

                                Pegasystems Inc.

                                  Common Stock

                               ---------------


                             Underwriting Agreement

                                                                   July __, 1996

Goldman, Sachs & Co.
Cowen & Company
Montgomery Securities
    As representatives of the several Underwriters
    named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004

Ladies and Gentlemen:

    Pegasystems Inc., a Massachusetts corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
2,700,000 shares and, at the election of the Underwriters, up to 510,000
additional shares of Common Stock, $.01 par value ("Stock") of the Company and
the stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 700,000 shares of Stock. The aggregate
of 3,400,000 shares to be sold by the Company and the Selling Stockholders is
herein called the "Firm Shares" and the aggregate of 510,000 additional shares
to be sold by the Company is herein called the "Optional Shares." The Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are herein collectively called the "Shares."


    1.    (a)   The Company represents and warrants to, and agrees with, each
of the Underwriters that:

          (i) A registration statement on Form S-1 (File No. 333-3751) (the
      "Initial Registration Statement") in respect of the Shares has been filed
      with the Securities and Exchange Commission (the "Commission"); the
      Initial Registration Statement and any post-effective amendment thereto,
      each in the form heretofore delivered to you, and, excluding exhibits
      thereto, to you for each of the other Underwriters, have been declared
      effective by the Commission in such form; other than a registration
      statement, if any, increasing the size of the offering (the "Rule 462(b)
      Registration Statement"), filed pursuant to Rule 462(b) under the
      Securities Act of 1933, as amended (the "Act"), which became effective
      upon filing, no other document with respect to such registration statement
      has heretofore been filed with the

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      Commission; and no stop order suspending the effectiveness of the Initial
      Registration Statement, any post-effective amendment thereto or the Rule
      462(b) Registration Statement, if any, has been issued and no proceeding
      for that purpose has been initiated or threatened by the Commission (any
      preliminary prospectus included in the Initial Registration Statement and
      the Rule 462(b) Registration Statement, if any, or filed with the
      Commission pursuant to Rule 424(a) of the rules and regulations of the
      Commission under the Act is hereinafter called a "Preliminary Prospectus";
      the various parts of the Initial Registration Statement and the Rule
      462(b) Registration Statement, if any, including all exhibits thereto and
      including the information contained in the form of final prospectus filed
      with the Commission pursuant to Rule 424(b) under the Act in accordance
      with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act
      to be part of the Initial Registration Statement at the time it was
      declared effective, each as amended at the time such part of the Initial
      Registration Statement became effective or such part of the Rule 462(b)
      Registration Statement, if any, became or hereafter becomes effective, are
      hereinafter collectively called the "Registration Statement"; and such
      final prospectus, in the form first filed pursuant to Rule 424(b) under
      the Act, is hereinafter called the "Prospectus");

          (ii) No order preventing or suspending the use of any Preliminary
      Prospectus has been issued by the Commission, and each Preliminary
      Prospectus, at the time of filing thereof, conformed in all material
      respects to the requirements of the Act and the rules and regulations of
      the Commission thereunder, and did not contain an untrue statement of a
      material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading; provided,
      however, that this representation and warranty shall not apply to any
      statements or omissions made in reliance upon and in conformity with
      information furnished in writing to the Company by an Underwriter through
      Goldman, Sachs & Co. expressly for use therein or by a Selling Stockholder
      expressly for use in the preparation of the answers therein to Items 7 and
      11(l) of Form S-1;

          (iii) The Registration Statement conforms, and the Prospectus and any
      further amendments or supplements to the Registration Statement or the
      Prospectus will conform, in all material respects to the requirements of
      the Act and the rules and regulations of the Commission thereunder and do
      not and will not, as of the applicable effective date as to the
      Registration Statement and any amendment thereto and as of the applicable
      filing date as to the Prospectus and any amendment or supplement thereto,
      contain an untrue statement of a material fact or omit to state a material
      fact required to be stated therein or necessary to make the statements
      therein not misleading; provided, however, that this representation and
      warranty shall not apply to any statements or omissions made in reliance
      upon and in conformity with information furnished in writing to the
      Company by an Underwriter through Goldman, Sachs & Co. expressly for use
      therein or by a Selling Stockholder expressly for use in the preparation
      of the answers therein to Items 7 and 11(l) of Form S-1;

