Amended and Restated Employment Agreement--Michael Darnell


 Exhibit 10.4 
 DARNELL EMPLOYMENT AGREEMENT 
 AMENDED AND RESTATED EMPLOYMENT AGREEMENT 
 This Amended and Restated Employment Agreement (“Agreement”) is made as of this 31st day of December, 2008, at Groveport, Ohio,
between Pinnacle Data Systems, Inc., an Ohio corporation (the “Company”), and Michael Darnell (the “Associate”), who hereby agree as follows: 
 BACKGROUND INFORMATION 
 A. The Company and the Associate are parties to
that certain Employment Agreement dated effective as of April 28, 2008 (the “Prior Agreement”); and 
 B. This
Agreement, as of the date hereof, hereby amends and restates the Prior Agreement in its entirety. 
 PROVISIONS 
 NOW, THEREFORE, in consideration of the foregoing Background Information, all of which is agreed to by the Company and Associate, and the promises and
covenants set forth below, the Company and Associate voluntarily agree as follows: 
 §1. Employment. The Company hereby renews
and continues the Associate’s employment, and the Associate hereby accepts such employment renewal and continuation by the Company, on the terms and subject to the conditions set forth in this Agreement. 
 §2. Term of Employment. The term of the Associate’s employment as renewed pursuant to this Agreement shall begin as of the date of this
Agreement and shall continue until May 1, 2012, or until terminated pursuant to §6 of this Agreement. 
 §3. Services.
The Associate is employed hereunder as the Vice President, Global Sales & Marketing. As such, the Associate shall be responsible for establishing and supervising the implementation of the business policies, operating programs, budgets,
forecasts, procedures, and direction of the domestic and global Sales and Marketing groups; developing and implementing strategic plans for those groups and the Company; monitoring and evaluating the effectiveness of those groups in contributing to
the attainment of the Company’s goals and objectives; and such other services as may be reasonably assigned to him from time to time by the President and Chief Executive Officer (“CEO”) to whom he reports. The Associate shall devote
his best efforts and full business time, attention, energy, and skill to the Company’s business and to the performance of his duties hereunder. 
 (a) Other Board Service. In addition to his responsibilities to the Company, upon the approval of the Company’s Board of Directors the Associate may sit on the corporate or advisory boards of other
companies, as long as those responsibilities do not interfere or conflict with Associate’s duties and responsibilities to the Company, or the performance thereof. Associate may receive compensation for such services when 







 
appropriate, as long as such compensation does not create a conflict of interest for the Associate or the Company. Associate may also attend to outside
investments and serve as a director, trustee or officer of, or otherwise participate in educational, welfare, social, religious, civic and other organizations. 
 §4. Compensation. During the term of his employment pursuant to this Agreement, the Associate shall be entitled to receive the following compensation: 
 (a) Salary. An annual minimum base salary of $205,000 (or any higher amount determined by the Board or the Compensation Committee).
The base salary will be payable in accordance with the Company’s general payroll policies for payment of compensation to salaried personnel. 
 (b) Bonus. An incentive cash bonus based upon factors and formulae deemed
appropriate by the Board or the Compensation Committee for each fiscal period ending during the term of employment under this Agreement (quarterly and/or yearly as determined by the Board or Compensation Committee). The bonus factors and formulae
for all periods of each fiscal year will be determined by the Board or the Compensation Committee no later than February 28th of that year, or
will remain unchanged from the prior quarterly or yearly period of bonus calculation until so determined. 
 §5. Fringe Benefits.
During the term of employment pursuant to this Agreement, the Associate shall be entitled to the following fringe benefits: 
 (a) Vacation. Twenty-three days of paid time off each calendar year. All earned vacation must be used or forfeited by February 15 of the year following the year for which it was earned. 
 (b) Stock Options. Stock options in such quantities and at such exercise prices as shall be established by the Board of Directors
or an option committee. The options shall be granted pursuant to and be subject to the terms of the Pinnacle Data Systems, Inc. 2005 Equity Incentive Plan, as amended, or any subsequent plan adopted by the Company. 
 (c) Disability Payments. If at any time during the term of employment the Associate shall be temporarily or permanently unable to
perform his duties hereunder due to a physical or mental condition that prevents the Associate from performing his duties hereunder, the Associate shall nonetheless be entitled to receive, for a period not to exceed six (6) months from the date
of commencement of such disability, any compensation that the Associate would otherwise be entitled to pursuant to §4(a), above, during the period of such disability, subject to the limitations below. Provided, however, that the
Associate’s disability be documented by a competent licensed physician selected to examine the Associate at the request of the disinterested Board of Directors, which examination expense shall be borne by the Company. In the event said
disability shall continue for a period greater than six (6) months, the Associate shall no longer be entitled 

