As filed with the Securities and Exchange Commission on July 31, 1996.
Registration No. 333-______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PEGASYSTEMS INC.
(Exact name of registrant as specified in its charter)
04-2787865
(I.R.S. employer identification no.)
Massachusetts
(State or other jurisdiction of incorporation or organization)
101 Main Street, Cambridge, MA 02142
(Address of principal executive offices) (Zip Code)
Amended and Restated 1994 Long-Term Incentive Plan
1996 Employee Stock Purchase Plan
1996 Non-Employee Director Stock Option Plan
(Full title of the plans)
Alan Trefler, President
Pegasystems Inc.
101 Main Street
Cambridge, MA 02142
(Name and address of agent for service)
(617) 374-9600
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
================================================================================
Title of Amount Proposed Proposed Amount
securities to be maximum maximum of
to be registered offering aggregate registration
registered (1) price per offering fee
share (2) price (2)
- --------------------------------------------------------------------------------
Common Stock, 5,750,000 $10.125 $58,218,750 $20,076
$.01 par value shares
================================================================================
(1) Plus such additional number of shares as may be required pursuant to
the plans in the event of a stock dividend, split-up of shares,
recapitalization or other similar change in the Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee,
in accordance with Rule 457(h)(1), on the basis of the average of the
high and low prices of the Common Stock as reported on the Nasdaq
National Market on July 24, 1996.
<PAGE>
EXPLANATORY NOTE
This Registration Statement has been prepared in accordance with the
requirements of Form S-8, as amended, and relates to 5,750,000 shares of Common
Stock, $.01 par value, of Pegasystems Inc. (the "Company") that have been
reserved for issuance under the Company's Amended and Restated 1994 Long-Term
Incentive Plan, 1996 Employee Stock Purchase Plan and 1996 Non-Employee Director
Stock Option Plan.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents are hereby incorporated by reference in this
Registration Statement:
(a) The Company's Registration Statement on Form S-1, as amended
(Registration No. 333-3807), initially filed with the Securities and Exchange
Commission (the "Commission") on May 15, 1996, containing the Company's audited
financial statements for its fiscal year ended December 31, 1995; and
(b) The description of the Company's Common Stock incorporated by
reference into the Company's registration statement on Form 8-A filed with the
Commission on June 21, 1996 from the Company's Registration Statement on Form
S-1 (SEC File No. 333-3807) initially filed with the Commission on May 15,
1996.
In addition, all documents filed by the Company after the initial
filing date of this registration statement pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and prior to the filing of a post-effective amendment which indicates
that all shares registered hereunder have been sold or which de-registers all
shares then remaining unsold, shall be deemed to be incorporated by reference in
this registration statement and to be a part hereof from the date of filing of
such documents.
II-1
<PAGE>
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Officers and Directors
Section 67 of Chapter 156B of the Massachusetts General Laws provides
that a corporation may indemnify its directors and officers to the extent
specified in or authorized by (i) the articles of organization, (ii) a by-law
adopted by the stockholders, or (iii) a vote adopted by the holders of a
majority of the shares of stock entitled to vote on the election of directors.
In all instances, the extent to which a corporation provides indemnification to
its directors and officers under Section 67 is optional. In its Restated
Articles of Organization, the Company has elected to commit to provide
indemnification to its directors and officers in specified circumstances.
Generally, the Restated Articles of Organization provide that the Company shall
indemnify directors and officers of the Company against liabilities and expenses
arising out of legal proceedings brought against them by reason of their status
as directors or officers or by reason of their agreeing to serve, at the request
of the Company, as a director or officer with another organization. Under this
provision, a director or officer of the Company shall be indemnified by the
Company for all costs and expenses (including attorneys' fees), judgments,
liabilities and amounts paid in settlement of such proceedings, even if he is
not successful on the merits, if he acted in good faith in the reasonable belief
that his action was in the best interests of the Company. The Board of Directors
may authorize advancing litigation expenses to a director or officer at his
request upon receipt of an undertaking by any such director or officer to repay
such expenses if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Article VI of the Company's Restated Articles of Organization
eliminates the personal liability of the Company's directors to the Company or
its stockholders for monetary damages for breach of a director's fiduciary duty,
except for liability (i) for any breach of a director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of laws, (iii) for
authorization of illegal dividends or redemptions, or (iv) for any transaction
in which a director derived an improper personal benefit.
The Company maintains directors and officers liability insurance for
the benefit of its directors and certain of its officers.
Item 7. Exemption from Registration Claimed
Not applicable.
II-2
<PAGE>
Item 8. Exhibits
4.1* Specimen stock certificate.
5.1 Opinion of Choate, Hall & Stewart as to the legality of
the shares being registered.
