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. 01 February 6, 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"), 1Mind Corporation (the "Holder") or
its registered successors and assigns is entitled to purchase:
(i) Eighty-Three Thousand Ninety-Two (83,092) 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 February 6, 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)
83,092.
"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 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
2
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) 83,092 plus (ii) the Total Additional Warrant Shares, by (b)
$70,808.28. 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).
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
3
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, 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
4
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
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;
5
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, 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
6
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]
7
IN WITNESS WHEREOF, this Warrant has been executed as an instrument under
seal as of the date first set forth above.
PEGASYSTEMS INC.
By: /s/ Richard H. Jones
--------------------
President
Agreed and accepted,
1MIND CORPORATION
By: /s/ Thomas Congoran
-------------------
President
28 Commercial Street
Concord, New Hampshire 03301
8
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
9
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]
10
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.
11