Exhibit 4(a)
VOID AFTER 5:00 P.M., COLUMBUS, OHIO TIME,
ON APRIL 23, 2001
Pinnacle Data Systems, Inc.
WARRANT TO PURCHASE COMMON SHARES
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Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby
certifies that, for value received, Corna Securities, Inc. is entitled, subject
to the terms set forth below, to purchase from the Company upon surrender of
this Warrant, at any time or times after April 24, 1997 and until 5:00 p.m.,
Columbus, Ohio time, April 23, 2001, the expiration date of this Warrant, 25,000
fully paid and nonassessable common shares, without par value, of the Company
(the "Shares") at an initial purchase price of $5.50 per share in lawful money
of the United States.
The number and character of the Shares which may be purchased upon exercise
of this Warrant and the Purchase Price (as hereinafter defined) per share in
effect from time to time are subject to adjustment from time to time as
hereinafter provided.
NEITHER THIS WARRANT NOR THE SHARES WHICH MAY BE ISSUED UPON EXERCISE OF
THIS WARRANT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT SUCH REGISTRATION UNLESS A VALID EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY HAS RECEIVED AN OPINION OF, OR
SATISFACTORY TO, ITS COUNSEL THAT SUCH TRANSFER WOULD NOT VIOLATE ANY FEDERAL OR
STATE SECURITIES LAWS. FURTHERMORE, THIS WARRANT SHALL NOT BE EXERCISABLE EXCEPT
FOR SHARES WHICH AT THE TIME OF SUCH EXERCISE ARE EXEMPT FROM SUCH REGISTRATION
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, IS THE SUBJECT MATTER OF
A TRANSACTION WHICH IS EXEMPT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR ARE REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
1. Exercise of Warrant.
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(a) Full Exercise. This Warrant may be exercised as a whole by the holder
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hereof by surrendering this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at any time or times after
April 24, 1997 but before 5:00 p.m., Columbus, Ohio time, April 23, 2001, at the
principal office of the Company accompanied by payment in cash or by certified
or official bank check, payable to the order of the Company, of the sum obtained
by multiplying the number of Shares called for on the face of this Warrant
(giving effect to any adjustments therein) by the Purchase Price then in effect.
(b) Partial Exercise. This Warrant also may be exercised in part by
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surrendering this Warrant in the manner specified in subsection (a) of this
Section 1, except that the number of
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Shares or other securities or property receivable upon the exercise of this
Warrant as a whole shall be proportionately reduced. Upon any such partial
exercise, the Company, at its expense, will forthwith issue to the holder hereof
a new Warrant or Warrants of like tenor calling in the aggregate for the number
of Shares (as adjusted pursuant to the provisions of Section 2) for which this
Warrant shall not have been exercised, issued in the name of the holder hereof
or such other person or as such holder may direct.
(c) Delivery of Share Certificates, Etc. As soon as practicable after any
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exercise of this Warrant and payment of the sum payable upon such exercise, and
in any event within 10 days thereafter, the Company, at its expense (including
the payment by it of any applicable issue taxes), will cause to be issued in the
name of and delivered to the holder hereof, or in the name of such other person
as such holder may direct, a certificate or certificates for the number of fully
paid and nonassessable Shares or other securities or property to which such
holder shall be entitled upon such exercise, plus, in lieu of any fractional
Shares to which such holder would otherwise be entitled, cash equal to such
fraction multiplied by the then current fair market value ("Market Value") of
one full share. The Market Value shall be the Closing Price (as hereinafter
defined) on the business day next preceding the day of exercise. As used herein,
the term "Closing Price" shall mean the last sale price or, in case no sale
takes place on such day, the average of the closing bid and asked prices, in
either case on the principal national securities exchange or the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") National
Market System ("NMS") on which the Common Shares of the Company are listed or
admitted to trading, or if not listed or admitted to trading on any national
securities exchange or on NASDAQ NMS, the average of the closing bid and asked
prices on such day as reported on NASDAQ, or if not reported on NASDAQ, the
average of the closing bid and asked prices as furnished by National Quotation
Bureau, Inc., or a similar reporting organization. All calculations with respect
to the Closing Price shall be made to the nearest cent. Issuance and delivery of
the Shares deliverable on the due exercise of this Warrant may be postponed by
the Company and its transfer agent during any period, not exceeding sixty days,
for which the transfer books of the Company for the Shares are closed between
(i) the record date set by the Board of Directors for the determination of
shareholders entitled to vote at or to receive notice of any shareholders
meeting, or entitled to receive payment of any dividends or to any allotment of
rights or to exercise rights in respect of any change, conversion or exchange of
capital stock, and (ii) the date of such meeting of shareholders, the date for
the payment of such dividends, the date for such allotment of rights, or the
date when any such change or conversion or exchange of capital stock shall go
into effect, as the case may be.