23.1 Consent of Ernst & Young L.L.P.
23.2 Consent of Choate, Hall & Stewart (included in Exhibit
5.1).
24.1 Power of Attorney (included in page II-6).
99.1 The Company's Amended and Restated 1994 Long-Term
Incentive Plan.
99.2 The Company's 1996 Employee Stock Purchase Plan.
99.3 The Company's 1996 Non-Employee Director Stock Option
Plan.
- ------------------
*Incorporated by reference from the Company's registration
statement on Form S-1 (SEC File No. 333-3807) initially filed with
the Commission on May 15, 1996.
Item 9. Undertakings
(a) The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Company hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the
II-3
<PAGE>
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cambridge, The Commonwealth of Massachusetts on July
25, 1996.
PEGASYSTEMS INC.
(Registrant)
By:/s/ Alan Trefler
-----------------------
Alan Trefler, President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Alan Trefler, Ira Vishner and Robert V.
Jahrling, jointly and severally, his true and lawful attorneys-in-fact and
agents with full powers of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on July 25, 1996 by the following
persons in the capacities indicated.
Name Capacity
/s/ Alan Trefler President, Clerk and Director
- -------------------------- (Principal Executive Officer)
Alan Trefler
/s/ Ira Vishner Vice President of Corporate
- -------------------------- Services and Director (Principal
Ira Vishner Financial and Accounting
Officer)
/s/ Edward A. Maybury Director
- --------------------------
Edward A. Maybury
/s/ Edward B. Roberts Director
- --------------------------
Edward B. Roberts
/s/ Leonard A. Schlesinger Director
- --------------------------
Leonard A. Schlesinger
/s/ Thomas E. Swithenbank Director
- --------------------------
Thomas E. Swithenbank
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Page
4.1* Specimen stock certificate.
5.1 Opinion of Choate, Hall & Stewart as
to the legality of the shares being
registered
23.1 Consent of Ernst & Young L.L.P.
23.2 Consent of Choate, Hall & Stewart
(included in Exhibit 5.1)
24.1 Power of Attorney (included in page II-6)
99.1 The Company's Amended and Restated 1994 Long-Term Incentive
Plan
99.2 The Company's 1996 Employee Stock Purchase Plan
99.3 The Company's 1996 Non-Employee Director
Stock Option Plan
- --------------
*Incorporated by reference from the Company's registration
statement on Form S-1 (SEC File No. 333-3807) initially filed with
the Commission on May 15, 1996.
DS1-275406
II-7
Exhibit 5.1
-----------
CHOATE, HALL & STEWART
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
EXCHANGE PLACE
53 STATE STREET
BOSTON, MASSACHUSETTS 02109-2891
TELEPHONE (617) 248-5000
FACSIMILE (617) 248-4000
TELEX 49615860
July 31, 1996
Pegasystems Inc.
101 Main Street
Cambridge, MA 02142
Gentlemen:
This opinion is delivered to you in connection with the registration
statement on Form S-8 (the "Registration Statement") to be filed on July 31,
1996 by Pegasystems Inc. (the "Company") under the Securities Act of 1933, as
amended, for registration under said Act of 5,750,000 shares of common stock,
$.01 par value (the "Common Stock"), of the Company.
We are familiar with the Company's Restated Articles of Organization, its
Restated By-Laws, and its corporate minute book, as well as the Registration
Statement. We have also examined such other documents, records and certificates
and made such further investigation as we have deemed necessary for the purposes
of this opinion.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock to be sold by the Company under its Amended and Restated
1994 Long-Term Incentive Plan, its 1996 Employee Stock Purchase Plan and its
1996 Non-Employee Director Stock Option Plan, as in effect on the date hereof,
when issued against receipt of the agreed purchase price therefor, will be
legally issued, fully paid and nonassessable.
We understand that this opinion is to be used in connection with the
Registration Statement and consent to the filing of this opinion as an exhibit
to the Registration Statement and to all references to this Firm included
therein.
Very truly yours,
CHOATE, HALL & STEWART
ds1-281467
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Amended and Restated 1994 Long-Term Incentive Plan, 1996
Employee Stock Purchase Plan, and 1996 Non-Employee Director Stock Option Plan,
of our report dated May 6, 1996 (except for Notes 10 and 11, as to which the
date is July 10, 1996) with respect to the consolidated financial statements of
Pegasystems Inc. included in its Registration Statement (Form S-1) for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8) of our report dated July 17, 1996, with respect to the financial
statement schedule of Pegasystems Inc. included in its Registration Statement
(Form S-1) for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Boston, Massachusetts
July 31, 1996
Pegasystems Inc.
