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EXHIBIT NO. 10(n)
LOAN AGREEMENT
This LOAN AGREEMENT (the "Loan Agreement" or "Agreement") is made and entered
into effective this 30th day of September, 1999 by and between FIRSTAR BANK,
N.A., a national banking corporation (the "Bank"), and PINNACLE DATA SYSTEMS,
INC. (the "Company" or "Borrower").
SECTION 1. THE LOAN(S).
1.1 THE REVOLVING LOAN. From the date hereof until September 30, 2000 (the
"Revolving Loan Maturity Date"), the Bank agrees to make loans and advances to
the Company on a revolving basis for the purpose of short-term working capital
up to the sum of $2,000,000.00, subject to the terms and conditions of this
Agreement (the "Revolving Loan"); provided, however, that the Bank shall have no
obligation to advance or readvance any sums pursuant hereto at any time when
there exists any set of facts or circumstances which, by themselves or upon
giving of notice or the lapse of time, or both, would constitute an Event of
Default under this Agreement. The Revolving Loan shall be evidenced by and
repayment thereof shall be made in accordance with the terms of a promissory
note of even date herewith (the "Revolving Note") or by one or more promissory
notes agreed upon by the parties hereto in substitution or partial substitution
therefor in favor of the Bank.
1.2 THE TERM LOAN. The Bank made a term loan to the Company in the amount
of $300,000.00 on January 20, 1998, which the Bank and the Company agree, shall
be subject to the terms and conditions of this Agreement (the "Term Loan"). The
Term Loan is evidenced by and repayment thereof shall be made in accordance with
the terms of a promissory note dated January 20, 1998 or by one or more
promissory notes agreed upon by the parties hereto in substitution or partial
substitution therefor in favor of the Bank (the "Term Note"). The principal
balance of the Term Loan shall be repaid in monthly installments of $5,000.00,
with the remaining principal balance and accrued interest thereon paid in full
on January 31, 2003. The Revolving Loan and the Term Loan shall be collectively
referred to herein as the "Loans".
1.3 REVOLVING LOAN INTEREST RATE. Borrower agrees to pay to Bank monthly
interest on the unpaid balance of the Revolving Loan at a variable rate of
interest (the "Prime Rate") equal to the Prime Rate of Bank from time to time in
effect. Each change in the Prime Rate automatically and immediately changes the
interest rate on the Revolving Loan without notice to Borrower. "Prime Rate" as
used herein shall mean the rate published by Bank from time to time as its Prime
Rate based on its consideration of economic, money market, business and
competitive factors, and it is not necessarily Bank's most favored rate. The
Prime Rate is currently 8.25%. Interest shall be calculated on a three hundred
sixty (360) day year basis and shall be based on the actual number of days that
elapse during the interest calculation period.
1.4 AVAILABILITY. Under the Revolving Loan the Borrower may borrow, repay,
and reborrow up to the lesser of: a) Eighty percent [80%] of Borrower's Eligible
Accounts Receivable; PLUS Fifteen percent [15%] of Borrower's Eligible
Components Inventory PLUS Thirty percent [30%] of Borrower's Eligible
Peripherals Inventory PLUS Forty percent [40%] of Borrower's Eligible Finished
Goods Inventory (the sum of which is the "Eligible Inventory") up to a maximum
Eligible Inventory advance of the lesser of $750,000 or 50% of the outstanding
balance on the Revolving Loan; MINUS the outstanding balance on the Term Loan;
or b) $2,000,000.00. The lesser of the amount computed in a) and the amount
shown in b) shall be called the "Amount Available". Should the total loan amount
outstanding at any time exceed the Amount Available, the Borrower shall, upon
notification, reduce the amount outstanding to an amount that is less than or
equal to the Amount Available. Advances under the Revolving Loan must be
requested in amounts of $25,000 or greater.
"Eligible Accounts Receivable" shall mean accounts receivable acceptable to
the Bank originating from the sale of inventory in the ordinary course of
business and outstanding less than ninety [90] days from the date of
invoice, MINUS the aggregate accounts receivable of any individual customer
if more than twenty-five percent [25%] of that customer's accounts
receivable is greater than 90 days from the date of invoice; MINUS accounts
receivable arising from a contract with the United States Government not
supported by an acceptable assignment of claim; MINUS accounts receivable
subject to a contra payable account; MINUS accounts receivable
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arising from a customer whose mailing address or executive office is
located outside the United States and is not supported by a letter of
credit acceptable to the Bank.