2. Adjustments of Purchase Price and of Number
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of Shares Issuable upon Exercise of Warrant.
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The term "Purchase Price" as used in this Warrant shall mean the initial
purchase price of $5.50 per share which is equal to 110% of the initial public
offering price per share of the Common Shares of the Company included in the
Form 1-A Offering Statement (No. 24C-4496) filed with the Securities and
Exchange Commission (the "Offering Statement"), as the same may be adjusted in
accordance with the provisions hereof. After each adjustment of the number of
Shares purchasable under this Warrant pursuant to this Section 2, the Purchase
Price shall be the price derived by multiplying the number of Shares purchasable
immediately prior to such adjustment by the Purchase Price in effect immediately
prior to such adjustment and dividing the product so obtained by the applicable
adjusted number of Shares purchasable under this Warrant. The number of Shares
purchasable under this Warrant shall be subject to adjustment from time to time
as follows:
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In case the Company shall (i) declare or pay a dividend or make a
distribution in shares of its capital stock (whether Common Shares or
of capital stock of any other class), (ii) subdivide its outstanding
Common Shares into a greater number of shares, (iii) combine its
outstanding Common Shares into a smaller number of shares, or (iv)
issue by reclassification of its Common Shares any shares of capital
stock of the Company; then and in each such case, the number of Shares
purchasable under this Warrant immediately prior to such action shall
be adjusted so that the holder of this Warrant thereafter upon the
exercise hereof shall be entitled to receive the number of Shares of
capital stock of the Company which he would have owned immediately
following such action had this Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section 2 shall
become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to
this Section 2, the holder of this Warrant shall become entitled to
receive shares of two or more classes of capital stock of the Company,
the Board of Directors of the Company shall determine the most
equitable allocation of the adjusted Purchase Price between or among
shares of such classes of capital stock.
Anything in this Section 2 to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this subsection are not required to be made shall
be carried forward and taken into account (together with any other adjustments
so carried forward) in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest one-hundredth of a
Share, as the case may be, but in no event shall the Company be obligated to
issue fractional Shares upon the exercise of this Warrant.
Immediately upon any adjustment of the Purchase Price pursuant to this
Section 2, the Company shall send written notice thereof to the holder of this
Warrant (by first class mail, postage prepaid), which notice shall state the
Purchase Price resulting from such adjustment, and any increase or decrease in
the number of Shares to be acquired upon exercise of this Warrant, setting forth
in reasonable detail the method of calculation and the facts upon which such
calculation is based.
3. Adjustment for Reorganization, Recapitalization,
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Consolidation, Merger, Etc.
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In case of any capital reorganization or reclassification of the Shares of
the Company, or in case of any consolidation or merger of the Company with or
into any other corporation, or in case of any sale to another corporation of the
properties and assets of the Company as, or substantially as, an entirety, then,
and in each such case, the holder of this Warrant shall have the right to
receive, upon the exercise of this Warrant as provided in Section 1 hereof, at
any time after the consummation of such reorganization, recapitalization,
reclassification, consolidation, merger or sale, the kind and amount of shares
of stock or other securities or property receivable upon such reorganization,
recapitalization, reclassification, consolidation, merger or sale by a holder of
the number of Shares issuable upon exercise of this Warrant
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immediately prior to such reorganization, recapitalization, reclassification,
consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests thereafter
of the holder of this Warrant shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities or property thereafter receivable upon the exercise of this Warrant.
The provisions of this Section 2 shall similarly apply to successive
recapitalizations, reclassifications and changes of shares and to successive
consolidations, mergers, sales or conveyances.
4. Notice of Stock Dividends, Subscriptions, Recapitalizations,
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Reclassifications, Consolidations, Merger, Etc.
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In case the Company shall pay any stock dividend or make any distribution
other than a cash dividend to the holders of its Shares, or shall offer for
subscription to the holders of its Shares after the date hereof any additional
Shares or any stock of any class of the Company or any other securities, or in
the case of any capital reorganization, recapitalization, or reclassification of
the capital stock of the Company or a consolidation or merger of the Company
with another corporation, or the final dissolution, liquidation or winding up of
the Company, or a sale of all or substantially all its assets (whether voluntary
or involuntary), then in any one or more of such cases, the Company shall mail
to the holder of this Warrant at the address of such holder on the records of
the Company a notice, at least ten days prior to the date on which the books of
the Company shall close (or a record shall be taken) for such stock dividend,
distribution or subscription rights, or on which such reorganization,
recapitalization, reclassification, consolidation, merger, dissolution,
liquidation, winding up or sale shall take place, as the case may be. Such
notice shall specify the date as of which shareholders of record shall be
entitled to participate in such dividend, distribution or subscription rights or
to exchange their Shares for other securities or property pursuant to such
reorganization, recapitalization, reclassification, consolidation or merger, or
to receive their respective distributive shares in the event of such
dissolution, liquidation, winding up or sale, as the case may be. Such notice
shall also set forth a statement of the effect of such action (to the extent
then known) on the Purchase Price and the kind and amount of shares of capital
stock and property receivable upon exercise of this Warrant.
