
                               SECURITY AGREEMENT


         SECURITY AGREEMENT dated as of December 16, 1993 by and between
Pegasystems Inc., a Massachusetts corporation (the "Debtor") and Fleet Bank of
Massachusetts, N.A. (the "Secured Party").

         WHEREAS, the Debtor has today executed and delivered to the Secured
Party a letter agreement (the "Letter Agreement") of even date herewith between
the Debtor and the Secured Party, which Letter Agreement provides inter alia for
the making of Term Loans (as defined therein) up to an aggregate principal
amount of $1,000,000; and

         WHEREAS, the Debtor has executed and delivered to the Secured Party and
may in the future execute and deliver to the Secured Party one or more
promissory notes in an aggregate original principal amount not to exceed
$1,000,000 (the "Term Notes") in order to evidence the Term Loans; and

         WHEREAS, as a condition to making any Term Loan, the Secured Party
requires that the Debtor grant to the Secured Party a security interest in the
Collateral (as defined in Section 1);

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby act and agree
as follows:

         1.       Definitions.  As used in this Security Agreement, the
following terms have the following meanings:

         "Collateral" - All of the following now or hereafter existing or owned
by the Debtor or in which the Debtor shall now or hereafter have any interest:

         (a) all Equipment;

         (b) all Related Collateral; and

         (c) all liens, guaranties, securities, rights, remedies and privileges
         pertaining to, and all products and proceeds (including, without
         limitation, insurance proceeds) of and all accessions to, any of the
         foregoing items of Collateral.

         "Equipment" - All of the Debtor's machinery, equipment, motor vehicles,
tools, furniture, furnishings and fixtures and all accessions, additions,
substitutions or replacements to or for any of the foregoing and all
attachments, components, accessories, parts and supplies relating thereto; all
whether now owned or hereafter arising or acquired and wherever located. The
Equipment includes, Without limitation, the items of Equipment described on
Exhibit A hereto.



<PAGE>



         "Event of Default" - The occurrence of any one or more of the
following: (i) any "Event of Default" as defined in any Loan Document, (ii) any
failure to pay when due any of the Obligations relating to the payment of money
or (iii) any failure by the Debtor to perform or observe any of its obligations
or agreements under this Security Agreement.

         "Lien" - Any lien, charge, encumbrance or security interest, whether
voluntary or involuntary.

         "Loan Documents" - This Security Agreement, the Letter Agreement, the
Term Notes and any other instruments or documents, letters of credit or other
agreements made by the Debtor with or in favor of the Secured Party, all whether
now existing or hereafter entered into or delivered.

         "Obligations" - The Term Notes and any and all indebtedness,
liabilities and obligations of the Debtor relating to the Term Loans or any of
same, whether for principal, interest, fees, charges or otherwise, now existing
or hereafter arising, such term to include obligations to perform acts and
refrain from taking action as well as obligations to pay money. For the purposes
of this Security Agreement, "Obligations" shall not be deemed to include the
"Revolving Note" or the "Revolving Loans" described in the Letter Agreement.

         "Person" - As defined in the Letter Agreement.

         "Premises" - All locations owned, leased, operated or used by the
Debtor, all of which are listed on Exhibit B hereto together with the record
owner of each such location.

         "Qualifying Equipment" - As defined in the Letter Agreement.

         "Related Collateral" - All of the following property of the Debtor: all
of the Debtor's rights under judgments relating to any loss or damage to any
Equipment; warranties, insurance claims, tort claims and chooses in action
relating to any loss or damage to any Equipment; and information, data, files,
writings, correspondence, books and records (including, without limitation, all
electronically recorded data) relating to any Equipment. For the purposes of
this Security Agreement, "Related Collateral" does not include patents,
trademarks, copyrights, Debtor's proprietary software or other intellectual
property of the Debtor.

         "UCC" - The Uniform Commercial Code as in effect from time to time in
Massachusetts, except that with respect to Collateral located or deemed located
in any other jurisdiction, such term shall refer to the Uniform Commercial Code
as in effect in each such other jurisdiction.


                                        2

<PAGE>



         Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.

         2.      Grant of Security Interest. As security for the full and timely
satisfaction of the Obligations, the Debtor hereby grants to the Secured Party a
continuing security interest in the Collateral, and in each item thereof, all to
the maximum extent that the Debtor has an interest therein or at any time in the
future obtains such an interest.

         3.      Representations and Warranties.  The Debtor represents
and warrants to the Secured Party that:

         (a) The execution, delivery and performance by the Debtor of this
Security Agreement, including the security interests herein granted or intended
to be granted, has been duly authorized by all necessary corporate and other
action and does not and will not:

                  (i) require any consent or approval of its stockholders, any
         governmental authority or any other Person;

                  (ii) contravene its charter or by-laws;

                  (iii) violate any provision of, or require any filing (other
         than the filing of financing statements with respect to the security
         interests herein granted), registration, consent or approval under, any
         law, rule, regulation (including, without limitation, Regulation U),
         order, writ, judgment, injunction, decree, determination or award
         presently in effect having applicability to the Debtor;

                  (iv) result in a breach of or constitute a default or require
         any consent under any indenture or loan or credit agreement or any
         other agreement, lease or instrument to which the Debtor is party or by
         which it or any of its properties may be bound or affected; or

                  (v) result in, or require, the creation or imposition of any
         Lien (other than as created hereunder) upon or with respect to any of
         the properties now owned or hereafter acquired by the Debtor.

         (b) This Security Agreement has been duly executed and delivered on
behalf of the Debtor and is a legal, valid and binding obligation of the Debtor
enforceable in accordance with its terms.


                                        3

<PAGE>



         (c) No Obligation has been or will hereafter be incurred

         (d) The principal place of business and chief executive offices of the
Debtor are located at 101 Main Street, Cambridge, MA 02142. Except as described
on Exhibit B hereto, none of the Collateral and no other assets of the Debtor
are located at any other address. The Debtor is a tenant in its Premises and the
record owners of the Debtor's Premises are as set forth on Exhibit B hereto.

