PEGASYSTEMS INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This 1996 Non-Employee Director Stock Option Plan
(hereinafter, the "Plan") is intended to promote the interests of Pegasystems
Inc., a Massachusetts corporation (the "Company"), by providing an inducement to
obtain and retain the services of qualified persons who are not employees or
officers of the Company to serve as members of its Board of Directors (the
"Board").
2. Available Shares. The total number of shares of Common Stock, $.01
par value per share, of the Company (the "Common Stock") for which options may
be granted under the Plan shall not exceed shares, subject to adjustment in
accordance with paragraph 10 of the Plan. Shares subject to the Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are surrendered
before exercise or lapse without exercise, in whole or in part, the shares
reserved therefor shall continue to be available under the Plan.
3. Administration. The Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer the Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe the Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
4. Granting of Options.
During the term of the Plan and subject to the availability of shares
under the Plan, each person who is first elected as a member of the Board (the
"Optionee") after May 13, 1996 and during the term of this Plan, and who is not
on the date of such election a current or former employee or officer of the
Company, shall be granted, contingent on stockholder approval of this Plan, an
option to purchase 30,000 shares of Common Stock (after giving effect to a
3-for-1 stock split in the form of a stock dividend to be effective on July 10,
1996) on the date of such grant, such option to vest pursuant to Section 7
below.
Except for the specific options referred to above, no other options
shall be granted under the Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of Section 10 below. For purposes
of this Plan, if, at the time an option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such option is granted and shall mean (i) the
average (on that date) of the high and low prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq National
Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the closing bid price (or average of bid prices) last quoted
(on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq National Market or
on a national securities exchange. If, at the time an option is granted under
this Plan, the Company's stock is not publicly traded, "fair market value" shall
be the fair market value on the date the option is granted as determined by the
Board in good faith.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of Section 8 below, an option granted hereunder shall expire on the
date which is ten (10) years after the date of grant of the option.
7. Vesting of Shares and Non-transferability of Options.
(a) Vesting. Options granted under this Plan shall not be
exercisable until they become vested. Options granted under this Plan shall vest
in the Optionee and thus become exercisable by the Optionee in five equal annual
installments commencing on the first anniversary of the date of grant.
(b) Legend on Certificates. The certificates representing such
shares shall carry such appropriate legend and such written instructions shall
be given to the Company's transfer agent as may be deemed necessary or advisable
by counsel to the Company in order to comply with the requirements of the
Securities Act of 1933 or any state securities laws.
(c) Non-transferability. Any option granted pursuant to this Plan
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order and
shall be exercisable during the Optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event an Optionee ceases to be a member of the Board
for any reason other than death or permanent disability, any then unexercised
portion of options granted to such Optionee shall, to the extent not then
vested, immediately terminate and become void; any portion of an option which is
then vested but has not been exercised at the time the Optionee so ceases to be
a member of the Board may be exercised, to the extent it is then vested, by the
Optionee until the earlier of the scheduled expiration date of the option and
90 days after the date the Optionee ceased to be a member of the Board.
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(b) In the event that an Optionee ceases to be a member of the
Board by reason of his or her death or permanent disability, any option granted
to such Optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the Optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) until the earlier of the scheduled expiration date of the option or one
year after the death or disability of the Optionee.
(c) Notwithstanding the provisions in this Section 8, the
Committee may, in its sole discretion, establish different terms and conditions
pertaining to the effect of a participant's ceasing to be a member of the Board.
9. Exercise of Option. An option granted hereunder shall, to the extent
then exercisable, be exercisable in whole or in part by giving written notice to
the Company at its principal office address, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares. Payment may be (a) in United States dollars in cash or by
check, (b) in whole or in part in shares of Common Stock of the Company already
owned by the person or persons exercising the option or shares subject to the
option being exercised (subject to such restrictions and guidelines as the Board
may adopt from time to time), valued at fair market value determined in
accordance with the provisions of Section 5 or (c) consistent with applicable
law, through the delivery of an assignment to the Company of a sufficient amount
of the proceeds from the sale of the Common Stock acquired upon exercise of the
option and an authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at the time of
exercise. There shall be no such exercise at any one time as to fewer than one
hundred (100) shares or all of the remaining shares then purchasable by the
person or persons exercising the option, if fewer than one hundred (100) shares.
The Company's transfer agent shall, on behalf of the Company, prepare a
certificate or certificates representing such shares acquired pursuant to
exercise of the option, shall register the optionee as the owner of such shares
on the books of the Company and shall cause the fully executed certificates(s)
representing such shares to be delivered to the optionee as soon as practicable
after payment of the option price in full. The holder of an option shall not
have any rights of a stockholder with respect to the shares covered by the
option except to the extent that one or more certificates for such shares shall
be delivered to him or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Matters. Upon
the occurrence of any of the following events, an Optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends. In the event the Company shall issue any of
its shares as a stock dividend upon or with respect to the shares of stock of
the class which shall at the time be subject to option hereunder, each Optionee
upon exercising an option shall be entitled to receive (for the purchase price
paid upon such exercise) the shares as to which he is exercising his option and,
in addition thereto (at no additional cost), such number of shares of the class
or classes in which such stock dividend or dividends were declared or paid, and
such
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amount of cash in lieu of fractional shares, as he would have received if
he had been the holder of the shares as to which he is exercising his option at
all times between the date of grant of such option and the date of its exercise.
