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Exhibit
10.3
Cognovit Promissory
Note
Revolving
Credit
LIBOR
Rate
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| $11,000,000 |
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April 8, 2008 |
PINNACLE DATA SYSTEMS,
INC. , an Ohio Corporation with offices at 6600 Port Road,
Groveport, Ohio 43125 (“Borrower”) shall pay to the
order of KEYBANK NATIONAL ASSOCIATION , a national banking
association, with offices at 88 East Broad Street, Columbus, Ohio
43215, and its successors and assigns (“Lender”),
$11,000,000, or so much thereof as may have been advanced under
this Note, plus interest on the outstanding balance from this date
until paid.
Advances . This Note
is being entered into pursuant to the Loan Agreement dated the same
date as this Note (the “Loan Agreement”) between Lender
and Borrower. Lender will, upon request from Borrower, make
Advances to or for the account of Borrower subject to and in
accordance with the terms and conditions of the Loan Agreement,
including Section 2.1. Subject to the foregoing, Borrower may
borrow, repay and reborrow under this Note.
Interest . Borrower
shall pay interest on the outstanding principal balance of this
Note at the rate per annum equal to the Prime Rate (“Prime
Rate”). “Prime Rate” means the rate per annum
from time to time established by the Lender as Lender’s Prime
Rate, whether or not such rate is publicly announced; the Prime
Rate may not be the lowest interest rate charged by the Lender for
commercial or other extensions of credit. In the event of any
change in the Prime Rate, the rate of interest applicable to
Borrower’s loans evidenced hereby shall be adjusted to
immediately correspond with each such change. All computations of
interest shall be made on the basis of a 360-day year and paid for
the actual number of days elapsed.
LIBOR Rate . Provided
that no Event of Default (as defined below) exists, Borrower shall
have the option (the “LIBOR Rate Option”) to elect from
time to time, in the manner and subject to the conditions
hereinafter set forth, the Adjusted LIBOR Rate as the interest rate
for all or any portion of the advances which would otherwise bear
interest at the Prime Rate.
1. For purposes hereof, the
following definitions apply:
“Adjusted LIBOR
Rate” means for any LIBOR Interest Period, an interest rate
per annum equal to the sum of (a) the rate obtained by
dividing (x) the LIBOR Rate for such LIBOR Interest Period by
(y) a percentage equal to one hundred percent
(100%) minus the Reserve Percentage for such LIBOR Interest
Period and (b) the LIBOR Margin.
“LIBOR Rate”
means the rate per annum calculated by the Lender in good faith,
which Lender determines with reference to the rate per annum
(rounded upwards to the next higher whole multiple of 1/16
th
if such rate is not such a
multiple) at which deposits in United States dollars are offered by
prime banks in the London interbank eurodollar market two LIBOR
Business Days prior to the day on which such rate is calculated by
the Lender, in an amount comparable to the amount of such advance
and with a maturity equal to the applicable LIBOR Interest
Period.
“LIBOR Business
Day” means a day on which dealings are carried on in the
London interbank eurodollar market.
“LIBOR Interest
Period” means the period commencing on the date an advance
bearing interest at the LIBOR Rate is made, continued, or converted
and continuing overnight, with successive periods commencing daily
thereafter.]
“LIBOR Margin”
means 2.45% per annum.
1
“Reserve
Percentage” means for any LIBOR Interest Period, that
percentage which is specified three (3) business days before
the first day of the such LIBOR Interest Period by the Board of
Governors of the Federal Reserve System (or any successor) or any
other governmental or quasi-governmental authority with
jurisdiction over the Lender for determining the maximum reserve
requirement (including, but not limited to, any basic,
supplemental, marginal, or emergency reserve requirement) for
Lender with respect to liabilities or assets constituting or
including (among other liabilities) “Eurocurrency
liabilities” (as defined in Regulation D of the Board of
Governors of the Federal Reserve System) in an amount equal to that
of the advances affected by such LIBOR Interest Period and with a
maturity equal to the LIBOR Interest Period.
2. Borrower may exercise the
LIBOR Rate Option is by giving Lender irrevocable written notice of
such exercise on the second LIBOR Business Day prior to the
proposed commencement of the relevant LIBOR Interest Period, which
written notice shall specify: (i) the portion of the advances
with respect to which Borrower is electing the LIBOR Rate Option,
(ii) the LIBOR Business Day upon which the applicable LIBOR
Interest Period is to commence and (iii) the duration of the
applicable LIBOR Interest Period. Upon the expiration of the
initial LIBOR Interest Period, Borrower may elect a new LIBOR Rate
or the Adjusted Prime Rate. If Borrower fails to make an election,
the advances will bear interest at the Adjusted LIBOR Rate for
consecutive LIBOR Interest Periods until an election is made.
Lender shall be under no duty to notify Borrower that a LIBOR
Interest Period is expiring. No LIBOR Interest Period may extend
beyond the maturity date of the Note.
3. If, because of the
introduction of or any change in, or because of any judicial,
administrative, or other governmental interpretation of, any law or
regulation, there shall be any increase in the cost to Lender of
making, funding, maintaining, or allocating capital to any advance
bearing interest at the Adjusted LIBOR Rate, including a change in
Reserve Percentage, then Borrower shall, from time to time upon
demand by Lender, pay to Lender additional amounts sufficient to
compensate Lender for such increased cost.
4. If Lender determines
(which determination shall be conclusive and binding upon Borrower,
absent manifest error) (i) that dollar deposits in an amount
approximately equal to the portion of the advances for which
Borrower has exercised the LIBOR Rate Option for the designated
LIBOR Interest Period are not generally available at such time in
the London Interbank Market for deposits in dollars, (ii) that
the rate at which such deposits are being offered will not
adequately and fairly reflect the cost to Lender of maintaining an
Adjusted LIBOR Rate on such portion of the advances or of funding
the same for such LIBOR Interest Period due to circumstances
affecting the London Interbank Market generally, (iii) that
reasonable means do not exist for ascertaining an Adjusted LIBOR
Rate, or (iv) that an Adjusted LIBOR Rate would be in excess
of the maximum interest rate which Borrower may by law pay, then,
in any such event, Lender shall so notify Borrower and all portions
of the advances bearing interest at an Adjusted LIBOR Rate that are
so affected shall, as of the date of such notification with respect
to an event described in clause (ii) or (iv)
above, or as of the expiration of the applicable LIBOR
Interest Period with respect to an event described in clause
(i) or (iii) above, bear interest at the
Adjusted Prime Rate until such time as the situations described
herein are no longer in effect.
5. If, because of the introduction of or
any change in, or because of any judicial, administrative, or other
governmental interpretation of, any law or regulation, it becomes
unlawful for Lender to make, fund, or maintain any advance at the
Adjusted LIBOR Rate, then (a) Lender shall notify Borrower
that Lender is no longer able to maintain the interest rate at an
Adjusted LIBOR Rate, (b) the LIBOR Rate Option shall
immediately terminate, and (c) the interest rate for any
portion of the advances for which the interest rate is then an
Adjusted LIBOR Rate shall automatically be converted to the Prime
Rate. Thereafter, Borrower shall not be entitled t
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