         (e) Except as set forth on Exhibit C hereto, the Debtor conducts
business (and in the last five years has conducted business) under no trade name
or style other than its corporate name.

         (f) The Debtor owns the Collateral free and clear of all Liens except
(a) Liens in favor of the Secured Party, and (b) Liens, if any, listed on
Exhibit D hereto.

         (g) The Equipment now owned by Debtor (including, without limitation,
those items of Equipment listed on Exhibit A hereto) has been accepted by the
Debtor and is in good repair, working order and condition, and the Debtor has
not asserted, and knows of no basis for, any material warranty or other claim
against any seller or manufacturer thereof.

         (h) This Agreement, coupled with the filing of appropriate UCC
financing statements with the Secretary of The Commonwealth of Massachusetts,
the City Clerk of Cambridge, MA and Middlesex South Registry of Deeds (these
being the only locations in which such filing is required by the UCC in order to
perfect the security interest granted herein), creates a valid and perfected
security interest (of first priority, except as shown on Exhibit D) in favor of
the Secured Party in all of the Collateral.

         4.      Covenants. (a) Payment and Performance.  The Debtor
shall unconditionally pay when due (or on demand if so payable)
each Obligation and shall duly and punctually perform each
Obligation.

         (b) Further Assurances. The Debtor will from time to time, at its
expense, promptly execute and deliver all such further instruments and
documents, and take all such further action, as may be necessary or that the
Secured Party may reasonably request in order to perfect and protect the
security interests granted or intended to be granted hereby or to enable the
Secured Party to enforce its rights and remedies hereunder with respect to any
Collateral, including, without limitation: marking or otherwise identifying
Equipment; furnishing the originals of all bills of jading, trust receipts and
warehousemen's receipts, with such endorsements as may be required by the
Secured Party; and executing and filing financing

                                        4

<PAGE>



statements. Further, the Debtor hereby authorizes the Secured Party to file
financing or continuation statements and amendments thereto relating to
Collateral without the signature of the Debtor where permitted by law.

         (c) Information. The Debtor shall maintain accurate and complete
records of all Collateral and its dealings with respect thereto in accordance
with generally accepted accounting principles applied on a consistent basis.
Upon reasonable notice from time to time (and at any time and without notice
after the occurrence and during the continuance of an Event of Default), the
Debtor shall permit the Secured Party and its employees, representatives and
agents to conduct field audits (at the Debtor's expense) and to inspect and/or
make copies of such records and/or the Collateral. The Debtor shall from time to
time furnish to the Secured Party such information concerning Collateral as the
Secured Party may reasonably request and will promptly notify the Secured Party
if any representation or warranty of the Debtor in Section 3 hereof or in the
Letter Agreement becomes inaccurate, incomplete or misleading in any material
respect. Without limiting the generality of the foregoing, the Debtor will upon
the Secured Party's request, with reasonable promptness, provide the Secured
Party with a written listing of all Collateral, and will provide the Secured
Party with such a listing immediately upon the occurrence of any Event of
Default.

         (d) Insurance. The Debtor shall at its expense maintain fire and
extended coverage insurance policies insuring the Equipment, with responsible
and reputable insurance companies or associations, in amounts sufficient to
provide for full replacement cost coverage (with agreed amount endorsement) and
in any event not less than the amount necessary to avoid co-insurance. All such
insurance shall name the Secured Party as secured party and loss payee. All
policies of such insurance shall contain a provision forbidding cancellation of
such insurance either by the carrier or by the insured without at least 15 days'
prior written notice to the Secured Party. The Debtor shall, as often as the
Secured Party shall reasonably request, deliver to the Secured Party duplicate
policies of such insurance and/or binders, certificates or other evidence
thereof (with evidence of premiums having been paid) from the insurer or a
reputable insurance broker. in case of any casualty, loss or damage to which the
following sentence is not applicable, the Debtor shall make the necessary
repairs or replacements and shall be entitled to be reimbursed therefor from and
to the extent of the proceeds of such insurance. After the occurrence of any
Event of Default, all insurance payments in respect of Equipment shall be paid
and applied as specified in Subsection 8(c) below.

         (e) Title; Sale or Removal of Collateral. The Debtor shall not create
or suffer to exist any Lien in or on any of the

                                        5

<PAGE>



Collateral, except as otherwise expressly permitted by ss.4.2 of the Letter
Agreement. The Debtor shall not, without the Secured Party's prior written
approval, sell, transfer or remove from the Premises or otherwise dispose of any
of the Collateral, except that the Debtor may remove and dispose of obsolete and
worn out equipment (other than any item of Equipment which is listed on Exhibit
A hereto or which is now or hereafter an item of Qualifying Equipment). Except
as provided in the immediately preceding sentence, no Collateral of the Debtor
will be located at any premises other than the Premises described in Subsection
3(d) above. The Debtor will not (i) move its chief executive office or principal
place of business from the location described in Subsection 3(d) above, (ii)
change its name or identity (or use any trade name or style except as described
in Subsection 3(e) above), (iii) make or suffer to be made any change in its
corporate structure, or (iv) have or acquire any office or facility in any other
location (other than one or more foreign offices for its non-United States
subsidiaries) until, in each case, after receipt of a certificate from the
Secured Party, signed by an officer thereof, stating that the Secured Party has,
to its satisfaction, obtained all documentation that it deems necessary or
desirable to obtain, maintain, perfect and/or confirm the first priority
security interests granted or intended to be granted herein.

         (f) Maintenance and Use of Collateral. The Debtor will maintain all
Equipment in good order and condition, Making all necessary repairs thereto. The
Debtor will not use any Equipment in violation of any applicable law or any
insurance thereon. Nothing contained herein shall require the Debtor to maintain
or repair any Equipment (other than any item of Equipment listed on Exhibit A
hereto or other item which is now or hereafter part of the Qualifying Equipment)
which is obsolete or worn out.