"Eligible Components Inventory", "Eligible Peripherals Inventory" and
"Eligible Finished Goods Inventory" shall mean product code subsets PDC1,
PDC5 and FGS, respectively, as accounted for in the Company's perpetual
inventory system. Eligible Inventory shall exclude: (i) capitalized labor
and overhead and (ii) Eligible Inventory not in the physical possession of
the Company or held outside the United States of America.
SECTION 2. REPRESENTATIONS & WARRANTIES. To induce the Bank to enter into this
Agreement and to agree to make the loans described in Section 1 hereof (the
"Loans"), the Borrower represents and warrants that:
2.1 CORPORATE EXISTENCE. Borrower is a corporation duly existing under the
laws of the State of Ohio, is qualified to do business in all states where
failure to be so qualified would have a material adverse effect on the Borrower
and has all requisite power and authority to own its property and carry on its
business as now being conducted.
2.2 BORROWING AUTHORIZATION. The execution by the Borrower and the delivery
and performance of this Agreement, the Note(s), and other documents connected to
the loans described herein have been authorized by necessary corporate action
and will not violate: 1) any provision of law; 2) the Articles of Incorporation
or By-laws of the Borrower; or 3) any agreement binding on the Borrower.
2.3 PURPOSE AND USE OF PROCEEDS. The proceeds of the Loan will be used by
the Borrower to support general working capital requirements.
2.4 FINANCIAL STATEMENTS. Financial statements of the Borrower dated
December 31, 1998 (a copy of which have been previously furnished to the Bank)
have been prepared in conformity with generally accepted accounting principles
consistently applied, and fairly represent the financial condition of the
Borrower and its operations as of the date of the statements, and since such
date there has been no material adverse change in its financial condition.
2.5 ACTIONS PENDING. There is no litigation pending or threatened against
or affecting the Borrower before any court or agency, or any contingent
liabilities that are not provided for in the financial statements referred to in
2.4, hereof.
2.6 LIENS. None of the assets of the Borrower are subject to any mortgage,
pledge, security interest, lien, or other encumbrance except for those noted in
the financial statements referred to in 2.4, hereof.
2.7 ENVIRONMENTAL MATTERS. All operations and property of the Borrower are
in full compliance with all federal, state, and local statutes, rules, and
regulations relating to air and water pollutants and hazardous waste disposal.
There is no judicial or administrative proceeding pending or threatened against
or affecting the Borrower with respect to such environmental matters.
2.8 COMPLIANCE. The Borrower is in compliance in all material respects with
all statutes, rules, and regulations applicable to it. No default (or event
which with notice or lapse of time, or both, would constitute a default) exists
under any agreement or instrument for borrowed money to which Borrower is a
party or pursuant to which any property of Borrower is encumbered.
2.9 LIABILITIES. All taxes, assessments, and other liabilities which are
due have been paid in full and in a timely manner, except for those taxes and
assessments which the Borrower is contesting in good faith and with respect to
which the Borrower has taken proper steps to perfect its appeal and which have
not resulted in liens on the Borrower's property which materially diminishes the
value of the property.
2.10 MILLENNIUM COMPLIANCE. Borrower has conducted a thorough review of its
mainframe information systems, PC/LAN systems, software, facilities, machinery
and equipment (collectively "Computer-Related Systems") and have determined the
total costs of becoming Year 2000 Compliant, including, costs related to
remediation, replacement, upgrading, conversion and testing of hardware and
other equipment and software. On the basis of this review, the Borrower has
concluded that the incremental cost to the Borrower of becoming Year 2000
Compliant will not have a material adverse effect on the financial condition of
the Borrower. Further, Borrower's Computer-Related Systems are Year 2000
Compliant or the Borrower has adequate plans and processes in place
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sufficient for all of the Borrower's Computer-Related Systems to become Year
2000 Compliant prior to such time that a failure to be Year 2000 Compliant might
reasonably be expected to have a material adverse effect upon Borrower's
business, operations, properties or financial condition. For purposes of this
Agreement, "Year 2000 Compliant" means that the Borrower's Computer-Related
Systems (1) will process all dates in and after the Year 2000 in a correct and
consistent manner in all applicable operations including but not limited to
input, output, comparisons (branching) and arithmetic operations (such as the
difference between two dates), (2) use fields providing at least four decimal
digits for the year portion of all stored dates, (3) calculate and handle leap
year dates correctly, and (4) will otherwise generally manipulate data and
generate output and reports in a fault-free manner during and after the Year
2000.