          (iv) Neither the Company nor any of its subsidiaries has sustained
      since the date of the latest audited financial statements included in the
      Prospectus any material loss or interference with its business from fire,
      explosion, flood or other calamity, whether


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      or not covered by insurance, or from any labor dispute or court or
      governmental action, order or decree, otherwise than as set forth or
      contemplated in the Prospectus; and, since the respective dates as of
      which information is given in the Registration Statement and the
      Prospectus, there has not been any change in the capital stock or long-
      term debt of the Company or any of its subsidiaries or any material
      adverse change, or any development involving a prospective material
      adverse change, in or affecting the general affairs, management, financial
      position, stockholders' equity or results of operations of the Company and
      its subsidiaries, otherwise than as set forth or contemplated in the
      Prospectus;

          (v) The Company and its subsidiaries do not own any real property; the
      Company and its subsidiaries have good and marketable title to all
      personal property owned by them, in each case free and clear of all liens,
      encumbrances and defects except such as are described in the Prospectus or
      such as do not materially affect the value of such property and do not
      interfere with the use made and proposed to be made of such property by
      the Company and its subsidiaries; and any real property and buildings held
      under lease by the Company and its subsidiaries are held by them under
      valid, subsisting and enforceable leases with such exceptions as are not
      material and do not interfere with the use made and proposed to be made of
      such property and buildings by the Company and its subsidiaries;

          (vi) The Company has been duly incorporated and is validly existing as
      a corporation in good standing under the laws of the Commonwealth of
      Massachusetts, with power and authority (corporate and other) to own its
      properties and conduct its business as described in the Prospectus, and
      has been duly qualified as a foreign corporation for the transaction of
      business and is in good standing under the laws of each other jurisdiction
      in which it owns or leases properties or conducts any business so as to
      require such qualification, or is subject to no material liability or
      disability by reason of the failure to be so qualified in any such
      jurisdiction; and each subsidiary of the Company has been duly
      incorporated and is validly existing as a corporation in good standing
      under the laws of its jurisdiction of incorporation;

          (vii) The Company has an authorized capitalization as set forth in the
      Prospectus, and all of the issued shares of capital stock of the Company
      have been duly and validly authorized and issued, are fully paid and non-
      assessable and conform to the description of the Stock contained in the
      Prospectus; and all of the issued shares of capital stock of each
      subsidiary of the Company have been duly and validly authorized and
      issued, are fully paid and non-assessable and (except for directors'
      qualifying shares) are owned directly or indirectly by the Company, free
      and clear of all liens, encumbrances, equities or claims;

          (viii) The unissued Shares to be issued and sold by the Company to the
      Underwriters hereunder have been duly and validly authorized and, when
      issued and delivered against payment therefor as provided herein, will be
      duly and validly issued and fully paid and non-assessable and will conform
      to the description of the Stock contained in the Prospectus;

          (ix) The issue and sale of the Shares to be sold by the Company and
      the compliance by the Company with all of the provisions of this Agreement
      and the consummation of the transactions herein contemplated will not
      conflict with or result

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      in a breach or violation of any of the terms or provisions of, or
      constitute a default under, any indenture, mortgage, deed of trust, loan
      agreement or other agreement or instrument to which the Company or any of
      its subsidiaries is a party or by which the Company or any of its
      subsidiaries is bound or to which any of the property or assets of the
      Company or any of its subsidiaries is subject, nor will such action result
      in any violation of the provisions of the Articles of Organization or By-
      laws of the Company or any statute or any order, rule or regulation of any
      court or governmental agency or body having jurisdiction over the Company
      or any of its subsidiaries or any of their properties; and no consent,
      approval, authorization, order, registration or qualification of or with
      any such court or governmental agency or body is required for the issue
      and sale of the Shares or the consummation by the Company of the
      transactions contemplated by this Agreement, except the registration under
      the Act of the Shares and such consents, approvals, authorizations,
      registrations or qualifications as may be required under state securities
      or Blue Sky laws in connection with the purchase and distribution of the
      Shares by the Underwriters or under the rules of the National Association
      of Securities Dealers, Inc.;

