaser are parties 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.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
SELLER
:
COMMERCIAL BUSINESS SYSTEMS, INC.
By:
__________________________________
Thomas M. Clayton, President
PURCHASER
:
POMEROY COMPUTER RESOURCES, INC.
By:
___________________________________
Stephen E. Pomeroy, Chief
Financial Officer
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<PAGE>
EXHIBIT A
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Georgia
4. Indiana
5. Illinois
6. Iowa
7. Kentucky
8. North Carolina
9. Ohio
10. Oklahoma
11. South Carolina
12. Tennessee
13. Texas
14. Virginia
15 West Virginia
CONSENT FOR USE OF SIMILAR NAME
On the ____ day of __________, 1998, the Board of Directors
of Commercial Business Systems, Inc. a Virginia corporation,
passed the following resolution:
RESOLVED, that Commercial Business Systems, Inc. gives
its consent to Pomeroy Computer Resources, Inc., a
Delaware corporation, for the use of the letters CBS.
COMMERCIAL BUSINESS SYSTEMS,
INC.
By:
__________________________________
The parties agree that the conditions set forth in Section
8.1 of the Asset Purchase Agreement relating to the Lease
Agreement for the property located at 14201 Justice Road,
Midlothian, Virginia 23113 shall be effectuated within 14 days
of the closing of this transaction.
COMMERCIAL BUSINESS SYSTEMS, INC.
By:________________________________
POMEROY COMPUTER RESOURCES, INC.
By:________________________________
__________________________________
THOMAS M. CLAYTON
__________________________________
STEVEN SHAPIRO
` STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of this ____ day of
February, 1998, by, between and among J. WALTER DUNCAN, JR., AS
TRUSTEE OF THE J. WALTER DUNCAN, JR. REVOCABLE TRUST (_W.
Duncan"), NICHOLAS V. DUNCAN ("N. Duncan"), JAMES B. KITE, JR.
(_J. Kite_), O. DEAN HIGGANBOTHAM (_Dean Higganbotham_) and DALE
HIGGANBOTHAM (_Dale Higganbotham_) (W. Duncan, N. Duncan, J.
Kite, Dean Higganbotham and Dale Higganbotham hereinafter
referred to collectively as the _Sellers_ and individually as
_Seller_) and POMEROY COMPUTER RESOURCES, INC., a Delaware
corporation (_Purchaser_).
W I T N E S S E T H :
WHEREAS, Sellers own all of the issued and outstanding shares of
Global Combined Technologies, Inc., an Oklahoma corporation,
which is a full-service provider of a variety of computer service
and support solutions to large and medium-sized commercial,
governmental and other professional customers throughout the
State of Oklahoma and the Dallas, Texas area, as follows:
W. Duncan - 14,901 shares
N. Duncan - 14,099 shares
J. Kite - 1,000 shares
Dean Higganbotham- 12,000 shares
Dale Higganbotham- 6,000
shares
Total - 48,000 shares
WHEREAS, Sellers desire to sell and Purchaser desires to purchase
all the Company Shares owned by Sellers, and Sellers and
Purchaser desire to engage in the other transactions provided for
herein.
NOW, THEREFORE, in and for the consideration of the mutual
promises and undertakings herein contained, and subject to the
terms and conditions hereinafter set forth, the Parties agree as
follows:
ARTICLE I
1.
Definitions. As used herein the following terms shall
have the following meanings, respectively:
1.01
Accounts Receivable: All notes and accounts receivable
held by Company or of which Company is the beneficial
holder and all notes, bonds and other evidences of
indebtedness of and rights to receive payments from any
Person held by Company.
1.02
Acquisition: The purchase and sale of all the Company
<PAGE>
Shares upon the terms and provisions, and subject to the
conditions, set forth in this Agreement.
1.03 Affiliate
: Shall have the meaning ascribed to such term
in Rule 405 promulgated under the Securities Act of 1933,
as amended.
1.04
Affiliate Receivables: Any account or note receivable or
other payment obligation owing to Company by any officer,
director, employee or Affiliate of Company.
1.05 Agreement
: This Stock Purchase Agreement.
1.06 Applicable Law
. All applicable provisions of all (i)
constitutions, treaties, statues, laws (including common
law), rules, regulations, ordinances, codes or order of
any Governmental Authority and (ii) orders, decisions,
injunctions, judgments, awards and decrees of or
agreements with any Governmental Authority.
1.07
Book Value: The shareholders' equity of Company as of
the Closing Date as reported in Company's Closing Balance
Sheet, determined in accordance with Section 3.02.
1.08 Book Value Report
: Shall have the meaning defined in
Section 3.02.
1.09 Business
. The operations of Company involving generally
the sale of goods, or the provision of services
(including repair and maintenance services), relating to
personal computers, client services, computer networks,
communication equipment, other equipment related thereto,
such as computer monitors, peripherals and all other
individual components, operating systems and application
software and other software (including software created
for use on the Internet) created for use in tie-in
arrangements, customer service and internal management
systems for sales, delivery and support and any other
business operations of Company.
1.10
Business Day. _Business Day_ shall mean a day other than
a Saturday, Sunday or other day on which commercial banks
in Cincinnati, Ohio are authorized or required to close.
1.11 Closing
: The consummation of the Acquisition on the
Closing Date at the place of Closing hereinafter
specified in accordance with the terms and conditions
hereof.
1.12
Closing Balance Sheet: The balance sheet of Company at
the date of the Closing.
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<PAGE>
1.13
Closing Date: The date on which the Closing shall take
place, determined in accordance with Article XIII.
1.14 Code
: The Internal Revenue Code of 1986, as amended.
1.15
Company: Global Combined Technologies, Inc., an Oklahoma
corporation.
1.16 Company Personnel
: Shall mean current or former
employees, officers, directors or consultants of Company.
1.17
Company Shares: All the issued and outstanding common
shares, $1.00 par value, of Company.
1.18
Contracts. Shall have the meaning defined in Section
4.09(a).
1.19 Consent
. Any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate,
declaration or filing with, or report or notice to, any
Person.
1.20 Court
: A Court is any federal, state, municipal,
domestic, foreign or any other governmental tribunal or
an arbitrator or person with similar power or authority.
1.21
Disclosure Schedule: The schedule dated as of the date
hereof, prepared pursuant to Article IV, copies of which
have been signed by Sellers and delivered to Purchaser.
1.22 EBIT
. The earnings of Company before interest and taxes,
and without incorporating any gains or losses realized on
the disposition of assets other than in the ordinary
course of business for Company's fiscal year ending
December 31, 1997. Company's EBIT for such period will
be determined in accordance with GAAP. Sales of
approximately $3,550,000 with a cost net of rebates of
$3,270,000 were invoiced in the year ending December 31,
1997, but had not yet been shipped as of such date.
Earnings from such sales shall be included in EBIT.
Sellers represent that all selling expenses attributable
to such sales have been properly accrued for in the year
ending December 31, 1997.
1.23 Employee Benefit Plans
: Shall mean all pension, annuity,
retirement, stock option, stock purchase, savings, profit
sharing or deferred compensation plans or agreements, any
retainer, consultant, bonus, group insurance, welfare,
health and disability plan, fringe benefit or other
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<PAGE>
incentive or benefit contract, plan, or commitment or
arrangement applicable to Company Personnel.
1.24 Employees
: With respect to Company, shall mean all full-
time and part-time employees of Company.
1.25
Employee Contracts: All employment contracts, consulting
agreements, and collective bargaining agreements or
related agreements with respect to Employees of Company.
1.26 Environmental Laws
: Shall mean all federal, state or
local judgments, decrees, orders, laws, licenses,
ordinances, rules or regulations pertaining to
environmental matters, including, without limitation,
those arising under the Resource Conservation and
Recovery Act (42 U.S.C. S1801, et
seq
.) (_RCRA_), the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (42 U.S.C. S9601, et
seq
.) (_CERCLA_), the Superfund Amendment and
Reauthorization Act of 1986 (_SARA_), the Federal Clean
Water Act (33 U.S.C. S1251,
et seq
.), the Federal Clean
Air Act (33 U.S.C. S7401,
et
seq.), the Toxic Substances
Control Act (15 U.S.C. S7401,
et seq
.) the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
S136,
et
seq.) and the Occupational Safety and Health Act
(29 U.S.C. S651, et
seq
.).
1.27
Environmental Liabilities and Costs: All Losses, whether
direct or indirect, known or unknown, current or
potential, past, present or future, imposed by, under or
pursuant to Environmental Laws, including, without
limitation, all Losses related to Remedial Actions, and
all fees, disbursements and expenses of counsel, experts,
personnel and consultants based on, arising out of or
otherwise in respect of: (i) the ownership or operation
of the Business, the Leased Real Property or any other
real properties, assets, equipment or facilities, by
Company, or any of its predecessors or Affiliates; (ii)
the environmental conditions existing on the Closing Date
on, under, above, or about any Leased Real Property or
any other real properties, assets, equipment or
facilities currently or previously owned, leased or
operated by Company, or any of its predecessors or
Affiliates; and (iii) expenditures necessary to cause any
Leased Real Property or any aspect of the Business to be
in compliance with any and all requirements of
Environmental Laws as of the Closing Date, including,
without limitation, all Environmental Permits issued
under or pursuant to such Environmental Laws, and
reasonably necessary to make full economic use of any
Leased Real Property.
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<PAGE>
1.28
Environmental Permits: Any federal, state and local
permit, license, registration, consent, order,
administrative consent order, certificate, approval or
other authorization with respect to Company necessary for
the conduct of the Business as currently conducted or
previously conducted under any Environmental Law.
1.29
ERISA: The Employee Retirement Income Security Act of
1974, as amended.
1.30 GAAP
: Generally accepted accounting principles in effect
in the United States consistently applied throughout the
periods involved.
1.31 Governmental Approval
: Any Consent of, with or from any
Governmental Authority.
1.32
Governmental Authority: Any nation or government, any
state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to
government, including, without limitation, any government
authority, agency, department, board, commission or
instrumentality of the United States, any State of the
United States or any political subdivision thereof, and
any tribunal or arbitrator(s) of competent jurisdiction,
and any self-regulatory organization.
1.33 Hazardous Materials
: Shall mean any hazardous waste, as
defined by 42 U.S.C. S6903(5), any hazardous substances
or wastes as defined by 42 U.S.C. S9601(14), any
pollutant or contaminant as defined by 42 U.S.C.
S9601(33) or any toxic substances or wastes, oil or
hazardous material or other chemicals or substances
regulated by any public or Governmental Authority.
1.34
HSR Act: The Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended and the rules and regulations
thereunder.
1.35 Indemnity Basket
: Shall have the meaning defined in
Section 11.08.
1.36 Indemnifying Party
: Shall have the meaning defined in
Section 11.06(a).
1.37
Intellectual Property: Any and all United States and
foreign: (a) patents (including reexaminations, design
patents, industrial designs and utility models) and
patent applications (including docketed patent
disclosures awaiting filing, provisional applications,
- 5 -
<PAGE>
reissues, divisions, continuations, continuations-in-part
and extensions), patent disclosures awaiting filing
determination, inventions and improvements thereto; (b)
trademarks, service marks, trade names, trade dress,
logos, business and product names, slogans, and
registrations and applications for registration thereof;
(c) copyrights (including software) and registrations
thereof including Company's name; (d) inventions,
processes, designs, formulae, trade secrets, know-how,
industrial models, confidential and technical
information, manufacturing, engineering and technical
drawings, product specifications and confidential
business information; (e) mask work and other
semiconductor chip rights and registrations thereof; (f)
intellectual property rights similar to any of the
foregoing; (g) copies and tangible embodiments thereof
(in whatever form or medium, including electronic media);
and (h) the Internet address and website of Company.
1.38 Inventories
: All inventories of raw materials, work in
process, finished products, goods, spare parts, office
and other supplies, including any of such inventories
held at any location controlled by Company or at any
other location (pursuant to conditional sales agreements,
consignment arrangements or in any bailment or otherwise)
and any such items previously purchased and in transit to
Company at any such locations.
1.39 Leased Real Property
: Shall mean all interests leased
pursuant to the Leases.
1.40 Leases
: Shall mean all real property leases, subleases,
licenses and occupancy agreements pursuant to which
Company is the lessee, sublessee, licensee or occupant
which relate to or are being used in the Business and
which are described on Disclosure Schedule 4.09.
1.41 Lien
: With the exception of Permitted Liens, a mortgage,
pledge, hypothecation, right of others, claim, security
interest, encumbrance, lease, sublease, license,
occupancy agreement, adverse claim or interest, easement,
covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest,
equity, option, lien, right of first refusal, charge or
other restrictions or limitations of any nature
whatsoever, including, without limitation, such that may
arise under any Contracts.
1.42 Line of Credit Indebtedness
: Includes any indebtedness
incurred, incurrable, or accrued pursuant to any of
Company's financing arrangements, agreements, letters of
credit and lines of credit with IBM Credit Corp.,
- 6 -
<PAGE>
Deutsche Financial Services Corp., Compaq Computer Corp.,
NationsBank, N.A. and BankOne, and any of their
successors and assigns, all as set forth on Disclosure
Schedule 1.42. Disclosure Schedule 1.42 shall set forth
the principal balance and all accrued interest of such
items on the date hereof.
1.43 Losses
. Any and all losses, liabilities, damages,
obligations and expenses arising as a result of the
designated action or inaction, and all actions, suits,
proceedings, demands, assessments, judgments, costs and
expenses (including, without limitation, attorney's fees
and other expenses incurred in investigating or defending
any claim, action, suit or proceeding and any and all
amounts paid in settlement thereof) with respect to the
designated action or inaction.
1.44 Notes
: The two-year subordinated promissory notes
payable to Sellers as more fully described in Section
2.03(b).
1.45
Other Sellers Documents: The agreements and other
documents and instruments described in Sections 6.01,
7.01 and 8.01.
1.46 Party or Parties
: Purchaser or Sellers or any of them.
1.47 Party to Be Indemnified
: as defined in Section 11.06(a).
1.48
Permitted Liens. Shall mean and include any (i) matters
described in detail and by item in Disclosure Schedule
1.48(i) to this Agreement, (ii) liens arising by
operation of Applicable Law for taxes, assessments,
labor, materials, and obligations not yet due or which
are being contested in good faith, which contested items
are set forth in detail in Disclosure Schedule 1.48(ii),
and (iii) all contracts, agreements, instruments,
obligations, encumbrances, defects and irregularities of
title, if any, affecting Company assets which
individually or in the aggregate do not materially
interfere with the present or future operation, value or
use of Company assets or its Business. The phrase
_Permitted Liens_ shall also include (a) liens imposed by
mandatory provisions of Applicable Law such as carriers,
materialmens, mechanics, warehousemens, landlords and
other like liens arising in the ordinary course of
business, securing obligations not yet due or which are
being contested in good faith, which contested items are
set forth in Disclosure Schedule 1.48, (b) liens arising
in the ordinary course of business from pledges or
deposits to secure public or statutory obligations,
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<PAGE>
deposits to secure (or in lieu of) surety, stay, appeal
or customs bonds and deposits to secure the payment of
Taxes, and (c) good faith deposits in connection with
bids, tenders, contracts or leases.
1.49 Person
: Any natural person, firm, partnership,
association, corporation, company, limited liability
company, limited partnership, trust, business trust,
Governmental Authority or other entity.
1.50 Post Closing Date
: Shall have the meaning defined in
Section 3.02.
1.51 Purchase Price
: The total consideration paid by
Purchaser to Sellers for the Company Shares as provided
in Section 2.02.
1.52 Pro Forma EBIT
: The EBIT of Company for the period
ending December 31, 1997, adjusted upward by $170,000.00
as previously agreed upon by Sellers and Purchaser for
nonrecurring costs plus any write offs or adjustments
made as a result of the audited financial statements of
Company, subject to review and approval by Purchaser.
Sales of approximately $3,550,000 with a cost net of
rebates of $3,270,000 were invoiced in the year ending
December 31, 1997, but had not yet been shipped as of
such date. Earnings from such sales shall be included in
determining Pro Forma EBIT. Sellers represent that all
selling expenses attributable to such sales have been
properly accrued for in the year ending December 31,
1997.
1.53 Remedial Action
: All actions required to (i) clean up,
remove, treat or in any way remediate any Hazardous
Materials; (ii) prevent the release of Hazardous
Materials so that they do not migrate or endanger or
threaten to endanger public health or welfare or the
environment; or (iii) perform studies, investigations and
care related to (i) and (ii) above.
1.54
Spare Parts: All replacements, components, devices,
equipment and other similar items owned or held by
Company for use in connection with the repair,
replacement, modification, customization or installation
of goods and products applicable to the Business.
1.55
Subsidiary: Each corporation or other Person in which a
Person owns or controls, directly or indirectly, capital
stock or other equity interests representing at least 50%
of the outstanding voting stock or other equity interest
or conferring the power to name the majority of the
members to the board of directors or other governing body
- 8 -
<PAGE>
of the corporation or other Person or otherwise direct
the management or policies thereof.
1.56 Tax or Taxes
: Any federal, state, provincial, local,
foreign or other income, alternative, minimum, any taxes
under Section 1374 of the Code, any taxes under Section
1375 of the Code, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital,
profits, windfall profits, gross receipts, value added,
sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance,
environmental, including taxes under Section 59A of the
Code), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational,
employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care,
withholding, estimated or other similar tax, duty or
other governmental charge or assessment or deficiencies
thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).
1.57 Tax Return
: Any return, report, declaration, form, claim
for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
1.58 Vendor Receivables
: Any amounts owing to Company from
vendors of goods and products used in the Business
resulting from discounts for prompt payment, volume
discounts, promotional programs or similar vendor special
pricing and term arrangements.
1.59 Year-End Financials
: The audited financial statements of
Company for the twelve-month periods ending December 31,
1997, December 31, 1996, December 31, 1995 and December
31, 1994.
ARTICLE II
2.
Purchase of Company Shares and Purchase Price.
2.01
Purchase of Company Shares. Sellers agree to sell and
transfer the Company Shares to Purchaser, and Purchaser
agrees to purchase the Company Shares from Sellers, on
the Closing Date.
2.02 Purchase Price
. The Purchase Price for the Company
Shares shall be Eleven Million Dollars ($11,000,000.00),
adjusted as follows:
(a) To the extent Company's Pro Forma EBIT exceeds
$1,875,627.00 (the _Excess EBIT_), the Purchase
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<PAGE>
Price shall be increased by the product of such
Excess EBIT multiplied by a factor of 3. In the
event that Company's Pro Forma EBIT is less than
$1,775,627.00 (the _Deficient EBIT_), the Purchase
Price shall be decreased by the product of the
Deficient EBIT multiplied by a factor of 3.
(b) To the extent that the Book Value as reported on the
Closing Balance Sheet is in excess of $2,280,000.00,
the Purchase Price shall be increased on a dollar-
for-dollar basis to the extent of such excess. To
the extent that the Book Value as reported on the
Closing Balance Sheet is less than $2,280,000.00,
the Purchase Price shall be decreased on a dollar-
for-dollar basis to the extent of such deficit.
2.03
Payment of Purchase Price.
(a) Ten Million Dollars ($10,000,000.00) in the
aggregate as may be adjusted in the manner set forth
in Section 3.02 shall be payable at Closing in cash
or by bank or certified checks or wire transfer of
Purchaser which amount shall be prorated among the
Sellers according to the following percentages:
W. Duncan - 31.04%
N. Duncan - 29.38%
J. Kite - 2.08%
Dean Higganbotham - 25.00%
Dale Higganbotham - 12.50%
(b) One Million Dollars ($1,000,000.00) in the
aggregate, as may be adjusted upward or downward as
set forth in Sections 3.01 and 3.02 shall be payable
in the form of the Notes of Purchaser, attached
hereto as Exhibit A (the _Notes_) which Notes shall
be prorated among the Sellers according to the
percentages set forth in Section 2.03(a) above.
Such Notes shall bear interest at the prime rate of
Star Bank, N.A., Purchaser's lender. Interest under
said Notes shall be payable quarterly in arrears
with the first interest payment being due and
payable ninety (90) days from the Closing. One-half
(1/2) of the outstanding principal balance of said
Notes shall be payable in full on the first annual
anniversary date of the Closing of the transaction
and the remaining principal balance of such Notes
shall be payable in full on the second annual
anniversary of the Closing of the transaction. A
copy of the Subordination Agreement to be executed
by all Sellers is attached hereto as Exhibit B.
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<PAGE>
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<PAGE>
ARTICLE III
3. Pre-Closing and Post-Closing Adjustments
.
- 12 -
<PAGE>
3.01 Upon the issuance of Company audited December 31, 1997
financial statements by Company's accountant, Arthur
Andersen, Company will deliver to Purchaser a
determination of Company's Pro Forma EBIT prepared by
Company's accountant along with any supporting
documentation reasonably requested by Purchaser. Within
ten days following delivery to Purchaser of such report
and prior to Closing, Purchaser shall have the right to
object in writing to the results contained in such
determination. If timely objection is not made by
Purchaser of such determination, such determination shall
become final and binding. If timely objection is made by
Purchaser to Sellers, and Purchaser and Sellers are able
to resolve their differences in writing within five (5)
days following the expiration of the Pro Forma EBIT
objection period, then such determination as resolved
shall become final and binding as it relates to this
Agreement. If timely objection is made by Purchaser to
Sellers, and Sellers and Purchasers are unable to resolve
their differences in writing within five (5) days
following the expiration of the Pro Forma EBIT objection
period, then all disputed matters relating to the report
shall be submitted to and reviewed by an arbitrator (the
_Arbitrator_) which shall be an independent accounting
firm selected by Sellers and Purchaser. If Purchaser and
Sellers are unable to agree promptly on the accounting
firm to serve as the Arbitrator, each shall select, by
not later than the 7th day following expiration of the
Pro Forma EBIT objection period, a nationally recognized
accounting firm, and each selected accounting firm shall
be instructed to jointly select promptly another
nationally recognized accounting firm, such third
accounting firm shall serve as the Arbitrator. The
Arbitrator shall consider only the disputed matters
pertaining to the determination and shall act promptly
and fairly to resolve all disputed matters and their
decision with respect to all disputed matters shall be
final and binding upon Sellers and Purchaser. The
expenses of the arbitration (including reasonable
attorney and accounting fees) shall be borne one-half
(1/2) by Purchaser and one-half (1/2) by Sellers. Any
net increase in the Purchase Price resulting from said
adjustments shall be made in the manner set forth in
Section 2.02(b) and shall be reflected by increasing the
face amount of the Notes set forth in Section 2.03(b) in
proportion to the Sellers' ownership of the Company
Shares. Any net reduction in the Purchase Price as a
result of said adjustments shall be made in the manner
set forth in Section 2.02(a) and shall be reflected by
decreasing the face amount of the Notes set forth in
Section 2.03(b) in proportion to the Sellers' ownership
of the Company Shares and if the decrease is in excess of
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<PAGE>
the face amount of the Notes, there shall be a decrease
in the cash to be paid by Purchaser to Sellers at Closing
as set forth in Section 2.03(a).
3.02 Within thirty (30) days after the Closing (the _Post
Closing Date_), the Sellers will deliver to Purchaser a
copy of the Closing Balance Sheet prepared by the Sellers
along with any supporting documentation reasonably
requested by Purchaser reflecting Company's calculation
of Book Value and the determination of any surplus or
deficit in Book Value in accordance with Section 2.02(b)
(the _Book Value Report_). For these purposes, the
calculation of Book Value will include soft dollar
accruals, such as rebates, etc. due to Company, which are
properly accruable under GAAP and are consistent with
Company's prior treatment of such items. Within fifteen
(15) days following delivery to Purchaser of the Book
Value Report, Purchaser shall have the right to object in
writing to the results contained therein. If timely
objection is not made by Purchaser to the Book Value
Report, the Book Value Report shall become final and
binding for purposes of this Agreement. If timely
objection is made by Purchaser to the Book Value Report,
and Sellers and Purchaser are able to resolve their
differences in writing within five (5) days following the
expiration of such fifteen (15) day period, then the Book
Value Report as resolved shall become final and binding
as it relates to this Agreement. If timely objection is
made by Purchaser to the Book Value Report, and Sellers
and Purchasers are unable to resolve their differences in
writing within such period, then all disputed matters
pertaining to the Book Value Report shall be submitted to
and reviewed by an Arbitrator according to the process
and procedure set forth in Section 3.01 above. The
expenses of arbitration (including reasonable attorney's
fees and accounting fees) shall be borne one-half (1/2)
by Purchaser and one-half (1/2) by Sellers. Any net
increase in the Purchase Price resulting from said
adjustment shall be made in the manner set forth in
Section 2.02(b) and shall be reflected by increasing the
face amount of the Notes set forth in Section 2.03(b) in
proportion to Sellers' ownership of the Company Shares.
Any net reduction in the Purchase Price as a result of
said adjustment shall be made in the manner set forth in
Section 2.02(b) and shall be reflected by decreasing the
face amount of the Notes set forth in Section 2.03(b) in
proportion to Sellers' ownership of the Company Shares
and if the decrease is in excess of the face amount of
the Notes, such amount equal to the excess shall be paid
immediately by Sellers to Purchaser by certified or
cashiers check on the date of the resolution of this
determination.
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<PAGE>
ARTICLE III A
3A. Matters Relating to Critical Technologies, L.L.C
.
3A.01 Open Orders
. Disclosure Schedule 3A.01 sets forth a list
of open orders (not invoiced and unearned) that were
issued to Company in December, 1997, but will be
fulfilled by Critical Technologies, L.L.C. (_Critical_).
Accordingly, the Parties acknowledge and agree that when
such orders are invoiced and payment is received, the
payment will be paid over by Company to Critical.
Sellers agree that they will cause Critical to reimburse
Company for costs incurred by Company in connection with
the orders described herein, all in accordance with past
practice.
3A.02
Certain Documents. Disclosure Schedule 3A.02 sets forth
a list of certain accounts receivable carried on Company
books which are attributable to work performed by
Critical. Accordingly, the Parties agree that when such
receivables are paid, the payment will be paid over by
Company to Critical. Sellers agree to cause Critical to
reimburse Company for costs incurred by Company in
connection with the accounts described herein, all in
accordance with past practice.