  

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to receive any compensation during the remaining period of such disability. In the event the Associate is entitled during this six (6) month period to
payments under any disability policy, the Company’s obligation shall only be to supplement such payments to bring the total amount Associate receives to an amount equal to his base salary pursuant to §4(a). 
 (d) Executive Development. The Associate is encouraged to attend personal executive development or experiential learning seminars
that also benefit the Company during each year of the employment term. 
 (e) Other Fringe Benefits. The Associate
shall be entitled to such other fringe benefits and perquisites as may be provided generally for the Company’s executive management pursuant to written policies established or changed from time to time by the Board. 
 (f) Reimbursements. Each reimbursement of an expense pursuant to §§5(d), or 5(e) (or any other provision of this
Agreement) shall be made (within sixty (60) days of such expense’s incurrence) upon the presentation of expense vouchers or reports in accordance with the standard procedures of the Company with respect to expense items, as may be modified
from time to time by the Board 
 §6. Termination of Employment. Notwithstanding and in lieu of any termination, severance,
income continuation, or similar policies of the Company, the Associate’s service relationship with respect to the Company may be Terminated (as hereinafter defined) in accordance with the following provisions. For purposes of this Agreement,
the Associate is “Terminated”, or a “Termination” of the Associate has occurred, upon the Associate’s “separation from service” with respect to the Company, as defined in Treas. Reg.
§ 1.409A-1(h), or in any successor regulations, and taking into account, among other things, the definition of “service recipient” and “employer” set forth in Treas. Reg. § 1.409A-1(h)(3). 
 (a) Following a Change in Control, by Associate. The Associate may effect
his Termination after a “Change in Control” of the Company (as defined below), provided that Associate effects such Termination for “Good Reason” (as defined below). If the Associate effects his
Termination pursuant to this provision, he shall be entitled to the following: (i) a cash amount equal to fifty percent (50%) of his base salary immediately prior to such Change in Control (A) payable to the Associate in equal
installments over the six (6) calendar months immediately following the calendar month during which such Termination occurs, in accordance with the Company’s general payroll policies for payment of compensation to salaried personnel,
provided, however, that (B) for each such installment payment (I) if the Associate is a “specified employee” (as such term is defined in Treas. Reg. § 1.409A-1(i)) at the time of such Termination, then, in
accordance with the “six-month delay rule” defined in Treas. Reg. § 1.409A-1(c)(3)(v), the payment date of such installment payment shall be delayed (if there would be a delay) to the date that is six months after the
date of Termination or, if earlier, the date that is the seventh (7th) day following the Associate’s date of death, but (II) the foregoing
delay shall be inapplicable to such installment payment to the extent such 

  