         (g) Access. The Debtor shall accord the Secured Party and the Secured
Party's representatives with such access from time to time, upon reasonable
notice, during normal business hours as the Secured Party and its
representatives may reasonably require to all properties owned by or over which
the Debtor has control, and in connection with such access, will permit the
Secured Party and such representatives, from time to time as may be requested,
to examine and inspect any and all of the Collateral and any and all of the
Debtor's books, records, electronically stored data, papers and files related to
the Collateral. The Debtor shall provide the Secured Party with such information
concerning the Debtor, the Collateral, the operation of the Debtor's business
and the Debtor's financial condition as the Secured Party may reasonably request
from time to time.

         (h) Taxes. The Debtor promptly shall pay, as they become due and
payable, all taxes, unemployment contributions and all other charges of any kind
or nature levied, assessed or claimed

                                        6

<PAGE>



against the Collateral by any Person whose claim could result in a Lien, except
any of the foregoing which is being contested in good faith and by appropriate
proceedings which serve as a matter of law to stay the enforcement of any such
Lien and as to which the Debtor has established and is maintaining adequate
reserves. At its option, the Secured Party may, but shall not be obligated to,
pay all taxes, unemployment contributions and any and all other charges levied,
assessed or claimed against the Collateral by any Person as the Secured Party
may, in its discretion, deem necessary or desirable to protect, maintain,
preserve, collect or realize upon any or all of the Collateral or the value
thereof or any right or remedy pertaining thereto.

         5.      Secured Party Appointed Attorney-in-Fact. (a) The Debtor hereby
irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, with
full authority in the name, place and stead of the Debtor, from time to time in
the Secured Party's discretion, after the occurrence and during the continuance
of an Event of Default to take any action and to execute any instrument which
the Secured Party may deem necessary or advisable to accomplish the purposes of
this Security Agreement, including, without limitation:

                  (i) to obtain and adjust any insurance required pursuant to
         this Security Agreement and/or the Letter Agreement;

                  (ii) to ask, demand, collect, sue for, recover, compromise,
         receive and give acquittance for monies due and to become due under or
         in respect of any of the Collateral;

                  (iii) to receive, endorse and collect any notes, drafts or
         other instruments, documents and chattel paper;

                  (iv) to file any claims or take any action or institute any
         proceedings which the Secured Party may deem necessary or desirable for
         the collection of any of the Collateral or otherwise to enforce the
         rights of the Secured Party with respect to any of the Collateral;

                  (v) to defend any suit, action or proceeding brought against
         the Debtor in respect of any Collateral, to settle, compromise or
         adjust any suit, action or proceeding hereinbefore described and, in
         connection therewith, to give such discharges or releases as the
         Secured Party may deem appropriate; and generally,

                  (vi) to do all things necessary to carry out the intent
         of this Security Agreement.

         (b) The power of attorney granted pursuant to this Section 5 is a power
coupled with an interest and shall be irrevocable

                                        7

<PAGE>



until the Obligations are paid indefeasibly in full and no commitment on the
part of the Secured Party to make loans remains outstanding under the Letter
Agreement.

         6.      Secured Party May Perform. if the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Secured Party
incurred in connection therewith shall be payable by the Debtor as provided
under Section 9 hereof, with interest at the rate provided in the Term Notes for
overdue payments.

         7.      Secured Party's Duties. The powers conferred on the Secured 
Party hereunder are solely to protect its interests in the Collateral and shall 
not impose any duty upon it to exercise any such powers. Except for the safe 
custody of any Collateral actually in its possession and the accounting for 
monies actually received by it hereunder, the Secured Party shall have no duty 
as to any Collateral. The Secured Party shall not be liable for any acts, 
omissions, errors of judgment or mistakes of fact or law including, without 
limitation, acts, omissions, errors or mistakes with respect to the Collateral, 
except for those arising out of or in connection with the Secured Party's gross 
negligence or willful misconduct. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in 
its possession if the Collateral is accorded treatment substantially equal to 
that which the Secured Party accords its own like property, it being understood 
that the Secured Party shall be under no obligation to take any necessary steps 
to collect any Collateral or preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for the sole
account of the Debtor and shall be added to the Obligations.

         8.      Remedies. If any Event of Default shall have occurred and be
continuing:

         (a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the UCC and also may
without limitation:

                  (i) require the Debtor to, and the Debtor hereby agrees that
         it will at its expense and upon request of the Secured Party forthwith,
         assemble all or any part of the Collateral as directed by the Secured
         Party and make it available to the Secured Party at a place or places
         to be designated by the Secured Party which is or are reasonably
         convenient to the respective parties;


                                        8

<PAGE>



                  (ii) itself or through agents, without notice to any Person
         and without judicial process of any kind, enter any of the Debtor's
         offices and facilities (or any other premises or location where any
         Collateral may be) and take physical possession of any Collateral or
         disassemble, render unusable and/or repossess any of the same, and the
         Debtor shall peacefully and quietly yield up and surrender the same;
         and

                  (iii) without notice except as specified below, sell, lease,
         assign, grant an option or options to purchase or otherwise dispose of
         the Collateral or any part thereof in one or more parcels at public or
         private sale, at any exchange, broker's board or at the Secured Party's
         offices or elsewhere, for cash, on credit or for future delivery, and
         upon such other terms as are commercially reasonable.