          (x) Neither the Company nor any of its subsidiaries is in violation of
      its Articles of Organization or By-laws (or other charter documents) or in
      default in the performance or observance of any material obligation,
      agreement, covenant or condition contained in any indenture, mortgage,
      deed of trust, loan agreement, lease or other agreement or instrument to
      which it is a party or by which it or any of its properties may be bound;

          (xi) The statements set forth in the Prospectus under the caption
      "Description of Capital Stock", insofar as they purport to constitute a
      summary of the terms of the Stock and under the caption "Underwriting",
      insofar as they purport to describe the provisions of the laws and
      documents referred to therein, are accurate, complete and fair;

          (xii) There are no legal or governmental proceedings pending to which
      the Company or any of its subsidiaries is a party or of which any property
      of the Company or any of its subsidiaries is the subject which, if
      determined adversely to the Company or any of its subsidiaries, would
      individually or in the aggregate have a material adverse effect on the
      current or future consolidated financial position, stockholders' equity or
      results of operations of the Company and its subsidiaries taken as a
      whole; and, to the best of the Company's knowledge, no such proceedings
      are threatened or contemplated by governmental authorities or threatened
      by others;

          (xiii) The Company is not and, after giving effect to the offering and
      sale of the Shares, will not be an "investment company" or an entity
      controlled by an "investment company", as such terms are defined in the
      Investment Company Act of 1940, as amended (the "Investment Company Act");

          (xiv) Neither the Company nor any of its affiliates does business with
      the government of Cuba or with any person or affiliate located in Cuba
      within the meaning of Section 517.075, Florida Statutes;


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<PAGE>

          (xv) Ernst & Young LLP, who have certified certain financial
      statements of the Company and its subsidiaries, are independent public
      accountants as required by the Act and the rules and regulations of the
      Commission thereunder; and

          (xvi) To the best of the Company's knowledge, each of the Company and
      its subsidiaries owns, is licensed to use or otherwise possesses adequate
      rights to use all material patents, patent rights, inventions, trade
      secrets, know-how, trademarks, service marks, trade names and copyrights
      described or referred to in the Prospectus as owned or used by it or which
      are necessary for the conduct of its businesses as described in the
      Prospectus; and the Company has not received any notice of, and has no
      knowledge of, any infringement of or conflict with asserted rights of
      others with respect to any patent, patent rights, inventions, trade
      secrets, know-how, trademarks, service marks, trade names or copyrights.

      (b) Each of the Selling Stockholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:

            (i) All consents, approvals, authorizations and orders necessary for
      the execution and delivery by such Selling Stockholder of this Agreement
      and the Power of Attorney and the Custody Agreement hereinafter referred
      to, and for the sale and delivery of the Shares to be sold by such Selling
      Stockholder hereunder, have been obtained; and such Selling Stockholder
      has full right, power and authority to enter into this Agreement, the
      Power of Attorney and the Custody Agreement and to sell, assign, transfer
      and deliver the Shares to be sold by such Selling Stockholder hereunder;

            (ii) The sale of the Shares to be sold by such Selling Stockholder
      hereunder and the compliance by such Selling Stockholder with all of the
      provisions of this Agreement, the Power of Attorney and the Custody
      Agreement and the consummation of the transactions herein and therein
      contemplated will not conflict with or result in a breach or violation of
      any of the terms or provisions of, or constitute a default under, any
      statute, indenture, mortgage, deed of trust, loan agreement or other
      agreement or instrument to which such Selling Stockholder is a party or by
      which such Selling Stockholder is bound or to which any of the property or
      assets of such Selling Stockholder is subject, nor will such action result
      in any violation of any statute or any order, rule or regulation of any
      court or governmental agency or body having jurisdiction over such Selling
      Stockholder or the property of such Selling Stockholder;