ARTICLE IV
4.
Representations of Sellers. Except as set forth in the
Disclosure Schedule attached hereto, which identifies the
specific sections to which each such disclosure relates,
Sellers, jointly and severally (except for
representations and warranties made by an individual
Seller which only relate to that specific Seller (i.e.
such as ownership of the Company Shares), which are made
severally only), represent, warrant and covenant to
Purchaser that the following statements are materially
true as of the date hereof and shall be materially true
and correct as of the Closing Date as if made again at
and as of that time:
4.01 Organization and Good Standing
. Except as disclosed in
Disclosure Schedule 4.01, Company is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Oklahoma and has all requisite
corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now
being conducted, and is duly licensed, authorized and
qualified to do business and in good standing in the
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States of Texas and California and in all other
jurisdictions in which the conduct of its business or the
ownership or leasing of its properties require it to be
so licensed, authorized or qualified. Copies of
Company's Articles of Incorporation and By-Laws and any
amendments thereto (certified to be correct by the
Secretary of Company) have been delivered to Purchaser
and are complete and correct as of the date hereof.
Disclosure Schedule 4.01 correctly lists, with respect to
Company, each jurisdiction, if any, in which it is
qualified to do business as a foreign corporation.
4.02 Capitalization
. The authorized capital stock of Company
consists solely of 250,000 common shares, $1.00 par
value, of which 48,000 shares are issued and outstanding.
Company has no treasury shares. The issued and out-
standing common shares of Company are held by the
following persons in the following numbers:
Name of Shareholder Number of Shares Held
W. Duncan - 14,901 shares
N. Duncan - 14,099 shares
J. Kite - 1,000 shares
Dean Higganbotham - 12,000 shares
Dale Higganbotham - 6,000 shares
Company has no authorized or outstanding preferred stock
or any other class of stock. The Company Shares have
been duly authorized and validly issued and are fully
paid and nonassessable. The Company Shares have been
issued in compliance with all applicable federal and
state securities laws and no past or present holder
thereof is entitled to any right of rescission in respect
thereof and no documentary taxes or other taxes were
required with respect to the issuance or transfer of such
Company Shares. There are no existing subscriptions,
options warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to
the issuance, sale or transfer of any capital stock of
Company or any securities convertible into or
exchangeable for any such capital stock.
4.03
Title to Shares. Sellers own, respectively, the number
of Company Shares set forth opposite each of their names
in Section 4.02 hereof, free and clear of all Liens. The
transfer of the Company Shares to Purchaser will convey
good and marketable title to the Company Shares, free and
clear of all Liens.
4.04 Subsidiaries
. Company has no subsidiaries.
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4.05
Authority. This Agreement is a valid and binding
obligation of each Seller, enforceable in accordance with
its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or limiting creditors' rights
generally, or by the availability of equitable remedies
or the application of general equitable principles.
Except as set forth in Disclosure Schedule 4.05, neither
the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby
will:
(i) violate, or conflict with, or require any Consent
under, or result in a breach of any provisions of,
or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or
accelerate the performance required by, or result in
the creation of any Lien upon any of the properties
or assets of Company under any of the terms,
conditions or provisions of the Articles of
Incorporation or Bylaws of Company or of any note,
bond, mortgage, indenture, deed of trust, license,
agreement or other instrument or obligation to which
Company, or any Seller is a party, or by which
Company or any Seller or any of their properties or
assets may be bound or affected; or
(ii) violate any order, writ, injunction or decree
applicable to Sellers or Company or any of their
properties or assets or, to the knowledge of
Sellers, violate any statute, rule or regulation
applicable to Sellers or Company or any of their
properties or assets; or
(iii) constitute a default or event that, with notice
or lapse of time, or both, would be a default,
breach, or violation of any lease, license,
promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement to which
Company is a party or by which it is bound; or
(iv) constitute an event that would permit any party to
terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of
Company; or
(v) except for compliance with the HSR Act, no Consent
by, notice to or registration with any Governmental
Authority is required on the part of Sellers or
Company prior or subsequent to the Closing Date in
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connection with the execution, delivery and
performance by Sellers of this Agreement or the
consummation of any of the transactions contemplated
hereby.
4.06 Closing Balance Sheet
. The Closing Balance Sheet, which
shall be attached hereto as Exhibit "C" on the Post-
Closing Date, will reflect only the assets and
liabilities of Company as of the Closing Date and will
not include any assets or liabilities of any corporation
or entity except Company. As of the Closing Date,
Company will not have any liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to
become due), including without limitation, any tax
liabilities of the nature required by GAAP to be
reflected or reserved against in the Closing Balance
Sheet, which are not accurately and fully reflected or
reserved against in the Closing Balance Sheet; provided,
however, that the Closing Balance Sheet shall not be
accompanied by notes and shall not include normal year-
end adjustments (if any) other than depreciation or any
other accrual of the nature set forth on Disclosure
Schedule 4.06, attached hereto, which are not material in
the aggregate.
4.07 Year End Financials
.
(a) The Year End Financials have been provided to
Purchaser, are in accordance with the books and
records of Company, and have been prepared in
accordance with GAAP as applied by Company on a
consistent basis throughout the periods covered by
such statements and fairly represent the financial
condition of Company as of the respective dates and
the results of operations of Company for the period
then ended. Except as stated in the Year End
Financials or as otherwise set forth in Disclosure
Schedule 4.07(a), there have been no unusual
accounting practices engaged in which have affected
the amount or trend of net income of Company, or any
unusual or nonrecurring transactions, during the
periods reflected in the Year End Financials.
(b) Absence of Undisclosed Liability
. Except as to the
extent specifically reflected in the Year End
Financials or otherwise set forth in Disclosure
Schedule 4.07(b), and except for trade payables,
liabilities and contractual obligations arising in
the ordinary course of business since the date of
Company's 1997 audited financial statements, Company
does not have any other liabilities of any nature,
whether accrued, absolute or contingent, or
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otherwise, and whether due, or to become due of the
nature required by GAAP to have been reflected or
reserved against in financial statements.
(c)
No Liabilities as Guarantor. Except as set forth
in Disclosure Schedule 4.07(c), Company is not
directly or indirectly obligated to guaranty or
assume any debt, dividend, or other obligation of
any person, corporation, association, partnership,
or other entity, except endorsements made in the
ordinary course of business in connection with the
deposit of items for collection.
(d) Absence of Material Change
. Except as set forth in
Disclosure Schedule 4.07(d) or as otherwise set
forth in this Agreement or the Exhibits hereto,
since December 31, 1997, there has not been:
(i) any change in the condition (financial or
otherwise), properties, business, operations or
prospects of Company which is materially
adverse, singly or in the aggregate;
(ii) any material loss, damage or destruction in the
nature of a casualty loss or otherwise, whether
covered by insurance or not, adversely
affecting any property or asset of Company;
(iii) an actual or any threatened strike or other
material labor trouble or material dispute;
(iv) any loss or any threatened loss of any
governmental permit, license, qualification,
special charter or certificate of authority
held or enjoyed or formerly held or enjoyed by
Company which loss has had or upon occurrence
would have a material effect, singly or in the
aggregate, on the condition (financial or
otherwise), properties, business, operations or
prospects of Company;
(v) to the knowledge of the Sellers, any statute,
regulation, order, ordinance or other law the
adoption, amendment or rescission of which
have a material effect, singly or in the
aggregate, on the condition (financial or
otherwise), properties, business, operations or
prospects of Company;
(vi) any indebtedness, liability or obligation
(whether absolute, accrued, contingent or
otherwise) incurred by Company, or other
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<PAGE>
transaction entered into by Company, other than
in the ordinary course of business and
consistent with past practice, or any guarantee
of any indebtedness, liability or obligation
made by Company;
(vii) any declaration, setting aside or payment of
any dividend or other distributions in respect
of any capital stock of Company other than
distributions that Company in its good faith
determines should not decrease Book Value below
$2,280,000.00;
(viii) any issuance, sale, combination or
reclassification of any capital stock or other
securities of Company;
(ix) any issuance or grant of any option, warrant or
other right in respect of any capital stock or
other securities of Company;
(x) any direct or indirect redemption, purchase or
other acquisition of any capital stock or other
securities of Company;
(xi) any obligation, liability, Lien or encumbrance
paid, discharged or satisfied by Company other
than in the ordinary course of business;
(xii) any mortgage, Lien, pledge, charge or
encumbrance (except for liens for current taxes
not yet due and payable), created, incurred or
assumed by Company other than in the ordinary
course of business;
(xiii) except in the ordinary course of business,
any sale, transfer or other disposition of any
tangible asset of Company, any cancellation of
any debt or claim of Company or any disposition
of any intangible properties, assets or rights
of Company;
(xiv) any salary or wage increase granted or
committed to be made, other than normal merit
or cost-of-living increases pursuant to
Company's general prevailing practices, with
respect to any officer, director, employee or
agent of Company, or any bonus, incentive or
deferred compensation, profit sharing,
retirement, pension, group insurance, death
benefit or other fringe benefit plan or trust
agreement entered into or amended or any
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<PAGE>
employment or consulting agreement entered into
or amended or altered;
(xv) any termination (whether by discharge,
retirement or otherwise) of any officer,
director, employee or agent of Company or any
notice to so terminate given or received by any
of the foregoing;
(xvi) any loan made, increased or forgiven to any
officer, director, employee or agent of Company
or to any member of any of their families;
(xvii) any capital expenditure, addition or
improvement made or committed to be made by
Company in excess of $10,000.00 with respect to
any single expenditure, addition or improvement
or in excess of $20,000.00 with respect to all
such expenditures, additions and improvements;
(xviii) any failure on the part of Company to
operate its business in the ordinary course or
to use its best efforts to preserve its
business organization intact, to retain the
services of its employees and to preserve its
goodwill and relationships with suppliers,
creditors and others having business
relationships with it;
(xix) any known material loss of business,
termination or discontinuance of any
relationship or dispute between Company and any
customer or supplier;
(xx) any loss, amendment, termination or waiver of
any material right of Company other than in the
ordinary course of business;
(xxi) any known write-off as uncollectible of any
notes or accounts receivable, or any portions
thereof, in excess of $10,000.00 with respect
to any single note or account or in excess of
$20,000.00 with respect to all such write-offs;
4.08
Assets. Except as provided in Disclosure Schedule 4.08,
Company has good and marketable title to all of its
assets and properties, real, personal or otherwise,
including, but not limited to, those assets and
properties reflected in Company's December 31, 1997
financial statements, except only for assets subsequently
disposed of in the ordinary course of business, free and
clear of all Liens, except (a) as specifically reflected
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<PAGE>
thereon, (b) the Line of Credit Indebtedness, or (c) for
Permitted Liens. To the best knowledge of Sellers, all
Company's tangible and other operating assets, property
and equipment are in good operating condition and repair,
free of structural or material mechanical defects and
conform with all applicable laws and regulations.
Without limiting the generality of the foregoing,
specific representations are set forth in the following
subparagraphs of this Section 4.08.
4.08.1
Accounts Receivable. All Accounts Receivable of Company
which have arisen in connection with the Business or
otherwise and which are reflected on Company's December
31, 1997 financial statements, and all such receivables
which will have arisen since December 31, 1997 have
arisen only from bona fide transactions in the ordinary
course of business and represent valid and existing
claims. Except as set forth on Disclosure Schedule
4.08.1, and subject to customer credits, the payment of
each Account Receivable will not, as of the Closing Date,
be subject to any known defense, counterclaim or
condition (other than Company's performance in the
ordinary course of business) whatsoever. Disclosure
Schedule 4.08.1 hereto accurately lists, as of a date
within five (5) days of execution of this Agreement, and
will list, as of a date within five (5) days of the
Closing Date, all receivables arising out of or relating
to the Business, the amount owing and the aging of such
Accounts Receivable. Sellers have provided Purchaser the
opportunity to review complete and correct copies of all
instruments, documents and agreements evidencing such
Accounts Receivable and of all instruments, documents or
agreements, if any, creating security therefor.
4.08.2
Vendor Receivables. All Vendor Receivables of Company
which have arisen in connection with the Business or
otherwise and which are reflected on Company's December
31, 1997 financial statements and all such Vendor
Receivables which have arisen since December 31, 1997
have arisen only from bona fide transactions in the
ordinary course of business and represent valid, and
existing claims. Except as set forth in Disclosure
Schedule 4.08.2, the payment of each Vendor Receivable
will not, as of the Closing Date, be subject to any known
defense, counterclaim or condition whatsoever.
Disclosure Schedule 4.08.2 hereto accurately lists, as of
a date within five (5) days of the execution of this
Agreement, and will list, as of a date within five (5)
days of the Closing Date, all Vendor Receivables arising
out of or relating to the Business, the amount owing and
the aging of such Vendor Receivables. Sellers have
provided Purchaser the opportunity to review complete and
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<PAGE>
correct copies of all instruments, documents and
agreements evidencing such Vendor Receivables and of all
instruments, documents and agreements, if any, creating
security therefor.
4.08.3 Inventory
. Except as specifically described on
Disclosure Schedule 4.08.03, all inventory reflected on
the December 31, 1997 financial statements consists of
items of quality and quantity which are usable or
saleable in the ordinary course of Business of Company in
the conduct of its Business, and items of below standard
quality and items not usable or saleable in the ordinary
course of Company's business have been written-down in
value in accordance with good business practices to
estimated net realizable market value or adequate
reserves have been provided therefor. The values at
which the Inventories are carried on the December 31,
1997 financial statement reflect the normal valuation
policy of Company in setting inventory at the lower of
cost or market, all in accordance with GAAP. In
addition, Sellers represent that the Inventory set forth
in Exhibit D has a value of $241,000.00 as set forth in
said Exhibit and if Sellers and Purchaser mutually agree
that the value of such Inventory on the Closing Date is
less than $241,000.00, then the Purchase Price shall be
reduced dollar for dollar by the amount by which the
agreed value of such Inventory is less than $241,000.00.
In addition, in consideration of Sellers' agreement to
pay for the entire Hart-Scott-Rodino Act filing fee in
the amount of $45,000.00 pursuant to the provisions of
Article 14.03 of this Agreement, the value of the DEC
inventory set forth on Exhibit E and all other items of
Company's inventory shall be accepted by Purchaser
without any further adjustment hereunder. Except as set
forth on Disclosure Schedule 4.08.3, since December 31,
1997, Inventories have been maintained at normal and
adequate levels for the continuation of the Business in
its normal course. Since December 31, 1997, no change
has occurred in such Inventories which materially
adversely affect or will materially adversely affect the
useability or salability thereof, no material write-downs
or write-ups of the value of such Inventories has
occurred and no additional amounts have been reserved
with respect to such Inventories. Disclosure Schedule
4.08.3 lists the location of all Inventories together
with a brief description of the type and amount at each
location.
4.08.4
Real Property. Company owns no real property.
4.08.5
Dealer Agreements. A list of Company's dealer agreements
is set forth in Disclosure Schedule 4,08.
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4.08.6
Intellectual Property.
(a) Title
. Disclosure Schedule 4.08.6(a) contains a
complete and correct list and a brief description of
all Intellectual Property described in Section
1.37(a), 1.37(b) and 1.37(c) that is owned by
Company and primarily related to, used in, held for
use in connection with, or necessary for the conduct
of, or otherwise material to the Business (the
_Owned Intellectual Property_). Company owns or has
the exclusive right to use pursuant to license,
sublicense, agreement or permission all of its
Intellectual Property, free from any Liens (other
than Permitted Lines). No Affiliate of Seller owns
or has any interest in or with respect to any
Company Intellectual Property and Company
Intellectual Property comprises all of the
Intellectual Property necessary for Company to
conduct and operate the Business following the
Closing as now being conducted by Company.
(b)
No Infringement. To the knowledge of Sellers, the
conduct of the Business does not infringe or
otherwise conflict with any rights of any Person in
respect of any Intellectual Property. To the
knowledge of Sellers, none of Company Intellectual
Property is being infringed or otherwise used or
available for use, by any other Person.
(c)
Licensing Arrangements. Disclosure Schedule
4.08.6(c) sets forth all agreements, arrangements or
laws (i) pursuant to which Company has leased or
licensed Intellectual Property, or the use of
Intellectual Property as otherwise permitted
(through non-assertion, settlement or similar
agreements or otherwise) to, any other Person and
(ii) pursuant to which Company has had Intellectual
Property licensed to it, or has otherwise been
permitted to use Intellectual Property (through non-
assertion, settlement or similar agreements or
otherwise), excluding software licensed by Company
for internal purposes, together with a brief
description of the Intellectual Property covered
thereby. All of the agreements or arrangements set
forth in Disclosure Schedule 4.08.6(c), (x) are in
full force and effect in accordance with their terms
and no default exists thereunder by Company, or to
the knowledge of Sellers, or other parties thereto
(y) are free and clear of all Liens other than
Permitted Liens, and (z) except as set forth on
Disclosure Schedule 4.08.6(e), do not contain any
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<PAGE>
change in control or other terms or conditions that
will become applicable or inapplicable as a result
of the consummation of the transactions contemplated
by this Agreement. Sellers have delivered to
Purchaser true and complete copies of all licenses
and arrangements (including amendments) set forth on
Disclosure Schedule 4.08.6(c).
(d)
No Intellectual Property Litigation. To Sellers'
knowledge, no claim or demand of any Person has been
made nor is there any proceeding that is pending, or
to the knowledge of Sellers, threatened, nor is
there to Sellers' knowledge, a reasonable basis
therefor, which (i) challenges the rights of Company
in respect of any of the Intellectual Property, (ii)
asserts that Company is infringing or otherwise in
conflict with, or is, except as set forth in
Disclosure Schedule 4.08.6(d), required to pay any
royalty, license fee, charge or other amount with
regard to, any Intellectual Property, or (iii)
claims that any default exists under any agreement
or arrangement regarding Intellectual Property.
None of Company's Intellectual Property is subject
to any outstanding order, ruling, decree, judgment
or stipulation by or with any court, arbitrator, or
administrative agency, or has been the subject of
any litigation within the last five years, whether
or not resolved in favor of Company.
(e) Due Registration, etc.
Company has no Intellectual
Property that has been registered with, filed and/or
issued by, as the case may be, the United States
Patent and Trademark Office, United States Copyright
Office or such other filing offices, domestic or
foreign.
(f)
Use of Name and Mark. Except as set forth in
Disclosure Schedule 4.08.6(f), there are no
restrictions or limitations pursuant to any order,
decisions, injunctions, judgements, awards or
decrees of any Governmental Authority on Purchaser's
right to use the names and marks set forth on
Disclosure Schedule 4.08.6(a) in the conduct of the
Business as presently carried on by Company.
4.08.7
Motor Vehicles. Disclosure Schedule 4.08.7 sets forth a
complete list of all motor vehicles owned by Company.
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<PAGE>
4.09
Contracts.
(a) Disclosure Schedule 4.09 contains a complete and
correct list of all agreements, contracts,
commitments and other instruments and arrangements
(whether written or oral) of the types described
below (x) by which Company or under which Company or
any of its assets, businesses or operations receive
benefits, or (y) to which Company is a party or by
which Company is bound in connection with the
Business (the _Contracts_).
(i) leases, licenses, permits, franchises,
insurance policies, Governmental Approvals and
other contracts concerning or relating to the
Leased Real Property in Sellers' or Company's
possession;
(ii) employment, bonuses, vacations, pensions,
profit sharing, retirement, stock options,
stock purchases, employee discounts or other
employee benefits, consulting, agency,
collective bargaining or other similar
contracts, agreements, and other instruments
and arrangements relating to or for the benefit
of current, future or former employees,
officers, directors, sales representatives,
distributors, dealers, agents, independent
contractors or consultants which involves
aggregate annual payments in excess of $50,000;
(iii) loan agreements, indentures, letters of
credit, mortgages, security agreements, pledge
agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and
instruments relating to the borrowing of money
or obtaining of or extension of credit;
(iv) brokerage or finder's agreements;
(v) joint venture, partnership and similar
contracts involving a sharing of profits or
expenses, including, but not limited to, joint
research and development and joint marketing
contracts;
(vi) asset purchase agreements and other acquisition
or divestiture agreements, including, but not
limited to, any agreements relating to the
sale, lease or disposal of any assets owned by
Company (other than sales of Inventory in the
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ordinary course of business) or involving
continuing indemnity or other obligations;
(vii) orders and other contracts for the purchase
or sale of Inventories, materials, supplies,
products or services open or as to which any
liability exists as of the date hereof, each of
which involves aggregate payments in excess of
$50,000;
(viii) contracts with respect to which the
aggregate amount that could reasonably expected
to be paid or received thereunder in the future
exceeds $50,000;
(ix) sales agency, manufacturer's representative,
marketing or distributorship agreements;
(x) contracts, agreements or arrangements with
respect to the representation of the Business
in foreign countries;
(xi) master lease agreements providing for the
leasing of either (a) personal property
primarily used in, or held for use primarily in
connection with, the Business and (b) other
personal property;
(xii) contracts, agreements or commitments with
any director, officer, employee, or Affiliate
of Company or any of the Sellers, or with any
holder of more than five percent (5%) of any
class of capital stock of Company outstanding
other than employment contracts; and
(xiii) any other contracts, agreements or
commitments that are material to the Business.
(b) Sellers have delivered to Purchaser complete and
correct copies of all written Contracts, together
with all amendments thereto, and accurate
descriptions of all material terms of all oral
Contracts, set forth or required to be set forth in
Disclosure Schedule 4.09.
(c) Company has not received notice of any plan or
intention of any party to any Contract to exercise
any right to cancel or terminate any Contract. To
the best knowledge of Sellers, there does not exist
under any Contract any event of default or event or
condition that, after notice or lapse of time or
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<PAGE>
both, would constitute a violation, breach or event
of default thereunder on the part of Company or, to
the best knowledge of Sellers, any other party
thereto, except as set forth in Disclosure Schedule
4.09 and except for such events or conditions that,
individually and in the aggregate, (i) has not had
or resulted in, and will not have or result in a
material effect on Company or its assets, and (ii)
has not and will not materially impair the ability
of Company to perform its obligations under this
Agreement and under the Other Sellers Documents.
Except as set forth in Disclosure Schedule 4.09, no
consent of any third party is required under any
Contract as a result of or in connection with, and
the enforceability of any Contract will not be
affected in any manner by the execution, delivery
and performance of this Agreement or any of the
Other Sellers Documents or the consummation of the
transactions contemplated thereby.
(d) Company has no outstanding power of attorney
relating to the Business.
4.10 Labor Disagreements
. In connection with the operation of
the Business of Company or any other business previously
operated by Company, (i) Company is not engaged in any
unfair labor practice; (ii) Company has not been notified
of any unfair labor practice charge or complaint against
Company pending and, to the knowledge of Sellers, no such
charge or complaint is threatened before the National
Labor Relations Board, any state labor relations board or
any court or tribunal; (iii) except as set forth on
Disclosure Schedule 4.10, Company has not been notified
of any charge or claim filed at or with the Equal
Employment Opportunity Commission, any state agency
having similar jurisdiction or any court or tribunal,
actually pending and, to the knowledge of Sellers, no
such charge or claim is threatened against Company in
connection with the operation of the Business of Company;
(iv) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending
against or affecting Company and, to the knowledge of
Sellers, none is or has been threatened; (v) Company has
not been notified of any grievance which might have a
material effect on the conduct of the operations of the
Business of Company; (vi) Company has no labor contracts
or collective bargaining agreements with respect to any
Company Personnel; (vii) no labor organization or group
of employees of Company has made a demand for recognition
or certification, and, to the Sellers' knowledge, there
are no representation or certification proceedings or
petitions seeking a representation proceeding presently
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<PAGE>
pending or threatened in writing to be brought or filed
with the National Labor Relations Board or any other
labor relations tribunal or authority, and (viii) Company
has not been notified of any organizing activities
involving Company pending with any labor organization or
group of employees of Company.
4.11 Employee Benefit Information
.
(i) Except as set forth on Disclosure Schedule 4.11(i),
Company does not maintain, is not required to
contribute to and has no liabilities with respect to
any Employee Benefit Plans and no Company Personnel
or dependent of such Company Personnel is entitled
to any benefits except as provided for by the
provisions of such Employee Benefit Plans or by
applicable law.
(ii) Sellers have provided Purchaser with (a) copies of
all Employee Benefit Plans or in the case of any
unwritten plan, a written description thereof, (b)
copies of any annual, financial or actuarial reports
and Internal Revenue Service determination letters
relating to such Employee Benefit Plans and (c)
copies of the most recent summary plan descriptions
(whether or not required to be furnished under
ERISA) and all material employee communications
relating to such Employee Benefit Plans and
distributed to Company Personnel.
(iii) Except as set forth on Disclosure Schedule
4.11(iii), the events contemplated by this Agreement
(either alone or together with any other event) will
not (a) entitle any Company Personnel to severance
pay, unemployment compensation, or other similar
payments under any Employee Benefit Plan or law, (b)
accelerate the time of payment or vesting or
increase the amount of benefits due under any
Employee Benefit Plan or compensation to any Company
Personnel, (c) result in any payments (including
parachute payments) under any Employee Benefit Plan
or law, becoming due to any Company Personnel, or
(d) terminate or modify or give a third party a
right to terminate or modify the provisions or terms
of any Employee Benefit Plan.
(iv) The Global Combined Technologies, Inc. Employee
Savings Plan (the _401(k) Plan_) is qualified under
Sections 401(a) and 401(k) of the Code and the
related trust is exempt from Tax under Section
501(a) of the Code and Company has no other
employees' savings plans qualified under Section
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401(a) or any other Section of the Code. The
Internal Revenue Service has issued an opinion
letter that the prototype plan to which the 401(k)
Plan relates is so qualified and nothing, to
Seller's knowledge, has occurred since the date of
such letter to cause the letter to be no longer
valid or effective assuming the plan is amended on a
timely basis to comply with changes to the Code, or
other legislative, regulatory or administrative
requirements subject to the remedial amendment
period applicable to such Act. All contributions
due with respect to the periods ending on or before
the Closing Date to the 401(k) Plan have been timely
made, and a pro rata portion of the contributions
(including matching contributions) for the plan year
in which the Closing Date occurs shall have been
made on or prior to the Closing Date for the period
ending on the Closing Date. The Global Combined
Technologies, Inc. Cafeteria Plan (the _Cafeteria
Plan_) satisfies all the applicable provisions of
Section 125 of the Code.