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installment payment is excluded from the six-month delay rule by virtue any of the exceptions described under Treas. Reg. § 1.409A-1(b) (including
without limitation any of the “separation pay plan” exceptions set forth in Treas. Reg. § 1.409A-1(b)(9)), or is otherwise excluded under Internal Revenue Code (“Code”) section 409A from the
application of the six-month delay rule requirements; (ii) fringe benefits for six (6) months following the date of Termination; (iii) any bonus earned and/or accrued through the date of Termination, payable at the time such
compensation is due and payable under the applicable arrangement; and (iv) the immediate vesting of one hundred percent (100%) of the unvested stock options held by the Associate, with each immediately vesting option becoming exercisable
on the date of Termination and continuing to be exercisable for a period of one hundred eighty (180) days following the date of Termination (subject to the Company, in its sole discretion, extending such period to up to one (1) year
following the date of Termination), provided that, for each such option, the provisions of this item (iv) shall be effective only to the extent such provisions would not cause such option to provide for a “deferral of
compensation” as such term is defined under Treas. Reg. § 1.409A-1(b). 
 (b) By Company, For Cause.
The Company may Terminate the Associate immediately upon the occurrence of cause (as defined below) or at any time thereafter. For purposes of this Agreement, “cause” shall mean that at least one of the following behaviors by
the Associate occurs: dishonesty, conviction of a crime (other than minor traffic offenses), habitual drunkenness, the use of illegal drugs, embezzlement, material conflict of interest, material violation of Company policy, willful insubordination,
or neglect of duty. If the Company Terminates the Associate pursuant to this provision, he shall be entitled to receive only his base salary through the date of Termination. 
 (c) By Company, Without Cause. The Company may Terminate the Associate
without cause at any time. If the Company Terminates the Associate pursuant to this provision, the Associate shall be entitled to receive the following: (i) a cash amount equal to fifty percent (50%) of his base salary immediately prior to
such Termination (A) payable to the Associate in equal installments over the six (6) calendar months immediately following the calendar month during which such Termination occurs, in accordance with the Company’s general payroll
policies for payment of compensation to salaried personnel, provided, however, that (B) for each such installment payment (I) if the Associate is a specified employee at the time of such Termination, then, in accordance with the six-month
delay rule, the payment date of such installment payment shall be delayed to the date that is six months after the date of Termination or, if earlier, the date that is the seventh (7th) day following the Associate’s date of death, but (II) the foregoing delay shall be inapplicable to such installment payment to the extent such installment payment is
excluded from the six-month delay rule by virtue any of the exceptions described under Treas. Reg. § 1.409A-1(b) (including without limitation any of the separation pay plan exceptions set forth in Treas. Reg. § 1.409A-1(b)(9)), or is
otherwise excluded under Code section 409A from the application of the six-month delay rule requirements; (ii) fringe benefits for six (6) months following the date of Termination; (iii) any bonus earned and/or accrued through the
date of Termination, 

  

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payable at the time such compensation is due and payable under the applicable arrangement; and (iv) the immediate vesting of fifty percent (50%) of
the unvested stock options held by the Associate, on a first granted, first vested basis, with each immediately vesting option becoming exercisable on the date of Termination and continuing to be exercisable for a period of one hundred eighty
(180) days following the date of Termination (subject to the Company, in its sole discretion, extending such period to up to one (1) year following the date of Termination), provided that, for each such option, the provisions of this item
(iv) shall be effective only to the extent such provisions would not cause such option to provide for a “deferral of compensation” as such term is defined under Treas. Reg. § 1.409A-1(b). If the Associate is Terminated under this
provision within six (6) months after a Change in Control, then, in the foregoing item (iv), “fifty percent (50%)” shall be replaced with “one hundred percent (100%)”. 
 (d) Upon Death or Long-Term Disability of Associate. Upon Termination as a result of the death of the Associate, the
Associate’s estate shall be entitled to the following: (i) his base salary to the date of Termination and (ii) any bonus earned and/or accrued through the date of Termination, payable at the time such compensation is due and payable
under the applicable arrangement. If the Associate is Terminated by the Company due to the long-term disability of Associate, then Associate shall be entitled to (iii) any amounts due to him under a long-term disability policy of the Company;
(iv) any disability payments due to him pursuant to §5(c); (v) any bonus earned and/or accrued through the date of Termination, payable at the time such compensation is due and payable under the applicable arrangement; and
(vi) the immediate vesting of fifty percent (50%) of the unvested stock options held by the Associate, on a first granted, first vested basis, with each immediately vesting option becoming exercisable on the date of Termination and through
a period of one hundred eighty (180) days following the date of Termination (subject to the Company, in its sole discretion, extending such period to up to one (1) year following the date of Termination), provided that, for each such
option, the provisions of this item (vi) shall be effective only to the extent such provisions would not cause such option to provide for a “deferral of compensation” as such term is defined under Treas. Reg. § 1.409A-1(b). For
purposes of this Agreement, the term “long-term disability” shall have the same meaning as long-term disability or other similar term used in any long-term or permanent disability policy provided by the Company and covering
the Associate. In the event that there is no long-term or permanent disability policy in effect covering the Associate, the term “long-term disability” shall mean that because of physical or mental incapacity, the Associate
has not performed his duties under this Agreement for six months or longer. In any event, Termination due to long-term disability may not be effected by the Company until at least one year from the date of commencement of such disability.