            (iii) Such Selling Stockholder has, and immediately prior to each
      Time of Delivery (as defined in Section 4 hereof) such Selling Stockholder
      will have, good and valid title to the Shares to be sold by such Selling
      Stockholder hereunder, free and clear of all liens, encumbrances, equities
      or claims; and, upon delivery of such Shares and payment therefor pursuant
      hereto, good and valid title to such Shares, free and clear of all liens,
      encumbrances, equities or claims, will pass to the several Underwriters;

            (iv) During the period beginning from the date hereof and continuing
      to and including the date 180 days after the date of the Prospectus, such
      Selling Stockholder shall not offer, sell, contract to sell or otherwise
      dispose of, except as


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<PAGE>

      provided hereunder, any Stock, or any securities of the Company that are
      substantially similar to the Shares, including but not limited to any
      securities that are convertible into or exchangeable for, or that
      represent the right to receive, Stock or any such substantially similar
      securities (other than pursuant to employee stock option plans existing on
      the date of this Agreement), without your prior written consent;

            (v) Such Selling Stockholder has not taken and will not take,
      directly or indirectly, any action which is designed to or which has
      constituted or which might reasonably be expected to cause or result in
      stabilization or manipulation of the price of any security of the Company
      to facilitate the sale or resale of the Shares;

            (vi) To the extent that any statements or omissions made in the
      Registration Statement, any Preliminary Prospectus, the Prospectus or any
      amendment or supplement thereto are made in reliance upon and in
      conformity with written information furnished to the Company by such
      Selling Stockholder expressly for use therein, such Preliminary Prospectus
      and the Registration Statement did, and the Prospectus and any further
      amendments or supplements to the Registration Statement and the
      Prospectus, when they become effective or are filed with the Commission,
      as the case may be, will conform in all material respects to the
      requirements of the Act and the rules and regulations of the Commission
      thereunder and will not contain any untrue statement of a material fact or
      omit to state any material fact required to be stated therein or necessary
      to make the statements therein not misleading;

            (vii) In order to document the Underwriters' compliance with the
      reporting and withholding provisions of the Tax Equity and Fiscal
      Responsibility Act of 1982 with respect to the transactions herein
      contemplated, such Selling Stockholder will deliver to you prior to or at
      the First Time of Delivery (as hereinafter defined) a properly completed
      and executed United States Treasury Department Form W-9 (or other
      applicable form or statement specified by Treasury Department regulations
      in lieu thereof);

            (viii) Certificates in negotiable form representing all of the
      Shares to be sold by such Selling Stockholder hereunder, or stock option
      agreements, accompanied by duly completed notices of exercise for all of
      the Shares to be sold by such Selling Stockholder hereunder, and the
      exercise price therefor, have been placed in custody under a Custody
      Agreement, in the form heretofore furnished to you (the "Custody
      Agreement"), duly executed and delivered by such Selling Stockholder to
      Choate, Hall & Stewart, as custodian (the "Custodian"), and such Selling
      Stockholder has duly executed and delivered a Power of Attorney, in the
      form heretofore furnished to you (the "Power of Attorney"), appointing the
      persons indicated in Schedule II hereto, and each of them, as such Selling
      Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority
      to execute and deliver this Agreement on behalf of such Selling
      Stockholder, to determine the purchase price to be paid by the
      Underwriters to the Selling Stockholders as provided in Section 2 hereof,
      to authorize the delivery of the Shares to be sold by such Selling
      Stockholder hereunder and otherwise to act on behalf of such Selling
      Stockholder in connection with the transactions contemplated by this
      Agreement and the Custody Agreement; and


