Exhibit 2.1
Exhibit 1.8(b)(ii)
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR
OTHWERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (ii) PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
(iii) PURSUANT TO THE RESALE PROVISIONS OF RULE 144 PROMULGATED
THEREUNDER.
No. [___] [______ __], 2002
WARRANT
To purchase shares of common stock, $.01 par value per share
("Common Stock"), of
PEGASYSTEMS INC.
(the "Company")
THIS CERTIFIES that, for value received, and subject to the terms and conditions
set forth in this warrant (the "Warrant"), [________] (the "Holder") or its
registered successors and assigns is entitled to purchase:
(i) [______ (____)] fully paid and nonassessable shares of
Common Stock (the "Initial Warrant Shares"); and
(ii) the Additional Warrant Shares (as hereinafter defined).
Subject to the terms and conditions set forth herein, this Warrant shall be
exercisable, in whole or in part, at any time after the earlier to occur of (i)
receipt by the Holder of the Earnout Notice (as hereinafter defined) or (ii) the
closing of a merger or consolidation between the Company and another corporation
or other entity (other than a merger between the Company and a wholly owned
subsidiary of the Company or a merger or consolidation in which the Company is
the surviving corporation) or a sale of all or substantially all of the
Company's consolidated assets. In any event, this Warrant may not be exercised
later than 5:00 p.m., Eastern Standard Time on ______ __, 2012 (the "Expiration
Date"). If not exercised prior to the Expiration Date, this Warrant shall
terminate and shall be of no further force and effect.
1. Purchase Agreement; Earnout.
1.1 Purchase Agreement. This Warrant is issued pursuant to
that certain Asset Purchase Agreement dated as of January 29, 2002 by
and among the Company, 1Mind Corporation, 1Mind.com, LLC and the
Company Equity Holders named therein, as amended from time to time (the
"Purchase Agreement"). Capitalized terms used herein but not defined
shall have the meanings ascribed to them in the Purchase Agreement.
1.2 Earnout Notice. After the amount of the Earnout
Consideration, if any, has been finally determined in accordance with
the Purchase Agreement (including the amount of any setoffs or
deductions therefrom), the Company shall deliver to the Holder a notice
in the form attached hereto as Exhibit A (the "Earnout Notice") at the
address set forth below the Holder's name on the signature page hereof.
1.3 Additional Warrant Shares. This Warrant shall be
exercisable for an additional number of fully paid and nonassessable
shares of Common Stock (the "Additional Warrant Shares") equal to the
product obtained by multiplying (a) the Total Additional Warrant Shares
(as hereinafter defined) by (b) the Applicable Multiple (as hereinafter
defined). The per share value of such Additional Warrant Shares shall
be deemed to be equal to the average of the last reported sale prices
per share of Common Stock on the Nasdaq National Market over the ten
consecutive trading days ending on the third trading day prior to the
Earnout Payment Date, subject to equitable adjustment in the event of
any stock split, stock dividend, reverse stock split or similar event
affecting the Common Stock.
1.4 Certain Definitions.
"Applicable Multiple" shall mean an amount equal to the
quotient obtained by dividing (y) the number of Initial Warrant Shares
by (z) [_________] (the total number of initial warrant shares subject
to the Warrant issued to the Company at Closing - to be determined at
the Closing).
"Total Additional Warrant Shares" shall mean that number of
shares of Common Stock as shall have a value equal to the Warrant
Holder Earnout Consideration. The value of such Total Additional
Warrant Shares shall be determined in accordance with the second
sentence of Section 1.3 hereof.
"Warrant Holder Earnout Consideration" shall mean the product
obtained by multiplying (i) 17.782% by (ii) an amount equal to the
Earnout Consideration (after giving effect to any setoffs or deductions
therefrom pursuant to Section 1.10 and Section 6.5(b) of the Purchase
Agreement).