 (e) By Voluntary Associate Resignation. The Associate may effect his termination at any time, upon giving not less
than thirty (30) days advance written notice prior to the date of Termination. If the Associate effects his Termination pursuant to this provision, then he shall be entitled to receive the following: (i) his base salary and fringe benefits
through the date of Termination; (ii) any bonus earned and/or accrued through 

  

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the date of Termination, payable at the time such compensation is due and payable under the applicable arrangement; and (iii) the retention of the right
to exercise any vested stock options in accordance with the plan under which the options were issued. If the Associate resigns without giving at least thirty (30) days notice, he shall not be entitled to any portion of the bonus described in
item (ii), above. 
 (f) Change in Control Defined. For purposes of this Agreement, a Change in Control shall be deemed
to occur: 
 (i) When any “person” as defined in §3(a)(9) of the Securities Exchange Act of 1934
(the “Exchange Act”) and as used in §13(d) and 14(d) thereof, including a “group” as defined in §13(d) of the Exchange Act, but excluding the Company and any subsidiary and any Associate
benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; 
 (ii) When, during any period of 24 consecutive months during the existence of this Agreement, the individuals who, at the beginning of
such period, constitute the Board (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such
24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph; or 
 (iii) Upon the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary through purchase of assets, by merger, or otherwise.

 (g) Good Reason Defined. For purposes of this Agreement, the Associate shall be deemed to have effected his
Termination for “Good Reason” if: 
 (i) Within six (6) months after a Change in Control of the
Company, one (1) of the following conditions arises without the consent of the Associate: (A) a material diminution in the Associate’s base compensation, (B) a material diminution in the Associate’s authority, duties, or
responsibilities, (C) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Associate is required to report, (D) a material diminution in the budget over which the Associate retains authority,
(E) a material change in the geographic location at which the Associate must perform the services set forth in this Agreement, or (F) any other action or inaction that constitutes a material breach by the Company of the terms of this
Agreement; 
  

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 (ii) Within ninety (90) days of the initial existence of any of the foregoing
conditions, the Associate provides notice to the Company of the existence of such condition and, upon such notice, the Company does not remedy such condition within thirty (30) days of the date of such notice; and 
 (iii) After the expiration of such thirty (30) day remedy period, the
Associate effects his Termination by no later than the later of (A) the thirtieth (30th) day following the end of such thirty
(30) day remedy period and (B) the end of the six (6) month period described in §6(g)(i). 
 For purposes of
§6(g)(i)(A), a “material diminution in the Associate’s base compensation” means a reduction of two percent (2%) or more from the level of such compensation immediately prior to the applicable Change in Control. For purposes
of §6(g)(i)(E), a “material change in the geographic location at which the Associate must perform the services set forth in this Agreement” means the primary place of the Associate’s employment with the Company is moved to more
than (30) miles outside the Columbus, Ohio I-270 outerbelt. It is intended that the Associate’s Termination for Good Reason constitute an “involuntary separation from service” with respect to the Company, as such term is defined
in Treas. Reg. § 1.409A-1(n), and, in particular, a “separation from service for good reason” that satisfies the safe harbor set forth in Treas. Reg. § 1.409A- 1(n)(2)(ii), and the foregoing provisions are to be interpreted and
applied in a manner consistent with such intent. 
 §7. Noncompetition; Nonsolicitation; Nondisclosure; Ownership of
Developments. In consideration of the substantial base salary and other benefits provided to the Associate, the Company and the Associate agree as follows: 
 (a) During the term of the Associate’s employment by the Company, pursuant to this Agreement or otherwise, and for a period of six
(6) months immediately after the Associate’s Termination, the Associate shall not: 
 (i) Engage in or participate
in any business that directly competes with the business of the Company within the United States and within any other country in which the Company has engaged in business during the term of the Associate’s employment by the Company; or

