PEGASYSTEMS INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
l. PURPOSE. The purpose of this Employee Stock Purchase Plan (the "Plan")
is to provide employees of Pegasystems Inc., a Massachusetts corporation
(the "Company"), and its subsidiaries, who wish to become stockholders
of the Company an opportunity to purchase shares of the Common Stock,
$.01 par value per share, of the Company (the "Shares"). The Plan is
intended to qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. ELIGIBLE EMPLOYEES. Subject to provisions of Sections 7, 8 and 9 below,
any individual who is in the full-time employment (as defined below) of
the Company, or any of its subsidiaries (as defined in Section 424(f) of
the Code) the employees of which are designated by the Board of
Directors of the Company (the "Board") as eligible to participate in the
Plan, is eligible to participate in any Offering of Shares (as defined
in Section 3 below) made by the Company hereunder. Full-time employment
shall include all employees whose customary employment is:
(a) in excess of 20 hours per week; and
(b) more than five months in the relevant calendar year.
3. OFFERING DATES. From time to time the Company, by action of the Board,
will grant rights to purchase Shares to employees eligible to
participate in the Plan pursuant to one or more offerings (each of which
is an "Offering") on a date or series of dates (each of which is an
"Offering Date") designated for this purpose by the Board.
4. PRICES. The Price per share for each grant of rights hereunder shall be
the lesser of:
(a) eighty-five percent (85%) of the fair market value of a Share on
the Offering Date on which such right was granted; or
(b) eighty-five percent (85%) of the fair market value of a Share on
the date such right is exercised.
At its discretion, the Board of Directors may determine a higher price
for a grant of rights.
For purposes of this Plan, the term "fair market value" on any date
means (i) the average (on that date) of the high and low prices of the
Company's 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; or (ii) the last reported sale price (on
that date) of the Common Stock on the Nasdaq National Market System, if
the Common Stock is not then traded on a national securities exchange;
or (iii) the average of the closing bid and asked prices last quoted (on
that date) by an established quotation service for over-the-counter
securities, if the Common Sock is not reported on the Nasdaq National
Market
System or on a national securities exchange. If the Company's
Common Stock is not publicly traded at the time a right is granted under
this Plan, "fair market value" shall mean the fair market value of the
Common Stock as determined by the Board after taking into consideration
all factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private transactions
negotiated at arm's length.
5. EXERCISE OF RIGHTS AND METHOD OF PAYMENT.
(a) Rights granted under the Plan will be exercisable periodically on
specified dates as determined by the Board.
(b) The method of payment for Shares purchased upon exercise of
rights granted hereunder shall be through regular payroll
deductions or by lump sum cash payment, or both, as determined by
the Board. No interest shall be paid upon payroll deductions
unless specifically provided for by the Board.
(c) Any payments received by the Company from a participating
employee and not utilized for the purchase of Shares upon
exercise of a right granted hereunder shall be promptly returned
to such employee by the Company after termination of the right to
which the payment relates.
6. TERM OF RIGHTS. Rights granted on any Offering Date shall be exercisable
upon the expiration of such period ("Offering Period") as shall be
determined by the Board when it authorizes the Offering, provided that
such Offering Period shall in no event be longer than twenty-seven (27)
months.
7. SHARES SUBJECT TO THE PLAN. No more than 500,000 (after giving effect to
a 3-for-1 stock split in the form of a stock dividend to be effective on
July 10, 1996) Shares may be sold pursuant to rights granted under the
Plan; provided, however, that appropriate adjustment shall be made in
such number, in the number of Shares covered by outstanding rights
granted hereunder, in the exercise price of the rights and in the
maximum number of Shares which an employee may purchase (pursuant to
Section 9 below) to give effect to any mergers, consolidations,
reorganizations, recapitalizations, stock splits, stock dividends or
other relevant changes in the capitalization of the Company occurring
after the effective date of the Plan, provided that no fractional Shares
shall be subject to a right and each right shall be adjusted downward to
the nearest full Share. Any agreement of merger or consolidation will
include provisions for protection of the then existing rights of
participating employees under the Plan. Either authorized and unissued
Shares or issued Shares heretofore or hereafter reacquired by the
Company may be made subject to rights under the Plan. If for any reason
any right under the Plan terminates in whole or in part, Shares subject
to such terminated right may again be subjected to a right under the
Plan.
8. LIMITATIONS ON GRANTS.
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(a) No employee shall be granted a right hereunder if such employee,
immediately after the right is granted, would own stock or rights
to purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of
the Company, or of any subsidiary, computed in accordance with
Sections 423(b)(3) and 424(d) of the Code.