5. Registration under the Securities Act of 1933.
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(a) The Company shall promptly prepare, file and use its best efforts to
process to effectiveness one new registration statement to cover a public
offering of the shares purchasable upon exercise hereof ("Warrant Shares"), if a
written request for registration under the Securities Act of 1933, as amended
(the "Act"), by holders of at least 50% of the then outstanding Warrant Shares
is made requesting the Company to do so prior to April 23, 2001 but after April
24, 1997. In lieu of the preparation and filing of a registration statement, the
Company may take other actions to cause the Warrant Shares to not be "restricted
securities" within the meaning of Rule 144 promulgated under the Act, which may
include filing claims for exemption on either Form 1-A or Form D and in
connection therewith, when necessary, filing appropriate blue sky registrations,
and when used in this Section 5, the term "registration" shall include any such
claims of exemption. The Company shall not be required to prepare, file or
process to effectiveness any registration statement after it has processed to
effectiveness one such registration statement hereunder. The reasonable out-of-
pocket expenses incurred by the Company which exceed $25,000, consisting of
registration fees with respect to the Warrant Shares, legal fees and expenses of
counsel to the Company attributable to the registration of the Warrant Shares,
accounting and auditing fees and expenses attributable to the registration of
the
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Warrant Shares (but excluding any accounting or auditing fees and expenses the
Company would have incurred absent such registration), out-of-pocket expenses
incurred by officers, employees or contractors of the Company attributable to
activities associated with the registration of the Warrant Shares, printing
costs and expenses (except, in the case of a registration statement covering
securities in addition to the Warrant Shares, such costs and expenses shall be
prorated according to the price to the public of the Warrant Shares being
registered as compared with the total price to the public of all securities
being offered), blue sky fees and expenses (allocated as provided above) and
underwriting fees specifically allocable to the Warrant Shares, but excluding
any amounts for salaries of any officers, employees or contractors of the
Company, shall be borne by such holders requesting such registration statement.
The first $25,000 of such expenses shall be borne entirely by the Company;
provided that the Company shall not be obligated to pay such expenses if the
registration statement is not processed to effectiveness solely because the
holders who requested the Company to file such registration statement have
decided not to proceed with registration for reasons other than any of the
following: (i) there shall have been a material adverse change in, or an event
shall have occurred which could materially adversely effect, the condition or
prospects or the business activities, financial or otherwise, of the Company and
its subsidiaries taken as a whole; (ii) a stop order shall have been issued
under the Act or any proceedings therefor shall have been initiated or
threatened by the Securities and Exchange Commission; (iii) there shall have
been an order suspending the sale of the Warrant Shares in any jurisdiction or
any proceedings for that purpose shall have been initiated or be completed; (iv)
the National Association of Securities Dealers, Inc. shall have objected to the
offering; or (v) registration of the Warrant Shares is rendered impracticable or
inadvisable because (A) additional material governmental restrictions, not
previously in force and effect, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange, on the American Stock Exchange or on
the over-the-counter market, or trading in securities generally shall have been
suspended on either such Exchange or on the over-the-counter market or a general
banking moratorium shall have been established by Federal or New York
authorities, or (B) a war or other calamity shall have occurred or shall have
accelerated to such an extent as to affect adversely the marketability of the
Warrant Shares. The Company agrees to file any registration statements hereunder
on Form S-3 if the Company is eligible to do so.
(b) The following provisions shall also be applicable to any such
registration statement:
(i) The holders whose Warrant or Warrant Shares are to be included
therein (the "Sellers") shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection
therewith as the Company shall reasonably request in writing. Following the
effective date of such registration statement, the Company shall, upon the
request of any Seller, forthwith supply such number of prospectuses meeting
the requirements of the Act, as shall be requested by such Seller to permit
such Seller to make a public offering of all Warrant Shares of such Seller
included therein. The Company shall use its best efforts to qualify the
Warrant Shares for sale in such states as the Sellers shall reasonably
designate.