 (ii) Sell or perform the same or similar services or products as then provided by the Company to, or solicit, any of the
Company’s present customers or accounts or persons or businesses which were customers or accounts within three years preceding the Associate’s Termination; or 
  


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 (iii) Promote or assist, financially or otherwise, any person, firm, association,
corporation, or other entity which directly competes with the Company; or 
 (iv) Otherwise enter into or engage in any
business which directly competes with the business carried on by the Company; or 
 (b) During the term of the
Associate’s employment by the Company, pursuant to this Agreement or otherwise, and for a period of one (1) year immediately after the Associate’s Termination, the Associate shall not: 
 (i) Solicit any of the Company’s associates to leave the employ of the Company; or 
 (ii) Seek to employ any of the Company’s associates (other than on behalf of the Company). 
 (c) The Associate shall not at any time, either during the term of his employment with the Company or after the Associate’s
Termination for whatever reason: 
 (i) Disclose to anyone (except to the extent necessary as a benefit to the Company in the
performance of his duties) any trade secrets or confidential information (as defined below). 
 (d) All inventions,
discoveries, concepts, improvements, formulas, processes, devices, methods, innovations, designs, ideas, and product developments (collectively, the “Developments”) developed or conceived by the Associate, solely or jointly
with others, whether or not patentable or copyrightable, at any time during the term of his employment with the Company or within one year after the Associate’s Termination for any reason, whether or not during normal working hours, and which
relate in any way to the actual or planned business activities of the Company shall be considered to be developed or conceived by the Associate on behalf of the Company within the scope of his employment, and all of the Associate’s right,
title, and interest therein shall be the exclusive property of the Company. The Associate hereby assigns, transfers, and conveys to the Company all of his right, title, and interest in and to any and all such Developments. The Associate shall
disclose fully, as soon as practicable and in writing, all Developments to the Board. At any time and from time to time, upon the request of the Company, the Associate shall execute and deliver to the Company any and all instruments, documents, and
papers, give evidence, and do any and all other acts which, in the opinion of counsel for the Company, are or may be necessary or desirable to document such transfer or to enable the Company to file and prosecute applications for, and to acquire,
maintain, and enforce, any and all patents, trademark registrations, or copyrights under United States or foreign law with respect to any such Developments or to obtain any validation, reissuance, continuance, or renewal of any such patent, 

  

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trademark, or copyright. The Company will be responsible for the preparation of any such instruments, documents, and papers and for the prosecution of any
such proceedings and will reimburse the Associate for all reasonable expenses the Associate incurs upon authorization of the Board. 
 (e) The Associate understands that this section is an essential element of this Agreement and that the Company would not have entered into this Agreement without this section being included in it. The Associate has consulted with his legal
counsel and has been fully advised concerning the reasonableness and propriety of this section in the specific context of the operations and business of the Company, and the Associate acknowledges that this section is reasonable and appropriate in
all respects. In the event of any violation or attempted violation of this section, the Associate specifically acknowledges and agrees that the Company’s remedy at law will be inadequate, that the Company, its business, and business
relationships will suffer irreparable injury and, therefore, that the Company shall be entitled to injunctive relief upon such breach in addition to any other remedy to which it may be entitled, either at law or in equity, without the necessity of
proof of actual damage. 
 (f) As used in this Agreement, the terms “trade secrets” and
“confidential information” shall mean any information which is not generally known to the public, and include without limitation any information relating to the Company’s business operations and structure, sales methods,
practices and techniques, technical know-how, Developments, advertising, marketing methods and practices, and the Company’s relationships with suppliers, associates, or other persons or entities doing business with the Company. 
 (g) For purposes of this Agreement, “directly” shall mean and include participation for the Associate’s own
account or as an owner, shareholder, member, partner, director, officer, Associate, creditor, or agent of any other person or organization or through the Associate’s spouse or other family relation, but shall not include a passive investment of
not more than two percent of the outstanding stock of a company whose shares are then being regularly traded in open-market brokerage transactions (either on a stock exchange or over-the-counter). 
 (h) In the event that a court of competent jurisdiction finally determines that any provision of this section is unenforceable, the
Company and the Associate agree that such court shall have jurisdiction to reform this Agreement and such provision so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court’s determination.