(v) Neither Company nor any entity that is or was at any
time treated as a single employer with Company under
Section 414(b), (c), (m) or (o) of the Code has at
any time (a) maintained, contributed to or been
required to contribute to any plan under which more
than one employer makes contributions (within the
meaning of Section 4064(a) of ERISA) or any plan
that is a multi-employer plan as defined in Section
3(37) of ERISA, (b) incurred or expects to incur any
liability to the Pension Benefit Guaranty
Corporation or otherwise under Title IV or ERISA
(other than the payment of premiums none of which
are overdue) or (c) incurred or expects to incur
liability in connection with an _accumulated funding
deficiency_ within the meaning of Section 412 of the
Code whether or not waived.
(vi) Company has, in the conduct of the affairs of the
Business of Company, complied in all material
respects with all applicable laws, rules and
regulations relating to the employment of labor,
including those relating to wages, hours, terms and
conditions of employment, collective bargaining and
the payment of social security and similar Taxes.
(vii) Company has not and prior to the Closing Date
will not have suffered a _plant closing_ or _mass
layoff_ within the meaning of the Worker Adjustment
and Retraining Notification Act (_WARN_).
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(viii) Company has complied in all material respects
with the Consolidated Omnibus Budget Reconciliation
Act of 1984.
4.12 Burdensome Obligations
. Except for agreements described
in the Disclosure Statement Exhibit 4.12, Company is not
a party to any so-called requirements or similar type of
contract limiting its freedom or latitude in the purchase
of its inventory, equipment or other items. Company is
not subject to or bound by any contract or other
obligation whatsoever which materially adversely affects
its business, properties or prospects, except as
expressly disclosed in this Agreement.
4.13 Lawful Operations
. To the best of Sellers' knowledge,
the businesses conducted and properties owned or leased
by Company conform with all Applicable Laws and all
permits and licenses, if any, that are required to enable
Company to operate its Business have been obtained.
4.14
Legal Proceedings; Claims. Except as set forth in the
Disclosure Schedule 4.14, there are no decrees or order
of any regulatory agency, court or public authority
materially adversely affecting the operations of Company,
and Company is not a party to any litigation or other
judicial or administrative proceedings. Except as set
forth in Disclosure Schedule 4.14, to Sellers' knowledge,
neither Company nor any Seller is a party to any
litigation or other judicial, administrative or other
proceeding pending or known by Sellers to be threatened
which would affect Company's or Sellers' ability to
perform this Agreement or would materially adversely
affect the assets or operations of Company; and, to the
best of Sellers' knowledge there are no claims in
existence or threatened against Company or any of its
properties which may result in litigation. There are no
known existing violations of any Federal, State, local or
foreign laws or regulations which might materially affect
the properties, assets, business, financial condition or
corporate status of Company; and Company is not in
default with respect to any order or decree of any court
or administrative regulatory agency.
4.15 Taxes
.
A. Company has:
(i) Except as set forth in Disclosure Schedule
4.16, prepared in accordance with reasonable
interpretations of all Applicable Laws, and
timely filed all Tax Returns required to be
filed or sent by it with respect to any Taxes;
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copies of all Company federal and state income
Tax Returns since the date of Company's
organization have been provided to Purchaser;
(ii) timely paid all Taxes that are shown as due and
payable on said Tax Returns;
(iii) established on its books and records
reserves that are adequate for the payment of
all Taxes not yet due and payable;
(iv) materially complied with all Applicable Laws,
rules and regulations relating to the payment
and withholding of Taxes and have timely and
properly withheld from employee wages and paid
over to the proper Governmental Authorities all
amounts required to be so withheld and paid
over under all Applicable Laws. There are no
liens for Taxes upon the assets of Company
except for Liens for Taxes not yet due.
Company is not a party to any agreement
providing for the allocation, sharing or
indemnification of Taxes.
To Sellers' knowledge, Company is not currently
under audit by any Governmental Authority for any
Taxes and has not extended the statute of
limitations relating to the filing of a Tax Return
or the payment of any Taxes.
B. Sellers represent that:
(i) Company made a Subchapter S election under the
Code to be treated as an S corporation on
January 1, 1997;
(ii) there has been no consent filed with the
Internal Revenue Service under Section 341(f)
of the Code; and
(iii) Each Seller shall be responsible for his or
its federal, state and local income taxes
relating to or arising from his or its
ownership of Company Shares, (including, but
not limited to, all items of income and gain
passing through the Company to the Seller
pursuant to applicable Sections of the Code)
relating to the Company being treated as an S
corporation.
(iv) Company will cease to be an S corporation upon
the Closing pursuant to Section 1362(d)(2) of
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the Code, and Section 1362(e)(3) of Code shall
govern the allocation of items of income, loss,
deduction or credit between the S short year
and C short year of Company.
4.16 Environmental Compliance
.
(i) To Seller's knowledge, Company is not in violation,
or alleged to be in violation, of any Environmental
Laws which would have a material effect on the
Business,
(ii) Company has not received a notice, complaint, order,
directive, claim or citation from any third party,
including without limitation any federal, state or
local governmental authority, (A) that Company has
been identified by the Unites States Environmental
Protection Agency (_EPA_) as a potentially
responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 CFR
Part 300 Appendix B, or the CERCLA Information
System; (B) that any Hazardous Materials which
Company has generated, stored, transported or
disposed of has been released at any site at which a
federal, state or local agency has conducted or has
ordered that any person conduct a remedial
investigation, removal or other response action
pursuant to any Environmental Law or has named
Company as a potentially responsible party; or (C)
that Company is or shall be named party to any
claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case,
contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with
the release of Hazardous Materials.
(iii) To the knowledge of Sellers, (A) no portion of
the property of Company has been used for the
handling, processing, storage or disposal of
Hazardous Materials except in compliance in all
material respects with applicable Environmental
Laws; and no underground tank or other underground
storage receptacle containing or formerly containing
any Hazardous Materials is located on any portion of
any of the properties currently or formerly owned,
operated or leased by Company or any of its
Affiliates during Company's or any of its
Affiliate's ownership, operation or lease of the
properties; (B) in the course of any activities
conducted by Company or operators of Company's
properties, no Hazardous Materials have been
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generated or are being used on the property except
in compliance in all material respects with
applicable Environmental Laws; (C) there have been
no releases (i.e., any past or present releasing,
spilling, leaking, leaching, pumping, pouring,
emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened
releases of Hazardous Materials on, upon, into or
from the property currently or formerly owned,
operated or leased by Company or any of its
Affiliates during or prior to Company's or any of
its Affiliate's ownership, operation or lease, which
releases would have a material effect on the value
of any of the property or adjacent properties or the
environment; and (D) in addition any Hazardous
Materials, that have been generated or stored by
Company or any of its Affiliates on any of the
currently or formerly owned, operated or leased
property of Company have been transported off site
only by carriers having an identification number
issued by the EPA and treated or disposed of only by
treatment or disposal facilities maintaining valid
permits as required under applicable Environmental
Laws, which transporters and facilities have been
and are operating in material compliance with such
permits and applicable Environmental Laws or, if any
transporter or facility has not been or is not in
material compliance, such failure would not have a
material effect on Company or any of its Affiliates.
(iv) Sellers have provided to Purchaser all
environmentally related audits, studies, reports,
analyses (including soil and groundwater analysis),
and results of investigations that have been
performed with respect to the currently or
previously owned, leased, or operated properties of
Company or any of its Affiliates, and that are in
the possession of Company, any of its Affiliates or
Sellers.
(v) There is not now nor, to the knowledge of Sellers,
have there been located at any of the properties of
Company, whether owned or leased asbestos containing
material or equipment containing polychlorinated
biphenyls in violation of any applicable
Environmental Law.
(vi) Company currently holds, and at all times has held,
all required federal, state, and local permits,
licenses, certificates and approvals necessary to
Company's Business (_Environmental Permits_).
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<PAGE>
Company has not been notified by any relevant
Governmental Authority that any Environmental Permit
will be modified, suspended, cancelled or revoked,
or cannot be renewed in the ordinary course of
business, which modification, suspense,
cancellation, revocation or non-renewal could affect
in any material way the manner in which Company
operates Company's Business.
4.17
Insurance. Company maintains policies of fire, extended
coverage, liability and other forms of insurance covering
its Business, properties and assets in amounts and
against such losses and risks as are generally maintained
for comparable businesses and properties, and valid
policies for such insurance will be outstanding and duly
in force through and on the Closing Date. Attached hereto
as Disclosure Schedule 4.17 is a complete list of all
insurance policies owned by Company, indicating risks
insured against, carrier, policy number, amount of
coverage, premiums and expiration dates.
4.18 Books and Records
. The books of account of Company
substantially reflect all its known material items of
income and expense and all its known material assets,
liabilities and accruals. The corporate minute books of
Company are substantially complete as to the records of
substantially all substantial proceedings of
incorporators, shareholders and directors, and there are
no substantial and material minutes or records of the
proceedings of any of said person not included therein.
The share ledgers and share certificate books contain a
complete and accurate record of all issuances and
transfers of shares in Company.
4.19 Certain Interests
. Except as set forth in Disclosure
Schedule 4.19, Sellers do not directly or indirectly own
any interest in any corporation, firm or enterprise
engaged in a business competitive with Company, except
(i) Company Shares or (ii) any passive investment by
Sellers in the stock of any publicly held corporation
which is not in excess of five percent of the issued and
outstanding capital stock of such corporation.
4.20 Officers and Directors; Certain Payments
. Disclosure
Schedule 4.20 is a true and complete list showing (a) the
names of all officers and directors of Company and the
directorships and officerships in Company held by each;
(b) the names and address of each financial institution
in which Company has an account, safe deposit box or
investment account, the names of all persons authorized
to draw thereon or to have access thereto, and the nature
of such authorization; and (c) the names of all persons
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holding tax or other powers of attorney from Company and
a summary statement of the terms thereof.
4.21
Commissions or Brokers Fees. Neither Company nor any
Seller has incurred any liability to any person for
financial advice, finder's fees or brokerage commission
with respect to the transactions contemplated by this
Agreement, which liability may be asserted against
Company, Purchaser or any affiliate of Purchaser.
4.22 Assets Necessary to the Business
. Company owns, leases,
licenses, or has the right to use all assets and
properties (tangible and intangible) necessary to carry
on its Business and operations as presently conducted.
Such assets and properties are all of the assets and
properties necessary to carry on the Business of Company
as presently conducted and, except as set forth in
Disclosure Schedule 4.22, none of the Sellers (other than
through their ownership of stock in Company) nor any
member of their respective families owns or leases or has
any interest in any assets or properties presently being
used to carry on the Business of Company.
4.23 Absence of Certain Business Practices
. Neither Company,
nor any officer, employee or agent of Company, nor any
other Person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to
give any gift, bribe, rebate or kickback or otherwise
provide any similar benefit to any customer, supplier,
governmental employee or any other Person who is or may
be in a position to help or hinder Company or the
Business (or assist Company in connection with any actual
or proposed transaction relating to the Business or any
other business previously operated by Company) (i) which
subjected or might have subjected Company to any damage
or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) which if not given in the
past, might have had a material effect on Company or its
assets, (iii) which if not continued in the future, might
have a material effect on Company or its assets or
subject Company to suit or penalty in any private or
governmental litigation or proceeding, (iv) for any of
the purposes described in Section 162(c) of the Code or
(v) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.
4.24
Transactions with Affiliates. Except as disclosed on
Disclosure Schedule 4.24, there is no lease, sublease,
contract, agreement or other arrangement of any kind
whatsoever entered into by Company with any Seller or
with any Affiliate of any Seller, except such of the
foregoing which may be terminated at Closing by Purchaser
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<PAGE>
without further liability. Prior to Closing, all
indebtedness owed by any Seller to Company shall be
repaid.
4.25
Territorial Restrictions. Except as described in
Disclosure Schedule 4.25, Company is not restricted by
any written agreement or understanding with any other
Person (excluding Applicable Laws of Governmental
Authorities) from carrying on the Business anywhere in
the world. Neither Purchaser nor any of its affiliates
will, as a result of its acquisition of Company Shares,
become restricted in carrying on the Business anywhere in
the world as a result of any Contract or other agreement
to which Company is a party or by which it is bound.
4.26 Customers
. Disclosure Schedule 4.26 includes a correct
list of the twenty-five (25) largest customers for
Company for each of the past two (2) fiscal years and the
amount of business done by Company with each such
customer for each year. None of the Sellers have any
knowledge or information, and are aware of any facts
indicating that any of the customers will or intend to
(a) cease doing business with Company; (b) materially
alter the amount of business they are presently doing
with Company; or (c) not do business with Company after
the Closing Date.
4.27 Suppliers
. Disclosure Schedule 4.27 sets forth the
names of and description of contractual arrangements
(whether or not binding or in writing) with the fifteen
(15) largest suppliers of Company and any sole suppliers
of significant goods or services (other than electricity,
gas, telephone or water) to Company with respect to which
practical alternative sources of supply are not readily
available on comparable terms and conditions. None of
the Sellers have any knowledge or information, or are
aware of any facts indicating that any of the suppliers
of Company will or intend to (a) cease doing business
with Company; (b) materially alter the amount of business
they are presently doing with Company; or (c) not do
business with Company after the Closing Date.
4.28
Conversion of Certain Indebtedness to Equity. Sellers
represent and warrant that on the 24th day of February,
1998, certain Sellers that were owed $1,554,206.18 of
principal in the aggregate and accrued interest of
$287,300.22, converted such indebtedness into paid-in
capital of Company. In connection with such conversion,
the Parties that were subject to such conversion
transaction disclosed all material facts to all Sellers
that are Parties to this Agreement.
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<PAGE>
4.29
Product Liability. Except as set forth in Disclosure
Schedule 4.28 and for warranties under Applicable Law,
(a) there are no warranties, express or implied, written
or oral, with respect to the products of the
Business;
(b) to Seller's knowledge, there are no pending or
threatened claims with respect to any warranty;
and
(c) Company does not have, and to the best knowledge of
Sellers, will not have, any liability, after the
Closing, with respect to any such warranty, whether
known or unknown, absolute, accrued, contingent, or
otherwise and whether due or to become due.
4.30 Disclosure
. No representation or warranty made by any
Seller in this Agreement and no exhibit, certificate or
documents furnished or to be furnished by any Seller
pursuant hereto contains or will contain any known untrue
statement of a material fact or omits or will omit any
known material fact necessary in order to make the
statements contained therein not misleading. The Sellers
have no knowledge of any factors materially and adversely
affecting the future prospects of Company's Business
which have not been disclosed in this Agreement and the
Disclosure Schedule.
ARTICLE V
5.
Representations of Purchaser. Purchaser represents,
warrants and agrees that:
5.01
Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware and has all the requisite corporate
power and authority to own, lease and operate its
properties and to carry on its business as it is now
being conducted.
5.02
Authority. This Agreement is a valid and binding
obligation of Purchaser, enforceable in accordance with
its terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or limiting creditors' rights
generally, or by the availability of equitable remedies
or the application of general equitable principles.
Except as set forth in Disclosure Schedule 5.02, neither
the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby
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<PAGE>
will:
(i) violate, or conflict with, or require any Consent
under, or result in a breach of any provisions of,
or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or
accelerate the performance required by, or result in
the creation of any Lien upon any of the properties
or assets of Purchaser under any of the terms,
conditions or provisions of the Articles of
Incorporation or Bylaws of Purchaser or of any note,
bond, mortgage, indenture, deed of trust, license,
agreement or other instrument or obligation to which
Purchaser is a party, or by which Purchaser or any
of its properties or assets may be bound or
affected, or
(ii) violate any order, writ, injunction or decree
applicable to Purchaser or any of its properties or
assets or, to the knowledge of Purchaser, violate
any statute, rule or regulation applicable to
Purchaser or any of its properties or assets; or
(iii) constitute a default or event that, with notice
or lapse of time, or both, would be a default,
breach, or violation of any lease, license,
promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement to which
Purchaser is a party or by which it is bound; or
(iv) constitute an event that would permit any party to
terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of
Purchaser.
(v) except for compliance with the HSR Act, no Consent
by, notice to or registration with any Governmental
Authority is required on the part of Purchaser prior
or subsequent to the Closing Date in connection with
the execution, delivery and performance by Purchaser
of this Agreement or the consummation of any of the
transactions contemplated hereby.
5.03
Commissions or Brokers' Fees. Purchaser has not incurred
any liability to any person for financial advice,
finder's fees or brokerage commission with respect to the
transactions contemplated by this Agreement, which
liability may be asserted against any Seller or Company.
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5.04
Securities Acts. Purchaser understands and acknowledges
(i) that the purchase and sale of the Company Shares
pursuant to this Agreement is intended to be exempt from
registration under Section 4(1) of the Securities Act of
1933, as amended (the _Securities Act_), and similar
exemptions provided under applicable state securities
laws, (ii) that the Company Shares have not been
registered under the Securities Act or any applicable
state securities laws and, therefore, cannot be resold
unless they are registered under the Securities Act or
applicable state securities laws, or unless an exemption
from registration is available, and (iii) that Purchaser
is acquiring the Company Shares for its own account for
investment and not with a view to, or for resale in
connection with, the distribution thereof.
ARTICLE VI
6.01
Release by Sellers. Each Seller, as of the Closing Date,
shall release and discharge Company from all actions,
claims or demands of every kind and nature which any of
the Sellers have or may have against Company (including,
but not limited to, any claims, if any, arising out of a
conversion of certain indebtedness owed by the Company to
certain Sellers to paid-in capital of Company on February
24, 1998), whether based upon contract or otherwise,
arising before the execution of this Agreement. Nothing
contained herein shall constitute a release of any rights
of the Sellers arising under this Agreement, of any
claims under any Employee Benefit Plans currently
maintained by Company, or with respect to anything which
may occur after the Closing Date.
ARTICLE VII
7.01 Covenants Not to Compete
. As inducement for and in
consideration of Purchaser entering into this Agreement,
the Sellers shall each enter into a non-competition
agreement. Such non-competition agreements are set forth
in Exhibits F, F-1, F-2, F-3, and F-4 attached hereto and
made a part hereof.
ARTICLE VIII
8.01
Employment Agreements. Upon the Closing Date, Company
shall enter into Employment Agreements with Dean
Higganbotham and Dale Higganbotham. Copies of said
Employment Agreements are attached hereto and made a part
hereof as Exhibits G and G-1.
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ARTICLE IX
9.1 Covenants of Sellers
.
9.01.1 Conduct of Business
. From the date hereof to the Closing
Date, except as expressly permitted or required by this
Agreement or as otherwise consented to by Purchaser in
writing, Sellers will cause Company to:
(a) carry on its Business in, and only in, the ordinary
course, in substantially the same manner as
heretofore conducted, and with respect to the
Business, use all reasonable efforts to preserve
intact its present business organization, maintain
its properties in good operating condition and
repair, keep available the services of its present
officers and significant employees, and preserve its
relationship with customers, suppliers and others
having business dealings with it, with the goal and
intent that its goodwill and ongoing business shall
be in all material respects unimpaired following the
Closing;
(b) pay accounts payable and other obligations of the
Business when they become due and payable in the
ordinary course of business consistent with prior
practice;
(c) perform in all material respects all of its
obligations under all Contracts and other agreements
and instruments relating to or affecting the
Business and comply in all material respects with
all Applicable Laws applicable to Company in the
ordinary course of business consistent with prior
practice;
(d) other than sales and purchases of Inventories in the
ordinary course where delivery is contemplated not
later than the calendar month following the Closing
Date, not enter into or assume any material
agreement, contract or instrument relating to the
Business, or enter into or permit any material
amendment, supplement, waiver or other modification
in respect thereof other than in the ordinary course
of business consistent with prior practice;
(e) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus
compensation but excluding incentive or bonus
compensation declared and paid prior to closing) of
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any employee employed in the operation of the
Business (other than normal merit pay increases made
in the ordinary course of the Business, consistent
with past practices) or institute, adopt or amend
(or commit to institute, adopt or amend) any
compensation or benefit plan, policy, program or
arrangement or collective bargaining agreement
applicable to any such employee;
(f) continue all policies of insurance relating to the
Business in full force and effect;
(g) not make any change or modification in Company's
accounting practices, policies or procedures which
in any way affect the Business, including any change
or modification with respect to the allocation of
revenues, costs and expenses applicable to the
Business; and
(h) not take any action or knowingly omit to take any
action, which action or omission would result in a
breach of any of the representations and warranties
set forth in Section 4.
9.01.2
Access and Information. From the date hereof until the
Closing Date, Company shall make available or cause to be
made available to the accountants, attorneys or other
representatives of Purchaser, for examination during
normal business hours, upon reasonable request, all
properties, assets, books of accounts, title papers,
insurance policies, contracts, leases, commitments,
records and other documents of every character relating
to Company.
9.01.3
Further Actions.
(a) Sellers agree to use all reasonable good faith
efforts to take all actions and to do all things
necessary, proper or advisable to consummate the
transactions contemplated hereby by the Closing
Date.
(b) Sellers will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all
applications, notifications and information required
to be filed or supplied by them or Company pursuant
to Applicable Law in connection with this Agreement,
the Other Sellers Documents and the consummation of
the other transactions contemplated hereby,
including, but not limited to any necessary filings
pursuant to the HSR Act.
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(c) Sellers, as promptly as practicable, will use all
reasonable efforts to obtain, or cause to be
obtained, all Consents necessary to be obtained by
them or Company in order to consummate the sale and
transfer of Company Shares pursuant to this
Agreement and the consummation of the other
transactions contemplated thereby.
(d) At all times prior to the Closing, Sellers shall
promptly notify Purchaser in writing of any fact,
condition, event or occurrence known to it in the
exercise of reasonable business prudence that will
or may result in the failure of any of the
conditions contained in Sections 12.01(1), (2) or
(3) to be satisfied, promptly upon any of them
becoming aware of the same.
9.01.4 Further Assurances
. Following the Closing, Sellers
shall, and shall cause each of their Affiliates and
Company to, from time to time, execute and deliver such
additional instruments, documents, conveyances or
assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by
Purchaser, to confirm and assure the rights and
obligations provided for in this Agreement and in the
Other Sellers Documents and render effective the
consummation of the transactions contemplated thereby.
Without limiting the generality of the foregoing, the
parties specifically contemplate closing the transactions
contemplated herein prior to the time that full
compliance by Sellers with the conditions precedent set
forth in Section 12.01(2) will be practicable. As a
result, notwithstanding the Closing, this Section 9.01.4
shall require prompt delivery thereafter by Sellers of
the consents, instruments and agreements called for
herein, including in Section 12.01(2).
9.01.5 Liability for Transfer Taxes
. Sellers shall be
responsible for the timely payment of, and shall
indemnify and hold harmless Purchaser and their
Affiliates against, all sales, income, use, value added,
documentary, stamp, and any other taxes and fees
attributable or arising out of the sale of the Company
Shares by Sellers to Purchaser. Sellers represent to
Purchaser that there will be no tax liability to Company
arising out of the sale of the Company Shares.
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ARTICLE X
10.01 Covenants of Purchaser
.
10.01.1Further Actions
.
(a) Purchaser agrees to use all reasonable good faith
efforts to take all actions and to do all things
necessary, proper or advisable to consummate the
transactions contemplated hereby by the Closing
Date.
(b) Purchaser will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all
applications, notifications and information required
to be filed or supplied by it pursuant to applicable
law in connection with this Agreement, the Other
Sellers Documents and the consummation of the other
transactions contemplated hereby, including, but not
limited to any necessary filings pursuant to the HSR
Act.
(c) Purchaser, as promptly as practicable, will use all
reasonable efforts to obtain, or cause to be
obtained, all Consents necessary to be obtained by
it in order to consummate the acquisition of the
Company Shares pursuant to this Agreement and the
consummation of the other transactions contemplated
hereby.
10.01.2Notice by Purchaser
. Purchaser agrees that should its
employees accountants, attorneys or other representatives
acquire knowledge prior to Closing, as a result of their
investigation of Company pursuant to this Agreement or
otherwise, of any material breach of or inaccuracy in the
representations and warranties contained in Section 4
above, Purchaser will notify the Sellers of such breach
in writing prior to Closing and Sellers shall have the
opportunity to cure such breach prior to Closing.
10.01.3Tax Elections
. Purchaser will not file any election
under Section 338 of the Code with respect to this
Agreement or the transactions contemplated herein.
10.01.4
Further Assurances. Following the Closing, Purchaser
shall, and shall cause each of its Affiliates and Company
to, from time to time, execute and deliver such
additional instruments, documents, conveyances or
assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by Sellers,
to confirm and assure the rights and obligations provided
for in this Agreement and in the Other Sellers Documents
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and render effective the consummation of the transactions
contemplated thereby. Without limiting the generality of
the foregoing, the parties specifically contemplate
closing the transactions contemplated herein prior to the
time that compliance by Purchaser with the conditions
precedent set forth in Section 12.02(7) relating to the
releases of any of the Sellers of their guaranties of any
of the Line of Credit Indebtedness will be practicable.
As a result, notwithstanding the Closing, this Section
10.01.4 shall require prompt delivery thereafter by
Purchaser of the instruments and agreements called for
herein, including that contained in Section 12.01(7).