(ii) The Company shall indemnify and hold harmless each Seller and
each underwriter (within the meaning of the Act) who may purchase from or
sell for any Seller any Warrant Shares from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged
untrue statement of a material fact
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contained in the Offering Statement, or any post-effective amendment
thereto or any registration statement under the Act or any prospectus
included therein required to be filed or furnished by reason of this
Section 5, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged
untrue statement or omission or alleged omission based upon information
furnished or required to be furnished in writing to the Company by such
Seller or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such Seller or
underwriter within the meaning of the Act. Each Seller agrees to indemnify
and hold harmless the Company and each person, if any, who controls the
Company within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company, but only insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished
or required to be furnished in writing to the Company by such Seller
expressly for use in the Offering Statement, or any post-effective
amendment thereto or any registration statement under the Act or any
prospectus included therein required to be filed or furnished by reason of
this Section 5.
(iii) The Company shall not be required to file any registration
statement relating to Warrant Shares or include any such securities in a
registration statement if in the written opinion of counsel to the Company,
which shall be reasonably satisfactory to counsel for the holder(s) of the
Warrant, the securities for which registration is requested may be sold
publicly without registration under the Act.
The Company's agreements in this Section 5 shall continue in effect
regardless of the exercise and surrender of this Warrant.
6. Reservation of Shares.
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The Company will reserve and have at all times available sufficient Shares
deliverable against the due exercise of this Warrant to satisfy the rights and
privileges contained herein.
7. Expiration.
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This Warrant shall be void after 5:00 p.m., Columbus, Ohio time, on April
23, 2001, and no rights herein given to the holder of this Warrant, except the
rights given in Section 5 hereof, shall exist thereafter.
8. Warrant Holder Not Deemed a Shareholder.
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No holder, as such, of this Warrant shall be entitled to vote or receive
dividends or be deemed the holder of shares of the Company for any purpose, nor
shall anything contained in this Warrant be construed to confer upon the holder
hereof, as such, any of the rights of a shareholder of the Company or any right
to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance of record to the
holder of this Warrant of the Shares which he is then entitled to receive upon
the due exercise of this Warrant.
9. No Limitation on Corporate Action.
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No provisions of this Warrant and no right or option granted or conferred
hereunder shall in any way limit, affect or abridge the exercise by the Company
of any of its corporate rights or powers to recapitalize, amend its Articles of
Incorporation, reorganize, consolidate or merge with or into another
corporation, or to transfer all or any part of its property or assets, or the
exercise of any other of its corporate rights and powers.
10. Exchange and Transfer of Warrant.
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Subject to Section 11, upon surrender for exchange of this Warrant (in
negotiable form, if not surrendered by the holder named on the face hereof) to
the Company's principal office, the Company, at its expense, will issue and
deliver new Warrants of like tenor, calling in the aggregate for the same number
of Shares, in the denomination or denominations requested, to or on the order of
such holder and in the name of such holder as such holder may direct. Until this
Warrant is transferred on the books of the Company, the Company may treat the
registered holder of this Warrant as absolute owner for all purposes without
being affected by any notice to the contrary.
11. Restrictions on Transfer.
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This Warrant may not be sold, transferred, assigned or hypothecated for a
period of three years following the date of this Warrant, except to officers of
Corna Securities, Inc. and members of the National Association of Securities
Dealers, Inc. who are participating with Corna Securities, Inc. in the sale of
the Shares to the public pursuant to the terms of the Offering Statement. The
Warrant is freely transferable thereafter except to the extent prohibited by
applicable Federal and State securities laws.
12. Notices.
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All communications hereunder shall be in writing and shall be deemed duly
given when delivered personally or three days after being mailed by first class
mail, postage prepaid, properly addressed, if to the Company, at 2155 Dublin
Road, Columbus, Ohio 43228, Attention: Robert K. Henkel, President, or if to the
holder hereof or to Corna Securities, Inc., at 5302 McKitrick Boulevard,
Columbus, Ohio 43235, Attention: Christopher Corna. The Company, the holder
hereof or Corna Securities, Inc. may change such address at any time or times by
notice hereunder to the others.
Dated: April 23, 1996 PINNACLE DATA SYSTEMS, INC.
By /s/ Robert K. Henkel
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Robert K. Henkel, President
Seal
Attest:
By /s/ John D. Bair
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John D. Bair, Secretary
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SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXERCISE THIS WARRANT
PINNACLE DATA SYSTEMS, INC.
The undersigned hereby exercises the right to purchase _____________ Shares
covered by this Warrant according to the conditions thereof and herewith makes
payment of the Purchase Price of such Shares in full.
_______________________________________
Signature
_______________________________________
_______________________________________
Address
Dated: __________________, 19__
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