 §8. General. This document contains the entire Agreement between the parties and supersedes any prior discussions,
negotiations, representations, or agreements between them relating to the employment of the Associate. No additions or other changes to this Agreement shall be made or be binding on either party unless made in writing and signed by each party to
this Agreement. Any notice or other communication required or desired to be given to any party 

  

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under this Agreement shall be in writing and shall be deemed given when either delivered personally to that party or deposited in the United States mail,
first-class postage prepaid, addressed to that party at the address set forth below its or his name below. Any party may change the address to which notices and other communications are to be given by giving the other parties notice of such change.
All questions concerning the validity, intention, or meaning of this Agreement or relating to the rights and obligations of the parties with respect to performance hereunder shall be construed and resolved under the laws of Ohio. If and to the
extent that any court of competent jurisdiction determines that it is impossible or violative of any legal prohibition to construe any provision of this Agreement consistently with any law, legal prohibition, or public policy and consequently holds
that provision to be invalid or prohibited, such holding shall in no way affect the validity of the other provisions of this Agreement, which shall remain in full force and effect. No failure by any party to insist upon strict compliance with any
term of this Agreement, to exercise any option, to enforce any right, or to seek any remedy upon any default of any other party shall affect, or constitute a waiver of, the first party’s right to insist upon such strict compliance, exercise
that option, enforce that right, or seek that remedy with respect to that default or any prior, contemporaneous, or subsequent default; nor shall any custom or practice of the parties at variance with any provision of this Agreement affect, or
constitute a waiver of, any party’s right to demand strict compliance with all provisions of this Agreement. The captions of the various sections of this Agreement are not part of the context of this Agreement, but are only labels to assist in
locating those sections, and shall be ignored in construing this Agreement. This Agreement shall be personal to the Associate and no rights or obligations of the Associate under this Agreement may be assigned by him. 
 §9. Installment Payment Designation. In accordance with Treas. Reg. §§ 1.409A-2(b)(2)(iii) and (iv), for purposes of this Agreement
any series of installment payments is to be treated as a right to a series of separate payments. 
 §10. Six-Month Delay Rule. Notwithstanding anything to the contrary contained in this Agreement, for each payment under this Agreement (a) if the Associate is a specified employee at the time of the
Associate’s Termination, then, in accordance with the six-month delay rule, the payment date of such payment shall be delayed (if there would be a delay) to the date that is six months after the date of Termination or, if earlier, the date that
is the seventh (7th) day following the Associate’s date of death, but (b) the foregoing delay shall be inapplicable to such payment
to the extent such payment is excluded from the six-month delay rule by virtue any of the exceptions described under Treas. Reg. § 1.409A-1(b) (including without limitation any of the separation pay plan exceptions set forth in Treas. Reg.
§ 1.409A-1(b)(9)), or is otherwise excluded under Code section 409A from the application of the six-month delay rule requirements. 
 §11. Limited Application with Respect to 2008. With respect to amendments adopted as part of this Agreement effecting a change in the time and/or form of payment, in accordance with Internal Revenue Service
(“IRS”) Notice 2006-79 (as modified and superseded by IRS Notice 2007-86) such amendments shall apply only to amounts that would otherwise be payable in 2008 and shall not cause amounts to be paid in 2008 that would not
otherwise be payable in 2008. 
  