ARTICLE XI
11.01 Survival of Representations and Warranties
. The Parties
acknowledge and agree that all the representations,
covenants, warranties and agreements contained in this
Agreement or in any agreement, instrument, exhibit,
certificate, schedule or other document delivered in
connection herewith, shall survive the Closing and shall
be binding upon the party giving such representation,
covenant, warranty or agreement and shall be fully
enforceable to the extent provided for in Sections 11.04
and 11.05 hereof, at law or in equity, for the period
beginning on the date of Closing and ending two (2) years
thereafter, except for the representations, warranties
and agreements designated and identified in Section 4.01,
4.02, 4.03, 4.05, 4.08 through 4.08.7, 4.15, 4.16, 5.01
and 5.02, which shall survive the Closing and shall
terminate in accordance with the statutes of limitation
governing written contracts and Exhibits F, F-1, F-2, F-
3, F-4, G and G-1, which shall terminate as provided
therein.
11.02
Reliance Upon and Enforcement of Warranties and
Agreements of Sellers
. Each Seller hereby agrees that,
notwithstanding any right of Purchaser to fully
investigate the affairs of Company, 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, covenants, warranties and agreements
of each Seller contained in this Agreement and upon the
accuracy of any document, schedule, certificate or
exhibit given or delivered to Purchaser pursuant to the
provisions of this Agreement.
11.03 Reliance Upon and Enforcement of Representations,
Warranties and Agreements of Purchaser
. Purchaser hereby
agrees that, notwithstanding any right of Sellers to
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fully investigate the affairs of Purchaser and
notwithstanding knowledge of facts determined or
determinable by Sellers pursuant to such investigation or
right of investigation, Sellers have the right to rely
fully upon the representations, covenants, warranties and
agreements of Purchaser contained in this Agreement and
upon the accuracy of any document, certificate or exhibit
given or delivered to Sellers pursuant to the provisions
of this Agreement.
11.04
Indemnification by Sellers. Each Seller, severally (in
proportion to his stock ownership), not jointly, shall
indemnify Purchaser against and hold it harmless from any
Losses resulting from or arising out of any inaccuracy in
or breach of any representation, warranty, covenant or
obligation made or incurred by any Seller herein or in
any other agreement, instrument or document delivered by
any Seller pursuant to the terms of this Agreement
subject to the provisions of Section 11.08.A. The
maximum liability of each Seller hereunder is set forth
on Disclosure Schedule 11.04. J. Walter Duncan, Jr.
hereby agrees to guaranty all obligations of the J.
Walter Duncan, Jr. Revocable Trust hereunder.
11.05
Indemnification by Purchaser. Purchaser agrees to
defend, indemnify and hold harmless the Sellers from,
against and in respect of any and all Losses resulting
from or arising out of an inaccuracy in or other breach
of any representation, warranty, covenant, or obligation
made or incurred by Purchaser herein or in any other
agreement, instrument or document delivered by Purchaser
pursuant to the terms of this Agreement.
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11.06
Notification of and Participation in Claims.
(a) No claim for indemnification shall arise until
notice thereof is given to the party from whom
indemnity is sought (the _Indemnifying Party_).
Such notice shall be sent to the Indemnifying Party
within ten (10) days after the party asserting such
right to indemnity (the _Party to be Indemnified_)
has received notification of such claim, but failure
to notify the Indemnifying Party shall in no event
prejudice the rights 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 Sellers on the one hand, or Purchaser on the
other hand, may have an obligation to indemnify the
other, the Party to be Indemnified shall give or
cause to be given to 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 irrevocably acknowledges in
writing full and complete responsibility for and
agrees to provide indemnification of the Party to be
Indemnified, 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 agree
to cooperate fully with each other in connection
with the mitigation, defense, negotiation or
settlement of any such third party legal proceeding,
claim or demand.
(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
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immediately indemnify the Party to be Indemnified
pursuant to the terms of Sections 11.04 and 11.05
hereunder, subject to the limitations set forth
elsewhere in this Section 11. 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, 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
and irrevocably acknowledge in writing full and
complete responsibility for, and agree to provide,
indemnification of the Party to be Indemnified. 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 11.04 or 11.05
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 11.04 or 11.05
hereof, including any and all 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 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
11.04 and 11.05 for the amount of the original
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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.
11.07
Provisions of General Application. With respect to any
right of indemnification arising under this Agreement,
the following provisions shall apply:
(a) Procedures
. The Party to be Indemnified and the
Indemnifying Party agree to cooperate in the defense
of any third party claim or action subject to this
Section 11, to permit the cooperation and
participation of the other parties in any such claim
or action, and to promptly notify the other parties
of the occurrence of any indemnified event or any
material developments or amounts due respecting any
indemnification event.
(b) No Implications
. Neither the rights of any Party
to indemnification from another Party nor the
obligations of any Party to indemnify another Party,
under this Agreement, shall in any way imply or
create, and each Party specifically disclaims, any
responsibility whatsoever by such Party for any
other Party's liabilities to any other person or
entity or Governmental Authority.
(c) Insurance
. Prior to enforcing any claim for
indemnification against the Indemnifying Party under
this Agreement, the Party to be Indemnified shall
administratively file in good faith with any
insurers all forms and submissions required by
applicable policies for the proceeds or other
benefits of insurance coverage, if any, applicable
to the claim or event from which such
indemnification right arose. In the event that
insurance proceeds are paid to the Party to be
Indemnified respecting an event to which an
indemnification right applies hereunder, such
indemnification right shall apply only to the extent
that the amount of damages indemnified against
exceeds such insurance proceeds actually paid to the
Party to be Indemnified; provided however, that: (a)
such insurance proceeds shall not affect or be
applied towards the maximum liability established in
Section 11.08 and (b) collection by judicial or
legal process of such insurance proceeds shall not
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be a condition precedent to asserting or collecting
such indemnification claims under this Agreement.
If the Indemnifying Party incurs indemnity costs or
pays indemnity damages under this Agreement, and the
Party to be Indemnified subsequently receives
insurance proceeds for the same claim or event, then
the Party to be Indemnified shall refund such
indemnity costs or damage payments to the
Indemnifying Party from such insurance proceeds to
the extent that the Party to be Indemnified has
received benefits from both sources (i.e., payments
of indemnity damages from the Indemnifying Party and
such insurance proceeds) in excess of the amount of
indemnifiable damages incurred by or asserted
against the Party to be Indemnified.
(d)
Mitigation. The Party to be Indemnified shall use
its good faith efforts to mitigate any claim or loss
by any third party hereunder and the Indemnifying
Party shall be entitled to participate in and
coordinate such mitigation with the Party to be
Indemnified.
11.08 A. Limitations
. Notwithstanding anything herein to
the contrary, no claims for indemnification shall be
made by Purchaser against the Sellers until such
time as all claims hereunder (the _Indemnity
Basket_), net of income tax benefit realized and/or
realizable by Company and/or Purchaser, total more
than Two Hundred Thousand Dollars ($200,000) in the
aggregate and then indemnification shall be made
only to the extent that such claim or claims exceed
Two Hundred Thousand Dollars ($200,000) in the
aggregate. In addition, notwithstanding anything
contained herein to the contrary, the maximum
aggregate liability that Sellers may be collectively
required to pay to Purchaser under this Section 11,
or as a result of any other provision of this
Agreement as a result of any and all breaches, if
any, of the representations and warranties
hereunder, or as a result of any and all defaults of
any covenants hereunder, shall be limited to Three
Million Dollars ($3,000,000).
B. Notwithstanding anything to the contrary in this
Agreement, the maximum aggregate amount that
Purchaser may be required to pay to Sellers
hereunder, or as a result of any other provision of
this Agreement as a result of any and all breaches,
if any, of representations and warranties contained
in Article V hereunder shall be limited to an amount
equal to $3,000,000.
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11.09
Assignment and Accounting for Benefits. To the extent
that the Indemnifying Party shall have actually paid
indemnity damages to or on behalf of the Party to be
Indemnified, the Party to be Indemnified shall make a
non-exclusive assignment (to the extent permitted under
applicable law) to the Indemnifying Party (as their
interest may appear) of the remedies, rights and claims,
if any, of the Party to be Indemnified against any and
all third parties for the same liability, including, but
not limited to, remedies, rights and claims against (i)
liability insurers and other insurance companies, and
(ii) any other person which has indemnified the Party to
be Indemnified for such liability. The parties shall
cooperate reasonably in the pursuit of any such remedies,
rights and claims.
For purposes of Section 11.08, the amount of any
indemnification claim shall be reduced by the effect of
any income tax benefit realized and/or realizable by
Company/Purchaser. For purposes hereof, a marginal rate
of forty percent (40%) shall be utilized.
11.10 Exclusive Remedy
. Anything contained in this Agreement
or the Other Seller Documents to the contrary
notwithstanding, the indemnification rights set forth in
this Section 11, all of which are subject to the terms,
limitations, and restrictions of this Section 11, shall
be the exclusive remedy after Closing against the Sellers
and/or Purchaser for monetary damages sustained as a
result of a breach of a representation, warranty,
covenant, or agreement under this Agreement. Such
limitations set forth in this Section 11 shall not impair
the rights of any of the parties: (a) to seek non-
monetary equitable relief, including (without limitation)
specific performance or injunctive relief to redress any
default or breach of this Agreement; or (b) to seek
enforcement, collection, damages, or such non-monetary
equitable relief to redress any subsequent default or
breach of any employment agreement, non-competition
agreement, transfer document, assumption, consent, or
agreement to be delivered at Closing hereunder. In
connection with the seeking of any non-monetary equitable
relief, each of the Parties acknowledges and agrees that
the other Parties hereto would be damaged irreparably in
the event that any of the provisions of this Agreement
are not performed in accordance with their specific terms
or otherwise are breached. Accordingly, each of the
Parties hereto agrees that the other Party hereto shall
be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and
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provisions hereof in any competent court having
jurisdiction over the Parties.
ARTICLE XII
12.
Conditions Precedent to the Obligations of Each Party.
The obligations of the Parties to consummate the
transactions contemplated hereby shall be subject to the
fulfillment, on or prior to the Closing Date, of the
following conditions:
1. HSR Act Notification
. In respect of any necessary
notifications of Purchaser and Sellers pursuant to
the HSR Act, the applicable waiting period and any
extensions thereof shall have expired or been
terminated.
2.
No Injunction, Etc. The consummation of the
transaction contemplated hereby shall not have been
restrained, enjoined or otherwise prohibited by any
Applicable Law, including any order, injunction,
decree or judgment of any Court or other
Governmental Authority. No Court or other
Governmental Authority shall have determined any
Applicable Law to make illegal the consummation of
the transactions contemplated hereby or by the other
Sellers Documents, and no proceeding with respect to
the application of any such Applicable Law to such
effect shall be pending.
12.01 Conditions Precedent to Purchaser's Obligations
. The
obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the fulfillment
(or waiver by Purchaser, in its sole discretion) on or
prior to the Closing Date of the following additional
conditions, which Sellers agree to use reasonable good
faith efforts to cause to be fulfilled:
1.
Representations, Performance. The representations
and warranties of Sellers contained in this
Agreement and in the Other Sellers Documents (i)
shall be true and correct in all respects (in the
case of any representation or warranty containing
any materiality qualification) or in all material
respects (in the case of any representation or
warranty without any materiality qualification) at
and as of the date hereof, and (ii) shall be
repeated and shall be true and correct in all
respects (in the case of any representation or
warranty containing any materiality qualification)
or in all material respects (in the case of any
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representation or warranty without any materiality
qualification) on and as of the Closing Date with
the same effect as though made on and as of the
Closing Date. Sellers shall have duly performed and
complied in all material respects with all
agreements and conditions required by this Agreement
and each of the Other Sellers Documents to be
performed or complied with by them prior to or on
the Closing Date. Sellers shall have delivered to
Purchaser a duly authorized, properly executed
certificate, dated the Closing Date to the foregoing
effect.
2. Consents
. Sellers have obtained all Consents
necessary to consummate the transactions
contemplated hereby, unless the failure to obtain
any such Consent would not materially adversely
affect the Company or its assets.
3. No Material Adverse Effect
. No event, occurrence,
fact, condition, change, development or effect shall
have occurred, exist or come to exist since December
31, 1997 that, individually or in the aggregate,
would have a material adverse effect on the Company
or its assets.
4. Transfer Documents and Other Miscellaneous Matters
.
Sellers have delivered to Purchaser, at or before
the Closing, the following documents, all of which
shall be in form and substance reasonably acceptable
to Purchaser and its counsel:
(i) A certificate or certificates for all of the
Company Shares. Such certificate(s) shall be
in form for transfer, duly endorsed in blank by
Sellers, or with appropriate duly executed
stock transfer powers attached;
(ii) Opinion letter of McAfee & Taft, counsel for
Sellers, addressed to Purchaser and dated the
Closing Date;
Error! iii) All minute books, stock certificates and
transfer books, contracts, policies of
insurance, tax returns, records of every kind
and nature and all other documents and writings
belonging or relating to the Company and its
corporate organization, business and assets;
(iv) Certificates, dated as of the most recent
practicable date, of the Secretary of State of
Oklahoma as to the good standing of Company;
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(v) The Disclosure Schedule;
(vi) Copies of the Certificate of Incorporation and
By-Laws of Company, certified as true and
correct by an officer of Company;
(vii) Such resignations of officers and directors
of Company as Purchaser may request; and
(viii) Such other documents which Purchaser
reasonably deems necessary to effectuate this
Agreement.
5. Certain Employment Agreements
. Dale Higganbotham
and Dean Higganbotham shall have entered into the
employment agreements described in Section 8.01.
6.
Covenant Not to Compete Agreements. Sellers shall
have entered into the Covenant Not to Compete
Agreements in the form set forth in Exhibits F, F-1,
F-2, F-3 and F-4.
7. Subordination Agreement
. Sellers shall have entered
into the Subordination Agreement set forth in
Exhibit _B_.
8.
Cancellation and Termination of Employment
Agreements. Company and Dale Higganbotham, Dean
Higganbotham and Nicholas V. Duncan shall enter into
an agreement in form and content satisfactory to
Purchaser's counsel canceling and terminating
certain Employment Agreements between such Parties
and the Company.
9. Lease Between 100 Park Avenue Corporation and
Company. Company shall have the right to remain in
the facilities located at 100 Park Avenue, Oklahoma
City, Oklahoma 73102 currently leased from 100 Park
Avenue Corporation, for a period of six (6) months
from the date of the Closing on the same terms and
conditions contained in the leases currently in
effect for such location. Company shall have the
right but not the obligation to negotiate a longer
term for such premises with 100 Park Avenue
Corporation on terms that are mutually agreeable to
both parties.
10. N. Duncan shall cause Critical Technologies, L.L.C.
to vacate the premises currently shared with Company
at 100 Park Avenue, Oklahoma City, Oklahoma on the
later of April 1, 1998 or the Closing of the
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transaction.
12.02 Conditions and Obligations of Sellers
. The obligation of
Sellers to consummate the transactions contemplated
hereby shall be subject to the fulfillment (or waiver by
the Sellers in their sole discretion), on or prior to the
Closing Date, of the following additional conditions,
which Purchaser agrees to use reasonable good faith
efforts to cause to be fulfilled:
1. Representations, Performance
. The representations
and warranties of Purchaser contained in the
Agreement or in the Other Sellers Documents (i)
shall be true and correct in all respects (in the
case of any representation or warranty containing
any materiality qualification) or in all material
respects (in the case of any representation or
warranty without any materiality qualification) at
and as of the date hereof, and (ii) shall be
repeated and shall be true and correct in all
respects (in the case of any representation or
warranty containing any materiality qualification)
or in all material respects (in the case of any
representation or warranty without any materiality
qualification) on and as of the Closing Date with
the same effect as though made at and as of such
date. Purchaser has duly performed and complied in
all material respects with all agreements and
conditions required by this Agreement and each of
the Other Sellers Documents to be performed or
complied with by it prior to or on the Closing Date.
Purchaser shall have delivered to Sellers a
certificate dated the Closing Date and signed by its
duly authorized officer, to the foregoing effect.
2. Consents and Approvals
. Purchaser have obtained all
Consents necessary to consummate the transactions
contemplated hereby.
3. Consideration and Other Miscellaneous Deliveries
.
Purchaser shall have delivered to Sellers at or
before the Closing, the following documents, all of
which shall be in form and substance acceptable to
Sellers and its counsel:
(i) A certified or cashiers checks or wire transfer
for the aggregate amount to be paid to each
Seller at the Closing pursuant to Section
2.03(a) hereof;
(ii) The Notes as set forth in Section 2.03(b);
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(iii) Certified copies of the corporation actions
taken by Purchaser authorizing the execution,
delivery and performance of this Agreement;
(iv) A Certificate of Good Standing for Purchaser
from the Secretary of State of Delaware dated
no earlier than forty-five (45) days prior to
the Closing Date;
(v) Opinion letter of Lindhorst & Dreidame Co.,
L.P.A., counsel for Purchaser, addressed to
Sellers and dated the Closing Date.
4. Certain Employment Agreements
. Dale Higganbotham
and Dean Higganbotham shall have entered into the
employment agreements described in Section 8.01.
5.
Covenant Not to Compete Agreements. Sellers have
entered into the Covenant Not to Compete Agreements
set forth in Exhibits F, F-1, F-2, F-3 and F-4.
6.
Subordination Agreement. Sellers shall have entered
into the Subordination Agreement set forth in
Exhibit B.
7.
Pay-off Line of Credit Indebtedness. Simultaneous
with the closing, Company pays off, or Purchaser
assumes, the Line of Credit Indebtedness and
incident thereto procure the releases of any of the
Sellers of their guarantees of any of the Line of
Credit Indebtedness.
8.
Other Seller Documents. Purchaser shall have
entered into each of the Other Seller Documents to
which it is a party.
ARTICLE XIII
13.01
Closing. The Closing of the sale and purchase of the
Company Shares (the _Closing_) shall take place within
five (5) days after the satisfaction of all the
contingencies set forth herein, but no later than March
31, 1998 unless such date is extended in order to satisfy
any governmental request relating to the parties'
compliance with the provisions of the HSR Act at the
offices of Lindhorst & Dreidame, Cincinnati, Ohio, or at
such other time and/or place as the parties may mutually
agree upon. The Closing shall be deemed effective as of
the day of Closing. The day on which the Closing
actually occurs is herein sometimes referred to as the
Closing Date.
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ARTICLE XIV
14. General Provisions
.
14.01 Further Documents
. The Parties will, upon request at any
time before or after Closing, execute, deliver and/or
furnish all such documents and instruments, and do or
cause to be done all such acts and things, as may be
reasonably necessary to carry out the purpose and intent
of this Agreement.
14.02 Publicity
. Neither the Sellers, nor Company, nor
Purchaser shall make any public announcements concerning
this transaction without the prior written consent of the
other Parties hereto. Nothing herein contained shall
restrict Company or Purchaser from communicating with its
employees concerning this transaction. Each Party shall
keep such communication confidential, and shall use its
best efforts to prevent its respective employees from
disseminating such information to the public. Nothing
herein contained shall prohibit any disclosure that is
required by law or a court of competent jurisdiction.
14.03 Expenses
. Except to the extent otherwise specifically
provided herein, 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 Sellers shall bear and pay all of the
expenses incident to the transactions contemplated by
this Agreement which were incurred by Sellers or their
representatives. Sellers agree to cause Company (either
as an offset to the Purchase Price or by reimbursement)
to pay the cost of filings required of Seller and/or
Purchaser under the HSR Act.
14.04
Notices. All notices and other communications required
by this Agreement shall be in writing and shall be deemed
given if delivered by hand or 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
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With a copy to:
James H. Smith III, Esq.
Lindhorst & Dreidame Co., L.P.A.
312 Walnut Street, Suite 2300
Cincinnati, Ohio 45201-4091
(b) If to Sellers, to:
Mr. Nicholas V. Duncan
100 Park Avenue, Suite 1200
Oklahoma City, Oklahoma 73102
With a copy to:
Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
14.05 Binding Effect
. Except as may be otherwise provided
herein, this Agreement and all provisions hereof shall be
binding upon and shall inure to the benefit of the
Parties hereto and their respective heirs, legal
representatives, successors and assigns. Except as
otherwise provided in this Agreement, no Party shall
assign its rights or obligations hereunder prior to
Closing without the prior written consent of the other
Party.
14.06 Headings
. The headings in this Agreement are intended
solely for the convenience of reference and shall be
given no effect in the construction or interpretation of
this Agreement.
14.07
Schedules and Exhibits. Schedules and exhibits referred
to in this Agreement constitute and integral part of this
Agreement as if fully rewritten herein. Any disclosure
made on any Schedule or Exhibit delivered pursuant hereto
shall be deemed to have been disclosed for purposes of
any other Schedule or Exhibit required hereby.
14.08
Counterparts. 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.
14.09 Governing
Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Oklahoma.
14.10 Severability
. 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
- 58 -
<PAGE>
enforceability or validity of the remaining provisions of
this Agreement shall not be affected thereby.
14.11 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, for 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 or 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.
14.12 Entire
Agreement. This Agreement and the agreements,
instruments and other documents to be delivered hereunder
constitute the entire understand 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,
understanding or agreements, oral or otherwise, in
relation thereto between the Parties other than those
incorporated herein and to be delivered hereunder.
Except as otherwise expressed or contemplated by this
Agreement, nothing expressed or implied in this Agreement
is intended or shall be construed so as to grant or refer
on any person, firm or corporation other than the Parties
hereto any rights or privileges hereunder. No
supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by the
Parties hereto.
14.13
Business Records. Sellers shall be permitted to retain
copies of such books and records relating to the business
of Company as related to the accounting and tax matters
of the business, and 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
years after the Closing Date.
14.14 Construction of Agreement
. In the event this Agreement
is interpreted by any court of competent jurisdiction, no
Party shall be deemed the drafter of this Agreement and
such court of law shall not construe this Agreement or
any provision thereof against any Party as the drafter
thereof.
14.15 401(k) Plan
. Subject to the satisfaction of all
- 59 -
<PAGE>
applicable rules under the Code, Purchaser shall cause
Company to maintain its 401(k) Plan for the remainder of
the 1998 fiscal year of Company.
14.16
Knowledge. Whenever in this Agreement the terms
_knowledge_ or _best knowledge_ are used with respect to
any Party, it shall mean the actual knowledge of the
Party, or the officers and directors of the Party or
Company, as applicable.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
PURCHASER:
POMEROY COMPUTER RESOURCES,
INC.
By:
_______________________________
SELLERS:
___________________________________
J. WALTER DUNCAN, JR., Trustee
of the J. Walter Duncan, Jr.
Revocable Trust
___________________________________
NICHOLAS V. DUNCAN
___________________________________
JAMES B. KITE, JR.
__________________________________
O. DEAN HIGGANBOTHAM
__________________________________
DALE HIGGANBOTHAM
- 60 -
<PAGE>
____________________________________
J. WALTER DUNCAN, JR. (solely as
to the provisions of Section
11.04)
- 61 -
AGREEMENT
This Agreement made and entered into this ____ day of
____________, 1998, by and between O. DEAN HIGGANBOTHAN
(hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to
as "Pomeroy").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Pomeroy entered into a Stock Purchase Agreement ("Stock Purchase
Agreement") with J. Walter Duncan, Jr., as Trustee of the J.
Walter Duncan, Jr. Revocable Trust, Nicolas V. Duncan, James B.
Kite, Jr., Dale Higganbotham, and Owner (hereinafter referred to
collectively as the _Shareholders_) for the acquisition by
Pomeroy of one hundred percent (100%) of the outstanding capital
shares in Global Combined Technologies, Inc., an Oklahoma
corporation (_Company_); and
WHEREAS, immediately prior to the Closing Date (as defined in the
Stock Purchase Agreement) Owner owned 12,000 shares of the
outstanding capital stock of Company; and
WHEREAS, Pomeroy would not have entered into the Stock Purchase
Agreement with all of the Shareholders without the consent of
Owner to enter into this covenant not to compete agreement; and
WHEREAS, pursuant to Article VII of said Stock 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 Stock Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Pomeroy to enter into the Stock
Purchase Agreement with the Shareholders, Owner covenants
and agrees that for a period equal to the later of (i) five
(5) years from the Closing Date as defined in the Stock
Purchase Agreement or (ii) one (1) year after the
termination of Owner's employment with Company under an
Employment Agreement executed by and between the Owner and
Company of even date herewith, Owner neither by himself nor
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 Pomeroy or any subsidiary
thereof relating to the Business of Pomeroy, as defined
<PAGE>
below; or
(b) Attempt to seek or cause any clients or customers of
Pomeroy or any of its subsidiaries to refrain from
continuing their patronage of the Business of Pomeroy;
or
(c) Engage in the Business of Pomeroy in any state in which
Pomeroy or any of its subsidiaries has an office during
the term of Owner's employment by Company. A list of
the states in which Pomeroy and any of 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
Pomeroy and any of its subsidiaries.
(e) Nothing in this Agreement shall prohibit Owner from
owning or purchasing less than five percent (5%) of the
outstanding stock of any publicly traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC Bulletin Board or from taking any action described
in items 1(b) - (d) above for the benefit of or on
behalf of Pomeroy or any of its subsidiaries.
For purposes of this Section, the _Business of Pomeroy_
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 personal computer hardware, software,
peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of personal
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
<PAGE>
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 business of Company acquired by
Pomeroy by virtue of the acquisition of all of the capital
shares in the Company and have been separately bargained for
and agrees that Pomeroy has been induced to enter into the
Stock 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 Pomeroy will
suffer irreparable injury in the event of a breach by Owner,
and Owner agrees that Pomeroy 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 irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Stock Purchase
Agreement, is being entered into to protect a legitimate
business interest of Pomeroy 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, or service mark, 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 reason-
ableness 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
- 3 -
<PAGE>
reasonable.
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 Pomeroy to Owner
pursuant to the Stock Purchase Agreement.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Pomeroy, and their respective successors,
heirs and assigns.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER
:
__________________________________
O. DEAN HIGGANBOTHAN
POMEROY
:
POMEROY COMPUTER RESOURCES ,
INC.
By:________________________________
- 4 -
AGREEMENT
This Agreement made and entered into this ____ day of
____________, 1998, by and between DALE HIGGANBOTHAN (hereinafter
referred to as "Owner") and POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter referred to as "Pomeroy").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Pomeroy entered into a Stock Purchase Agreement ("Stock Purchase
Agreement") with J. Walter Duncan, Jr., as Trustee of the J.