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<PAGE>


            (ix) The Shares represented by the certificates and the notices of
      exercise of options, accompanied by the exercise price therefor, each as
      held in custody for such Selling Stockholder under the Custody Agreement,
      are subject to the interests of the Underwriters hereunder; the
      arrangements made by such Selling Stockholder for such custody, and the
      appointment by such Selling Stockholder of the Attorneys-in-Fact by the
      Power of Attorney, are to that extent irrevocable; the obligations of the
      Selling Stockholders hereunder shall not be terminated by operation of
      law, whether by the death or incapacity of any individual Selling
      Stockholder or, in the case of an estate or trust, by the death or
      incapacity of any executor or trustee or the termination of such estate or
      trust, or in the case of a partnership or corporation, by the dissolution
      of such partnership or corporation, or by the occurrence of any other
      event; if any individual Selling Stockholder or any such executor or
      trustee should die or become incapacitated, or if any such estate or trust
      should be terminated, or if any such partnership or corporation should be
      dissolved, or if any other such event should occur, before the delivery of
      the Shares hereunder, certificates representing the Shares shall be
      delivered by or on behalf of the Selling Stockholders in accordance with
      the terms and conditions of this Agreement and of the Custody Agreements;
      and actions taken by the Attorneys-in-Fact pursuant to the Powers of
      Attorney shall be as valid as if such death, incapacity, termination,
      dissolution or other event had not occurred, regardless of whether or not
      the Custodian, the Attorneys-in-Fact, or any of them, shall have received
      notice of such death, incapacity, termination, dissolution or other event.

    2. Subject to the terms and conditions herein set forth, (a) the Company and
each of the Selling Stockholders agree, severally and not jointly, to sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and each of the Selling Stockholders, at a
purchase price per share of $.............., the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Shares to be sold by the Company and each of the Selling
Stockholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all of the Underwriters from the
Company and all of the Selling Stockholders hereunder and (b) in the event and
to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.

    The Company hereby grants to the Underwriters the right to purchase at their
election up to 510,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to


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<PAGE>


the Company, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.

    3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.

    4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co., for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer or certified or
official bank check or checks, payable to the order of the Company and the
Custodian in federal (same day) funds. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York time, on
July __, 1996 or such other time and date as Goldman, Sachs & Co., the Company
and the Selling Stockholders may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".

    (b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, and the check or checks specified in subsection
(a) above, if any, will be delivered at the offices of Hale and Dorr, 60 State
Street, Boston, Massachusetts 02109 (the "Closing Location"), and the Shares
will be delivered at the Designated Office, all at such Time of Delivery. A
meeting will be held at the Closing Location at .......p.m., New York City time,
on the New York Business Day next preceding such Time of Delivery, at which
meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.


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<PAGE>


    5.   The Company agrees with each of the Underwriters:

        (a) To prepare the Prospectus in a form approved by you and to file such
    Prospectus pursuant to Rule 424(b) under the Act not later than the
    Commission's close of business on the second business day following the
    execution and delivery of this Agreement, or, if applicable, such earlier
    time as may be required by Rule 430A(a)(3) under the Act; to make no further
    amendment or any supplement to the Registration Statement or Prospectus
    prior to the last Time of Delivery which shall be disapproved by you
    promptly after reasonable notice thereof; to advise you, promptly after it
    receives notice thereof, of the time when any amendment to the Registration
    Statement has been filed or becomes effective or any supplement to the
    Prospectus or any amended Prospectus has been filed and to furnish you with
    copies thereof; to advise you, promptly after it receives notice thereof, of
    the issuance by the Commission of any stop order or of any order preventing
    or suspending the use of any Preliminary Prospectus or prospectus, of the
    suspension of the qualification of the Shares for offering or sale in any
    jurisdiction, of the initiation or threatening of any proceeding for any
    such purpose, or of any request by the Commission for the amending or
    supplementing of the Registration Statement or Prospectus or for additional
    information; and, in the event of the issuance of any stop order or of any
    order preventing or suspending the use of any Preliminary Prospectus or
    prospectus or suspending any such qualification, promptly to use its best
    efforts to obtain the withdrawal of such order;