1994 Long-Term Incentive Plan
As Amended and Restated on May 13, 1996
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
SECTION CONTENTS PAGE
- ------- -------- -----
1. Purpose; Definitions 1
2. Administration 4
3. Stock Subject to Plan 5
4. Eligibility 7
5. Stock Options 7
6. Stock Appreciation Rights 13
7. Restricted Stock 15
8. Long-Term Performance Awards 17
9. Amendments and Termination 19
10. Unfunded Status of Plan 20
11. General Provisions 20
12. Effective Date of Plan 22
13. Term of Plan 22
- --------------------------------------------------------------------------------
Pegasystems Inc. Page i Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
SECTION 1. Purpose; Definitions.
The name of this Plan is the Pegasystems Inc. 1994 Long-Term Incentive
Plan (the "Plan"). The purpose of the Plan is to provide incentives: (a) to
employees of Pegasystems Inc. (the "Corporation") by providing them with
opportunities to purchase stock in the Corporation pursuant to options granted
hereunder which qualify as Incentive Stock Options under Section 422 of the
Internal Revenue Code of 1986; (b) to directors (whether or not employees),
employees and consultants of the Corporation by providing them with
opportunities to purchase stock in the Corporation pursuant to options granted
hereunder which do not qualify as Incentive Stock Options under Section 422 of
the Internal Revenue Code of 1986, and otherwise to participate in shareholder
value which has been created.
For the purposes of the Plan, the following terms shall be defined as
set forth below:
a. "Award" means any Option, Stock Appreciation Right, Restricted
Stock or Long-Term Award granted under this Plan.
b. "Board" means the Board of Directors of the Corporation.
c. "Cause" means a felony conviction of a Participant or the failure
of a Participant to contest prosecution for a felony, or a
Participant's willful misconduct or dishonesty, any of which is
directly and materially harmful to the business or reputation of
the Corporation.
d. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
e. "Committee" means a Compensation Committee of the Board, if such
Committee has been appointed by the Board and has been authorized
to administer the Plan. Such Committee will consist of two or
more members of the Board. In the event the Corporation registers
any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
each member of the Committee shall be a "Disinterested Person" as
defined below. All references herein to the Committee shall mean
the Board if there is no Committee so appointed. From time to
time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 1 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
cause), and appoint new members in substitution thereof, fill
vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
f. "Corporation" means Pegasystems Inc., a corporation organized
under the laws of the Commonwealth of Massachusetts, or any
successor organization.
g. "Disability" means permanent and total disability as determined
under the Corporation's long-term disability program.
h. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the Securities and Exchange
Commission under the Exchange Act, or any successor definition
adopted by the Securities and Exchange Commission.
i. "Early Retirement" means that a Participant has attained the
consent of the Committee to retire prior to having attained age
60 or qualifies for early retirement pursuant to the early
retirement provisions as set forth in a pension plan of the
Corporation in which the Optionee is a participant.
j. "Fair Market Value" means, as of any given date, the mean of the
highest and lowest quoted selling prices of the Stock on the
exchange on which the Corporation's shares are listed for trading
(consolidated trading) or, if no such sale occurs on the exchange
on such date, the fair market value of the Stock as determined by
the Committee in good faith based on the best available facts and
circumstances at the time.
k. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the meaning
of Section 422 of the Code.
l. "Insider" means a Participant who is subject to the requirements
of the Rules (as defined below).
m. "Long-Term Performance Award" or "Long-Term Award" means an award
made pursuant to Section 8 below that is payable in cash and/or
Stock (including Restricted Stock) in accordance with the terms
of the grant, based
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 2 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
on Corporation, business unit and/or individual performance over
a period of at least two years.
n. "Non-Qualified Stock Option" means any Stock Option that is not
an Incentive Stock Option.
o. "Normal Retirement" means retirement of a Participant from active
employment with the Corporation and any subsidiary or affiliate
after either having attained age 60 or pursuant to the normal
retirement provisions of an applicable pension plan of the
Corporation.
p. "Option" means any Incentive Stock Option or Non-Qualified Stock
Option to purchase shares of Stock (including Restricted Stock,
if the Committee so determines) granted pursuant to Section 5
below.
q. "Optionee" means a Participant who is the recipient of any
Incentive Stock Option or Non-Qualified Stock Option under this
Plan.
r. "Participant" means anyone to whom an Award is granted pursuant
to the Plan.
s. "Plan" means the Pegasystems Inc. 1994 Long-Term Incentive Plan,
as hereinafter amended from time to time.
t. "Restricted Stock" means an award of shares of Stock that is
subject to restrictions pursuant to Section 7 below.
u. "Retirement" means Normal or Early Retirement.
v. "Rules" means Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the regulations promulgated
thereunder.
w. "Securities Broker" means the registered securities broker
acceptable to the Corporation who agrees to effect the cashless
exercise of an Option pursuant to Section 5(m) hereof.