Walter Duncan, Jr. Revocable Trust, Nicolas V. Duncan, James B.
Kite, Jr., O. Dean Higganbotham, and Owner (hereinafter referred
to collectively as the _Shareholders_) for the acquisition by
Pomeroy of one hundred percent (100%) of the outstanding capital
shares in Global Combined Technologies, Inc., an Oklahoma
corporation (_Company_); and
WHEREAS, immediately prior to the Closing Date (as defined in the
Stock Purchase Agreement) Owner owned 6,000 shares of the
outstanding capital stock of Company; and
WHEREAS, Pomeroy would not have entered into the Stock Purchase
Agreement with all of the Shareholders without the consent of
Owner to enter into this covenant not to compete agreement; and
WHEREAS, pursuant to Article VII of said Stock 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 Stock Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Pomeroy to enter into the Stock
Purchase Agreement with the Shareholders, Owner covenants
and agrees that for a period equal to the later of (i) five
(5) years from the Closing Date as defined in the Stock
Purchase Agreement or (ii) one (1) year after the
termination of Owner's employment with Company under an
Employment Agreement executed by and between the Owner and
Company of even date herewith, Owner neither by himself nor
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 Pomeroy or any subsidiary
thereof relating to the Business of Pomeroy, as defined
below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of
Pomeroy or any of its subsidiaries to refrain from
continuing their patronage of the Business of Pomeroy;
or
(c) Engage in the Business of Pomeroy in any state in which
Pomeroy or any of its subsidiaries has an office during
the term of Owner's employment by Company. A list of
the states in which Pomeroy and any of 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
Pomeroy and any of its subsidiaries.
(e) Nothing in this Agreement shall prohibit Owner from
owning or purchasing less than five percent (5%) of the
outstanding stock of any publicly traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC Bulletin Board or from taking any action described
in items 1(b) - (d) above for the benefit of or on
behalf of Pomeroy or any of its subsidiaries.
For purposes of this Section, the _Business of Pomeroy_
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 personal computer hardware, software,
peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of personal
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.
- 2 -
<PAGE>
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 business of Company acquired by
Pomeroy by virtue of the acquisition of all of the capital
shares in the Company and have been separately bargained for
and agrees that Pomeroy has been induced to enter into the
Stock 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 Pomeroy will
suffer irreparable injury in the event of a breach by Owner,
and Owner agrees that Pomeroy 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 irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Stock Purchase
Agreement, is being entered into to protect a legitimate
business interest of Pomeroy 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, or service mark, 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 reason-
ableness 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
- 3 -
<PAGE>
of time and for such area as may be determined by
arbitration or by a Court of competent jurisdiction to be
reasonable.
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 Pomeroy to Owner
pursuant to the Stock Purchase Agreement.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Pomeroy, and their respective successors,
heirs and assigns.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER:
__________________________________
DALE HIGGANBOTHAN
POMEROY
:
POMEROY COMPUTER RESOURCES ,
INC.
By:________________________________
- 4 -
AGREEMENT
This Agreement made and entered into this ____ day of
____________, 1998, by and between J. WALTER DUNCAN, JR.
(hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to
as "Pomeroy").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Pomeroy entered into a Stock Purchase Agreement ("Stock Purchase
Agreement") with Owner, as Trustee of the J. Walter Duncan, Jr.
Revocable Trust, Nicolas V. Duncan, James B. Kite, Jr., O. Dean
Higganbotham, and Dale Higganbothan (hereinafter referred to
collectively as the _Shareholders_) for the acquisition by
Pomeroy of one hundred percent (100%) of the outstanding capital
shares in Global Combined Technologies, Inc., an Oklahoma
corporation (_Company_); and
WHEREAS, immediately prior to the Closing Date (as defined in the
Stock Purchase Agreement) Owner owned 14,901 shares of the
outstanding capital stock of Company; and
WHEREAS, Pomeroy would not have entered into the Stock Purchase
Agreement with all of the Shareholders without the consent of
Owner to enter into this covenant not to compete agreement; and
WHEREAS, pursuant to Article VII of said Stock 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 Stock Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Pomeroy to enter into the Stock
Purchase Agreement with the Shareholders, Owner covenants
and agrees that for a period of five (5) years from the
Closing Date as defined in the Stock Purchase Agreement,
Owner neither by himself nor 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 Pomeroy or any subsidiary
thereof relating to the Business of Pomeroy, as defined
below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of
Pomeroy or any of its subsidiaries to refrain from
continuing their patronage of the Business of Pomeroy;
or
(c) Engage in the Business of Pomeroy in any state in which
Pomeroy or any of its subsidiaries has an office during
the term of this Agreement. A list of the states in
which Pomeroy and any of 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
Pomeroy and any of its subsidiaries.
(e) Nothing in this Agreement shall prohibit Owner from
owning or purchasing less than five percent (5%) of the
outstanding stock of any publicly traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC Bulletin Board or from taking any action described
in items 1(b) - (d) above for the benefit of or on
behalf of Pomeroy or any of its subsidiaries.
For purposes of this Section, the _Business of Pomeroy_
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 personal computer hardware, software,
peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of personal
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.
- 2 -
<PAGE>
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 business of Company acquired by
Pomeroy by virtue of the acquisition of all of the capital
shares in the Company and have been separately bargained for
and agrees that Pomeroy has been induced to enter into the
Stock 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 Pomeroy will
suffer irreparable injury in the event of a breach by Owner,
and Owner agrees that Pomeroy 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 irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Stock Purchase
Agreement, is being entered into to protect a legitimate
business interest of Pomeroy 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, or service mark, 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 reason-
ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in
Paragraph 1, said covenants and restrictions shall
- 3 -
<PAGE>
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.
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 Pomeroy to Owner
pursuant to the Stock Purchase Agreement.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Pomeroy, and their respective successors,
heirs and assigns.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER:
__________________________________
J. WALTER DUNCAN, JR.
POMEROY:
POMEROY COMPUTER RESOURCES ,
INC.
By:________________________________
- 4 -
AGREEMENT
This Agreement made and entered into this ____ day of
____________, 1998, by and between NICHOLAS V. DUNCAN
(hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to
as "Pomeroy").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Pomeroy entered into a Stock Purchase Agreement ("Stock Purchase
Agreement") with J. Walter Duncan, Jr., as Trustee of the J.
Walter Duncan, Jr. Revocable Trust, James B. Kite, Jr., O. Dean
Higganbotham, Dale Higganbothan and Owner (hereinafter referred
to collectively as the _Shareholders_) for the acquisition by
Pomeroy of one hundred percent (100%) of the outstanding capital
shares in Global Combined Technologies, Inc., an Oklahoma
corporation (_Company_); and
WHEREAS, immediately prior to the Closing Date (as defined in the
Stock Purchase Agreement) Owner owned 14,099 shares of the
outstanding capital stock of Company; and
WHEREAS, Pomeroy would not have entered into the Stock Purchase
Agreement with all of the Shareholders without the consent of
Owner to enter into this covenant not to compete agreement; and
WHEREAS, pursuant to Article VII of said Stock 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 Stock Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Pomeroy to enter into the Stock
Purchase Agreement with the Shareholders, Owner covenants
and agrees that for a period of four (4) years from the
Closing Date as defined in the Stock Purchase Agreement,
Owner neither by himself nor 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 Pomeroy or any subsidiary
thereof relating to the Business of Pomeroy, as defined
below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of
Pomeroy or any of its subsidiaries to refrain from
continuing their patronage of the Business of Pomeroy;
or
(c) Engage in the Business of Pomeroy in any state in which
Pomeroy or any of its subsidiaries has an office during
the term of this Agreement. A list of the states in
which Pomeroy and any of 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
Pomeroy and any of its subsidiaries.
(e) Nothing in this Agreement shall prohibit Owner from
owning or purchasing less than five percent (5%) of the
outstanding stock of any publicly traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC Bulletin Board or from taking any action described
in items 1(b) - (d) above for the benefit of or on
behalf of Pomeroy or any of its subsidiaries. In
addition, nothing in this Agreement shall prohibit
Owner from engaging in the business of developing and
selling software and third party software to run
special business applications; selling and servicing
application servers that run the software it sells and
selling, designing, developing, integrating and
supporting services related to such applications.
For purposes of this Section, the _Business of Pomeroy_
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 personal computer hardware, software,
peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of personal
computer hardware, software, peripheral devices or
- 2 -
<PAGE>
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 business of Company acquired by
Pomeroy by virtue of the acquisition of all of the capital
shares in the Company and have been separately bargained for
and agrees that Pomeroy has been induced to enter into the
Stock 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 Pomeroy will
suffer irreparable injury in the event of a breach by Owner,
and Owner agrees that Pomeroy 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 irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Stock Purchase
Agreement, is being entered into to protect a legitimate
business interest of Pomeroy 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, or service mark, 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
- 3 -
<PAGE>
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 reason-
ableness 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.
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 Pomeroy to Owner
pursuant to the Stock Purchase Agreement.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Pomeroy, and their respective successors,
heirs and assigns.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER:
__________________________________
NICHOLAS V. DUNCAN
POMEROY
:
POMEROY COMPUTER RESOURCES ,
INC.
By:________________________________
- 4 -
<PAGE>
EXHIBIT A
STATES IN WHICH POMEROY
AND/OR ITS PARENT CORPORATION
AND/OR SUBSIDIARIES TRANSACT BUSINESS
1. Alabama
2. Florida
3. Georgia
4. Indiana
5. Illinois
6. Iowa
7. Kentucky
8. North Carolina
9. Ohio
10. Oklahoma
11. South Carolina
12. Tennessee
13. Texas
14. West Virginia
AGREEMENT
This Agreement made and entered into this ____ day of
____________, 1998, by and between JAMES B. KITE, JR.
(hereinafter referred to as "Owner") and POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (hereinafter referred to
as "Pomeroy").
W I T N E S S E T H :
WHEREAS, simultaneously with the execution of this Agreement,
Pomeroy entered into a Stock Purchase Agreement ("Stock Purchase
Agreement") with J. Walter Duncan, Jr., as Trustee of the J.
Walter Duncan, Jr. Revocable Trust, Nicholas V. Duncan, O. Dean
Higganbotham, Dale Higganbothan and Owner (hereinafter referred
to collectively as the _Shareholders_) for the acquisition by
Pomeroy of one hundred percent (100%) of the outstanding capital
shares in Global Combined Technologies, Inc., an Oklahoma
corporation (_Company_); and
WHEREAS, immediately prior to the Closing Date (as defined in the
Stock Purchase Agreement) Owner owned 1,000 shares of the
outstanding capital stock of Company; and
WHEREAS, Pomeroy would not have entered into the Stock Purchase
Agreement with all of the Shareholders without the consent of
Owner to enter into this covenant not to compete agreement; and
WHEREAS, pursuant to Article VII of said Stock 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 Stock Purchase Agreement, the parties hereto
agree as follows:
1. As an inducement for Pomeroy to enter into the Stock
Purchase Agreement with the Shareholders, Owner covenants
and agrees that for a period of five (5) years from the
Closing Date as defined in the Stock Purchase Agreement,
Owner neither by himself nor 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 Pomeroy or any subsidiary
thereof relating to the Business of Pomeroy, as defined
below; or
<PAGE>
(b) Attempt to seek or cause any clients or customers of
Pomeroy or any of its subsidiaries to refrain from
continuing their patronage of the Business of Pomeroy;
or
(c) Engage in the Business of Pomeroy in any state in which
Pomeroy or any of its subsidiaries has an office during
the term of this Agreement. A list of the states in
which Pomeroy and any of 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
Pomeroy and any of its subsidiaries.
(e) Nothing in this Agreement shall prohibit Owner from
owning or purchasing less than five percent (5%) of the
outstanding stock of any publicly traded company whose
stock is traded on a nationally or regionally
recognized stock exchange or is quoted on NASDAQ or the
OTC Bulletin Board or from taking any action described
in items 1(b) - (d) above for the benefit of or on
behalf of Pomeroy or any of its subsidiaries.
For purposes of this Section, the _Business of Pomeroy_
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 personal computer hardware, software,
peripheral devices or related products;
(ii) Sale or servicing, whether at the wholesale or
retail level, or leasing or renting, of personal
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.
- 2 -
<PAGE>
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 business of Company acquired by
Pomeroy by virtue of the acquisition of all of the capital
shares in the Company and have been separately bargained for
and agrees that Pomeroy has been induced to enter into the
Stock 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 Pomeroy will
suffer irreparable injury in the event of a breach by Owner,
and Owner agrees that Pomeroy 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 irrespec-
tive 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, which Agreement
is ancillary to the main thrust of the Stock Purchase
Agreement, is being entered into to protect a legitimate
business interest of Pomeroy 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, or service mark, 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 reason-
ableness of the line of business, time or geographical area
covered by certain covenants and restrictions contained in
Paragraph 1, said covenants and restrictions shall
- 3 -
<PAGE>
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.
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 Pomeroy to Owner
pursuant to the Stock Purchase Agreement.
3. The terms and conditions of this Agreement shall be binding
upon the Owner and Pomeroy, and their respective successors,
heirs and assigns.
4. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Kentucky, which
is the state in which the corporate headquarters of Pomeroy
are located.
IN WITNESS WHEREOF, the parties hereto have executed this Agree-
ment on the day and year first above written.
OWNER:
__________________________________
JAMES B. KITE, JR.
POMEROY:
POMEROY COMPUTER RESOURCES ,
INC.
By:________________________________
- 4 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the ____ day of _____, 1998, by and
between GLOBAL COMBINED TECHNOLOGIES, INC., an Oklahoma
corporation ("Company"), and O. DEAN HIGGANBOTHAM ("Employee").
W I T N E S S E T H :
WHEREAS, Company is a fully-owned subsidiary of Pomeroy Computer
Resources, Inc., a Delaware corporation (_PCR_); and
WHEREAS, PCR has entered into an Stock Purchase Agreement
("Purchase Agreement") of even date pursuant to which it bought
one hundred percent (100%) of the outstanding stock of Company;
and
WHEREAS, Employee owns twenty five percent (25%) of the
outstanding stock of Company; and
WHEREAS, as an inducement for and in consideration of PCR
entering into the Purchase Agreement, 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 ____ day of __________,
1998, and shall continue for a period of three (3) years
ending __________, 2001 unless terminated earlier pursuant
to the provisions of Section 10, provided that Sections 8,
9, 10(b), 10(c) 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 intent not to renew the terms of this Agreement
sixty (60) days prior to expiration of the then expiring
term. Employee's base salary for each renewal term shall be
May 1, 1998 (10:40AM)
<PAGE>
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 President of Company.
Employee shall be responsible to and report directly to the
Board of Directors of Company. 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 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 described in Exhibit _A_ attached hereto.
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 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) 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) 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.
Expenses. During the term of Employee's employment
hereunder, Employee shall be entitled to receive prompt
<PAGE>
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 7 of the Purchase Agreement relating
to Employee's Covenant Not to Compete with PCR and Company.
Accordingly, such provisions of Section 7 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 GLOBAL COMBINED TECHNOLOGIES, INC., 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 7 of the Purchase Agreement. Accordingly, such
provisions of Section 7 and Exhibit _____ 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,
- 3 -
<PAGE>
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 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 five (5) 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.
(a) For purposes of this provision, the term _Company's
Trade Secrets_ shall include such information of PCR
and any of its subsidiaries.
10. Termination
.
(a) The Employee's employment with the Company may be
terminated at any time as follows:
(i) By Employee's death;
(ii) By Employee's physical or mental disability
which renders Employee unable to perform his
duties hereunder.
(iii) By the Company, for cause upon three (3) day's
written notice to Employee. For purposes of this
Agreement, the term "cause" shall mean termination
upon: (i) 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; (ii) the
conviction of Employee of a felony or other crime
involving theft or fraud, (iii) Employee's gross
neglect or gross misconduct in carrying out his
duties hereunder resulting, in either case, in
material harm to the Company; or (iv) any material
breach by Employee of this Agreement.
(iv) By the Company at its discretion, without cause,
upon thirty (30) days written notice to Employee;
provided that Company complies with the provisions
- 4 -
<PAGE>
of Section 10(c).
(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.
(c) In the event that Company would terminate Employee's
employment hereunder without cause pursuant to Section
10(a)(iv), 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 and (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 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
- 5 -
<PAGE>
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 Kentucky and shall
not be modified 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 mailed by certified or registered
mail, return receipt requested, postage prepaid to the
following addresses (or to such other address for a party as
shall be specified by notice pursuant hereto):
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
With a copy to:
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 _________ County, Oklahoma, 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
- 6 -
<PAGE>
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 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 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
- 7 -
<PAGE>
in several counterparts, each of which shall be deemed an
original part, which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effective as
of the day and year first above written.
WITNESSES: COMPANY:
GLOBAL COMBINED TECHNOLOGIES,
INC.
__________________________
__________________________
By:_________________________________
Stephen Pomeroy
Chief Executive Officer
EMPLOYEE:
__________________________
__________________________
____________________________________
O. DEAN HIGGANBOTHAM
- 8 -
<PAGE>
EXHIBIT _A_
(a) BASE SALARY: During the term of this Agreement, Employee
shall be paid an annual base salary of Two Hundred Fifty Thousand
Dollars ($250,000.00) per year. Said annual base salary shall be
payable semi-monthly.
(b) QUARTERLY BONUS: In addition to Employee's base salary as
set forth in Section 5(a), for each quarter during the initial
term of this Agreement, Employee shall be entitled to a quarterly
cash bonus in the event Employee satisfies the following economic
criteria during such quarter:
QUANTITY SALES VOLUME OF
COMPANY YEAR ONE YEAR TWO YEAR THREE
(In Millions) (3% NPBT) (3.5%(NPBT (4% NPBT)
)
Greater than 22 but less $
than 23 3,500.00
Greater than 23 but less 4,933.00 $
than 24 3,500.00
Greater than 24 but less 6,367.00 4,933.00 $
than 25 3,500.00
Greater than 25 but less 7,800.00 6,367.00 4,933.00
than 26
Greater than 26 but less 9,233.00 7,800.00 6,367.00
than 27
Greater than 27 but less 10,667.00 9,233.00 7,800.00
than 28
Greater than 28 but less 12,100.00 10,667.00 9,233.00
than 29
Greater than 29 but less 13,533.00 12,100.00 10,667.00
than 30
Greater than 30 but less 14,967.00 13,533.00 12,100.00
than 31
Greater than 31 but less 16,400.00 14,967.00 13,533.00
than 32
Greater than 32 but less 17,833.00 16,400.00 14,967.00
than 33
<PAGE>
Greater than 33 but less 19,267.00 17,833.00 16,400.00
than 34
Greater than 34 but less 20,700.00 19,267.00 17,833.00
than 35
Greater than 35 but less 22,133.00 20,700.00 19,267.00
than 36
Greater than 36 but less 23,567.00 22,133.00 20,700.00
than 37
Greater than 37 but less 25,000.00 23,567.00 22,133.00
than 38
Greater than 38 but less 25,000.00 23,567.00
than 39
Greater than 39 but less 25,000.00
than 40
<PAGE>
(i) For purposes of this Section, the term _Gross Sales_
shall mean the gross sales of equipment, software and services by
Company during the applicable quarter set forth above. All
refunds or returns which are made during such quarter shall be
subtracted along with all accounts receivable derived from such
sales that are written off during such quarter in accordance with
Company's accounting system. The quarterly gross sales of
Company shall be determined by the Company's internally-generated
financial statements and the determination by the Company's Chief
Financial Officer shall be final, binding and conclusive upon all
parties. The Company's financial statement shall be provided to
Employee each month. Any amount due hereunder shall be paid
within thirty (30) days after the conclusion of such previous
quarter. Provided, however, until such date that is thirty (30)
days after the ASTEA accounting system is implemented and
operational at Company, Company shall advance as a non-refundable
draw the sum of Twelve Thousand Five Hundred Dollars ($12,500.00)
per quarter. The amount of such advance shall be a credit
against the amount that Employee shall be entitled to based on
the satisfaction of the applicable criteria set forth in Section
5(b). In the event the amount of such non-refundable draw
exceeds the amount earned by Employee under the aforementioned
criteria, Employee shall be entitled to retain any excess during
the applicable period. Within sixty (60) days of the conclusion
of the installation of ASTEA at Company, Company and Employee
will implement a reconciliation of all quarterly bonuses due and
owing Employee under the terms of Section 5(b) and the amount of
the non-refundable draws paid to Employee pursuant to the
provisions of this paragraph and will remit any additional
amounts, if any, that may be owed to Employee pursuant to Section
5(b) within such sixty (60) day period.
(c) In addition to Employee's base salary as set forth in
Section 5(a), any quarterly bonus compensation that Employee may
be entitled to as set forth in Section 5(b) above during each
year of the initial term of this Agreement, Employee shall be
entitled to a bonus, incentive deferred compensation and
incentive stock option award in the event Employee satisfies
certain economic criteria pertaining to Company's performance
and/or Pomeroy Computer Resources, Inc.'s (_PCR_) performance set
forth as follows:
COMPANY
YEAR END SALES (In Millions)* CASH STOCK OPTIONS
Greater than 90 but less than 95 $ 3,000
50,000.00
Greater than 95 but less than 75,000.00 5,125
100
Greater than 100 but less than 100,000.00 7,250
105
<PAGE>
Greater than 105 but less than 108,335.00 9,375
110
Greater than 110 but less than 116,670.00 11,500
115
Greater than 115 but less than 125,005.00 13,625
120
Greater than 120 but less than 133,340.00 15,750
125
Greater than 125 but less than 141,675.00 17,875
150
Greater than 150 150,010.00 20,000
*Year end NPBT = 3% Year One, 3.5% Year Two, 4% Year Three
PCR
YEAR END SALES (In Millions) YEAR CASH STOCK OPTIONS
1
Greater than 585 with NPBT greater 7,500
than 5%
(i) For purposes of this Section, the term _Gross Sales_
shall mean the gross sales of equipment, software and services by
Company during the applicable period, except that the _Gross
Sales_ as used for PCR shall be determined on a consolidated
basis. In making said gross sales determination, all gains and
losses realized on the sale or other disposition of Company's (or
PCR's, as applicable) assets not in the ordinary course shall be
excluded. In addition, any gross sales of PCR relating to any
acquisitions that are closed in such year shall be excluded. All
refunds or returns which are made during such period shall be
subtracted along with all accounts receivable derived from such
sales that are written off during such period in accordance with
Company's and PCR's accounting system. Such gross sales and net
pre-tax profit margin of Company and PCR shall be determined by
the independent accountant regularly retained by Company and PCR
in accordance with generally accepted accounting principles and
the determination by the accountant shall be final, binding and
conclusive upon all parties hereto. In making said determination
of the applicable pre-tax profit margin of the Company and PCR,
commencing on the earlier of the installation of the ASTEA
accounting system at Company or January 1, 1999, a 1.5% MAS
Royalty fee on gross sales to Company shall be made incident to
the determination. Fifty percent (50%) of the amount determined
under Section 5(c) shall be payable to Employee within thirty
(30) days of the determination by the accountant as a bonus and
<PAGE>
the remaining fifty percent (50%) will constitute incentive
deferred compensation which shall be payable to Employee
according to the terms of the Incentive Deferred Compensation
Agreement attached hereto and incorporated herein as Exhibit _A_.
Any Incentive Deferred Compensation shall be fully vested over a
three (3) year period, vesting thirty-three and one-third percent
(33_%) per year of employment from the effective date of this
Agreement.
Any award of the incentive stock options to acquire common
stock of PCR earned hereunder shall be at the fair market value
of the common shares as of January 5, 1999 or any other
applicable date, which shall mean with respect to such shares,
the average between the high and low bid and asked 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).
(d) The parties agree that in January, 1999 and January, 2000,
they will negotiate in good faith, the level of gross sales of
PCR for the aforementioned incentive stock option amount to be
earned for such years, which gross sales criteria shall be
predicated upon PCR's goals, projections and budgets established
at the outset of such fiscal year.
LD 107867-1
TERMINATION OF EMPLOYMENT AGREEMENT
THIS TERMINATION OF EMPLOYMENT AGREEMENT effective the 17th day
of March, 1998 by and between GLOBAL COMBINED TECHNOLOGIES, INC.
(hereinafter referred to as _Company_) and NICHOLAS V. DUNCAN
(hereinafter referred to as _Employee_).
R E C I T A L S :
Whereas, Company and Employee entered into a certain
employment agreement (_Employment Agreement_), effective
the first day of January, 1997; and
Whereas, pursuant to a Stock Purchase Agreement dated
February 25, 1998, all of the Shareholders of the Company
agreed to sell 100% of the Stock of the Company to Pomeroy
Computer Resources, Inc.; and
Whereas, Company and Employee are desirous of terminating
the Employment Agreement.
NOW, THEREFORE, in consideration for the above premises and in
mutual consideration of the promises hereinafter contained, the
parties agree as follows:
1. Termination of Employment Agreement
.
Company and Employee agree that effective this __ day of
March, 1998, the Employment Agreement is hereby terminated.
The parties agree that all payments due under the
Employment Agreement have been paid up to such date.
Incident to such termination, neither party shall have any
further rights or obligations under such Employment
Agreement.
2. Miscellaneous
.
This Agreement contains the entire agreement of the parties
and shall not be modified except in a writing signed by both
parties hereto. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have hereunto executed this
Termination of Employment Agreement on the day and year first
Page 1 of 2 Pages
<PAGE>
above written.
Witnesses:
Company:
GLOBAL COMBINED TECHNOLOGIES, INC.
________________________
________________________ BY:
__________________________________
Witnesses: Employee
:
_________________________
________________________________________
Nicholas V. Duncan
_________________________
1
Page 2 of 2 Pages
TERMINATION OF EMPLOYMENT AGREEMENT
THIS TERMINATION OF EMPLOYMENT AGREEMENT effective the 17th day
of March, 1998 by and between GLOBAL COMBINED TECHNOLOGIES, INC.
(hereinafter referred to as _Company_) and O. DEAN HIGGANBOTHAM
(hereinafter referred to as _Employee_).