2. Exercise.
2.1 Cash Exercise. This Warrant may be exercised, in whole or
in part, by the surrender of this Warrant certificate (with a duly
completed and executed
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notice of exercise in the form attached hereto as Exhibit B) at the
principal office of the Company (or at such other office or agency of
the Company as it may designate by notice in writing to the registered
holder hereof at such holder's last address appearing on the books of
the Company) and upon payment to the Company by a check payable to the
order of the Company in an amount calculated by multiplying the number
of shares of Common Stock for which the Warrant is then being exercised
by the Exercise Price. As used herein, "Exercise Price" shall mean an
amount equal to the quotient obtained by dividing (a) the sum of (i)
[_________] (the total number of initial warrant shares subject to the
Warrant issued to the Company at Closing - to be determined at the
Closing) plus (ii) the Total Additional Warrant Shares, by (b)
[$______] (the aggregate exercise price of all Company Options - to be
determined at the Closing). The certificate(s) for such shares of
Common Stock shall be delivered to the registered holder hereof as soon
as practicable but in any event, not later than fifteen (l5) days after
the Warrant shall have been so exercised and a new Warrant certificate
evidencing the number of shares of Common Stock, if any, remaining
unexercised under the Warrant shall also be issued to the registered
holder within such period of time unless the Warrant has expired. The
registered holder of the Warrant evidenced by this certificate shall
have all the rights of a holder of Common Stock to be issued upon
exercise of the Warrant when such registered holder tenders payment of
the Exercise Price to the Company along with this Warrant certificate
duly endorsed in accordance with this Section 2. No fractional shares
of Common Stock, or scrip for any such fractional shares, shall be
issued upon any exercise of the Warrant; but the holder hereof shall be
entitled to cash equal to such fraction multiplied by the then
effective Fair Market Value (as hereinafter defined).
2.2 Cashless Exercise. In lieu of exercising this Warrant, the
registered holder hereof may elect at any time after this Warrant has
become exercisable in accordance with Section 2.1 up through and
including the Expiration Date to receive shares of Common Stock equal
to the value of this Warrant (or the portion thereof being cancelled)
by surrender of this Warrant certificate (with a duly completed and
executed notice of exercise in the form attached hereto as Exhibit B)
at the principal office of the Company (or at such other office or
agency of the Company as it may designate by notice in writing to the
registered holder hereof at such holder's last address appearing on the
books of the Company), in which event the Company shall issue to the
holder hereof a number of shares of Common Stock computed using the
following formula:
X = Y (A - B)
---------
A
Where:
X = The number of shares of Common Stock to be issued to the
registered holder upon exercise.
Y = The number of shares of Common Stock purchasable under
this Warrant (or upon the portion thereof being cancelled).
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A = The Fair Market Value of one share of Common Stock.
B = Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Section, "Fair Market Value" of the
Common Stock shall mean the average of the closing bid and asked prices
of the Common Stock quoted in the over-the-counter market summary or
the closing sales price per share quoted on any exchange on which the
Common Stock is listed, whichever is applicable, as published in the
Eastern Edition of The Wall Street Journal for the ten (10) consecutive
trading days ending on the third trading day prior to the date of
determination of Fair Market Value. If the Common Stock is not then
traded over-the-counter or on an exchange, the Fair Market Value shall
be determined in good faith by the Board of Directors of the Company.
2.3 Adjustment in Exercise Price and Number of Shares. Prior
to the Expiration Date, the Exercise Price shall be subject to
adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price pursuant to Sections 3.1 or 3.2
hereof, the holder of this Warrant shall thereafter be entitled to
purchase at the Exercise Price resulting from such adjustment, the
number of shares obtained by dividing (1) the product of (x) the number
of shares purchasable pursuant hereto immediately prior to such
adjustment and (y) the Exercise Price immediately preceding such
adjustment by (2) the Exercise Price resulting from such adjustment.
3. Adjustments.
3.1 Stock Dividends. If at any time while this Warrant is
outstanding the Company shall declare a dividend or make any other
distribution upon any class or series of stock of the Company payable
in Common Stock or securities convertible into or exercisable for
Common Stock, the Exercise Price shall be adjusted, from and after the
date of determination of stockholders entitled to receive such dividend
or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares
of Common Stock outstanding immediately prior to such dividend or
distribution (assuming the conversion, exchange or exercise of all
securities convertible into, exchangeable for or exercisable for Common
Stock), and (b) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution (assuming the conversion, exchange or exercise of all
securities convertible into, exchangeable for or exercisable for Common
Stock).