SECTION 3. COLLATERAL. All obligations of the Borrower to the Bank under this
Agreement and the Note(s) shall be secured by the following (collectively called
the "Collateral"):
3.1 A security interest in the Borrower's Accounts, Instruments, Chattel
Paper, Investment Property, Inventory, Equipment, Motor Vehicles, Fixtures, and
General Intangibles as such terms are defined in the Security Agreements, now
owned or hereafter acquired, their proceeds (cash or non-cash) and any insurance
proceeds related thereto;
3.2 An assignment of insurance in the amount of $1,000,000.00 on the life
of Xxxx X. Xxxx.
The Collateral and all documentation with respect thereto shall be in a form
satisfactory to the Bank, and the Borrower agrees to execute any and all
documents necessary to assure the protection, perfection, and/or enforcement of
the Bank's security interest in the Collateral.
SECTION 4. COVENANTS. In consideration of the Bank's promise to make the loans
described herein, the Borrower agrees that, from the date of this Agreement
until the Note(s) are paid in full, they will:
4.1 FINANCIAL STATEMENT. Furnish the Bank: 1) a copy of its audited
financial statements prepared in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding years by independent
certified public accountants acceptable to the Bank within 120 days of the
Borrower's fiscal year end; and 2) a copy of its unaudited financial statements,
similarly prepared, in a form satisfactory to the Bank within 30 days of the end
of each of its fiscal months.
4.2 PERIODIC REPORTS. Provide the Bank 1) an aging of accounts receivable
in a form satisfactory to the Bank within 30 days of the end of each of the its
fiscal months; 2) a calculation of the Amount Available, substantially in the
form of the attached Exhibit "A" and a "no-default" certification, substantially
in the form of the attached Exhibit "B", both signed by an authorized officer of
the Borrower within 30 days of the end of each of its fiscal months; 3) a
breakdown of Eligible Inventory in a form satisfactory to the Bank within 30
days of the end of each of its fiscal months; and 4) other reports and
information as the Bank may reasonably request.
4.3 INSURANCE. Maintain insurance on all real and personal property with
carriers acceptable to the Bank in an amount and against hazards and liabilities
as is common with other companies in similar situations. The policies shall show
the Bank as "name insured" and "loss payee." The Borrower shall provide the Bank
with certificates of insurance or other satisfactory evidence upon request.
4.4 TAXES. Pay all taxes, assessments, and other liabilities when due,
except for those which are contested in good faith.
4.5 NOTICE. Give the Bank prompt notice of any: (i) default of this or any
other Agreement or contract under which the Borrower is liable; (ii)
environmental or labor dispute; (iii) lawsuit filed naming the Borrower as a
defendant; (iv) reportable event under ERISA; or (v) material change in the
Borrower's business prospects or financial condition.
4.6 CORPORATE EXISTENCE AND STATUS. Maintain its corporate existence and
remain in good standing under the laws of each jurisdiction where the Borrower
is duly qualified to conduct its business.
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4.7 MAINTENANCE OF PROPERTY. Maintain Borrower's property in good condition
and repair, and not commit or permit any action that may impair the value of the
property or the Bank's Collateral.
4.8 MILLENNIUM COMPLIANCE. Promptly evaluate each newly-acquired item of
software, hardware, machinery and equipment to determine if it is Year 2000
Compliant and promptly take steps to ensure that all material suppliers,
vendors, third-parties providing goods or services to the Borrower and all
material customers are Year 2000 Compliant or have a comprehensive and
reasonable plan to become Year 2000 Compliant in a timely manner, such that such
suppliers, vendors, third-parties and customers will not experience Year 2000
related problems that could result in a material adverse effect upon the
Borrower's business, operations, or financial condition.
4.9 DEBT SERVICE COVERAGE RATIO. Not permit its Debt Service Coverage Ratio
to be less than 1.25:1. "Debt Service Coverage Ratio" shall be defined as net
income plus depreciation and amortization expense plus interest expense less
dividends all divided by required principal payments, including capital lease
payments, plus interest expense. Debt Service Coverage shall be measured monthly
on the basis of a rolling twelve months. All financial terms in this Agreement
shall have the meanings given them under generally accepted accounting
principles.