R E C I T A L S :
Whereas, Company and Employee entered into a certain
employment agreement (_Employment Agreement_), effective
this first day of January, 1997; and
Whereas, pursuant to a Stock Purchase Agreement dated
February 25, 1998, all of the Shareholders of the Company
agreed to sell 100% of the Stock of the Company to Pomeroy
Computer Resources, Inc.; and
Whereas, Company and Employee are desirous of terminating
the Employment Agreement.
NOW, THEREFORE, in consideration for the above premises and in
mutual consideration of the promises hereinafter contained, the
parties agree as follows:
1.
Termination of Employment Agreement.
Company and Employee agree that effective this __ day of
March, 1998, the Employment Agreement is hereby terminated.
The parties agree that all payments due under the
Employment Agreement have been paid up to such date.
Incident to such termination, neither party shall have any
further rights or obligations under such Employment
Agreement.
2. Miscellaneous
.
This Agreement contains the entire agreement of the parties
and shall not be modified except in a writing signed by both
parties hereto. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have hereunto executed this
Page 1 of 2 Pages
<PAGE>
Termination of Employment Agreement on the day and year first
above written.
Witnesses:
Company:
GLOBAL COMBINED TECHNOLOGIES, INC.
________________________
________________________ BY:
__________________________________
Witnesses: Employee
:
_________________________
_______________________________
O. DEAN HIGGANBOTHAM
_________________________
1
Page 2 of 2 Pages
TERMINATION OF EMPLOYMENT AGREEMENT
THIS TERMINATION OF EMPLOYMENT AGREEMENT effective the 17th day
of March, 1998 by and between GLOBAL COMBINED TECHNOLOGIES, INC.
(hereinafter referred to as _Company_) and DALE E. HIGGANBOTHAM
(hereinafter referred to as _Employee_).
R E C I T A L S :
Whereas, Company and Employee entered into a certain
employment agreement (_Employment Agreement_), dated the
8th day of December, 1997; and
Whereas, pursuant to a Stock Purchase Agreement dated
February 25, 1998, all of the Shareholders of the Company
agreed to sell 100% of the Stock of the Company to Pomeroy
Computer Resources, Inc.; and
Whereas, Company and Employee are desirous of terminating
the Employment Agreement.
NOW, THEREFORE, in consideration for the above premises and in
mutual consideration of the promises hereinafter contained, the
parties agree as follows:
1. Termination of Employment Agreement
.
Company and Employee agree that effective this __ day of
March, 1998, the Employment Agreement is hereby terminated.
The parties agree that all payments due under the
Employment Agreement have been paid up to such date.
Incident to such termination, neither party shall have any
further rights or obligations under such Employment
Agreement.
2.
Miscellaneous.
This Agreement contains the entire agreement of the parties
and shall not be modified except in a writing signed by both
parties hereto. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have hereunto executed this
112924 Page 1 of 2 Pages
<PAGE>
Termination of Employment Agreement on the day and year first
above written.
Witnesses: Company
:
GLOBAL COMBINED TECHNOLOGIES, INC.
________________________
________________________ BY:
__________________________________
Witnesses: Employee
:
_________________________
________________________________________
DALE E. HIGGANBOTHAM
_________________________
112924 Page 2 of 2 Pages
PURCHASER'S CERTIFICATE
March ___, 1998
The undersigned, being the Chief Financial Officer of
Pomeroy Computer Resources, Inc., the Purchaser under that Stock
Purchase Agreement dated as of February 25, 1998, by and among
Purchaser and the Sellers of all the issued and outstanding
shares of Global Combined Technologies, Inc. (_Agreement_),
hereby certifies as follows:
1. Each of the representations and warranties of Purchaser
contained in the Agreement, and as applicable, the Other Sellers
Documents as that term is defined in the Agreement (the _Other
Sellers Documents_) is true and correct in all respects (in the
case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification)
at and as of February 25, 1998 and on the date hereof as though
made on the date hereof, except for changes therein specifically
permitted by the Agreement or resulting from any transaction
expressly consented to in writing by the Sellers.
2. Purchaser has duly performed and complied in all
material respects with all agreements and conditions required by
the Agreement and, as applicable, each of the Other Sellers
Documents.
Executed and delivered this _____ day of March, 1998.
POMEROY COMPUTER RESOURCES, INC.
By:
________________________________
Stephen E. Pomeroy, Chief
Financial Officer
INCENTIVE DEFERRED COMPENSATION AGREEMENT
This Incentive Deferred Compensation Agreement is made effective
as of the ____ day of March, 1998, by and between GLOBAL COMBINED
TECHNOLOGIES, INC., an Oklahoma corporation (the "Company") and
DALE E. HIGGANBOTHAM ("Higganbotham").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the
Company and Higganbotham have entered into an Employment
Agreement for the employment of Higganbotham by Company;
WHEREAS, pursuant to Exhibit A of said Employment Agreement,
Higganbotham 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:
1. In the event Higganbotham 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 Higganbotham 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)(iv) of the
Employment Agreement, all incentive deferred compensation
earned shall be vested in full and shall be payable to
Higganbotham 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.
3. In the event Higganbotham discontinues employment with the
Company during the initial term or any renewal term of this
Employment Agreement or if Higganbotham 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 Higganbotham 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 Higganbotham would violate
<PAGE>
the terms of his covenant not to compete and confidentiality
agreement as 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 33%
Two years 67%
Three years 100%
This vesting schedule shall apply separately to each year that
incentive deferred compensation is earned by Higganbotham upon
the satisfaction of the economic criteria set forth in the
Employment Agreement. Provided, however, Higganbotham shall be
vested fully in all amounts hereunder on March 13, 2003 and all
amounts due hereunder shall be paid to him on such date,
notwithstanding the fact that Higganbotham continues to be
employed by the Company.
By way of illustration, if Higganbotham satisfied the economic
criteria for years 1 and 2 of the Agreement, at the end of year
2, Higganbotham would be 67% vested as to the incentive deferred
compensation credited in year 1 and 33% vested as to the
incentive deferred compensation credited in year 2.
4. No deferred compensation shall be paid under the terms of
this Agreement in the event Higganbotham 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
5. Higganbotham 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.
6. It is the intention of the parties that the incentive
deferred compensation to be payable to Higganbotham
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
Higganbotham or his beneficiary.
<PAGE>
7. Nothing contained in this Agreement shall in any way affect
or interfere with the right of Higganbotham 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.
8. This Agreement shall be binding upon the heirs,
administrators, executors, successors and assigns of
Higganbotham and the successors and assigns of Company.
This Agreement shall not be modified or amended except in
writing signed by both parties.
9. This Agreement shall be subject to and construed under the
laws of the State of Oklahoma.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
GLOBAL COMBINED TECHNOLOGIES, INC.
By:__________________________________
____________________________________
DALE E. HIGGANBOTHAM
- 3 -
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of March, 1998, among (i) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii)
NICHOLAS V. DUNCAN, (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, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997, as further amended by a Letter Agreement
dated December 1, 1997 and January 28, 1998, (the "Senior Loan
Agreement"), between the Borrower and the Senior Creditor, the
Senior Creditor has extended a commitment to make available to
Borrower a certain revolving credit loan in the principal amount
of Forty Million ($40,000,000.00) Dollars (the "Senior Loan");
and
WHEREAS, the Senior Loan is 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 Note") in the maximum
aggregate principal amount not to exceed Forty Million
($40,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase all the outstanding stock owned by
Subordinated Creditor in Global Combined Technology, Inc.; and
WHEREAS, in connection with the acquisition of all the
outstanding stock of Subordinated Creditor in Global Combined
Technologies, Inc., the Subordinated Creditor will take back a
promissory note in the principal amount of $337,859.00, as may be
adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement, plus interest, fees, costs and other amounts payable
in respect thereof and all of the other owners of the outstanding
stock of Global Combined Technologies, Inc. will take back
respective promissory notes in the principal amount of
$812,381.00 in the aggregate for a total of $1,150,240.00, as may
be adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement ("Acquisition Debt") in partial consideration of the
payment of the purchase price for such stock; and
WHEREAS, a condition under the Senior Loan 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:
<PAGE>
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
_ means the promissory note
issued by Borrower to the Subordinated Creditor.
1.1.03 "Acquisition Notes
" collectively means the
promissory notes issued by Borrower to the
Subordinated Creditors which evidence the Acquisition
Debt.
1.1.04 "Agreement
" means this Subordination Agreement.
1.1.05 "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.
1.1.06 "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 liquidation, dissolution, reorgan-
ization or winding up of the Borrower, or of all or
any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.07 "Borrower
" has the meaning specified in the
introductory paragraph hereto.
1.1.08 "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
<PAGE>
against the Borrower, whether under 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.
1.1.09 "
Enforcement Action Notice" has the meaning
specified in Section 3.2(b).
1.1.10 "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.
1.1.11 "
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 and any Permitted Increase.
1.1.12 "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.
1.1.13 "Payment in Full
" and "
Paid in Full" mean payment
in full in cash.
1.1.14 "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
redemption, retirement, repurchase or other
- 3 -
<PAGE>
acquisition for value of any Subordinated Debt.
1.1.15 "
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.
1.1.16 "
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.
1.1.17 "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.
1.1.18 "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
- 4 -
<PAGE>
reorganization.
1.1.19 "Senior Creditor
" has the meaning specified in the
introductory paragraph hereto.
1.1.20 "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 Forty
Million Dollars ($40,000,000.00).
(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, indemnities, 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.
1.1.21 "
Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Note
(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.
1.1.22 "Senior Loan
" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.23 "Senior Loan Agreement
" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.24 "Standstill Event
" means the occurrence of any one
or more of the
Events of Default under the Acquisition
Note.
1.1.25 "
Standstill Event Notice" shall mean the date the
Subordinated Creditor shall have provided written
notice of such Standstill Event to the Senior Creditor
- 5 -
<PAGE>
and Borrower.
1.1.26 "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).
1.1.27 "
Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of
the Acquisition Note.
1.1.28 "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).
1.1.29 "
Subordinated Debt Documents" means, collectively
(a) the Acquisition Notes, and
(b) each Instrument now or hereafter executed in
connection with or evidencing, governing,
guarantying or securing any indebtedness under any
such document.
1.1.30 "
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.
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Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The
term "including" means 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 Subordi-
nated 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
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collected or received by the Subordinated Creditor, then
such payment or distribution shall be paid over or delivered
forthwith to the Senior Creditor.
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
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(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 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 respective 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
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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 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) March ____, 2000.
(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 Subordinated
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.
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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 com-
mencing or instituting, any Bankruptcy or Insolvency
Proceeding.
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 Agree-
ment).
ARTICLE 4
WAIVERS
4.1
Waivers of Notice, etc. The obligations of the Subordinated
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
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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 Docu-
ments 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 any Senior Debt, or (iv) any failure or
refusal by the Senior Creditor to foreclose or to real-
ize 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
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fact. Such notice shall be provided in writing to the
disbursement agent at the following address:
Nicholas V. Duncan
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7101
5.2 Representations and Warranty of the Borrower
. The Borrower
hereby represents to the Senior Creditor as follows:
(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 transac-
tions. 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
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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.
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 continue to hold, or to continue to hold, the
Senior Debt. The Senior Creditor shall be deemed con-
clusively to have relied upon the obligations 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
obligations 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
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<PAGE>
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
Subordinated 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.
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, representations, warranties or understandings,
whether oral, written or implied, as to the subject matter
of this 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
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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 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.
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<PAGE>
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SUBORDINATED CREDITOR:
________________________________________
NICHOLAS V. DUNCAN
Address:_________________________________
______________________________________
Fax:____________________________________
SENIOR CREDITOR:
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
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<PAGE>
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of ______, 1998, 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.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OHIO
COUNTY OF HAMILTON
On this ____ day of ________, 1998, before me personally
appeared NICHOLAS V. DUNCAN, to me known, who, being by me duly
sworn, declared that he is a signatory of the foregoing
Subordination Agreement; and that he did execute the foregoing
Subordination Agreement, and that the foregoing Subordination
Agreement constitutes HIS free act and deed.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of _____, 1998, 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:
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of March, 1998, among (i) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii)
JAMES B. KITE, JR., (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, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997, as further amended by a Letter Agreement
dated December 1, 1997 and January 28, 1998, (the "Senior Loan
Agreement"), between the Borrower and the Senior Creditor, the
Senior Creditor has extended a commitment to make available to
Borrower a certain revolving credit loan in the principal amount
of Forty Million ($40,000,000.00) Dollars (the "Senior Loan");
and
WHEREAS, the Senior Loan is 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 Note") in the maximum
aggregate principal amount not to exceed Forty Million
($40,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase all the outstanding stock owned by
Subordinated Creditor in Global Combined Technology, Inc.; and
WHEREAS, in connection with the acquisition of all the
outstanding stock of Subordinated Creditor in Global Combined
Technologies, Inc., the Subordinated Creditor will take back a
promissory note in the principal amount of $23,963.00, as may be
adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement, plus interest, fees, costs and other amounts payable
in respect thereof and all of the other owners of the outstanding
stock of Global Combined Technologies, Inc. will take back
respective promissory notes in the principal amount of
$1,126,277.00 in the aggregate for a total of $1,150,240.00, as
may be adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement ("Acquisition Debt") in partial consideration of the
payment of the purchase price for such stock; and
WHEREAS, a condition under the Senior Loan 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:
<PAGE>
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
_ means the promissory note
issued by Borrower to the Subordinated Creditor.
1.1.03 "Acquisition Notes
" collectively means the
promissory notes issued by Borrower to the
Subordinated Creditors which evidence the Acquisition
Debt.
1.1.04 "Agreement
" means this Subordination Agreement.
1.1.05 "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.
1.1.06 "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 liquidation, dissolution, reorgan-
ization or winding up of the Borrower, or of all or
any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.07 "Borrower
" has the meaning specified in the
introductory paragraph hereto.
1.1.08 "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
<PAGE>
against the Borrower, whether under 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.
1.1.09 "
Enforcement Action Notice" has the meaning
specified in Section 3.2(b).
1.1.10 "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.
1.1.11 "
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 and any Permitted Increase.
1.1.12 "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.
1.1.13 "Payment in Full
" and "
Paid in Full" mean payment
in full in cash.
1.1.14 "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
redemption, retirement, repurchase or other
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acquisition for value of any Subordinated Debt.
1.1.15 "
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.
1.1.16 "
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.
1.1.17 "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.
1.1.18 "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
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reorganization.
1.1.19 "Senior Creditor
" has the meaning specified in the
introductory paragraph hereto.
1.1.20 "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 Forty
Million Dollars ($40,000,000.00).
(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, indemnities, 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.
1.1.21 "
Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Note
(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.
1.1.22 "Senior Loan
" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.23 "Senior Loan Agreement
" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.24 "Standstill Event
" means the occurrence of any one
or more of the
Events of Default under the Acquisition
Note.
1.1.25 "
Standstill Event Notice" shall mean the date the
Subordinated Creditor shall have provided written
notice of such Standstill Event to the Senior Creditor
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and Borrower.
1.1.26 "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).
1.1.27 "
Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of
the Acquisition Note.
1.1.28 "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).
1.1.29 "
Subordinated Debt Documents" means, collectively
(a) the Acquisition Notes, and
(b) each Instrument now or hereafter executed in
connection with or evidencing, governing,
guarantying or securing any indebtedness under any
such document.
1.1.30 "
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.
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Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The
term "including" means 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 Subordi-
nated 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
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collected or received by the Subordinated Creditor, then
such payment or distribution shall be paid over or delivered
forthwith to the Senior Creditor.
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
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(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 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 respective 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
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<PAGE>
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 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) March ____, 2000.
(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 Subordinated
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.
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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 com-
mencing or instituting, any Bankruptcy or Insolvency
Proceeding.
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 Agree-
ment).
ARTICLE 4
WAIVERS
4.1
Waivers of Notice, etc. The obligations of the Subordinated
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
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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 Docu-
ments 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 any Senior Debt, or (iv) any failure or
refusal by the Senior Creditor to foreclose or to real-
ize 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
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fact. Such notice shall be provided in writing to the
disbursement agent at the following address:
James B. Kite, Jr.
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7101
5.2 Representations and Warranty of the Borrower
. The Borrower
hereby represents to the Senior Creditor as follows:
(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 transac-
tions. 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
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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.
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 continue to hold, or to continue to hold, the
Senior Debt. The Senior Creditor shall be deemed con-
clusively to have relied upon the obligations 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
obligations 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
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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
Subordinated 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.
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, representations, warranties or understandings,
whether oral, written or implied, as to the subject matter
of this 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
- 15 -
<PAGE>
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 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.
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<PAGE>
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SUBORDINATED CREDITOR:
________________________________________
JAMES B. KITE, JR.
Address:_________________________________
______________________________________
Fax:____________________________________
SENIOR CREDITOR:
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
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<PAGE>
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA, ss:
On this ____ day of ______, 1998, 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.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF _____________
COUNTY OF ___________
On this ____ day of ________, 1998, before me personally
appeared JAMES B. KITE, JR., to me known, who, being by me duly
sworn, declared that he is a signatory of the foregoing
Subordination Agreement; and that he did execute the foregoing
Subordination Agreement, and that the foregoing Subordination
Agreement constitutes HIS free act and deed.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA, ss:
On this ____ day of _____, 1998, 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:
- 18 -
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of March, 1998, among (i) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii) O.
DEAN HIGGANBOTHAM, (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, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997, as further amended by a Letter Agreement
dated December 1, 1997 and January 28, 1998, (the "Senior Loan
Agreement"), between the Borrower and the Senior Creditor, the
Senior Creditor has extended a commitment to make available to
Borrower a certain revolving credit loan in the principal amount
of Forty Million ($40,000,000.00) Dollars (the "Senior Loan");
and
WHEREAS, the Senior Loan is 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 Note") in the maximum
aggregate principal amount not to exceed Forty Million
($40,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase all the outstanding stock owned by
Subordinated Creditor in Global Combined Technology, Inc.; and
WHEREAS, in connection with the acquisition of all the
outstanding stock of Subordinated Creditor in Global Combined
Technologies, Inc., the Subordinated Creditor will take back a
promissory note in the principal amount of $287,560.00, as may be
adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement, plus interest, fees, costs and other amounts payable
in respect thereof and all of the other owners of the outstanding
stock of Global Combined Technologies, Inc. will take back
respective promissory notes in the principal amount of
$862,680.00 in the aggregate for a total of $1,150,240.00, as may
be adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement ("Acquisition Debt") in partial consideration of the
payment of the purchase price for such stock; and
WHEREAS, a condition under the Senior Loan 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:
<PAGE>
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
_ means the promissory note
issued by Borrower to the Subordinated Creditor.
1.1.03 "Acquisition Notes
" collectively means the
promissory notes issued by Borrower to the
Subordinated Creditors which evidence the Acquisition
Debt.
1.1.04 "Agreement
" means this Subordination Agreement.
1.1.05 "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.
1.1.06 "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 liquidation, dissolution, reorgan-
ization or winding up of the Borrower, or of all or
any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.07 "Borrower
" has the meaning specified in the
introductory paragraph hereto.
1.1.08 "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
<PAGE>
against the Borrower, whether under 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.
1.1.09 "
Enforcement Action Notice" has the meaning
specified in Section 3.2(b).
1.1.10 "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.
1.1.11 "
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 and any Permitted Increase.
1.1.12 "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.
1.1.13 "Payment in Full
" and "
Paid in Full" mean payment
in full in cash.
1.1.14 "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
redemption, retirement, repurchase or other
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<PAGE>
acquisition for value of any Subordinated Debt.
1.1.15 "
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.
1.1.16 "
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.
1.1.17 "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.
1.1.18 "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
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<PAGE>
reorganization.
1.1.19 "Senior Creditor
" has the meaning specified in the
introductory paragraph hereto.
1.1.20 "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 Forty
Million Dollars ($40,000,000.00).
(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, indemnities, 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.
1.1.21 "
Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Note
(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.
1.1.22 "Senior Loan
" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.23 "Senior Loan Agreement
" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.24 "Standstill Event
" means the occurrence of any one
or more of the
Events of Default under the Acquisition
Note.
1.1.25 "
Standstill Event Notice" shall mean the date the
Subordinated Creditor shall have provided written
notice of such Standstill Event to the Senior Creditor
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<PAGE>
and Borrower.
1.1.26 "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).
1.1.27 "
Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of
the Acquisition Note.
1.1.28 "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).
1.1.29 "
Subordinated Debt Documents" means, collectively
(a) the Acquisition Notes, and
(b) each Instrument now or hereafter executed in
connection with or evidencing, governing,
guarantying or securing any indebtedness under any
such document.
1.1.30 "
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.
- 6 -
<PAGE>
Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The
term "including" means 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 Subordi-
nated 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
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<PAGE>
collected or received by the Subordinated Creditor, then
such payment or distribution shall be paid over or delivered
forthwith to the Senior Creditor.
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
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<PAGE>
(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 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 respective 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
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<PAGE>
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 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) March ____, 2000.
(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 Subordinated
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.
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<PAGE>
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 com-
mencing or instituting, any Bankruptcy or Insolvency
Proceeding.
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 Agree-
ment).
ARTICLE 4
WAIVERS
4.1 Waivers of Notice, etc
. The obligations of the Subordinated
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
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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 Docu-
ments 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 any Senior Debt, or (iv) any failure or
refusal by the Senior Creditor to foreclose or to real-
ize 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
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<PAGE>
fact. Such notice shall be provided in writing to the
disbursement agent at the following address:
O. Dean Higganbotham
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7101
5.2 Representations and Warranty of the Borrower
. The Borrower
hereby represents to the Senior Creditor as follows:
(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 transac-
tions. 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
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<PAGE>
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.
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 continue to hold, or to continue to hold, the
Senior Debt. The Senior Creditor shall be deemed con-
clusively to have relied upon the obligations 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
obligations 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
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<PAGE>
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
Subordinated 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.
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, representations, warranties or understandings,
whether oral, written or implied, as to the subject matter
of this 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
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<PAGE>
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 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.
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<PAGE>
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SUBORDINATED CREDITOR:
________________________________________
O. DEAN HIGGANBOTHAM
Address:_________________________________
______________________________________
Fax:____________________________________
SENIOR CREDITOR:
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
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<PAGE>
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of ______, 1998, 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.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this ____ day of ________, 1998, before me personally
appeared O. DEAN HIGGANBOTHAM, to me known, who, being by me duly
sworn, declared that he is a signatory of the foregoing
Subordination Agreement; and that he did execute the foregoing
Subordination Agreement, and that the foregoing Subordination
Agreement constitutes HIS free act and deed.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of _____, 1998, 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:
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of March, 1998, among (i) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii),
DALE E. HIGGANBOTHAM (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, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997, as further amended by a Letter Agreement
dated December 1, 1997 and January 28, 1998, (the "Senior Loan
Agreement"), between the Borrower and the Senior Creditor, the
Senior Creditor has extended a commitment to make available to
Borrower a certain revolving credit loan in the principal amount
of Forty Million ($40,000,000.00) Dollars (the "Senior Loan");
and
WHEREAS, the Senior Loan is 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 Note") in the maximum
aggregate principal amount not to exceed Forty Million
($40,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase all the outstanding stock owned by
Subordinated Creditor in Global Combined Technology, Inc.; and
WHEREAS, in connection with the acquisition of all the
outstanding stock of Subordinated Creditor in Global Combined
Technologies, Inc., the Subordinated Creditor will take back a
promissory note in the principal amount of $143,780.00, as may be
adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement, plus interest, fees, costs and other amounts payable
in respect thereof and all of the other owners of the outstanding
stock of Global Combined Technologies, Inc. will take back
respective promissory notes in the principal amount of
$1,006,460.00 in the aggregate for a total of $1,150,240.00, as
may be adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement ("Acquisition Debt") in partial consideration of the
payment of the purchase price for such stock; and
WHEREAS, a condition under the Senior Loan 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:
<PAGE>
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
_ means the promissory note
issued by Borrower to the Subordinated Creditor.
1.1.03 "Acquisition Notes
" collectively means the
promissory notes issued by Borrower to the
Subordinated Creditors which evidence the Acquisition
Debt.
1.1.04 "
Agreement" means this Subordination Agreement.
1.1.05 "
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.
1.1.06 "
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 liquidation, dissolution, reorgan-
ization or winding up of the Borrower, or of all or
any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.07 "
Borrower" has the meaning specified in the
introductory paragraph hereto.
1.1.08 "
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
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<PAGE>
against the Borrower, whether under 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.
1.1.09 "Enforcement Action Notice
" has the meaning
specified in Section 3.2(b).
1.1.10 "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.
1.1.11 "
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 and any Permitted Increase.
1.1.12 "
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.
1.1.13 "
Payment in Full" and "
Paid in Full" mean payment
in full in cash.
1.1.14 "
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
redemption, retirement, repurchase or other
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acquisition for value of any Subordinated Debt.
1.1.15 "
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.
1.1.16 "
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.
1.1.17 "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.
1.1.18 "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
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<PAGE>
reorganization.
1.1.19 "Senior Creditor
" has the meaning specified in the
introductory paragraph hereto.
1.1.20 "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 Forty
Million Dollars ($40,000,000.00).
(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, indemnities, 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.
1.1.21 "
Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Note
(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.
1.1.22 "
Senior Loan" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.23 "Senior Loan Agreement
" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.24 "
Standstill Event" means the occurrence of any one
or more of the Events of Default
under the Acquisition
Note.
1.1.25 "Standstill Event Notice
" shall mean the date the
Subordinated Creditor shall have provided written
notice of such Standstill Event to the Senior Creditor
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<PAGE>
and Borrower.
1.1.26 "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).
1.1.27 "
Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of
the Acquisition Note.
1.1.28 "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).
1.1.29 "
Subordinated Debt Documents" means, collectively
(a) the Acquisition Notes, and
(b) each Instrument now or hereafter executed in
connection with or evidencing, governing,
guarantying or securing any indebtedness under any
such document.
1.1.30 "
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.