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 3 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
x. "Stock" means the Common Stock, $.01 par value per share, of the
Corporation.
y. "Stock Appreciation Right" means the right, pursuant to an award
granted under Section 6 below, to surrender to the Corporation
all (or a portion) of a Stock Option in exchange for an amount
equal to the difference between (i) the Fair Market Value (or
such lesser ceiling as may be specified in the option grant), as
of the date such Stock Option (or such portion thereof) is
surrendered, of the shares of Stock covered by such Stock Option
(or such portion thereof), and (ii) the aggregate exercise price
of such Stock Option (or such portion thereof).
SECTION 2. Administration
The Plan shall be administered by the Committee.
The Committee shall have the authority to grant to eligible
Participants, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Restricted Stock and/or (iv) Long-Term Performance
Awards.
In particular, the Committee shall have the authority:
(i) to select the Participants to whom Stock Options, Stock
Appreciation Rights, Restricted Stock and Long-Term Performance
Awards may from time to time be granted hereunder.
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock and Long-Term Performance Awards, or any
combination thereof, are to be granted hereunder;
(iii) to determine the number of shares to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder including, but
not limited to, the share price and any restriction or
limitation, or any vesting acceleration or
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 4 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
forfeiture waiver regarding any Stock Option or other award
and/or the shares of Stock relating thereto, based on such
factors as the Committee shall determine, in its sole discretion;
(v) to determine whether and under what circumstances a Stock Option
may be settled in cash or stock, including Restricted Stock under
Section 5(k);
(vi) to determine whether and under what circumstances a Stock Option
may be exercised without a payment of cash under Section 5(1);
and
(vii) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the
election of the Participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Corporation and
Plan Participants.
SECTION 3. Stock Subject to the Plan
(a) Stock Subject to Plan. The stock to be subject or related to
awards under the Plan shall be shares of the Corporation's Stock
and may be either authorized and unissued or held in the treasury
of the Corporation. The maximum number of shares of Stock
authorized with respect to the grant of awards under the Plan,
subject to adjustment in accordance with paragraph 3(c) below,
shall be up to 5,000,000 shares of 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); any or all of such 5,000,000
shares of Stock may be granted for awards of Incentive Stock
Options.
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 5 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
In addition, shares equal to 2% of Stock outstanding shares at
the start of each Fiscal Year shall each year be reserved
exclusively for the granting of replacement Options under Section
5(e) below to all Participants. Such additional authorization of
Stock for the granting of replacement Options shall not, at any
time, cause the maximum shareholder dilution caused by the Plan
to exceed the 5,000,000 shares of Stock authorized for grant
under the Plan.
Notwithstanding the foregoing, no individual shall receive, over
the term of the Plan, more than an aggregate of 30% of the shares
authorized for grant under the Plan, including shares subject to
replacement Options awarded under the Plan.
(b) Unused, Forfeited and Reacquired Shares. The shares related to
the unexercised or undistributed portion of any terminated,
expired or forfeited Award for which no material benefit was
received by a Participant (i.e. dividends) shall be made
available for distribution in connection with future awards under
the Plan to the extent permitted to receive exemptive relief
pursuant to the Rules. Any shares made available for distribution
in connection with future awards under this Plan pursuant to this
paragraph (b) shall be in addition to the shares available
pursuant to paragraph (a) of this Section 3.
(c) Other Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, Stock dividend, or other change
in corporate structure affecting the Stock, such substitution or
adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Options granted under the
Plan and in the number and price of shares subject to other
Awards made under the Plan, as may be determined to be
appropriate by the Committee in its sole discretion, provided
that the number of shares subject to any award shall always be a
whole number. Such adjusted option price shall also be used to
determine the amount payable by the Corporation upon the exercise
of any Stock Appreciation Right associated with any Stock Option.
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 6 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
SECTION 4. Eligibility
Directors (whether or not employees of the Corporation), consultants and
employees of the Corporation who are responsible for or who contribute to the
management, growth and/or profitability of the Corporation and/or any Subsidiary
(as defined below) or affiliate of the Corporation are eligible to be granted
Awards under the Plan.
SECTION 5 Stock Options
Stock Options may be granted alone, in addition to or in tandem with
other awards granted under the Plan. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
With the exception of Optionees who are either (i) consultants or (ii)
directors who are not also employees of the corporation, who shall not be
eligible to receive Incentive Stock Options, the Committee shall have the
authority to grant any Optionee Incentive Stock Options, Non-Qualified Stock
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the
time of grant, but for Non-Qualified Stock Options shall not be
less than 50% of the Fair Market
- --------------------------------------------------------------------------------
Pegasystems Inc. Page 7 Confidential
<PAGE>
Pegasystems Inc.