(b) No employee shall be granted a right which permits his right to
purchase shares under all employee stock purchase plans of the
Company and its subsidiaries to accrue at a rate which exceeds
twenty-five thousand dollars ($25,000) (or such other maximum as
may be prescribed from time to time by the Code) of the fair
market value of such Shares (determined at the time such right is
granted) for each calendar year in which such right is
outstanding at any time in accordance with the provisions of
Section 423(b)(8) of the Code.
(c) No right granted to any participating employee under a single
Offering shall cover more shares than may be purchased at an
exercise price equal to 10% of the base salary payable to the
employee during the Offering not taking into consideration any
changes in the employee's rate of compensation after the date the
employee elects to participate in the Offering, or such other
percentage as determined by the Board from time to time. This
provision shall be construed to meet the requirements set forth
in Section 423(b)(5) of the Code.
9. LIMIT ON PARTICIPATION. Participation in an Offering shall be limited to
eligible employees who elect to participate in such Offering in the
manner, and within the time limitation, established by the Board when it
authorizes the offering.
10. CANCELLATION OF ELECTION TO PARTICIPATE. An employee who has elected to
participate in an Offering may, unless the employee has waived this
cancellation right at the time of such election in a manner established
by the Board, cancel such election as to all (but not part) of the
rights granted under such Offering by giving written notice of such
cancellation to the Company before the expiration of the Offering
Period. Any amounts paid by the employee for the Shares or withheld for
the purchase of Shares from the employee's compensation through payroll
deductions shall be paid to the employee, without interest, upon such
cancellation.
11. TERMINATION OF EMPLOYMENT. Upon termination of employment for any
reason, including the death of the employee, before the date on which
any rights granted under the Plan are exercisable, all such rights shall
immediately terminate and amounts paid by the employee for the Shares or
withheld for the purchase of Shares from the employee's compensation
through payroll deductions shall be paid to the employee or to the
employee's estate, without interest.
12. EMPLOYEE'S RIGHTS AS STOCKHOLDER. No participating employee shall have
any rights as a stockholder in the Shares covered by a right granted
hereunder until such right
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has been exercised, full payment has been made for the corresponding
Shares and a certificate for the Shares is actually issued.
13. RIGHTS NOT TRANSFERABLE. Rights under the Plan are not assignable or
transferable by a participating employee and are exercisable only by the
employee.
14. LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN. The Plan is intended
to provide shares of Common Stock for investment and not for resale. The
Company does not, however, intend to restrict or influence any employee
in the conduct of his or her own affairs. An employee may, therefore,
sell stock purchased under the Plan at any time the employee chooses,
subject to compliance with any applicable federal or state securities
laws; provided, however, that because of certain federal tax
requirements, each employee agrees by entering the Plan, promptly to
give the Company notice of any such stock disposed of within two years
after the date of grant or within one year of the date of exercise of
the applicable right, such notice to set forth the number of such shares
disposed of. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN
THE PRICE OF THE STOCK.
15. AMENDMENTS TO OR DISCONTINUANCE OF THE PLAN. The Board may at any time
terminate or amend the Plan without notice and without further action on
the part of stockholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect the
then existing rights of any participating employee; and
(b) that any such amendment which:
(i) increases the number of Shares subject to the Plan
(subject to the provisions of Section 7);
(ii) changes the class of persons eligible to participate under
the Plan; or
(iii) materially increases the benefits accruing to participants
under the Plan
shall be subject to approval of the stockholders of the Company.
16. EFFECTIVE DATE AND APPROVALS. The Plan was adopted by the Board on May
13, 1996 to become effective as of said date. The Company's obligation
to offer, sell and deliver its Shares under the Plan is subject to the
approval of its stockholders not later than May 13, 1997 and of any
governmental authority required in connection with the authorized
issuance or sale of such Shares and is further subject to the Company
receiving the opinion of its counsel that all applicable securities laws
have been complied with.
17. TERM OF PLAN. No rights shall be granted under the Plan after May 13,
2006.
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18. ADMINISTRATION OF THE PLAN. The Board or any committee or persons to
whom it delegates its authority (the "Administrator") shall administer,
interpret and apply all provisions of the Plan. The Administrator may
waive such provisions of the Plan as it deems necessary to meet special
circumstances not anticipated or covered expressly by the Plan. Nothing
contained in this Section shall be deemed to authorize the Administrator
to alter or administer the provisions of the Plan in a manner
inconsistent with the provisions of Section 423 of the Code. No member
of the Administrator shall be liable for any action or determination
made in good faith with respect to the Plan or any right granted under
it.
Date approved by the Board
of Directors of the Company: May 13, 1996
Date approved by the
Stockholders of the Company: June 26, 1996
ds1-256712.1
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