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<PAGE>
Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The
term "including" means 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 Subordi-
nated 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 Distribu
tions 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
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<PAGE>
collected or received by the Subordinated Creditor, then
such payment or distribution shall be paid over or delivered
forthwith to the Senior Creditor.
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
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<PAGE>
(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 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 respective 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
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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 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) March ____, 2000.
(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 Subordinated
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.
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<PAGE>
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 com-
mencing or instituting, any Bankruptcy or Insolvency
Proceeding.
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 Agree-
ment).
ARTICLE 4
WAIVERS
4.1 Waivers of Notice, etc
. The obligations of the Subordinated
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
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<PAGE>
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 Docu-
ments 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 any Senior Debt, or (iv) any failure or
refusal by the Senior Creditor to foreclose or to real-
ize 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
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<PAGE>
fact. Such notice shall be provided in writing to the
disbursement agent at the following address:
DALE E. HIGGANBOTHAM
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7101
5.2 Representations and Warranty of the Borrower
. The Borrower
hereby represents to the Senior Creditor as follows:
(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 transac-
tions. 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
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<PAGE>
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.
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 continue to hold, or to continue to hold, the
Senior Debt. The Senior Creditor shall be deemed con-
clusively to have relied upon the obligations 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
obligations 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
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<PAGE>
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
Subordinated 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.
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, representations, warranties or understandings,
whether oral, written or implied, as to the subject matter
of this 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
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<PAGE>
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 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.
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<PAGE>
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SUBORDINATED CREDITOR:
________________________________________
DALE E. HIGGANBOTHAM
Address:_________________________________
______________________________________
Fax:____________________________________
SENIOR CREDITOR:
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
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<PAGE>
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of ______, 1998, 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.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this ____ day of ________, 1998, before me personally
appeared DALE E. HIGGANBOTHAM, to me known, who, being by me duly
sworn, declared that he is a signatory of the foregoing
Subordination Agreement; and that he did execute the foregoing
Subordination Agreement, and that the foregoing Subordination
Agreement constitutes HIS free act and deed.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of _____, 1998, 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:
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<PAGE>
112887
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into
this ______ day of March, 1998, among (I) POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation (the "Borrower"), (ii),
J. WALTER DUNCAN JR., AS TRUSTEE OF THE J. WALTER DUNCAN JR.
REVOCABLE TRUST (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, 1996, as amended by a Letter Agreement
dated June 27, 1996, as further amended by a Letter Agreement
dated June 26, 1997, as further amended by a Letter Agreement
dated December 1, 1997 and January 28, 1998, (the "Senior Loan
Agreement"), between the Borrower and the Senior Creditor, the
Senior Creditor has extended a commitment to make available to
Borrower a certain revolving credit loan in the principal amount
of Forty Million ($40,000,000.00) Dollars (the "Senior Loan");
and
WHEREAS, the Senior Loan is 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 Note") in the maximum
aggregate principal amount not to exceed Forty Million
($40,000,000.00) Dollars.
WHEREAS, Borrower is using a portion of the proceeds of the
Senior Loan to purchase all the outstanding stock owned by
Subordinated Creditor in Global Combined Technology, Inc.; and
WHEREAS, in connection with the acquisition of all the
outstanding stock of Subordinated Creditor in Global Combined
Technologies, Inc., the Subordinated Creditor will take back a
promissory note in the principal amount of $357,078.00, as may be
adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement, plus interest, fees, costs and other amounts payable
in respect thereof and all of the other owners of the outstanding
stock of Global Combined Technologies, Inc. will take back
respective promissory notes in the principal amount of
$793,162.00 in the aggregate for a total of $1,150,240.00, as may
be adjusted pursuant to Section 2.02(b) of the Stock Purchase
Agreement ("Acquisition Debt") in partial consideration of the
payment of the purchase price for such stock; and
WHEREAS, a condition under the Senior Loan 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:
<PAGE>
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
_ means the promissory note
issued by Borrower to the Subordinated Creditor.
1.1.03 "Acquisition Notes
" collectively means the
promissory notes issued by Borrower to the
Subordinated Creditors which evidence the Acquisition
Debt.
1.1.04 "Agreement
" means this Subordination Agreement.
1.1.05 "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.
1.1.06 "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 liquidation, dissolution, reorgan-
ization or winding up of the Borrower, or of all or
any portion of the property of Borrower, whether
voluntary or involuntary, partial or complete.
1.1.07 "Borrower
" has the meaning specified in the
introductory paragraph hereto.
1.1.08 "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
<PAGE>
against the Borrower, whether under 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.
1.1.09 "
Enforcement Action Notice" has the meaning
specified in Section 3.2(b).
1.1.10 "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.
1.1.11 "
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 and any Permitted Increase.
1.1.12 "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.
1.1.13 "Payment in Full
" and "
Paid in Full" mean payment
in full in cash.
1.1.14 "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
redemption, retirement, repurchase or other
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acquisition for value of any Subordinated Debt.
1.1.15 "
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.
1.1.16 "
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.
1.1.17 "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.
1.1.18 "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
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reorganization.
1.1.19 "Senior Creditor
" has the meaning specified in the
introductory paragraph hereto.
1.1.20 "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 Forty
Million Dollars ($40,000,000.00).
(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, indemnities, 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.
1.1.21 "
Senior Debt Documents" means, collectively, (a)
the Senior Loan Agreement and (b) the Senior Note
(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.
1.1.22 "Senior Loan
" has the meaning specified in the
first paragraph of the Recitals hereto.
1.1.23 "Senior Loan Agreement
" has the meaning specified
in the first paragraph of the Recitals hereto.
1.1.24 "Standstill Event
" means the occurrence of any one
or more of the
Events of Default under the Acquisition
Note.
1.1.25 "
Standstill Event Notice" shall mean the date the
Subordinated Creditor shall have provided written
notice of such Standstill Event to the Senior Creditor
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and Borrower.
1.1.26 "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).
1.1.27 "
Subordinated Creditor" has the meaning specified
in the introductory paragraph hereto or any holder of
the Acquisition Note.
1.1.28 "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).
1.1.29 "
Subordinated Debt Documents" means, collectively
(a) the Acquisition Notes, and
(b) each Instrument now or hereafter executed in
connection with or evidencing, governing,
guarantying or securing any indebtedness under any
such document.
1.1.30 "
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.
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Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The
term "including" means 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 Subordi-
nated 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
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collected or received by the Subordinated Creditor, then
such payment or distribution shall be paid over or delivered
forthwith to the Senior Creditor.
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
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(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 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 respective 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
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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 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) March ____, 2000.
(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 Subordinated
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.
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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 com-
mencing or instituting, any Bankruptcy or Insolvency
Proceeding.
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 Agree-
ment).
ARTICLE 4
WAIVERS
4.1 Waivers of Notice, etc
. The obligations of the Subordinated
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
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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 Docu-
ments 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 any Senior Debt, or (iv) any failure or
refusal by the Senior Creditor to foreclose or to real-
ize 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
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fact. Such notice shall be provided in writing to the
disbursement agent at the following address:
J. Walter Duncan, Jr., as Trustee
of the J. Walter Duncan, Jr. Revocable Trust
or at such other address as may be provided by the
Subordinated Creditor to the Senior Creditor; and
With a copy to: Mark E. Burget, Esq.
McAfee & Taft
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7101
5.2 Representations and Warranty of the Borrower
. The Borrower
hereby represents to the Senior Creditor as follows:
(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 transac-
tions. 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,
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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.
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 continue to hold, or to continue to hold, the
Senior Debt. The Senior Creditor shall be deemed con-
clusively to have relied upon the obligations 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
obligations of the Subordinated Creditor under this
Agreement shall be assigned automatically to, and the term
"Subordinated Creditor" as used in this Agreement shall
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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
Subordinated 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.
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, representations, warranties or understandings,
whether oral, written or implied, as to the subject matter
of this 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
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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 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:
- 16 -
<PAGE>
POMEROY COMPUTER RESOURCES, INC.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
Attention:________________________________
SUBORDINATED CREDITOR
:
________________________________________
J. WALTER DUNCAN, JR., AS TRUSTEE
OF THE J. WALTER DUNCAN, JR.,
REVOCABLE TRUST
Address:_________________________________
______________________________________
Fax:____________________________________
SENIOR CREDITOR:
STAR BANK, N.A.
By:_____________________________________
Title:____________________________________
Address:_________________________________
______________________________________
Fax:____________________________________
- 17 -
<PAGE>
Attention:________________________________
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of ______, 1998, 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.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OKLAHOMA
COUNTY OF OKLAHOMA
On this ____ day of ________, 1998, before me personally
appeared J. WALTER DUNCAN, JR., AS TRUSTEE OF THE J. WALTER
DUNCAN, JR., REVOCABLE TRUST, to me known, who, being by me duly
sworn, declared that he is a signatory of the foregoing
Subordination Agreement; and that he did execute the foregoing
Subordination Agreement, and that the foregoing Subordination
Agreement constitutes HIS free act and deed.
________________________________________
NOTARY PUBLIC
My Commission Expires:
STATE OF OHIO
COUNTY OF HAMILTON, ss:
On this ____ day of _____, 1998, 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..
- 18 - <PAGE>
________________________________________
NOTARY PUBLIC
My Commission Expires:
SUBORDINATED PROMISSORY NOTE
$23,963.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of
JAMES B. KITE, JR. ("Lender"), the sum of Twenty-Three Thousand
Nine Hundred Sixty-Three and 00/100 Dollars ($23,963.00)
(adjusted upward or downward in the manner hereinafter set
forth), together with interest on the outstanding principal
balance from the date hereof, at the rate specified below.
2. The initial face amount of this note ($23,963.00) shall be
adjusted either downward or upward by any increase or decrease
required by Section 2.02(b) of the Stock Purchase Agreement.
Such adjustments and the manner in which they are to be made
shall be done in accordance with Section 3.02 of the Stock
Purchase Agreement. If, prior to such adjustment, Borrower has
made any interest payment to Lender hereunder, the parties agree
to adjust any prior payments to equitably reflect either the
increase or decrease made as a result of any adjustments
contained in Section 2.02(b) of the Stock Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of Star
Bank, National Association, Cincinnati, Ohio as of the date of
Closing (as defined in the Stock Purchase Agreement) per annum.
Interest on the unpaid principal balance of this Note shall be
due and payable quarterly, with the first interest payment due
and payable ninety (90) days from the date hereof and on the 18th
day of each successive third month thereafter. Principal shall
be paid in two (2) equal annual installments of Eleven Thousand
Nine Hundred Eighty-One and 50/100 Dollars ($11,981.50), as may
be adjusted pursuant to the provisions of paragraph 2, commencing
on the first Anniversary Date of this Note and then on the second
Anniversary Date until paid in full.
4. All payments received hereunder shall be applied first to
interest and then to principal. Subject to the Subordination
Agreement, as defined below, this Note may be prepaid, in whole
or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are
subordinated and made junior in right of payment to the extent
and in the manner provided in the Subordination Agreement of even
date herewith (the "Subordination Agreement") between Star Bank,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
such Subordination Agreement as long as it is in effect.
<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 Stock Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). The unpaid
interest accrued during the continuation of any Event of Default
on the indebtedness evidenced by this Note (whether for principal
or otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant to and subject to the terms and
conditions of the Stock Purchase Agreement. Any holder of this
Note is subject to all claims and defenses which the Borrower
could pursue against Lender under the Stock Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise,
the Lender may, at its option, subject to the Subordination
Agreement, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to property held as
security herefor. The failure to exercise any option to
accelerate the maturity hereof shall not be taken or deemed to be
a waiver of the right to exercise such option or to accelerate
such maturity. All remedies provided for herein upon any default
by the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Stock Purchase
Agreement, Lender made certain representations, warranties,
covenants and agreements with and to the Borrower. Lender agrees
that if the Borrower is entitled to indemnification from the
Lender under the Stock Purchase Agreement or any other of the
Stock Purchase Documents and Borrower has complied with the
notice provisions of section 11.06 of the Stock Purchase
Agreement, the amount of such indemnification due from Lender may
be set off against the amounts payable hereunder if permitted
under the Stock Purchase Agreement, being first applied to
interest and the withholding of all or any part of payment due
hereunder as a result of such a set off shall not be considered
an Event of Default hereunder. Lender agrees that the amount to
which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to
Lender hereunder or by the terms of this Note, but shall be
governed by the terms of the Stock Purchase Documents.
10. The provisions of this Note and the obligations of the
- 2 -
<PAGE>
Borrower hereunder shall in all respects be governed by and
interpreted and determined in accordance with the internal laws
of the State of Oklahoma.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to
a competitor of Borrower shall be made only with the prior
written approval of Borrower, which approval shall not be
unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing or selling of
computers and/or computer equipment.
12. The Borrower hereby unconditionally and irrevocably waives
notice of acceptance, presentment, notice of nonpayment (except
as provided herein), protest, notice of protest, suit and all
other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness represented by
this Note be collected by action in law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should
this Note be placed in the hands of attorneys for collection
after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the
Lender hereof at any time, in addition to principal and all (if
any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby, all court costs and reasonable
attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any
provision of this Note involves transcending the limit of
validity prescribed by any applicable usury statute or any other
applicable law with regard to obligations of like character and
amount, then the obligation to be fulfilled will be reduced to
the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under
this Note in excess of the limit of such validity. In no event
shall the Borrower be bound to pay interest of more than the
legal limit for the use, forbearance or detention of money, and
the right to demand any such excess is hereby expressly waived by
the Lender.
15. No delay or omission of the holder of this Note to exercise
any right or power arising from any default shall impair any such
right or power or be considered to be a waiver of any such
default or any acquiescence therein, nor shall the action or non-
action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following
meanings, respectively:
- 3 -
<PAGE>
(a) "Anniversary Date" - March 18, 1999 and each March 18
thereafter.
(b) "Stock Purchase Agreement" - The Stock Purchase
Agreement between and among the Borrower and the Sellers as that
term is defined in the Stock Purchase Agreement dated February
25, 1998.
(c) "Stock Purchase Documents" - The Stock Purchase
Agreement and any employment agreements, non-competition
agreements or subordination agreements referred to or made a part
of the Stock Purchase Agreement.
(d) "Event of Default" - Shall include (i) the failure of
Borrower to make any payment of principal or interest due under
this Note for a period of seven (7) days after receipt of written
notice from the Lender to the Borrower that such installment has
not been paid; or (ii) a default under any of the other
subordinated promissory notes issued to the other Sellers under
the Stock Purchase Agreement; or (iii) an event of default under
the Senior Debt loan documentation that has been declared in
writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) _Senior Debt_ - The debt of the Borrower to Star
Bank, National Association as set forth in the Subordination
Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 18, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION TO WHICH REFERENCE IS
HEREBY MADE, RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF
ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL
AND INTEREST HEREOF.
- 4 -
SUBORDINATED PROMISSORY NOTE
$287,560.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of O.
DEAN HIGGANBOTHAM ("Lender"), the sum of Two Hundred Eighty-Seven
Thousand Five Hundred Sixty and 00/100 Dollars ($287,560.00)
(adjusted upward or downward in the manner hereinafter set
forth), together with interest on the outstanding principal
balance from the date hereof, at the rate specified below.
2. The initial face amount of this note ($287,560.00) shall be
adjusted either downward or upward by any increase or decrease
required by Section 2.02(b) of the Stock Purchase Agreement.
Such adjustments and the manner in which they are to be made
shall be done in accordance with Section 3.02 of the Stock
Purchase Agreement. If, prior to such adjustment, Borrower has
made any interest payment to Lender hereunder, the parties agree
to adjust any prior payments to equitably reflect either the
increase or decrease made as a result of any adjustments
contained in Section 2.02(b) of the Stock Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of Star
Bank, National Association, Cincinnati, Ohio as of the date of
Closing (as defined in the Stock Purchase Agreement) per annum.
Interest on the unpaid principal balance of this Note shall be
due and payable quarterly, with the first interest payment due
and payable ninety (90) days from the date hereof and on the 18th
day of each successive third month thereafter. Principal shall
be paid in two (2) equal annual installments of One Hundred
Forty Three Thousand Seven Hundred Eighty and 00/100 Dollars
($143,780.00), as may be adjusted pursuant to the provisions of
paragraph 2, commencing on the first Anniversary Date of this
Note and then on the second Anniversary Date until paid in full.
4. All payments received hereunder shall be applied first to
interest and then to principal. Subject to the Subordination
Agreement, as defined below, this Note may be prepaid, in whole
or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are
subordinated and made junior in right of payment to the extent
and in the manner provided in the Subordination Agreement of even
date herewith (the "Subordination Agreement") between Star Bank,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
such Subordination Agreement as long as it is in effect.
<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 Stock Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). The unpaid
interest accrued during the continuation of any Event of Default
on the indebtedness evidenced by this Note (whether for principal
or otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant to and subject to the terms and
conditions of the Stock Purchase Agreement. Any holder of this
Note is subject to all claims and defenses which the Borrower
could pursue against Lender under the Stock Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise,
the Lender may, at its option, subject to the Subordination
Agreement, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to property held as
security herefor. The failure to exercise any option to
accelerate the maturity hereof shall not be taken or deemed to be
a waiver of the right to exercise such option or to accelerate
such maturity. All remedies provided for herein upon any default
by the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Stock Purchase
Agreement, Lender made certain representations, warranties,
covenants and agreements with and to the Borrower. Lender agrees
that if the Borrower is entitled to indemnification from the
Lender under the Stock Purchase Agreement or any other of the
Stock Purchase Documents and Borrower has complied with the
notice provisions of section 11.06 of the Stock Purchase
Agreement, the amount of such indemnification due from Lender may
be set off against the amounts payable hereunder if permitted
under the Stock Purchase Agreement, being first applied to
interest and the withholding of all or any part of payment due
hereunder as a result of such a set off shall not be considered
an Event of Default hereunder. Lender agrees that the amount to
which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to
Lender hereunder or by the terms of this Note, but shall be
governed by the terms of the Stock Purchase Documents.
10. The provisions of this Note and the obligations of the
- 2 -
<PAGE>
Borrower hereunder shall in all respects be governed by and
interpreted and determined in accordance with the internal laws
of the State of Oklahoma.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to
a competitor of Borrower shall be made only with the prior
written approval of Borrower, which approval shall not be
unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing or selling of
computers and/or computer equipment.
12. The Borrower hereby unconditionally and irrevocably waives
notice of acceptance, presentment, notice of nonpayment (except
as provided herein), protest, notice of protest, suit and all
other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness represented by
this Note be collected by action in law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should
this Note be placed in the hands of attorneys for collection
after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the
Lender hereof at any time, in addition to principal and all (if
any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby, all court costs and reasonable
attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any
provision of this Note involves transcending the limit of
validity prescribed by any applicable usury statute or any other
applicable law with regard to obligations of like character and
amount, then the obligation to be fulfilled will be reduced to
the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under
this Note in excess of the limit of such validity. In no event
shall the Borrower be bound to pay interest of more than the
legal limit for the use, forbearance or detention of money, and
the right to demand any such excess is hereby expressly waived by
the Lender.
15. No delay or omission of the holder of this Note to exercise
any right or power arising from any default shall impair any such
right or power or be considered to be a waiver of any such
default or any acquiescence therein, nor shall the action or non-
action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following
meanings, respectively:
- 3 -
<PAGE>
(a) "Anniversary Date" - March 18, 1999 and each March 18
thereafter.
(b) "Stock Purchase Agreement" - The Stock Purchase
Agreement between and among the Borrower and the Sellers as that
term is defined in the Stock Purchase Agreement dated February
25, 1998.
(c) "Stock Purchase Documents" - The Stock Purchase
Agreement and any employment agreements, non-competition
agreements or subordination agreements referred to or made a part
of the Stock Purchase Agreement.
(d) "Event of Default" - Shall include (i) the failure of
Borrower to make any payment of principal or interest due under
this Note for a period of seven (7) days after receipt of written
notice from the Lender to the Borrower that such installment has
not been paid; or (ii) a default under any of the other
subordinated promissory notes issued to the other Sellers under
the Stock Purchase Agreement; or (iii) an event of default under
the Senior Debt loan documentation that has been declared in
writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) _Senior Debt_ - The debt of the Borrower to Star
Bank, National Association as set forth in the Subordination
Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 18, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION TO WHICH REFERENCE IS
HEREBY MADE, RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF
ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL
AND INTEREST HEREOF.
- 4 -
SUBORDINATED PROMISSORY NOTE
$143,780.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of
DALE E. HIGGANBOTHAM ("Lender"), the sum of One Hundred Forty-
Three Thousand Seven Hundred Eighty and 00/100 Dollars
($143,780.00) (adjusted upward or downward in the manner
hereinafter set forth), together with interest on the outstanding
principal balance from the date hereof, at the rate specified
below.
2. The initial face amount of this note ($143,780.00) shall be
adjusted either downward or upward by any increase or decrease
required by Section 2.02(b) of the Stock Purchase Agreement.
Such adjustments and the manner in which they are to be made
shall be done in accordance with Section 3.02 of the Stock
Purchase Agreement. If, prior to such adjustment, Borrower has
made any interest payment to Lender hereunder, the parties agree
to adjust any prior payments to equitably reflect either the
increase or decrease made as a result of any adjustments
contained in Section 2.02(b) of the Stock Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of Star
Bank, National Association, Cincinnati, Ohio as of the date of
Closing (as defined in the Stock Purchase Agreement) per annum.
Interest on the unpaid principal balance of this Note shall be
due and payable quarterly, with the first interest payment due
and payable ninety (90) days from the date hereof and on the 18th
day of each successive third month thereafter. Principal shall
be paid in two (2) equal annual installments of Seventy-One
Thousand Eight Hundred Ninety and 00/100 Dollars ($71,890.00), as
may be adjusted pursuant to the provisions of paragraph 2,
commencing on the first Anniversary Date of this Note and then on
the second Anniversary Date until paid in full.
4. All payments received hereunder shall be applied first to
interest and then to principal. Subject to the Subordination
Agreement, as defined below, this Note may be prepaid, in whole
or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are
subordinated and made junior in right of payment to the extent
and in the manner provided in the Subordination Agreement of even
date herewith (the "Subordination Agreement") between Star Bank,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
such Subordination Agreement as long as it is in effect.
<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 Stock Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). The unpaid
interest accrued during the continuation of any Event of Default
on the indebtedness evidenced by this Note (whether for principal
or otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant to and subject to the terms and
conditions of the Stock Purchase Agreement. Any holder of this
Note is subject to all claims and defenses which the Borrower
could pursue against Lender under the Stock Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise,
the Lender may, at its option, subject to the Subordination
Agreement, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to property held as
security herefor. The failure to exercise any option to
accelerate the maturity hereof shall not be taken or deemed to be
a waiver of the right to exercise such option or to accelerate
such maturity. All remedies provided for herein upon any default
by the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Stock Purchase
Agreement, Lender made certain representations, warranties,
covenants and agreements with and to the Borrower. Lender agrees
that if the Borrower is entitled to indemnification from the
Lender under the Stock Purchase Agreement or any other of the
Stock Purchase Documents and Borrower has complied with the
notice provisions of section 11.06 of the Stock Purchase
Agreement, the amount of such indemnification due from Lender may
be set off against the amounts payable hereunder if permitted
under the Stock Purchase Agreement, being first applied to
interest and the withholding of all or any part of payment due
hereunder as a result of such a set off shall not be considered
an Event of Default hereunder. Lender agrees that the amount to
which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to
Lender hereunder or by the terms of this Note, but shall be
governed by the terms of the Stock Purchase Documents.
10. The provisions of this Note and the obligations of the
Borrower hereunder shall in all respects be governed by and
<PAGE>
interpreted and determined in accordance with the internal laws
of the State of Oklahoma.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to
a competitor of Borrower shall be made only with the prior
written approval of Borrower, which approval shall not be
unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing or selling of
computers and/or computer equipment.
12. The Borrower hereby unconditionally and irrevocably waives
notice of acceptance, presentment, notice of nonpayment (except
as provided herein), protest, notice of protest, suit and all
other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness represented by
this Note be collected by action in law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should
this Note be placed in the hands of attorneys for collection
after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the
Lender hereof at any time, in addition to principal and all (if
any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby, all court costs and reasonable
attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any
provision of this Note involves transcending the limit of
validity prescribed by any applicable usury statute or any other
applicable law with regard to obligations of like character and
amount, then the obligation to be fulfilled will be reduced to
the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under
this Note in excess of the limit of such validity. In no event
shall the Borrower be bound to pay interest of more than the
legal limit for the use, forbearance or detention of money, and
the right to demand any such excess is hereby expressly waived by
the Lender.
15. No delay or omission of the holder of this Note to exercise
any right or power arising from any default shall impair any such
right or power or be considered to be a waiver of any such
default or any acquiescence therein, nor shall the action or non-
action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following
meanings, respectively:
(a) "Anniversary Date" - March 18, 1999 and each March 18
- 3 -
<PAGE>
thereafter.
(b) "Stock Purchase Agreement" - The Stock Purchase
Agreement between and among the Borrower and the Sellers as that
term is defined in the Stock Purchase Agreement dated February
25, 1998.
(c) "Stock Purchase Documents" - The Stock Purchase
Agreement and any employment agreements, non-competition
agreements or subordination agreements referred to or made a part
of the Stock Purchase Agreement.
(d) "Event of Default" - Shall include (i) the failure of
Borrower to make any payment of principal or interest due under
this Note for a period of seven (7) days after receipt of written
notice from the Lender to the Borrower that such installment has
not been paid; or (ii) a default under any of the other
subordinated promissory notes issued to the other Sellers under
the Stock Purchase Agreement; or (iii) an event of default under
the Senior Debt loan documentation that has been declared in
writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) _Senior Debt_ - The debt of the Borrower to Star
Bank, National Association as set forth in the Subordination
Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 18, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION TO WHICH REFERENCE IS
HEREBY MADE, RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF
ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL
AND INTEREST HEREOF.
- 4 -
SUBORDINATED PROMISSORY NOTE
$357,078.00 Cincinnati, Ohio
(to be adjusted as hereinafter set forth) March ___, 1998
1. FOR VALUE RECEIVED, POMEROY COMPUTER RESOURCES, INC., a
Delaware corporation (hereinafter, together with its successors
in title and assigns, called the "Borrower") does hereby
absolutely and unconditionally promise to pay to the order of J.