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 §12. Tax Liabilities. 
 (a) The Associate (or the Associate’s permitted successors in interest as the case may be) shall be solely responsible for any taxes,
penalties, or interest imposed upon the Associate (or his successors in interest) in connection with this Agreement. In no event shall the Company, or any of the Company’s affiliates, or any employees or other agents of the Company or of any of
the Company’s affiliates, be required to indemnify the Associate (or his successors in interest) for, or otherwise be required to pay, any such liabilities. In connection with any payments hereunder, the Company shall have the right to deduct
from such payments amounts that the Company, in the Company’s sole discretion, determines are sufficient to satisfy any federal, state, local, or other tax withholding requirements related thereto. 
 (b) Notwithstanding §12(a), if any of the amounts described in §§6(a)(i) or 6(c)(i) are includible in the Associate’s
gross income for a taxable year of the Associate by virtue of the operation of Code section 409A(a)(1)(A) then, to the extent permissible under Treas. Reg. § 1.409A-3(j)(4)(vii), the Company shall accelerate payment to the Associate of amounts
under §§6(a)(i) or 6(c)(i) (as the case may be) as follows: 
 (i) The Company shall make to the Associate a lump
sum payment in an amount equal to sixty percent (60%) of the remaining balance owed to the Associate under §§6(a)(i) or 6(c)(i) at the time of such lump sum payment. 
 (ii) The Company shall make such lump sum payment (within ninety (90) days after the end of such taxable year) upon documentation to
the Company’s satisfaction of such inclusion in gross income. 
 (iii) A lump sum payment made under this
§§12(b) shall reduce correspondingly the amount of remaining installments owed to the Associate under §§6(a)(i) or 6(c)(i) (as the case may be). Such reduction shall be applied to such remaining installments proportionately.

 (c) Notwithstanding §12(a), the Company hereby agrees that, in the event that the “additional tax” referred
to under Code section 409A(a)(1)(B) (or any comparable additional tax referred to under state, local, or other tax law) (collectively, “Additional Tax Liabilities”) is imposed upon the Associate with respect to any amounts to be paid to
the Associate under this Agreement, the Company shall make tax gross-up payments (each, a “Gross-Up Payment”) to the Associate to the extent necessary to reimburse the Associate for any Additional Tax Liabilities and for any
tax liabilities resulting from any Gross-Up Payments (together with Additional Tax Liabilities, the “Tax Liabilities”). The Company shall make each Gross-Up Payment (within ninety (90) days of the time that the Associate remits the
related Tax Liabilities payment to the corresponding taxing authority) upon documentation to the Company’s satisfaction of such Tax Liabilities payment. In the event that the Associate receives a tax refund with respect to a Tax Liabilities
payment, the Associate shall pay to the Company a corresponding amount within ninety (90) days of the Associate’s receipt of such refund. 
  

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 §13. Construction of Agreement. Notwithstanding anything to the contrary contained in this
Agreement, (a) it is intended that the provisions of this Agreement (i) comply with Code section 409A, any regulations promulgated thereunder, administrative pronouncements interpreting Code section 409A and such regulations, and Code
section 409A transition rules set forth in IRS Notice 2007-86 and any other applicable Code section 409A transition guidance, and/or (ii) not provide for the “deferral of compensation” as such term is defined under Treas. Reg. §
1.409A-1(b) and (b) such provisions shall be interpreted and applied in a manner consistent with such intent. 
 [Signatures on next
page.] 
  

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		 		 	PINNACLE DATA SYSTEMS, INC.
				
	 /s/ Michael Darnell
	 		 	By:	 	 /s/ Hugh C. Cathey

	Michael Darnell	 		 		 	Hugh C. Cathey
		 		 		 	Chairman of the Compensation Committee
		
	 Address:            7272 Gearied
Street
   Pickerington, OH 43147
	 	 Address:            6600 Port
Road, Suite 100
   Groveport, OH 43125


  

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