4.10 TANGIBLE CAPITAL BASE. Not permit its Tangible Capital Base to be less
than $1,850,000 plus the greater of 80% of net income or $100,000 beginning with
the fiscal year ending December 31, 1998 and for each fiscal year thereafter.
"Tangible Capital Base" shall mean, as of any date, the sum of the Company's
total equity plus debts acceptably subordinated to the Bank minus any intangible
assets minus any loans or advances to officers, shareholders, or employees of
the Company.
4.11 LEVERAGE RATIO. Not permit its Leverage Ratio to be greater than
1.75:1. "Leverage Ratio" shall mean, as of any date, the quotient of the
Company's total liabilities less debt acceptably subordinated to the Bank
divided by the Company's Tangible Capital Base.
4.12 CAPITAL IMPROVEMENTS. Not expend for new equipment or capital
improvements (including capitalized leases) an amount in excess of $300,000 in
any one fiscal year. No accumulation of such amounts shall be allowed from
year-to-year.
4.13 FIRSTAR BANK, N.A. LOCKBOX. Maintain a lockbox at the Bank.
Substantially all corporate receipts are to be mailed to and processed through
this lockbox.
4.14 INDEBTEDNESS. Not incur or permit to exist any indebtedness, except:
(i) the borrowings evidenced by this Agreement; (ii) the borrowings provided for
in the financial statements referred to in Section 2.4, hereof; (iii) favorable
short-term unsecured trade credit granted in the ordinary course of business;
(vi) purchase money for equipment purchases or leases. Purchase money
indebtedness may not exceed $250,000 at any one time.
4.15 LIENS. Not create or permit to exist any mortgage, pledge, security
interest, or other encumbrance with respect to any assets now owned or hereafter
acquired, except for (i) liens created in favor of the Bank hereunder; or (ii)
purchase money interests created in connection with the acquisition of property
acquired after the date of this Agreement which attaches specifically to the
property acquired.
4.16 LOANS AND ADVANCES. Borrower will not make any loans or advances to
any person, corporation or entity. Loans or advances made for travel or other
expenses advanced to employees in the ordinary course of business are excluded
from this limitation.
4.17 RESTRICTED PAYMENTS. Neither (i) declare nor pay any dividend to
common shareholders; nor (ii) purchase or redeem any shares of its stock from
common or preferred shareholders.
4.18 GUARANTIES. Not guaranty any obligation or indemnify any other person
or enterprise except for the personal liability from the Borrower's own
officers', directors', or employees' own actions on behalf of the Borrower.
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4.19 MERGER AND SALE OF ASSETS. Not be a party to any merger,
consolidation, or reorganization (including the purchase of all or substantially
all of the equity or assets of any other enterprise). Not, except in the
ordinary course of its business, sell, transfer, or lease any part of its
property.
4.20 INVESTMENTS. Not invest in, loan, or make advances to any other
enterprises, except for (i) obligations of the United States Treasury and
agencies thereof, (ii) commercial paper maturing within one-year and rated
"A-1/P-l or better," or (iii) Certificates of Deposit of the Bank.
4.21 WAIVER. Any variance from these covenants shall be permitted only with
the prior written consent and/or waiver of the Bank. Any such waiver shall not
preclude the exercise of any power or right under this Agreement by the Bank.
SECTION 5. CLOSING CONDITIONS. The obligation of the Bank to make the Loans
described by this Agreement is subject to the satisfaction of each of the
following conditions:
5.1 RESOLUTIONS. The Borrower shall have delivered to the Bank a copy of
the resolutions of the Borrower's Boards of Directors authorizing the loans
described herein and the execution and delivery of this Agreement, the Note(s),
and other documents the Bank deems necessary for these loans, certified by
appropriate officers of the Borrower.
5.2 OTHER DOCUMENTS; INSPECTION. The Borrower shall have delivered to the
Bank such other documents as the Bank may request prior to the date of the
initial loan. The Bank or its designated representative shall have the
continuing right to inspect and review all the Borrower's records, documents,
and assets, whether or not directly related to the obligations hereunder.