WALTER DUNCAN, JR., AS TRUSTEE OF THE J. WALTER DUNCAN, JR.
REVOCABLE TRUST ("Lender"), the sum of Three Hundred Fifty-Seven
Thousand Seventy-eight and 00/100 Dollars ($357,078.00) (adjusted
upward or downward in the manner hereinafter set forth), together
with interest on the outstanding principal balance from the date
hereof, at the rate specified below.
2. The initial face amount of this note ($357,078.00) shall be
adjusted either downward or upward by any increase or decrease
required by Section 2.02(b) of the Stock Purchase Agreement.
Such adjustments and the manner in which they are to be made
shall be done in accordance with Section 3.02 of the Stock
Purchase Agreement. If, prior to such adjustment, Borrower has
made any interest payment to Lender hereunder, the parties agree
to adjust any prior payments to equitably reflect either the
increase or decrease made as a result of any adjustments
contained in Section 2.02(b) of the Stock Purchase Agreement.
3. Interest shall accrue at the rate of the prime rate of Star
Bank, National Association, Cincinnati, Ohio as of the date of
Closing (as defined in the Stock Purchase Agreement) per annum.
Interest on the unpaid principal balance of this Note shall be
due and payable quarterly, with the first interest payment due
and payable ninety (90) days from the date hereof and on the 18th
day of each successive third month thereafter. Principal shall
be paid in two (2) equal annual installments of One Hundred
Seventy-Eight Thousand Five Hundred Thirty-nine and 00/100
Dollars ($178,539.00), as may be adjusted pursuant to the
provisions of paragraph 2, commencing on the first Anniversary
Date of this Note and then on the second Anniversary Date until
paid in full.
4. All payments received hereunder shall be applied first to
interest and then to principal. Subject to the Subordination
Agreement, as defined below, this Note may be prepaid, in whole
or in part, at any time, without penalty.
5. This Note and all obligations of the Borrower hereunder are
subordinated and made junior in right of payment to the extent
and in the manner provided in the Subordination Agreement of even
date herewith (the "Subordination Agreement") between Star Bank,
National Association, the Lender and the Borrower and no action
may be taken by the Lender except in accordance with the terms of
<PAGE>
such Subordination Agreement as long as it is in effect.
6. Upon the occurrence of an Event of Default, the entire
principal amount outstanding under this Note, and accrued
interest thereon, shall at once become due and payable, at the
option of the Lender and the Lender shall have the remedies set
forth in the Stock Purchase Documents and Subordination
Agreement. During the continuance of any Event of Default, all
principal evidenced by this Note (whether for principal or
otherwise) shall (to the extent permitted by applicable law) bear
interest at the annual rate of twelve percent (12%). The unpaid
interest accrued during the continuation of any Event of Default
on the indebtedness evidenced by this Note (whether for principal
or otherwise) in accordance with the foregoing terms of this
paragraph shall become and be absolutely due and payable by the
Borrower to the Lender hereof on demand by the Lender of this
Note at any time. Interest will continue to accrue on all
indebtedness evidenced hereby until the Event of Default shall be
cured or otherwise remedied.
7. This Note is issued pursuant to and subject to the terms and
conditions of the Stock Purchase Agreement. Any holder of this
Note is subject to all claims and defenses which the Borrower
could pursue against Lender under the Stock Purchase Agreement.
8. When this Note becomes due, by acceleration or otherwise,
the Lender may, at its option, subject to the Subordination
Agreement, demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to property held as
security herefor. The failure to exercise any option to
accelerate the maturity hereof shall not be taken or deemed to be
a waiver of the right to exercise such option or to accelerate
such maturity. All remedies provided for herein upon any default
by the Borrower shall be cumulative and not exclusive.
9. Notwithstanding the above, pursuant to the Stock Purchase
Agreement, Lender made certain representations, warranties,
covenants and agreements with and to the Borrower. Lender agrees
that if the Borrower is entitled to indemnification from the
Lender under the Stock Purchase Agreement or any other of the
Stock Purchase Documents and Borrower has complied with the
notice provisions of section 11.06 of the Stock Purchase
Agreement, the amount of such indemnification due from Lender may
be set off against the amounts payable hereunder if permitted
under the Stock Purchase Agreement, being first applied to
interest and the withholding of all or any part of payment due
hereunder as a result of such a set off shall not be considered
an Event of Default hereunder. Lender agrees that the amount to
which the Borrower may be entitled to recover from Lender shall
not be limited by either the amount paid or due to be paid to
Lender hereunder or by the terms of this Note, but shall be
governed by the terms of the Stock Purchase Documents.
10. The provisions of this Note and the obligations of the
<PAGE>
Borrower hereunder shall in all respects be governed by and
interpreted and determined in accordance with the internal laws
of the State of Oklahoma.
11. The rights of the Lender hereunder are fully assignable and
transferrable, except that any assignment and/or transfer made to
a competitor of Borrower shall be made only with the prior
written approval of Borrower, which approval shall not be
unreasonably withheld. A competitor of Borrower is any
individual or entity that engages in the leasing or selling of
computers and/or computer equipment.
12. The Borrower hereby unconditionally and irrevocably waives
notice of acceptance, presentment, notice of nonpayment (except
as provided herein), protest, notice of protest, suit and all
other conditions precedent in connection with the delivery,
acceptance, collection and/or enforcement of this Note.
13. Should all or any part of the indebtedness represented by
this Note be collected by action in law, or in bankruptcy,
insolvency, receivership or other court proceedings, or should
this Note be placed in the hands of attorneys for collection
after the occurrence of an Event of Default, the Borrower hereby
promises to pay to the Lender of this Note, upon demand by the
Lender hereof at any time, in addition to principal and all (if
any) other amounts payable on or in respect of this Note or the
indebtedness evidenced hereby, all court costs and reasonable
attorneys' fees and all other reasonable collection charges and
expenses incurred or sustained by the Lender of this Note.
14. If for any circumstances whatsoever, the fulfillment of any
provision of this Note involves transcending the limit of
validity prescribed by any applicable usury statute or any other
applicable law with regard to obligations of like character and
amount, then the obligation to be fulfilled will be reduced to
the limit of such validity as provided in such statute of law, so
that in no event shall any exaction of interest be possible under
this Note in excess of the limit of such validity. In no event
shall the Borrower be bound to pay interest of more than the
legal limit for the use, forbearance or detention of money, and
the right to demand any such excess is hereby expressly waived by
the Lender.
15. No delay or omission of the holder of this Note to exercise
any right or power arising from any default shall impair any such
right or power or be considered to be a waiver of any such
default or any acquiescence therein, nor shall the action or non-
action of the holder in case of default on the part of the
Borrower impair any right or power resulting therefrom.
16. As used herein, the following terms shall have the following
meanings, respectively:
- 3 -
<PAGE>
(a) "Anniversary Date" - March 18, 1999 and each March 18
thereafter.
(b) "Stock Purchase Agreement" - The Stock Purchase
Agreement between and among the Borrower and the Sellers as that
term is defined in the Stock Purchase Agreement dated February
25, 1998.
(c) "Stock Purchase Documents" - The Stock Purchase
Agreement and any employment agreements, non-competition
agreements or subordination agreements referred to or made a part
of the Stock Purchase Agreement.
(d) "Event of Default" - Shall include (i) the failure of
Borrower to make any payment of principal or interest due under
this Note for a period of seven (7) days after receipt of written
notice from the Lender to the Borrower that such installment has
not been paid; or (ii) a default under any of the other
subordinated promissory notes issued to the other Sellers under
the Stock Purchase Agreement; or (iii) an event of default under
the Senior Debt loan documentation that has been declared in
writing, remains uncured past any applicable cure period, and
results in the declared acceleration of the Senior Debt.
(e) _Senior Debt_ - The debt of the Borrower to Star
Bank, National Association as set forth in the Subordination
Agreement.
WITNESSES: BORROWER
Pomeroy Computer Resources,
Inc.
_____________________________
By:
_____________________________
_____________________________ Its:
_____________________________
THE OBLIGATION REPRESENTED BY THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SUBORDINATION AGREEMENT DATED MARCH 18, 1998 IN FAVOR
OF THE STAR BANK, NATIONAL ASSOCIATION TO WHICH REFERENCE IS
HEREBY MADE, RESTRICTING THE RIGHTS OF THE MAKER OR DRAWER AND OF
ANY HOLDER WITH RESPECT TO PAYMENTS ON ACCOUNT OF THE PRINCIPAL
AND INTEREST HEREOF.
- 4 -
SEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SEVENTH AMENDMENT TO EMPLOYMENT AGREEMENT is made effective
the 6th day of January, 1998, by and between POMEROY COMPUTER
RESOURCES, INC., a Delaware corporation ("Company") and DAVID B.
POMEROY, II (the "Executive").
WHEREAS, on the 12th day of March, 1992, Company and Executive
executed an Employment Agreement ("Agreement") that became
effective on the date of the closing of the initial public
offering of the Company (April 10, 1992); and
WHEREAS, Company and Executive entered into an Amendment to
Employment Agreement effective July 6, 1993; and
WHEREAS, Company and Executive entered into a Second Amendment to
Employment Agreement effective October 14, 1993;
WHEREAS, Company and Executive entered into a Third Amendment to
Employment Agreement effective January 6, 1995;
WHEREAS, Company and Executive entered into a Fourth Amendment to
Employment Agreement effective for the fiscal year ending January
5, 1996;
WHEREAS, Company and Executive entered into a Fifth Amendment to
Employment Agreement effective January 6, 1996;
WHEREAS, Company and Executive entered into a Sixth Amendment to
Employment Agreement effective January 6, 1997; and
WHEREAS, Company and Executive desire to amend the Agreement, as
amended, to reflect certain changes agreed upon by Company and
Executive regarding compensation payable to Executive for the
1998 fiscal year and thereafter.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, the parties hereto
covenant and agree as follows:
1. Section 5(a)(iii) shall be amended as follows:
(iii) During the Company's 1998 fiscal year, Executive
shall be paid at the annual rate of $475,000.00. This
rate shall continue for each subsequent year of the
Agreement unless modified by the Compensation Committee
as provided in Section 5(a)(iv).
2. Section 5(b)(i) is amended commencing with the 1998 fiscal
year as follows:
(i) Executive shall be entitled to a bonus and non-
Page 1 of 4 Pages
<PAGE>
qualified stock option award for the 1998 fiscal year
in the event Employee satisfies the applicable criteria
set forth below of the income from operations (as
defined) of the Company for 1998, as follows:
(i) Income from operations greater than $28,000,000.00
but less than or equal to $33,000,000.00 =
$200,000.00 cash bonus and 25,000 non-qualified
stock options;
(ii) Income from operations greater than $33,000,000.00
but less than or equal to $38,000,000.00 =
$300,000.00 cash bonus and 50,000 non-qualified
stock options; or
(iii) Income from operations greater than
$38,000,000.00 = $400,000.00 cash bonus and 75,000
non-qualified stock options.
Within thirty (30) days of the conclusion of the 1998 fiscal
year of the Corporation and each fiscal year thereafter,
Executive and Company shall agree upon the threshold of
operating income to be utilized for determining any bonus
and non-qualified stock options to be awarded to Executive
for such year. Such bonus and non-qualified stock option
awards for each subsequent year of this Agreement shall be
consistent with Executive's prior plan.
Any award of 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. 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 asked 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).
For purposes of this Agreement, the term _income from
operations_ shall be computed without respect to the bonus
payable to the Executive pursuant to this Section 5(b)(i)
and shall exclude any gains or losses realized by the
Company on the sale or other disposition of its assets
(other than in the ordinary course of business). Such
income from operations of the Company shall be determined on
a consolidated basis by the independent accountant regularly
retained by the Company, subject to the foregoing provisions
of this subparagraph (i) in accordance with generally
accepted accounting principles. Said determination and
payment of such bonus shall be made within ninety (90) days
following the end of the fiscal year of the Company and the
determination by the accountant shall be final, binding and
Page 2 of 4 Pages
<PAGE>
conclusive upon all parties hereto. In the event the
audited financial statements are not issued within such
ninety-day period, the Company shall make the payment due
hereunder (if any) based on its best reasonable estimate of
any liability hereunder, which amount shall be reconciled by
both parties once the audited financial statements are
issued. Company shall have the ability to advance amounts
to Executive based on the projected amount of the bonus
compensation to be paid hereunder. In the event that such
advance payments are in excess of the amount due hereunder,
any such excess shall be reimbursed to Company by Executive
within ninety (90) days following the end of the fiscal
year. In the event such advance payments are less than the
amount of said bonus as determined hereunder, any additional
amount due Executive shall be paid within ninety (90) days
following the end of the fiscal year of the Company.
3. Section 5(h) is amended as follows:
Effective upon the Trustee under Executive's Irrevocable
Trust obtaining an additional one million dollars of whole
life coverage on the life of Executive at standard rates,
line 9 of Section 5(h) is amended by inserting $2,000,000.00
in lieu of $1,000,000.00.
4. The Agreement shall be amended by adding at the end of
Section 5(h), the following Section 5(i):
5(i) Flight Time Business Usage (Cincinnati Air). In the
event of a Change in Control as defined under the terms
of this Agreement, Executive shall be provided each
year with one hundred (100) hours of flight time for
business usage by private air carrier provided by
Cincinnati Air or some other executive jet services
that may be designated by Executive. In the event
Executive does not use such designated hours of flight
time for business usage during any particular year
after a Change of Control has occurred, no carryover
shall exist for any unused time.
5. This Agreement shall be amended by adding at the end of the
Agreement, the following new Section 5(j):
5(j) During the term of this Agreement, Company shall pay
Executive the sum of Five Thousand Dollars ($5,000.00)
per month to enable Company to utilize real estate
owned by Executive in Desert Mountain, Arizona for the
purposes of conducting business related to Company's
operations in the Midwest and Southwest portions of the
United States and for periodic Board of Directors
meetings. Company and Executive shall agree upon
designated times for use of such property for the
purposes set forth above.
Page 3 of 4 Pages
<PAGE>
6. Section 19 shall be amended by adding at the end of such
Section, the following language:
Executive shall be awarded, effective January 6, 1998, an
option to acquire 25,000 shares of the common stock of
Company at the fair market value of such shares on January
3, 1998 (the first business day prior to January 5, 1998).
Such option shall be awarded to Executive by Company
pursuant to the terms of an Award Agreement which is
attached hereto and incorporated herein by reference as
Exhibit C.
Except as modified above, the terms of the Employment Agreement,
as amended, are hereby affirmed and ratified by the parties.
IN WITNESS WHEREOF, this Seventh Amendment to Employment
Agreement has been executed as of the day and year first above
written.
WITNESSES: POMEROY COMPUTER RESOURCES, INC.
_______________________
_______________________ By:
______________________________
_______________________
_______________________
__________________________________
DAVID B. POMEROY, II, Executive
Page 4 of 4 Pages
COLLATERAL ASSIGNMENT SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into effective this 6th day of
January, 1998, by, between and among POMEROY COMPUTER RESOURCES,
INC., a Delaware corporation (the "Company"); JAMES H. SMITH III
as successor Trustee under an Irrevocable Trust Agreement with
David Pomeroy II, as Grantor dated September 24, 1987, ("Owner");
and DAVID POMEROY II who is a valuable employee of said Company,
("Employee").
WHEREAS, Company is desirous of paying the premiums due on a New
York Life Insurance Company policy on Employee's life as an
employment benefit for the Employee, on the terms and conditions
hereinafter set forth; and
WHEREAS, the parties intend that Owner would collaterally assign
its interest in such policy to Company; and
WHEREAS, the parties intend that by such collateral assignment,
the Company shall retain only the right to such repayment, with
the Owner retaining all other ownership rights in the policy as
specified herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1.
POLICY OWNERSHIP
1.1 James H. Smith III, as successor Trustee under an
Irrevocable Trust Agreement with David Pomeroy II, is the
owner of a policy of insurance on the life of David Pomeroy
II, ("Insured") issued by New York Life Insurance Company
("Insurance Company"). The policy number, face amount and
beneficiary of said policy is recorded on Schedule "A"
attached hereto ("Policy"). Said Policy will be
collaterally assigned to the Company as security for the
payments of amounts the Company will contribute for the
premium payments. The Owner shall own the Policy and may
exercise all rights of ownership with respect to it,
subject only to the collateral assignment of the Policy to
Company.
2. PAYMENT OF PREMIUMS
2.1 On or before the due date of each premium on the Policy,
the Company will pay to the Owner or may pay directly to
Insurance Company, an amount equal to the projected premium
charge for the Policy less an amount equal to the value of
the annual economic benefit (as computed for federal income
tax purposes) attributable to the life insurance protection
provided to Employee under this Agreement, which amount
shall be the obligation of and responsibility of the Owner.
2.2 Upon receipt of the amount which the Company is required to
contribute under paragraph 2.1 of this Article, and if the
<PAGE>
Company has not exercised its option to make the payment
directly to Insurance Company, the Owner will pay the full
amount of the premium to Insurance Company. The Owner will
pay the premium on the date it is due or within the grace
period allowed by the Policy for the payment of the
premium.
3. ASSIGNMENT OF POLICY
3.1 The Owner shall collaterally assign the Policy to the
Company so as to reflect the respective interests of the
parties under this Agreement. Said assignment has been
executed by the parties on ____________________, 1998, and
made a part of said Policy and this Agreement.
4.
DIVIDENDS
4.1 Any dividend declared on the Policy shall be applied to
purchase paid-up additional insurance on the life of the
Employee. The parties hereto agree that the dividend
election provision of the Policy shall conform to the
provisions hereof.
5.
SURRENDER OF POLICY
5.1 The Owner shall have the sole and exclusive right to
surrender the Policy.
5.2 If the Policy is surrendered, the Owner shall receive the
surrender value of the Policy on behalf of the Company and
shall pay that amount to the Company. The Owner may direct
Insurance Company in writing to draw a check payable to the
Company for that amount.
6. DEATH CLAIM
6.1 Upon the death of the of the Employee, the Company shall
have an interest in the proceeds of the Policy equal to the
premium advance ("Premium Advance"). The Premium Advance
shall be an amount equal to the cumulative total of the
Company's share of the premiums paid on the policy less any
amounts previously repaid by Owner to Company incident
thereto. The balance of proceeds remaining shall be paid
directly by Insurance Company to the beneficiary or
beneficiaries designated by the Policy.
7.
TERMINATION OF AGREEMENT
7.1 This Agreement shall terminate upon surrender of the Policy
by the Owner or upon thirty (30) days written notice of
termination given by either party to the other, by
registered mail at the party's last known address.
7.2 On termination, the Owner shall have thirty (30) days from
the effective date of termination in which to remit to
Company without interest the then existing Premium Advance.
Upon receipt of this amount, the Company shall release the
collateral assignment on the Policy.
- 2 -
<PAGE>
7.3 If the Owner does not remit the described amount within the
thirty (30) day period, the Owner shall obtain the Policy's
surrender value. In that case, Owner shall receive the
surrender value of the Policy on behalf of the Company with
respect to the then existing Premium Advance and pay that
amount to the Company. The Insurance Company may be
directed by the Owner in writing to draw a check payable in
that amount to the Company.
8.
INSURANCE COMPANY
8.1 Any payments made or action taken by Insurance Company in
accordance with the provisions of the Policy and the
collateral assignment of the Policy shall fully discharge
it from all claims, suits and demands of all persons.
9.
AMENDMENT AND BINDING EFFECT
9.1 This embodies all agreements by the parties made with
respect to the Policy. This Agreement may not be modified
or amended except by a writing signed by the parties. The
Agreement shall be binding upon the parties, their heirs,
legal representatives, successors and assigns.
10.
GOVERNING LAW
10.1 This Agreement shall be subject to and shall be construed
under the laws of the Commonwealth of Kentucky.
11. MISCELLANEOUS
11.1 The following provisions are intended to meeting the
requirements of the Employee Retirement Income Security Act
of 1974.
(a) The named fiduciary shall be the Company.
(b) The funding policy under this Agreement is that all
premiums on the Policy be remitted to the Insurance
Company when due.
(c) Direct payment by the Insurer is the basis of payment
of benefits under this Agreement, with those benefits,
in turn, being based on the payment of premiums as
provided in the Plan.
(d) For claims procedure purposes, the "claims manager"
shall be the chief financial officer of the Company.
(i) If for any reason a claim for benefits under this
Agreement is denied by the Company, the claims
manager shall deliver to the claimant a written
explanation setting forth the specific reasons
for the denial, pertinent references to the
Agreement section on which the denial is based,
- 3 -
<PAGE>
such other data as may be pertinent and
information on the procedures to be followed by
the claimant in obtaining a review of his claim,
all written in a manner calculated to be
understood by the claimant. For this purpose:
(A) The claimant's claim shall be deemed filed
when presented orally and in writing to the
claims manager.
(B) The claims manager's explanation shall be in
writing delivered to the claimant within
ninety (90) days of the date the claim is
filed.
(ii) The claimant shall have sixty (60) days following
his receipt of the denial of the claim to file
with the claims manager a written request for
review of the denial. For such review, the
claimant or his representative may submit
pertinent documents and written issues and
comments.
(iii) The claims manager shall decide the issue on
review and furnish the claimant with a copy
within sixty (60) days of receipt of the claim's
request for review of his claim. The decision on
review shall be in writing and shall include
specific reasons for the decision written in a
manner calculated to be understood by the
claimant, as well as specific references to the
pertinent agreement provisions on which the
decision is based. If a copy of the decision is
not so furnished to the claimant within such
sixty (60) days, the claim shall be deemed denied
on review.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement at Hebron, Kentucky, on the day and year first above
written.
POMEROY COMPUTER RESOURCES, INC.
By_______________________________
_________________________________
James H. Smith III, Successor
Trustee
_________________________________
- 4 -
<PAGE>
David Pomeroy II - Employee
- 5 -
<PAGE>
SCHEDULE A
Policy No. Face Amount
Beneficiary
46 190 933 $1,000,000.00 James H. Smith III, or his
successor, as Successor
Trustee under the David B.
Pomeroy II Irrevocable Trust
Agreement dated September 24,
1987.
- 6 -
<PAGE>
INSURER: New York Life Insurance Company
POLICY #:
46 190 933
INSURED:
David Pomeroy II
OWNER:
James H. Smith III, successor Trustee under an
Irrevocable Trust Agreement dated September 24, 1987,
with David B. Pomeroy II, as Grantor
COLLATERAL ASSIGNEE:
Pomeroy Computer Resources, Inc.
This Collateral Assignment Split Dollar Agreement was recorded by
New York Life Insurance Company on ________________, 1998.
NEW YORK LIFE INSURANCE
COMPANY
By:
_____________________________
(Name and
Title)
- 7 -
<TABLE>
Pomeroy Computer Resources, Inc.
Exhibit 11 - Computation of Earnings Per Share
(in thousands, except per share amounts)
<CAPTION>
Quarter Ended
April 5,
1997 1998
______ ______
BASIC
<S> <C> <C>
Weighted average common
shares outstanding 10,336 11,392
====== ======
Net income $2,958 $4,277
====== ======
Net income per
common share $ 0.29 $ 0.38
====== ======
DILUTED
Weighted average common
shares outstanding 10,336 11,392
====== ======
Dilutive effect of stock
options outstanding
during the period 313 319
Contingent shares - -
------ ------
Total common and common
equivalent shares 10,649 11,711
====== ======
Net income $2,958 $4,277
====== ======
Net income per
common share $ 0.28 $ 0.37
====== ======
</TABLE>
<TABLE>
Pomeroy Computer Resources, Inc.
Exhibit 11 - Computation of Earnings Per Share
(in thousands, except per share amounts)
<CAPTION>
Quarter Ended
April 5,
1997 1998
______ ______
BASIC
<S> <C> <C>
Weighted average common
shares outstanding 10,336 11,392
====== ======
Net income $2,958 $4,277
====== ======
Net income per
common share $ 0.29 $ 0.38
====== ======
DILUTED
Weighted average common
shares outstanding 10,336 11,392
====== ======
Dilutive effect of stock
options outstanding
during the period 313 319
Contingent shares - -
------ ------
Total common and common
equivalent shares 10,649 11,711
====== ======
Net income $2,958 $4,277
====== ======
Net income per
common share $ 0.28 $ 0.37
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedules contain standard reports for Quarter
ended April 5,1998 and restated data for Quarters ended April 5, 1997 and April
5, 1996. Dulited Earnings per share have been restated to conform with the
implementation of SFAS 128 in the fourth quarter of fiscal 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-05-1999 JAN-05-1998 JAN-05-1997
<PERIOD-END> APR-05-1998 APR-05-1997 APR-05-1996
<CASH> 932 277 1,099
<SECURITIES> 0 0 0
<RECEIVABLES> 124,718 69,204 45,174
<ALLOWANCES> 649 507 243
<INVENTORY> 50,897 31,334 18,165
<CURRENT-ASSETS> 177,578 101,464 65,244
<PP&E> 20,255 14,031 9,846
<DEPRECIATION> 7,611 4,654 3,261
<TOTAL-ASSETS> 217,117 124,254 82,403
<CURRENT-LIABILITIES> 119,325 48,739 60,578
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 114 75 27
<OTHER-SE> 93,571 72,918 19,127
<TOTAL-LIABILITY-AND-EQUITY> 217,117 124,254 82,403
<SALES> 135,198 100,366 63,224
<TOTAL-REVENUES> 135,198 100,366 63,224
<CGS> 111,966 83,462 53,624
<TOTAL-COSTS> 111,966 83,462 53,624
<OTHER-EXPENSES> 0 0 4,392
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 423 367 435
<INCOME-PRETAX> 6,789 4,672 (2,277)
<INCOME-TAX> 2,512 1,664 (922)
<INCOME-CONTINUING> 4,277 2,958 (1,355)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,277 2,958 (1,355)
<EPS-PRIMARY> 0.38 0.29 (0.23)
<EPS-DILUTED> 0.37 0.28 (0.22)
</TABLE>