         (b) The Secured Party may maintain possession of Collateral at the
Premises or remove the same or any part thereof to such places as the Secured
Party may elect. The Debtor waives all rights which it would otherwise have
under any applicable law to prohibit entry to any premises or to require notice
of any such action, to the extent permitted by law. The Debtor agrees that, to
the extent notice of sale shall be required by law, 10 days, prior written
notice to the Debtor shall constitute reasonable notification. Notice of any
public sale shall be sufficient if it describes the Collateral to be sold in
general terms, stating the items or amounts thereof and the location and nature
thereof, and is published at least once in any newspaper selected by the Secured
Party and of general circulation in the locale of such sale, not less than 10
days prior to the sale. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale-having been given and may be the
purchaser at any such sale, if public, to the extent permitted by applicable
law, free from any right of redemption. The Debtor shall be fully liable for any
deficiency. The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. All sales made by the Secured Party under this Subsection 8(b) must
be conducted in a manner which is commercially reasonable.

         (c) Any cash held by the Secured Party as Collateral and all cash or
other proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral,
shall be applied by the Secured Party in the following order of priorities:

                           First, to the payment of the costs and expenses of
                  any sale or other reasonable expenses (including, without
                  limitation, any reasonable legal fees and

                                        9

<PAGE>



                  expenses), liabilities and advances made or incurred by the
                  Secured Party in connection therewith or referred to in
                  Section 9 or provided for by the Letter Agreement;

                           Next, to payment of interest on and principal of the
                  Term Notes (in such order as may be provided for in the Letter
                  Agreement or as otherwise determined by the Secured Party);

                           Next, to the payment of any other Obligations; and

                           Finally, after payment in full of all Obligations, to
                  the payment to the Debtor or its successors or assigns, or to
                  whomsoever may be lawfully entitled to receive the same or as
                  a court of competent jurisdiction may direct, of any surplus
                  then remaining of such cash.

         9.      Expenses and Indemnification. The Debtor agrees to reimburse 
the Secured Party for and indemnify and hold harmless the Secured Party from and
against any and all liability, loss, damage, cost or expense (including, without
limitation, reasonable fees and disbursements of counsel, experts and agents)
imposed on, incurred by or asserted against the Secured Party arising out of or
in connection with: preparation of this Security Agreement, the documents
relating hereto, or amendments, modifications or waivers hereof; taxes
(excluding any corporate excise or income taxes payable by the Secured Party by
reason hereof or otherwise) and other governmental charges in connection with
this Security Agreement and the Collateral; exercise of the Secured Party's
rights with respect to this Security Agreement and the Collateral; any
enforcement, collection or other proceedings resulting therefrom or any
negotiations or other measures to preserve the Secured Party's rights hereunder;
the custody or preservation of, or the sale of or other realization upon, any of
the Collateral; any failure by the Debtor to perform or observe any of the
provisions of this Security Agreement; any investigative, administrative or
judicial proceeding (whether or not the Secured Party is designated a party
thereto) relating to or arising out of this Security Agreement; or any
bankruptcy, insolvency or other similar proceeding relating to the Debtor,
unless the Secured Party was at fault with respect to such liability, loss,
damage, cost or expense or acted in bad faith with respect thereto. The Debtor's
obligations under the preceding sentence shall constitute Obligations and shall
survive the termination of this Security Agreement.

         10.     Termination.  This Security Agreement shall remain in full 
force and effect so long as any Obligations remain outstanding or any commitment
remains in effect under the Letter Agreement or otherwise. Upon the satisfaction
in full of all of

                                       10

<PAGE>



the obligations and termination of all credit facilities established under the
Letter Agreement or otherwise, the Secured Party shall, at the Debtor's expense,
execute and deliver to the Debtor all instruments of assignment or otherwise as
may be necessary to establish full title of the Debtors to any of the
Collateral, subject to any prior sale or other disposition thereof pursuant to
Section 8. Until then, this Security Agreement shall itself constitute
conclusive evidence of the validity, effectiveness and continuing force hereof,
and any Person may rely hereon.

         11.     Waiver; Rights Cumulative. No failure to exercise and no delay 
in exercising, on the part of the Secured Party, any right or remedy hereunder 
or otherwise shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right or remedy. Waiver by the Secured Party of any right or remedy
on any one occasion shall not be construed as a bar to or waiver thereof or of
any other right or remedy on any future occasion. The Secured Party's rights and
remedies hereunder and under the Loan Documents shall be cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.

         The provisions of this Security Agreement are not in derogation or
limitation of any obligations, liabilities or duties of the Debtor under any of
the other Loan Documents or any other agreement with or for the benefit of the
Secured Party. No inconsistency in default provisions between this Agreement and
any of the other Loan Documents or any such other agreement will be deemed to
create any additional grace period or otherwise derogate from the express terms
of each such default provision. No covenant, agreement or obligation of the
Debtor contained herein, nor any right or remedy of the Secured Party contained
herein, shall in any respect be limited by or be deemed in limitation of any
inconsistent or additional provisions contained in any of the other Loan
Documents or any such other agreement.

         12.     Severability. In the event that any provision of this Agreement
or the application thereof to any Person, property or circumstance shall be held
to any extent to be invalid or unenforceable, the remainder of this Security
Agreement and the application of such provision to Persons, properties and
circumstances other than those as to which it has been held invalid or
unenforceable shall not be affected thereby, and each provision of this Security
Agreement shall be valid and enforceable to the fullest extent permitted by law.

         13.     Binding Effect; Assignment.  This Security Agreement
shall be binding upon the Debtor and its successors and assigns and shall inure
to the benefit of the Debtor and the Secured Party and their respective
successors and assigns.

                                       11

<PAGE>




         14.     Notices.  All notices and other communications under or
relating to this Security Agreement shall be given in the manner
and to the addresses of the parties provided for in ss.6.6 of the
Letter Agreement.

         15.     Headings.  Section headings in this Security Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.

         16.     Governing Law.  This Security Agreement shall be governed by, 
and construed and enforced in accordance with, the  laws of The Commonwealth of 
Massachusetts, except that the creation, perfection and enforcement of security 
interests in Collateral located in jurisdictions other than Massachusetts will 
be governed by the laws of the respective jurisdictions in which such 
Collateral is located.

         IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be executed, as an instrument under seal, by their
respective officers thereunto duly authorized, as of the date first above
written.

                                             PEGASYSTEMS INC.


                                            By [Signature of Ira Vishner]
                                               -------------------------------
                                                Its  Treasurer


                                              FLEET BANK OF MASSACHUSETTS, N.A.



                                             By [Signature of Thomas M. Davies]
                                                -----------------------------
                                                 Its Vice President




                                       12

<PAGE>



EXHIBIT A   -    Equipment List

EXHIBIT B   -    Debtor's offices and other locations, including
                 owners of real estate

EXHIBIT C   -    Trade names

EXHIBIT D   -    Other existing encumbrances



                                       13

<PAGE>



Exhibit A:  Equipment List
- --------------------------
         Computer Equipment
         Furniture and Fixtures

Exhibit B: Debtor's offices and other locations, including owners of real estate
- --------------------------------------------------------------------------------
         101 Main Street, Cambridge, MA  02141
         Landlord:                  Riverfront Office Park Joint Venture
                                    c/o Codman Management Company, Inc.
                                    One Main Street
                                    Cambridge, MA  02141

         3 New York Plaza, New York, NY  10004
         Landlord:                  Pamela Equities Corp.
                                    475 Park Avenue South
                                    New York, NY  10016

         One Montgomery Street, San Francisco, CA  94104
         Landlord:                  Goldfarb & Lipman
                                    One Montgomery Street
                                    Telesis Tower, 23rd Floor
                                    San Francisco, CA  94104

Exhibit C:  Trade names
- -----------------------
         None

Exhibit D:  Other existing encumbrances
- ---------------------------------------
         Liens in favor of furniture and equipment vendors Eaton Financial
Corporation, First & Main Corporation, IBM Credit Corporation, PacificCorp
Capital Inc., Phoenix Leasing Inc., and Phoenix Leasing Cash Distribution Fund
V, L.P.




<PAGE>


[Pegasystems, Inc. Logo]      December 15, 1993


                              EXHIBIT A (continued)

Mr. Thomas W. Davies
Vice President
High Technology Group
Fleet Bank
Fleet Center
Mail Stop:  MA BOFO4M
75 State Street
Boston, MA  02109-1810

Dear Tom:

         Enclosed are copies of invoices covering assets we have purchased in
1993. For your convenience, the software portion has been listed separately,
allowing you to verify that it does not exceed the limits specified in our
agreement. The assets to be financed are broken down as follows:



<TABLE>
<CAPTION>
EQUIPMENT AND FURNITURE
<S>                    <C>                                                                              <C>
====================================================================================================================
1/5/93                 2 Laser printers                                                                  $2,837.40
- --------------------------------------------------------------------------------------------------------------------
1/6/93                 Color desktop printer                                                               $709.50
- --------------------------------------------------------------------------------------------------------------------
1/8/93                 3 Optical disks                                                                   $2,175.00
- --------------------------------------------------------------------------------------------------------------------
1/22/93                5 tape drives and controllers                                                     $2,455.50
- --------------------------------------------------------------------------------------------------------------------
1/29/93                3 Computer systems                                                                $7,300.00
- --------------------------------------------------------------------------------------------------------------------
1/29/93                5 monitors, 2 computer systems                                                    $6,510.00
- --------------------------------------------------------------------------------------------------------------------
2/2/93                 Ethernet board                                                                      $207.25
- --------------------------------------------------------------------------------------------------------------------
2/4/93                 Trakker port tape                                                                   $452.00
- --------------------------------------------------------------------------------------------------------------------
2/10/93                12 modems                                                                         $3,586.20
- --------------------------------------------------------------------------------------------------------------------
2/16/93                4 printers                                                                          $366.50
- --------------------------------------------------------------------------------------------------------------------
2/25/93                NI Adapter for BA2XX                                                              $3,605.76
- --------------------------------------------------------------------------------------------------------------------
2/25/93                TeleToolkit and EuroPak                                                             $214.28
- --------------------------------------------------------------------------------------------------------------------
2/26/93                DEC 4100 VAX and associated disks                                                $41,373.25
- --------------------------------------------------------------------------------------------------------------------
3/2/93                 2 Post script HP4                                                                   $611.70
- --------------------------------------------------------------------------------------------------------------------
3/10/93                IRMA 3 Convtblbrd                                                                   $429.85
- --------------------------------------------------------------------------------------------------------------------
3/10/93                2 MicroMUM units                                                                  $3,007.00
- --------------------------------------------------------------------------------------------------------------------
3/10/93                3 Western Digital disks                                                           $1,048.50
- --------------------------------------------------------------------------------------------------------------------
3/11/93                Cabinets, disks, memory                                                          $25,640.00
- --------------------------------------------------------------------------------------------------------------------
3/11/93                COAX/TP convtr                                                                      $819.30