1994 Long-Term Incentive Plan
================================================================================
Value of the Stock at the time of grant, and for Incentive Stock
Options shall be not less than 100% of the Fair Market Value of
the Stock at the time of grant. However, any Incentive Stock
Option granted to any Optionee who, at the time the Option is
granted, owns more than 10% of the voting power of all classes of
stock of the Corporation or of a Parent or Subsidiary
corporation, shall have an exercise price no less than 110% of
Fair Market Value per share on date of the grant. The term
"Parent" and "Subsidiary" as used herein shall mean "parent
corporation" and "subsidiary corporation" as those terms are
defined in Section 424 of the Code.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option or Non-Qualified Stock
Option shall be exercisable more than ten years after the date
the Option is granted. However, any Option granted to any
Optionee who at the time the Option is granted owns more than 10%
of the voting power of all classes of Stock of the Corporation or
of a Parent or Subsidiary corporation may not have a term of more
than five years. No Option may be exercised by any person after
expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant, provided, however,
that, except as provided in Section 5(g), unless otherwise
determined by the Committee at or after grant, no Stock Option
shall be exercisable during the six months following the date of
the granting of the Option. If the Committee provides, in its
discretion, that any Stock Option is exercisable only in
installments, the Committee may waive such installment exercise
provisions at any time at or after grant in whole or in part,
based on such factors as the Committee shall determine, in its
sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
provisions apply under Section 5(c), Stock Options may be
exercised in whole or in part at any time and from time to time
during the Option period, by giving written notice of exercise to
the Corporation specifying the number of shares to be purchased.
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Such notice shall be accompanied by payment in full of the
purchase price, either by certified or bank check, or such other
instrument as the Committee may accept. As determined by the
Committee, in its sole discretion, at or after grant, payment in
full or in part may also be made in the form of unrestricted
Stock already owned by the Optionee or, in the case of the
exercise of a Non-Qualified Stock Option or Restricted Stock
subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the Option is exercised, as
determined by the Committee), provided, however, that, in the
case of an Incentive Stock Option, the right to make a payment in
the form of already owned shares may be authorized only at the
time the Option is granted.
The Committee, in its sole discretion, may at the time of grant
or such later time as it determines, permit payment of the Option
exercise price of a Non-Qualified Stock Option to be made in
whole or in part in the form of Restricted Stock. If such payment
is permitted, then such Restricted Stock (and any replacement
shares relating thereto) shall remain (or be) restricted in
accordance with the original terms of the Restricted Stock award
in question, and any additional Stock received upon the exercise,
shall be subject to the same forfeiture restrictions, unless
otherwise determined by the Committee, in its sole discretion, at
or after grant.
If payment of the Option exercise price of a Non-Qualified Option
is made in whole or in part in the form of unrestricted stock
already owned by the Participant, the Corporation may require
that the stock be owned by the Participant for a period of six
months or longer so that such payment would not result in a
pyramid exercise.
No shares of Stock shall be issued until full payment therefor
has been made. An Optionee shall generally have the rights to
dividends or other rights of a shareholder with respect to shares
subject to the Option when the Optionee has given written notice
of exercise, has paid in full for such shares, and, if requested,
has given the representation described in Section 11(a).
(e) Replacement Options. If an Option granted pursuant to the Plan
may be exercised by an Optionee by means of a stock-for-stock
swap method of exercise as provided in 5(d) above, then the
Committee may, in its sole
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discretion, at the time of the original Option grant or at such
subsequent time during the term of such Option as the Committee,
in its sole discretion, shall deem appropriate, authorize the
Participant to automatically receive a replacement Option
pursuant to this part of the Plan. This replacement Option shall
cover a number of shares determined by the Committee, but in no
event more than the number of shares equal to the difference
between the number of shares covered by the original Option
exercised and the net shares received by the Participant from
such exercise. The exercise price of the replacement Option shall
equal the then current Fair Market Value, and with a term not to
exceed ten years.
The Committee shall have the right, in its sole discretion and at
any time, to discontinue the automatic grant of replacement
Options if it determines the continuance of such grants to no
longer be in the best interest of the Corporation.
(f) Non-transferability of Options. No Stock Option shall be
transferable by the Optionee otherwise than by will or by the
laws of descent and distribution, and all Stock Options shall be
exercisable, during the Optionee's lifetime, only by the
Optionee.