5.3 DEFAULT. Before and after giving effect to the Loan(s) described
herein, no event of default (as defined below) or event, which would with the
passage of time become an event of default, shall have occurred and/or be
continuing.
5.4 WARRANTIES. Before and after giving effect to the loan(s) described
herein, the representations and warranties noted in Section 2 above shall be
true and correct on the date of this Agreement.
SECTION 6. EVENTS OF DEFAULT. Upon the occurrence of any of the following events
the Bank may declare the Note(s) due and immediately payable, without further
notice or demand and the Bank shall have all rights to realize on the
collateral. To the extent the Amount Available is not being utilized by the
Borrower, the Bank may upon such declaration of default terminate any unused
balance. The occurrence of any of the following events shall be an "Event of
Default" hereunder and under the Loan Documents:
6.1 Non-payment of principal or interest prescribed herein when due or when
notice of such non-payment is sent to the Borrower by the Bank, or any default,
demand, or acceleration under any Note or related instrument concerning the
Collateral; or
6.2 Non-payment of principal or interest on any other borrowed money
obligation when due or the holder of such obligation declares the obligation due
prior to its stated maturity unless the obligation is disputed in good faith; or
6.3 Any representation or warranty of the Borrower in this or any other
loan document is false; or
6.4 The Borrower violates any covenant or condition of this or any other
loan documentation; or
6.5 The Borrower is unable to pay its business debts as they become due or
the Borrower's consolidated financial statement indicates an insolvency or
deficit net worth; or
6.6 The Borrower applies for the appointment of a trustee or receiver of
any part of the assets of the Borrower or commences any proceedings relating to
Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, or other liquidation law of any jurisdiction;
or
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6.7 Any such application, if filed, or any such proceedings are commenced
against the Borrower, and the Borrower indicates its approval, consent, or
acquiescence; or an order is entered appointing such trustee or receiver, or
adjudicating the Borrower bankrupt or insolvent, or approving the petition in
any such proceedings, and such order remains in effect for thirty (30) days; or
6.8 A material part of the Borrower's operations shall cease for a period
of thirty (30) days, other than temporary or seasonal cessations which are
simultaneously experienced by other companies in the Borrower's lines of
business (which, if continued, would not have a material adverse effect on the
Borrower's operations or financial condition); or
6.9 If, in the reasonable opinion of the Bank, there has been a material
adverse change in the financial affairs or operating condition of the Borrower
or in the value of the Collateral which, in the reasonable judgment of Bank,
materially imperils the Borrower's ability to repay or secure its obligations to
the Bank under this Agreement.
The above recitations of Events of Default supplement and are in addition to any
defaults specified in any other Loan Documents. If any Event of Default occurs,
Bank may, without further notice or demand accelerate the obligations and any
other obligations of Borrower to Bank and thereupon all such obligations shall
immediately be due and payable, and the Bank shall have all rights provided
herein or in any of the other Loan Documents or otherwise provided by law to
realize on the Collateral, and to the extent that the Borrower has not borrowed
the maximum amount otherwise available to it under the Loans, Bank may elect to
make no further funds available to Borrower.
SECTION 7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement supersedes all prior understandings
and agreements, whether written or oral, among the parties hereto relating to
the transactions provided herein.
7.2 LAW; JURISDICTION; VENUE. This Agreement, the Loans, and the Note(s)
shall be deemed made in Ohio, and all the rights and obligations of the parties
hereunder shall in all respects be governed by and construed in accordance with
the laws of the State of Ohio, including all matters of construction, validity,
and performance. Without limitation on the ability of the Bank to exercise all
its rights as to the Collateral security for any loan or note, or to initiate
and prosecute actions for repayment in any applicable jurisdiction, Bank and
Borrower agree that any action or proceeding commenced by or on behalf of the
parties relating to this Agreement, the loans, or the Note(s) shall be commenced
and maintained exclusively in courts of applicable jurisdiction located in
Franklin County, Ohio. These documents memorialize the entire Agreement between
the parties and any amendments to these documents may only be made in writing
and signed by all parties.
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WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHTS TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE OF HIS PART OF COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE. (SEC. 2323.13 O.R.C.)
Accepted this _4TH__ day of October, 1999
BORROWER:
Pinnacle Data Systems, Inc.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Title: CFO
--------------------------------
BANK:
Firstar Bank, National Association
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Vice President
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EXHIBIT A
PINNACLE DATA SYSTEMS, INC.