<PAGE>


Fleet Bank
December 15, 1993
Page 2




- --------------------------------------------------------------------------------------------------------------------
3/11/93                Computer card upgrade                                                             $1,280.00
- --------------------------------------------------------------------------------------------------------------------
3/12/93                16-Port Terminal Server and rack maintenance kit                                  $2,457.00
- --------------------------------------------------------------------------------------------------------------------
3/17/93                20 PC Ethernet controllers                                                        $3,933.00
- --------------------------------------------------------------------------------------------------------------------
3/18/93                Network card                                                                        $131.50
- --------------------------------------------------------------------------------------------------------------------
3/19/93                Cabinets                                                                          $6,585.00
- --------------------------------------------------------------------------------------------------------------------
3/30/93                2 controllors, 1 rack mount                                                         $976.70
- --------------------------------------------------------------------------------------------------------------------
4/7/93                 50 Computer monitors                                                             $23,500.00
- --------------------------------------------------------------------------------------------------------------------
4/7/93                 5 keyboards                                                                         $300.00
- --------------------------------------------------------------------------------------------------------------------
4/7/93                 Gateway pc order                                                                $106,880.00
- --------------------------------------------------------------------------------------------------------------------
4/16/93                2 adapters, 10 modems                                                             $3,375.00
- --------------------------------------------------------------------------------------------------------------------
4/28/93                2 ethernet adapters                                                                 $789.00
- --------------------------------------------------------------------------------------------------------------------
4/30/93                12 drives, 15 controllors                                                         $2,613.00
- --------------------------------------------------------------------------------------------------------------------
4/30/93                1 printer, feeder, cabinet                                                        $4,300.00
- --------------------------------------------------------------------------------------------------------------------
5/7/93                 2 laser jet printers                                                              $8,600.00
- --------------------------------------------------------------------------------------------------------------------
5/11/93                2 HP 1500 sheet feed                                                                $860.00
- --------------------------------------------------------------------------------------------------------------------
5/11/93                1 HP 1500 sheet feed                                                                $430.00
- --------------------------------------------------------------------------------------------------------------------
5/14/93                6 PC's with monitors                                                             $14,100.00
- --------------------------------------------------------------------------------------------------------------------
5/19/93                tape drive-Microsolutions                                                           $404.80
- --------------------------------------------------------------------------------------------------------------------
5/25/93                2 Ethernet Link III                                                                 $427.10
- --------------------------------------------------------------------------------------------------------------------
5/25/93                1 PC and carrying case                                                            $2,768.95
- --------------------------------------------------------------------------------------------------------------------
5/26/93                DPT controllor                                                                      $388.70
- --------------------------------------------------------------------------------------------------------------------
5/26/93                4000 DAT tape drive                                                               $1,688.75
- --------------------------------------------------------------------------------------------------------------------
5/26/93                8 MB upgrade                                                                      $1,376.20
- --------------------------------------------------------------------------------------------------------------------
5/26/93                1 DCA Irmaprint                                                                     $749.40
- --------------------------------------------------------------------------------------------------------------------
5/28/93                2 GB INTNL DAT                                                                    $2,445.90
- --------------------------------------------------------------------------------------------------------------------
5/28/93                Modem                                                                               $799.40
- --------------------------------------------------------------------------------------------------------------------
5/28/93                2 cabinets                                                                          $570.00
- --------------------------------------------------------------------------------------------------------------------
5/28/93                HP 4SI cabinet                                                                      $285.00
- --------------------------------------------------------------------------------------------------------------------
6/7/93                 HP Vectra PC 1GB                                                                  $5,607.88
- --------------------------------------------------------------------------------------------------------------------
6/7/93                 HP Vectra PC 430 MB                                                               $4,672.90
- --------------------------------------------------------------------------------------------------------------------
6/7/93                 2 mono VGA monitors                                                                 $385.50



<PAGE>


Fleet Bank
December 15, 1993
Page 3




- --------------------------------------------------------------------------------------------------------------------
6/7/93                 internal fax/modem and carrying case                                                $544.94
- --------------------------------------------------------------------------------------------------------------------
6/10/93                4 8MB memory                                                                      $1,376.20
- --------------------------------------------------------------------------------------------------------------------
6/10/93                Irma print                                                                          $749.40
- --------------------------------------------------------------------------------------------------------------------
6/11/93                Multimedia sound system                                                             $165.97
- --------------------------------------------------------------------------------------------------------------------
6/23/93                3 print server                                                                    $1,785.00
- --------------------------------------------------------------------------------------------------------------------
6/29/93                6 PC's and 10 monitors                                                           $15,602.00
- --------------------------------------------------------------------------------------------------------------------
7/21/93                Token ring                                                                          $610.30
- --------------------------------------------------------------------------------------------------------------------
8/3/93                 Laser Jet printer                                                                 $1,418.70
- --------------------------------------------------------------------------------------------------------------------
8/17/93                Postscript printer                                                                  $305.85
- --------------------------------------------------------------------------------------------------------------------
8/18/93                2 Gig SCSI disk                                                                   $2,240.00
- --------------------------------------------------------------------------------------------------------------------
8/23/93                1 4mb memory expansion                                                              $183.25
- --------------------------------------------------------------------------------------------------------------------
8/26/93                printer equipment                                                                 $2,655.00
- --------------------------------------------------------------------------------------------------------------------
8/31/93                Blazer modem                                                                        $315.75
- --------------------------------------------------------------------------------------------------------------------
8/31/93                1 HP laster jet printer                                                           $4,330.00
- --------------------------------------------------------------------------------------------------------------------
9/3/93                 modem                                                                               $955.00
- --------------------------------------------------------------------------------------------------------------------
9/9/93                 ESP1 print controllor                                                               $625.00
- --------------------------------------------------------------------------------------------------------------------
9/17/93                Desk Porte Modem                                                                    $339.00
- --------------------------------------------------------------------------------------------------------------------
9/21/93                Seagate Disk Drive                                                                $1,945.00
- --------------------------------------------------------------------------------------------------------------------
9/22/93                7 PC's with tower cases                                                          $17,843.00
- --------------------------------------------------------------------------------------------------------------------
9/23/93                Desk Porte Modem                                                                    $339.00
- --------------------------------------------------------------------------------------------------------------------
9/30/93                2 4MB 72pin SIMMS                                                                   $420.00
- --------------------------------------------------------------------------------------------------------------------
10/11/93               Laser Printer Cabinet                                                               $304.00
- --------------------------------------------------------------------------------------------------------------------
10/27/93               Notebook Executive Traveller                                                        $239.98
- --------------------------------------------------------------------------------------------------------------------
11/1/93                Display monitors and controller cards                                               $190.00
- --------------------------------------------------------------------------------------------------------------------
11/9/93                Seagate disk drive                                                                $1,945.00
- --------------------------------------------------------------------------------------------------------------------
11/10/93               7 Desktop modems                                                                  $2,303.00
- --------------------------------------------------------------------------------------------------------------------
11/12/93               Laser jet printer                                                                 $1,370.00