(g) Termination by Reason of Death. Subject to Section 5(j), if an
Optionee's employment by the Corporation and any Subsidiary or
affiliate terminates by reason of death, any Stock Option held by
such Optionee may thereafter be exercised, to the extent then
exercisable or on such accelerated basis as the Committee may
determine at or after grant, by the legal representative of the
estate or by the legatee of the Optionee under the will of the
Optionee, for a period of one year (or such shorter period as the
Committee may specify at grant) from the date of such death or
until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section 5(k), if
an Optionee's employment by the Corporation and any Subsidiary or
affiliate terminates by reason of Disability, any Stock Option
held by such Optionee may thereafter be exercised by the
Optionee, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may
determine at or after grant, for a period of two years (or such
shorter period as the Committee may specify at grant) from the
date of such termination of employment or until the expiration of
the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the Optionee dies within such
two-year period (or such shorter period
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as the Committee shall specify at grant), any unexercised Stock
Option held by such Optionee shall, at the sole discretion of the
Committee, thereafter be exercisable to the extent to which it
was exercisable at the time of death for a period of twelve
months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 5(j), if
an Optionee's employment by the Corporation terminates by reason
of Normal or Early Retirement, any Stock Option held by such
Optionee may thereafter be exercised by the Optionee, to the
extent it was exercisable at the time of such Retirement or on
such accelerated basis as the Committee may determine at or after
grant, for a period of two years (or such shorter period as
Committee may specify at grant) from the date of such termination
of employment or the expiration of the stated term of such Stock
Option, whichever period is the shorter; provided, however, that,
if the Optionee dies within such two-year period, any unexercised
Stock Option held by such Optionee shall, at the sole discretion
of the Committee, thereafter be exercisable, to the extent to
which it was exercisable at the time of death, for a period of
twelve months from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(j) Other Termination. Unless otherwise determined by the Committee
at or after grant, if an Optionee's employment by the Corporation
terminates for any reason other than death, Disability or Normal
or Early Retirement, the Stock Option shall thereupon terminate,
except that such Stock Option may
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be exercised for the lesser of three months or the balance of
such Stock Option's term if the Optionee is involuntarily
terminated by the Corporation without Cause.
(k) Incentive Stock Option Limitations. To the extent required for
"Incentive Stock Option" status under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of
grant) of the Stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by the
Optionee during any calendar year under the Plan and/or any other
Option plan of the Corporation (within the meaning of Section 424
of the Code) after 1986 shall not exceed $100,000.
To the extent (if any) permitted under Section 422 of the Code,
if (i) a Participant's employment with the Corporation is
terminated by reason of death, Disability or Retirement and (ii)
the portion of any Incentive Stock Option that is otherwise
exercisable during the post-termination period specified under
Section 5(g), (h) or (i), applied without regard to this Section
5(k), is greater than the portion of such Option that is
exercisable as an "Incentive Stock Option" during such
post-termination period under Section 422, such post-termination
period shall automatically be extended (but not beyond the
original Option term) to the extent necessary to permit the
Optionee to exercise such Incentive Stock Option.
(l) Cash-out of Option; Settlement of Spread Value in Restricted
Stock. On receipt of written notice to exercise, the Committee
may, in its sole discretion, elect to cash out all or part of the
portion of the Option(s) to be exercised by paying the Optionee
an amount, in cash or stock, equal to the excess of the Fair
Market Value of the Stock over the option price (the "Spread
Value") on the effective date of such cash-out.
In addition, if the Option agreement so provides at grant or is
amended (with the Optionee's consent) after grant and prior to
exercise to so provide, the Committee may require that all or
part of the shares to be issued with respect to the Spread Value
of an exercised Option take the form of Restricted Stock, which
shall be valued on the date of exercise on the basis of the Fair
Market Value of such Restricted Stock determined without regard
to the forfeiture restrictions involved.
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(m) Cashless Exercise. To the extent permitted under the applicable
laws and regulations under Section 16 of the Securities Exchange
Act of 1934, as amended, and the Rules promulgated thereunder,
and with the consent of the Committee, the Corporation agrees to
cooperate in a "cashless exercise" of an Option. The cashless
exercise shall be effected by the Participant delivering to the
Securities Broker instructions to sell a sufficient number of
shares of Common Stock to cover the costs and expenses associated
therewith.
SECTION 6. Stock Appreciation Rights
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under
the Plan. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of
such Stock Option. In the case of an Incentive Stock Option, such
rights may be granted only at the time of the grant of such Stock
Option.
A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the
related Stock Option, except that, unless otherwise determined by
the Committee, in its sole discretion, at the time of grant, a
Stock Appreciation Right granted with respect to less than the
full number of shares covered by a related Stock Option shall not
be reduced until the number of shares covered by an exercise or
termination of the related Stock Option exceeds the number of
shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an Optionee, in
accordance with Section 6(b), by surrendering the applicable
portion of the related Stock Option. Upon such exercise and
surrender, the Optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock
Options which have been so surrendered, in whole or in part,
shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.