3.2 Subdivision or Combination of Stock. If and whenever the
Company shall at any time subdivide its outstanding shares of Common
Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares,
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the Exercise Price in effect immediately prior to such combination
shall be proportionately increased.
3.3 Recapitalizations. If at any time or from time to time
there shall be any capital reorganization or reclassification of the
capital stock of the Company, consolidation or merger of the Company
with another corporation (other than a consolidation or merger in which
the Company is the surviving corporation and which does not result in
any reclassification of the Common Stock) (any such event being
referred to herein as a "Recapitalization") provision shall be made so
that the registered holders shall thereafter be entitled to receive
upon exercise of the Warrant the number of shares of stock or other
securities of the Company or otherwise, to which a holder of Common
Stock deliverable upon exercise of the Warrant would have been entitled
on such Recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3
with respect to the rights of the holders of the Warrant after the
Recapitalization to the end that the provisions of this Section 3
(including adjustment of the Exercise Price then in effect and the
number of shares for which the Warrant may be exercised) shall be
applicable after that event in as nearly an equivalent manner as may be
practicable.
4. Company to Provide Stock. The Company covenants and agrees that all
shares of Common Stock which may be issued upon the exercise of the Warrant,
evidenced hereby, upon due exercise of the Warrant, will be duly authorized,
validly issued fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof to the registered holder hereof other
than those which the Company shall promptly pay or discharge. The Company
further covenants and agrees that during the period within which the Warrant
evidenced hereby may be exercised, the Company will at all times reserve such
number of shares of Common Stock as may be sufficient to permit the exercise in
full of the Warrants.
5. Other Notices. If any time prior to the Expiration Date:
(a) The Company shall declare any dividend on the Common
Stock; or
(b) The Company shall authorize the issue of any options,
warrants or rights pro rata to all holders of Common Stock entitling
them to subscribe for or purchase any shares of stock of the Company or
to receive any other rights; or
(c) The Company shall authorize the distribution pro rata to
all holders of Common Stock of evidences of its indebtedness or assets
(including cash dividends or distributions paid out of retained
earnings or retained surplus); or
(d) There shall occur any reclassification of the Common
Stock, or any consolidation or merger of the Company with or into
another
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corporation (other than a consolidation or merger in which the Company
is the surviving corporation and which does not result in any
reclassification of the Common Stock) or a sale or transfer to another
corporation of all or substantially all of the consolidated assets of
the Company; or
(e) There shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company;
then and in each of such cases, the Company shall mail to the registered holder
hereof at its last address appearing on the books of the Company, as promptly as
practicable but in any event at least twenty days prior to the applicable record
date (or determination date) mentioned below, a notice stating to the extent
such information is available, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights are to be determined, or (ii)
the date on which such liquidation, dissolution or winding up is expected to
become effective and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up.
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant certificate, and in the case of any such loss, theft or destruction of
any Warrant certificate, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant certificate,
unless the Company has received notice that any such Warrant has been acquired
by a bona fide purchaser, the Company at its expense will execute and deliver,
in lieu thereof, a new Warrant certificate of like tenor.
7. Registered Holder. The registered holder of this Warrant
certificate, as registered with the Company, shall be deemed the owner hereof
and of the Warrants evidenced hereby for all purposes. The registered holder of
this Warrant certificate shall not be entitled by virtue of ownership of this
Warrant certificate to any rights whatsoever as a stockholder of the Company.
8. Amendments and Waivers. Any provision in this Warrant certificate to
the contrary notwithstanding, changes to this Warrant certificate may be made
and compliance with any covenant or provision herein set forth may be omitted or
waived if the Company shall obtain consent thereto in writing from the Company
Equity Holder Representative (as defined in the Purchase Agreement).
9. Transfer.
9.1 No Transfer Prior to Receipt of Earnout Notice. Except as
provided in Section 1.8(c)(ii) of the Purchase Agreement, this Warrant
may not be sold,
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assigned, transferred, pledged, hypothecated or otherwise disposed of
until after receipt by the Holder of the Earnout Notice.