<PAGE>


Fleet Bank
December 15, 1993
Page 4




- --------------------------------------------------------------------------------------------------------------------
11/23/93               Postscript simm and memory for laser jet printer                                    $384.50
- --------------------------------------------------------------------------------------------------------------------
2/12/93                Configuration equipment                                                          $21,725.00
- --------------------------------------------------------------------------------------------------------------------
2/17/93                Configuration equipment                                                          $22,590.00
- --------------------------------------------------------------------------------------------------------------------
3/8/93                 1 sign and dir. strip                                                               $398.02
- --------------------------------------------------------------------------------------------------------------------
3/30/93                Lobby signage light                                                               $5,000.00
- --------------------------------------------------------------------------------------------------------------------
3/31/93                Configuration equipment                                                          $20,083.00
- --------------------------------------------------------------------------------------------------------------------
3/31/93                Security system                                                                  $12,946.40
- --------------------------------------------------------------------------------------------------------------------
5/7/93                 Marble for lobby                                                                  $1,928.00
- --------------------------------------------------------------------------------------------------------------------
6/30/93                24 Baluns                                                                           $480.00
- --------------------------------------------------------------------------------------------------------------------
1/28/93                FAX machine for SF                                                                $2,523.00
- --------------------------------------------------------------------------------------------------------------------
2/23/93                VMX 200                                                                          $27,500.00
- --------------------------------------------------------------------------------------------------------------------
2/25/93                Copier                                                                           $15,353.10
- --------------------------------------------------------------------------------------------------------------------
3/30/93                Telephone system                                                                 $64,800.00
- --------------------------------------------------------------------------------------------------------------------
3/31/93                42 bulletin boards                                                                $1,627.50
- --------------------------------------------------------------------------------------------------------------------
4/3/93                 Shelving                                                                            $419.00
- --------------------------------------------------------------------------------------------------------------------
5/19/93                Cubicles                                                                         $47,599.32
- --------------------------------------------------------------------------------------------------------------------
6/14/93                Thermobinder                                                                        $995.00
- --------------------------------------------------------------------------------------------------------------------
6/28/93                4 Pictures                                                                        $3,605.00
- --------------------------------------------------------------------------------------------------------------------
7/1/93                 Art posters                                                                       $2,510.00
- --------------------------------------------------------------------------------------------------------------------
7/6/93                 Shelving                                                                            $455.80
- --------------------------------------------------------------------------------------------------------------------
7/29/93                Multiplex slide storage system                                                      $665.00
- --------------------------------------------------------------------------------------------------------------------
8/10/93                4 vases                                                                             $425.00
- --------------------------------------------------------------------------------------------------------------------
8/19/93                Literature rack                                                                     $235.00
- --------------------------------------------------------------------------------------------------------------------
9/10/93                NY Voice Mail                                                                    $13,301.08
- --------------------------------------------------------------------------------------------------------------------
9/19/93                Slide projector and zoom lens for SF                                                $518.99
- --------------------------------------------------------------------------------------------------------------------
10/7/93                Audio Equipment for the video camera                                                $258.01
                       



<PAGE>


Fleet Bank
December 15, 1993
Page 5




- --------------------------------------------------------------------------------------------------------------------
10/13/93               Six desks                                                                         $1,878.00
- --------------------------------------------------------------------------------------------------------------------
10/19/93               Six desks                                                                         $1,878.00
- --------------------------------------------------------------------------------------------------------------------
10/28/93               Overhead projector                                                                  $363.30
- --------------------------------------------------------------------------------------------------------------------
12/8/93                145 office chairs                                                                $18,580.00
- --------------------------------------------------------------------------------------------------------------------
                       TOTAL EQUIPMENT AND FURNITURE                                                   $659,154.58
- --------------------------------------------------------------------------------------------------------------------
SOFTWARE
- --------------------------------------------------------------------------------------------------------------------
1/4/93                 1C++ software                                                                       $396.80
- --------------------------------------------------------------------------------------------------------------------
1/5/93                 1C++ VMS Personal License                                                         $1,280.00
- --------------------------------------------------------------------------------------------------------------------
1/7/93                 MS Video/Windows                                                                    $127.65
- --------------------------------------------------------------------------------------------------------------------
1/11/93                Microsoft software                                                                  $525.00
- --------------------------------------------------------------------------------------------------------------------
1/12/93                Software upgrade                                                                    $299.00
- --------------------------------------------------------------------------------------------------------------------
1/15/93                DCA Remote LAN Node                                                                 $477.00
- --------------------------------------------------------------------------------------------------------------------
1/15/93                BTRIEVE for Windows                                                                 $402.00
- --------------------------------------------------------------------------------------------------------------------
1/15/93                Misc. software                                                                      $741.60
- --------------------------------------------------------------------------------------------------------------------
1/15/93                Windows for workgroups                                                              $207.00
- --------------------------------------------------------------------------------------------------------------------
1/15/93                Misc. software                                                                      $111.45
- --------------------------------------------------------------------------------------------------------------------
1/15/93                Software upgrade                                                                    $129.00
- --------------------------------------------------------------------------------------------------------------------
1/26/93                Config. Admin. Base & License                                                     $1,734.00
- --------------------------------------------------------------------------------------------------------------------
1/28/93                Software disc                                                                       $372.50
- --------------------------------------------------------------------------------------------------------------------
1/29/93                100 Combined site license                                                         $3,250.00
- --------------------------------------------------------------------------------------------------------------------
1/31/93                5 software packages                                                                 $875.00
- --------------------------------------------------------------------------------------------------------------------
2/8/93                 Browse software                                                                      $69.95
- --------------------------------------------------------------------------------------------------------------------
2/8/93                 Perf. monitor license                                                             $3,592.00
- --------------------------------------------------------------------------------------------------------------------
2/19/93                M/S office license                                                                  $398.00
- --------------------------------------------------------------------------------------------------------------------
2/19/93                Appl. Fram (software)                                                               $565.00
- --------------------------------------------------------------------------------------------------------------------
2/23/93                100 licenses for software (After Dark)                                            $1,195.00
- --------------------------------------------------------------------------------------------------------------------
2/25/93                1 SNA 3270                                                                        $3,148.80