(b) Merger; Consolidation; Liquidation; Sale of Assets. In the
event the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation or if the
Company is liquidated or sells or otherwise disposes of all or substantially all
of its assets to another corporation while unexercised options remain
outstanding under this Plan, (i) subject to the provisions of clauses (iii),
(iv) and (v) below, after the effective date of such merger, consolidation or
sale, as the case may be, each holder of an outstanding option shall be
entitled, upon exercise of such option, to receive in lieu of shares of Common
Stock, shares of such stock or other securities as the holders of shares of
Common Stock received pursuant to the terms of the merger, consolidation or
sale; or (ii) the Board may waive any discretionary limitations imposed with
respect to the exercise of the option so that all options from and after a date
prior to the effective date of such merger, consolidation, liquidation or sale,
as the case may be, specified by the Board, shall be exercisable in full; or
(iii) all outstanding options may be cancelled by the Board as of the effective
date of any such merger, consolidation, liquidation or sale, provided that
notice of such cancellation shall be given to each holder of an option, and each
such holder thereof shall have the right to exercise such option in full
(without regard to any discretionary limitations imposed with respect to the
option) during a 30-day period preceding the effective date of such merger,
consolidation, liquidation or sale; or (iv) all outstanding options may be
cancelled by the Board as of the date of any such merger, consolidation,
liquidation or sale, provided that notice of such cancellation shall be given to
each holder of an option and each such holder thereof shall have the right to
exercise such option but only to the extent exercisable in accordance with any
discretionary limitations imposed with respect to the option prior to the
effective date of such merger, consolidation, liquidation or sale; or (v) the
Board may provide for the cancellation of all outstanding options and for the
payment to the holders thereof of some part or all of the amount by which the
value thereof exceeds the payment, if any, which the holder would have been
required to make to exercise such option.
(c) Issuance of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(d) No Fractional Shares. No fractional shares shall actually be
issued under the Plan. Any fractional shares which, but for this subparagraph
(d), would have been issued to an Optionee pursuant to an option, shall be
deemed to have been issued and immediately sold to the Company for their fair
market value, and the Optionee shall receive from the Company cash in lieu of
such fractional shares.
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(e) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in Section 2 above
that are subject to options which previously have been or subsequently may be
granted under the Plan shall also be appropriately adjusted to reflect such
events. The Board shall determine the specific adjustments to be made under this
Section 10 and its determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the provisions
of Sections 4 and 9 above, the Company shall have no obligation to deliver any
certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The shares with respect to which the option has been exercised
are at the time of the issue of such shares effectively registered under
applicable federal and state securities laws as now in force or
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that such
shares are exempt from registration under federal and state securities
laws as now in force or hereafter amended; and the Company has complied
with all applicable laws and regulations with respect thereto, including
without limitation all regulations required by any stock exchange upon
which the Company's outstanding Common Stock is then listed.
12. Representation of Optionee. If requested by the Company, the
Optionee shall deliver to the Company written representations and warranties
upon exercise of the option that are necessary to show compliance with federal
and state securities laws, including representations and warranties to the
effect that a purchase of shares under the option is made for investment and not
with a view to their distribution (as that term is used in the Securities Act of
1933).
13. Option Agreement. Each option granted under the provisions of this
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the Optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
14. Term and Amendment of Plan. This Plan was adopted by the Board
effective as of May 13, 1996, subject to approval by the stockholders of the
Company. Options may no longer be granted under the Plan after May 13, 2006, and
the Plan shall terminate when all options granted or to be granted hereunder are
no longer outstanding. Subject to the provisions of Section 4 above, options may
be granted under the Plan prior to the date of stockholder approval of the Plan.
If the approval of stockholders is not obtained by May 13, 1997, any grants of
options under the Plan made prior to that date will be rescinded. The Board may
at any time terminate the Plan or make such modification or amendment thereof as
it deems advisable; provided, however, that the Board may not, without approval
by the stockholders, (a) increase the maximum number of shares for which options
may be granted under the Plan
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(except by adjustment pursuant to Section 10), (b) materially modify the
requirements as to eligibility to participate in the Plan, (c) materially
increase benefits accruing to option holders under the Plan or (d) amend the
Plan in any manner which would cause Rule 16b-3 to become inapplicable to the
Plan; and provided further that the provisions of this Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof) under the
Securities Exchange Act of 1934 (including without limitation, provisions as to
eligibility, amount, price and timing of awards) may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder. Termination or any modification or amendment of the Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
15. Compliance with Regulations. It is the Company's intent that this
Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934 (or any successor or amended version thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of the Plan is
deemed not to be in compliance with Rule 16b-3, the provision shall be null and
void.
16. Governing Law. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of The Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.
ds1B256710.1
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