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b. Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they
relate, if any, shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan; provided,
however, that any Stock Appreciation Right granted subsequent to
the grant of the related Stock Option shall not be exercisable
during the first six months of its term, except that this special
limitation shall not apply in the event of death or Disability of
the Optionee prior to the expiration of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an Optionee
shall be entitled to receive up to, but not more than, an amount
in cash and/or shares of Stock equal in value to the excess of
the Fair Market Value of one share of Stock over the Option price
per share or such lesser amount as specified in the grant
agreement, multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable
under Section 5(f) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 of the Plan on the number of
shares of Stock to be issued under the Plan, but only to the
extent of the number of shares issued under the Stock
Appreciation Right at the time of exercise based on the value of
the Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the
market price of
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the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Stock Option.
SECTION 7. Restricted Stock
(a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Committee
shall determine the Participants to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares to
be awarded, the price (if any) to be paid by the recipient of
Restricted Stock (subject to Section 7(b)), the time or times within
which such awards may be subject to forfeiture, and all other
conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with
respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing
the award and has delivered a fully executed copy thereof to the
Corporation, and has otherwise complied with the applicable terms and
conditions of such award.
(i) The purchase price for shares of Restricted Stock shall not be
less than what prevailing law may require.
(ii) Awards of Restricted Stock must be accepted within a period of 60
days (or such shorter period as the Committee may specify at
grant) after the award date, by executing a Restricted Stock
Award Agreement and paying whatever price (if any) is required
under Section 7(b)(i).
(iii) Each Participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of
Restricted Stock. Such
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certificate shall be registered in the name of such Participant,
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award,
substantially in the following form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Pegasystems Inc.
1994 Long-Term Incentive Plan and an Agreement entered into
between the registered owner and Pegasystems Inc. Copies of
such Plan and or Agreement are on file in the offices of
Pegasystems Inc. 101 Main Street, Cambridge, MA 02142-1590
Attention: Vice President, Corporate Services.
(iv) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Corporation
until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award, the Participant shall
have delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of
such award (the "Restriction Period"), the Participant shall not
be permitted to sell, transfer, pledge, assign or otherwise
encumber shares of Restricted Stock awarded under the Plan.
Within these limits, the Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part,
based on service, performance and/or such other factors or
criteria as the Committee may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
the Participant shall have, with respect to the shares of
Restricted Stock,
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all of the rights of a shareholder of the Corporation, including
the right to vote the shares, and the right to receive any cash
dividends. The Committee, in its sole discretion, as determined
at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines,
reinvested in additional Restricted Stock to the extent shares
are available under Section 3.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a Participant's employment
with the Corporation for any reason during the Restriction
Period, all shares still subject to restriction shall be
forfeited by the Participant.
(iv) In the event of hardship or other special circumstances of a
Participant whose employment with the Corporation is
involuntarily terminated (other than for Cause), the Committee
may, in its sole discretion, waive in whole or in part any or all
remaining restrictions with respect to such Participant's shares
of Restricted Stock, based on such factors as the Committee may
deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, the certificates for such shares shall be delivered to
the Participant promptly.
SECTION 8. Long Term Performance Awards
(a) Awards and Administration. Long Term Performance Awards may be awarded
either alone or in addition to other awards granted under the Plan. The
Committee shall determine the nature, length and starting date of the
performance period (the "Performance Period") for each Long Term
Performance Award, which shall be at least two years, and shall
determine the performance objectives to be used in valuing Long Term
Performance Awards and determining the extent to which such Long Term
Performance Awards have been earned. Performance objectives may vary
from Participant to Participant and between groups of Participants and
shall be based upon such Corporation, business unit and/or individual
performance factors and criteria as the Committee may deem appropriate,
including, but not limited to, earnings per share or return on equity.
Performance Periods may overlap and
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Participants may participate simultaneously with respect to Long
Term Performance Awards that are subject to different Performance
Periods and/or different performance factors and criteria.
At the beginning of each Performance Period, the Committee shall
determine for each Long Term Performance Award subject to such
Performance Period the range of dollar values or number of shares
of Stock to be awarded to the Participant at the end of the
Performance Period if and to the extent that the relevant
measure(s) of performance for such Long Term Performance Award is
(are) met. Such dollar values or number of shares of Stock may be
fixed or may vary in accordance with such performance and/or
other criteria as may be specified by the Committee, in its sole
discretion.
(b) Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance
objectives to a Long Term Performance Award, the Committee may revise
the performance objectives and/or underlying factors and criteria
applicable to the Long Term Performance Awards affected, to the extent
deemed appropriate by the Committee, in its sole discretion, to avoid
unintended windfalls or hardship.