<PAGE>


Fleet Bank
December 15, 1993
Page 6




- --------------------------------------------------------------------------------------------------------------------
2/26/93                86 Font licenses                                                                  $3,341.50
- --------------------------------------------------------------------------------------------------------------------
2/26/93                11 software packages                                                              $8,930.10
- --------------------------------------------------------------------------------------------------------------------
3/10/93                Windows Hijack                                                                      $118.35
- --------------------------------------------------------------------------------------------------------------------
3/10/93                10 modems & 6 VGA Graphics                                                        $5,495.00
- --------------------------------------------------------------------------------------------------------------------
3/10/93                4 True type font licenses                                                           $153.40
- --------------------------------------------------------------------------------------------------------------------
3/17/93                Pathworks DOS license                                                               $131.20
- --------------------------------------------------------------------------------------------------------------------
3/25/93                1 DSSI disk                                                                       $3,358.23
- --------------------------------------------------------------------------------------------------------------------
4/7/93                 35 software packages                                                              $6,125.00
- --------------------------------------------------------------------------------------------------------------------
4/7/93                 One Time Charge Programs                                                            $406.00
- --------------------------------------------------------------------------------------------------------------------
4/14/93                1 DSSI disk                                                                       $3,114.88
- --------------------------------------------------------------------------------------------------------------------
4/30/93                Misc. software                                                                      $497.00
- --------------------------------------------------------------------------------------------------------------------
5/11/93                Univel software                                                                     $204.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                Netware Client SDK software                                                         $295.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                LAN Workplace for DOS toolkit                                                       $399.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                Netware NFS software                                                                $500.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                NetWare 250 User software                                                           $500.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                Asynch. Com 16 port                                                                 $200.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                Access Server                                                                       $200.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                LAN Workstation for Windows                                                         $200.00
- --------------------------------------------------------------------------------------------------------------------
5/12/93                Netware for SAA v. 1.3                                                              $200.00
- --------------------------------------------------------------------------------------------------------------------
5/18/93                C++ V/V license                                                                   $7,206.40
- --------------------------------------------------------------------------------------------------------------------
5/24/93                Archserv software                                                                   $431.60
- --------------------------------------------------------------------------------------------------------------------
5/25/93                Novell 3.11 software                                                              $1,277.90
- --------------------------------------------------------------------------------------------------------------------
5/25/93                10-User LAN for DOS Software                                                      $1,261.00
- --------------------------------------------------------------------------------------------------------------------
5/25/93                1 FTP PC/TCP software                                                               $377.80
- --------------------------------------------------------------------------------------------------------------------
5/25/93                10-User NFS Client software                                                         $882.00
- --------------------------------------------------------------------------------------------------------------------
5/26/93                Misc. software                                                                    $2,666.10



<PAGE>


Fleet Bank
December 15, 1993
Page 7




- --------------------------------------------------------------------------------------------------------------------
5/26/93                6 Windows for Workgroups software packages                                          $264.00
- --------------------------------------------------------------------------------------------------------------------
5/28/93                2 HP MS-DOS                                                                         $174.00
- --------------------------------------------------------------------------------------------------------------------
5/28/93                FTP Development Kit                                                                 $433.35
- --------------------------------------------------------------------------------------------------------------------
7/2/93                 Misc. software                                                                      $595.00
- --------------------------------------------------------------------------------------------------------------------
7/15/93                Arcserv software                                                                  $1,454.00
- --------------------------------------------------------------------------------------------------------------------
8/3/93                 Script moudule                                                                      $395.00
- --------------------------------------------------------------------------------------------------------------------
8/4/93                 ProComm plus for Windows                                                             $94.99
- --------------------------------------------------------------------------------------------------------------------
8/4/93                 C software                                                                          $487.50
- --------------------------------------------------------------------------------------------------------------------
8/6/93                 PL/I to C software translator                                                       $875.00
- --------------------------------------------------------------------------------------------------------------------
10/1/93                Windows v. 3.1 software                                                              $89.99
- --------------------------------------------------------------------------------------------------------------------
10/7/93                VMS source code license                                                           $1,995.00
- --------------------------------------------------------------------------------------------------------------------
10/12/93               CD Rom software                                                                      $60.00
- --------------------------------------------------------------------------------------------------------------------
10/20/93               Net Census License                                                                  $315.00
- --------------------------------------------------------------------------------------------------------------------
10/29/93               Windows Department Kit                                                            $1,950.00
- --------------------------------------------------------------------------------------------------------------------
11/8/93                Clear software                                                                      $229.00
- --------------------------------------------------------------------------------------------------------------------
11/9/93                Misc. software                                                                      $694.00
- --------------------------------------------------------------------------------------------------------------------
11/5/93                Power++ software                                                                    $495.00
- --------------------------------------------------------------------------------------------------------------------
11/11/93               VMS 16 user license                                                               $2,757.60
- --------------------------------------------------------------------------------------------------------------------
                       TOTAL SOFTWARE                                                                   $81,726.64
- --------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------
                       TOTAL                                                                           $740,881.22
====================================================================================================================

</TABLE>

         Please prepare the appropriate documents for a term loan amount of
$620,000, which is based on 80% of the total assets listed in this letter plus
the outstanding balance of $27,500 on our Shawmut note due September 1994.





         Thanks very much for your help.

                                   Sincerely,


                                   [Signature of Ira Vishner]
                                   Ira Vishner
                                   Vice President
                                   Corporate Services

IV:jc

Enclosures