9.2 General. Subject to the provisions of Section 9.1 above,
this Warrant and the shares of Common Stock issued upon exercise hereof
may not be transferred or assigned without compliance with applicable
federal and state securities laws by the transferor and the transferee
and in accordance with the legend appearing on the face of this Warrant
(including the delivery of investment representation letters and legal
opinions reasonably satisfactory to the Company). Any transferee of
this Warrant shall be bound by the terms hereof. Subject to the
provisions of this Section 9, title to this Warrant may be transferred
in the same manner as a negotiable instrument transferable by
endorsement and delivery with a properly executed assignment (in the
form of Exhibit C hereto) at the principal office of the Company (or at
such other office or agency of the Company as it may designate by
notice in writing to the registered holder hereof at such holder's last
address appearing on the books of the Company).
[Signature page follows]
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IN WITNESS WHEREOF, this Warrant has been executed as an instrument
under seal as of the date first set forth above.
PEGASYSTEMS INC.
By:
---------------------------
Name:
Title:
Agreed and accepted,
- ----------------------
[HOLDER]
- ----------------------
- ----------------------
- ----------------------
[Address]
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EXHIBIT A
---------
EARNOUT NOTICE
--------------
[Date]
[Holder]
[Address]
Dear Sir or Madam:
Reference is made to the Asset Purchase Agreement dated as of January
__, 2002 (the "Purchase Agreement") by and among Pegasystems Inc., [Target Co.],
[Target Subsidiary LLC] and the Company Equity Holders named therein.
Capitalized terms used herein but not defined shall have the meanings ascribed
to them in the Purchase Agreement or the Warrant referred to below.
As the holder of a Warrant issued pursuant to the Purchase Agreement,
you are hereby notified that (If no Earnout Consideration is greater than zero,
insert the following) [the Earnout Consideration (after giving effect to
applicable offsets and deductions) is equal to zero. Accordingly, the Warrant
shall not be exercisable for any Additional Warrant Shares.] (If Earnout
Consideration is greater than zero, insert the following)
[(a) the Earnout Consideration (after giving effect to
applicable setoffs and deductions) is equal to [$--------];
(b) the Warrant Holder Earnout Consideration is [________];
(c) the number of Initial Warrant Shares (as set forth in the
Warrant) is [______];
(d) the Applicable Multiple is [______]; and
(e) the number of Additional Warrant Shares for which the
Warrant shall be exercisable is [______].]
PEGASYSTEMS INC.
By:
-----------------------
Authorized Officer
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EXHIBIT B
---------
NOTICE OF EXERCISE
------------------
_________ __, 200_
To: Pegasystems Inc.
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby elects to purchase (check applicable box):
[_] ____ shares of Common Stock covered by such Warrant; or
[_] the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.2.
The undersigned herewith makes payment of the full purchase price for
such shares at the price per share provided for in such Warrant. Such payment
takes the form of (check applicable box or boxes):
[_] $______ in lawful money of the United States; and/or
[_] the cancellation of such portion of the attached Warrant as is
exercisable for a total of _____ shares of Common Stock (using
a Fair Market Value of $_____ per share for purposes of this
calculation); and/or
[_] the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable pursuant
to the cashless exercise procedure set forth Section 2.2.
------------------------------
Signature
------------------------------
Printed Name
------------------------------
------------------------------
------------------------------
[Address]
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EXHIBIT C
---------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, [______________________] hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant (No.
____) with respect to the number of shares of Common Stock of Pegasystems Inc.
covered thereby set forth below, unto:
- --------------------------------------------------------------------------------
Name of Assignee Address No. of Shares of Common Stock
- ---------------- ------- -----------------------------
- ------------------------------ ------------ ----------------------------------
- ------------------------------ ------------ ----------------------------------
- ------------------------------ ------------ ----------------------------------
- ------------------------------ ------------ ----------------------------------
Dated: ___________ __, 200__ Signature: ________________________________
Signature Guaranteed/1/:
By: _______________________
- ---------------------
/1/ The signature should be guaranteed by an eligible guarantor
institution (including banks, stockbrokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.
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