(c) Termination of Employment. Unless otherwise provided in the applicable
award agreement(s), if a Participant terminates employment with the
Corporation during a Performance Period because of death, Disability or
Retirement, such Participant shall be entitled to a payment with
respect to each outstanding Long Term Performance Award at the end of
the applicable Performance Period:
(i) based, to the extent relevant under the terms of the
award, upon the Participant's performance for the portion
of such Performance Period ending on the date of
termination and the performance of the applicable business
unit(s) for the entire Performance Period, and
(ii) prorated where deemed appropriate by the Committee, for
the portion of the Performance Period during which the
Participant was employed by the Corporation, all as
determined by the Committee, in its sole discretion.
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However, the Committee may provide for an earlier payment in
settlement of such award in such amount and under such terms and
conditions as the Committee deems appropriate.
If a Participant terminates employment with the Corporation
during a Performance Period for any other reason, then such
Participant shall not be entitled to any payment with respect to
the Long Term Performance Awards subject to such Performance
Period, unless the Committee shall otherwise determine, in its
sole discretion.
(d) Form of Payment. The earned portion of a Long Term Performance
Award may be paid currently or on a deferred basis with such
interest or earnings equivalent as may be determined by the
Committee, in its sole discretion. Payment shall be made in the
form of cash or whole shares of Stock, including Restricted
Stock, either in a lump sum payment or in annual installments
commencing as soon as practicable after the end of the relevant
Performance Period, all as the Committee shall determine at or
after grant. If and to the extent a Long Term Performance Award
is payable in Stock and the full amount of such value is not paid
in Stock, then the shares of Stock representing the portion of
the value of the Long Term Performance Award not paid in Stock
shall again become available for award under the Plan.
SECTION 9. Amendments and Termination
The Board may amend, alter, or discontinue the Plan at any time and from
time to time, but no amendment, alteration, or discontinuation shall be made
which would impair the rights of an Optionee or Participant with respect to a
Stock Option, Stock Appreciation Right, Restricted Stock or Long Term
Performance Award which has been granted under the Plan, without the Optionee's
or Participant's consent, or which, without the approval of the Corporation's
stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following amendments, would:
(a) except as expressly provided in this Plan, increase the total
number of shares reserved for the purpose of the Plan;
(b) decrease the Option price of any Stock Option to less than 50% of
the Fair Market Value on the date of grant;
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(c) change the employees or class of employees eligible to
participate in the Plan; or
(d) extend the maximum Option period under Section 5(b) of the Plan.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher Option prices.
Subject to the above provisions, the Committee shall have broad
authority to amend the Plan to take into account changes in applicable tax laws
and accounting rules, as well as other developments.
SECTION 10. Unfunded Status of Plan
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant or Optionee by the Corporation, nothing contained herein shall give
any such Participant or Optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Board may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder, provided, however, that, unless the Board otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
SECTION 11. General Provisions
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option under the Plan to represent to and agree with
the Corporation in writing that the Optionee or Participant is
acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on
transfer.
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All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the
Exchange Act, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of
the Corporation any right to continued employment with the
Corporation, as the case may be, nor shall it interfere in any
way with the right of the Corporation to terminate the employment
of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the Participant for Federal
income tax purposes with respect to any award under the Plan, the
Participant shall pay to the Corporation, or make arrangements
satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined
by the Committee, the minimum required withholding obligations
may be settled with Stock, including Stock that is part of the
award that gives rise to the withholding requirement. The
obligations of the Corporation under the Plan shall be
conditional on such payment or arrangements and the Corporation
shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the
Participant.
(e) At the time of grant, the Committee may provide in connection
with any grant made under this Plan that the shares of Stock
received as a result of such grant shall be subject to a right of
first refusal, pursuant to which the Participant shall be
required to offer to the Corporation any shares that the
Participant wishes to sell, with the price being the then Fair
Market Value of
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the Stock, subject to such other terms and conditions as the
Committee may specify at the time of grant.
(f) Shares may be subject to a repurchase right by the Corporation
which the Corporation shall have the right to exercise from time
to time as may be set forth in a grant agreement for an award
granted under this Plan.
(g) The reinvestment of dividends in additional Restricted Stock (or
in other types of Plan awards) at the time of any dividend
payment shall only be permissible if sufficient shares of Stock
are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Plan awards).
(h) The Committee shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom
any amounts payable in the event of the Participant's death are
to be paid.
(i) The Plan and all awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
SECTION 12. Effective Date of Plan
The Plan shall be effective on the date it is approved by a vote of the
holders of a majority of the total outstanding Stock.
SECTION 13. Term of Plan
No Stock Option, Stock Appreciation Right, Restricted Stock or Long Term
Performance Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the date of stockholder approval, but awards granted prior to
such tenth anniversary may extend beyond that date.
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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
<PAGE>
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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<PAGE>
(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
3
<PAGE>
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.
4
<PAGE>
(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
5
<PAGE>
(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
6
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
<PAGE>
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.
2
<PAGE>
(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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<PAGE>
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.
4
<PAGE>
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
5