BORROWING BASE CERTIFICATE
-----------------------------
(Date)
We submit the following information regarding accounts receivable and inventory
of the Company in connection with the Loan Agreement effective September 30,
1999 entered into by and between Pinnacle Data Systems, Inc. and Firstar Bank,
N.A. (the "Bank"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings given them in the Loan Agreement.
Completed as of ___________________.
Total Accounts receivable $__________________
Less: Accounts receivable over 90 days from invoice date: ($_________________)
25% cross-age ($_________________)
Ineligible government receivables ($_________________)
Contra accounts payable ($_________________)
Ineligible foreign receivables ($_________________)
Eligible Accounts Receivable: (a) $__________________
Accounts receivable advance rate (b) x 80%
Accounts receivable advance (a x b) (c) $__________________
Eligible Components Inventory (d) $__________________
Eligible Components Inventory advance rate (e) x 15%
Components Inventory advance (c x d) (f) $__________________
Eligible Peripherals Inventory (g) $__________________
Eligible Peripherals Inventory advance rate (h) x 30%
PERIPHERALS INVENTORY ADVANCE (E X F) (I) $__________________
Eligible Finished Goods Inventory (j) $__________________
Eligible Finished Goods Inventory advance rate (k) x 40%
FINISHED GOODS INVENTORY ADVANCE (G X H) (L) $__________________
Less: Term Loan outstanding balance (m) ($_________________)
Amount Available: (c + f + i + l - m) $__________________
Less: Revolving Loan outstanding balance ($_________________)
AVAILABILITY EXCESS/(SHORTAGE) $__________________
If shortage, amount of pay down authorized by the Company through
a debit to its account number 000-000-000 $__________________
I hereby certify that at no time during the past month did the Revolving Loan
outstanding balance exceed the amount available and that no Event of Default
exists at this time or existed during the period.
Pinnacle Data Systems, Inc.
By:____________________________ Its: ____________________________
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PINNACLE DATA SYSTEMS, INC.
ACCOUNTS RECEIVABLE RECONCILIATION
Accounts Receivable per the accounts receivable aging: $__________________
Accounts Receivable per the borrowing base certificate: $__________________
Accounts Receivable per the month end financial statement: $__________________
Please provide explanations for any variances between the above accounts
receivable reports in the space below.
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EXHIBIT B
PINNACLE DATA SYSTEMS, INC.
COMPLIANCE CERTIFICATE
DATE:______________________
This certificate is given by Pinnacle Data Systems, Inc. ("Company"), pursuant
to subsection 4.2.2 of that certain Loan Agreement (the "Loan Agreement" or
"Agreement") effective September 30, 1999 by and between the Company and Firstar
Bank, N.A. (the "Bank"). Capitalized terms used herein without definition shall
have the meanings set forth in the Agreement.
The undersigned is an officer of the Company and is duly authorized to execute
and deliver this certificate on behalf of the Company. By executing this
certificate, the undersigned hereby certifies to the Bank that:
1. The financial statements delivered with this certificate in accordance with
subsection 4.1 as applicable of the Agreement fairly present in all
material respects the results of operations and financial condition of the
Company as of the date of such financial statements;
2. I have reviewed the terms of the Agreement and the Revolving Note
(collectively the "Revolving Notes") and have made, or have caused to be
made under my supervision, a review in reasonable detail of the
transactions and conditions of the Company during the accounting period
covered by such financial statements;
3. Such review has not disclosed the existence during or at the end of such
accounting period, and I have no knowledge of the existence as of the date
hereof, if any condition or event that constitutes an Event of Default, as
defined in both Section 6 of the Agreement and in the Revolving Note,
except as set forth in Attachment A hereto which includes a description of
the nature and period of existence of such an Event of Default and what
action the Company has taken, is undertaking and proposes to take with
respect thereto; and
4. The Company is in compliance with the covenants contained in Section 4 of
the Agreement, as demonstrated below in the financial covenant compliance
worksheet attached hereto as Attachment B. Any instances were the Company
is not in compliance should be described in Attachment A attached hereto.
IN WITNESS WHEREOF, the Company has caused this compliance certificate to be
executed by the authorized officer of the Company this ____ day of _______,
_______
Pinnacle Data Systems, Inc.
By:_______________________
Title:______________________