        (b) Promptly from time to time to take such action as you may reasonably
    request to qualify the Shares for offering and sale under the securities
    laws of such jurisdictions as you may request and to comply with such laws
    so as to permit the continuance of sales and dealings therein in such
    jurisdictions for as long as may be necessary to complete the distribution
    of the Shares, provided that in connection therewith the Company shall not
    be required to qualify as a foreign corporation or to file a general consent
    to service of process in any jurisdiction;

        (c) Prior to 12:00 p.m., New York City time, on the New York Business
    Day next succeeding the date of this Agreement and from time to time, to
    furnish the Underwriters with copies of the Prospectus in New York City in
    such quantities as you may reasonably request, and, if the delivery of a
    prospectus is required at any time prior to the expiration of nine months
    after the time of issue of the Prospectus in connection with the offering or
    sale of the Shares and if at such time any events shall have occurred as a
    result of which the Prospectus as then amended or supplemented would include
    an untrue statement of a material fact or omit to state any material fact
    necessary in order to make the statements therein, in the light of the
    circumstances under which they were made when such Prospectus is delivered,
    not misleading, or, if for any other reason it shall be necessary during
    such period to amend or supplement the Prospectus in order to comply with
    the Act, to notify you and upon your request to prepare and furnish without
    charge to each Underwriter and to any dealer in securities as many copies as
    you may from time to time reasonably request of an amended Prospectus or a
    supplement to the Prospectus which will correct such statement or omission
    or effect such compliance, and in case any Underwriter is required to
    deliver a prospectus in connection with sales of any of the Shares at any
    time nine months or more after the time of issue of the Prospectus, upon
    your request but at the expense of such Underwriter, to prepare and deliver
    to such Underwriter as many copies as you


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<PAGE>

      may request of an amended or supplemented Prospectus complying with
      Section 10(a)(3) of the Act;

        (d) To make generally available to its securityholders as soon as
    practicable, but in any event not later than eighteen months after the
    effective date of the Registration Statement (as defined in Rule 158(c)
    under the Act), an earnings statement of the Company and its subsidiaries
    (which need not be audited) complying with Section 11(a) of the Act and the
    rules and regulations of the Commission thereunder (including, at the option
    of the Company, Rule 158);

        (e) During the period beginning from the date hereof and continuing to
    and including the date 180 days after the date of the Prospectus, not to
    offer, sell, contract to sell or otherwise dispose of, except as provided
    hereunder, any securities of the Company that are substantially similar to
    the Shares, including but not limited to any securities that are convertible
    into or exchangeable for, or that represent the right to receive, Stock or
    any such substantially similar securities (other than option issuances and
    the issuance of Stock upon the exercise of options pursuant to employee
    stock plans existing on the date of this Agreement), without your prior
    written consent, except that the Company may issue such securities in
    exchange for all of the equity or substantially all of the assets of a
    company in connection with a merger or acquisition, provided that prior to
    any such issuance the recipients of such securities shall have agreed with
    Goldman, Sachs & Co. in writing to be bound by this provision for the
    remainder of the 180-day period;

        (f) To furnish to its stockholders as soon as practicable after the end
    of each fiscal year an annual report (including a balance sheet and
    statements of income, stockholders' equity and cash flows of the Company and
    its consolidated subsidiaries certified by independent public accountants)
    and, as soon as practicable after the end of each of the first three
    quarters of each fiscal year (beginning with the fiscal quarter ending after
    the effective date of the Registration Statement), consolidated summary
    financial information of the Company and its subsidiaries for such quarter
    in reasonable detail;

        (g) During a period of five years from the effective date of the
    Registration Statement, to furnish to you copies of all reports or other
    communications (financial or other) furnished to stockholders, and to
    deliver to you (i) as soon as they are available, copies of any reports and
    financial statements furnished to or filed with the Commission or any
    national securities exchange on which any class of securities of the Company
    is listed; and (ii) such additional information concerning the business and
    financial condition of the Company as you may from time to time reasonably
    request (such financial statements to be on a consolidated basis to the
    extent the accounts of the Company and its subsidiaries are consolidated in
    reports furnished to its stockholders generally or to the Commission);

        (h) To use the net proceeds received by it from the sale of the Shares
    pursuant to this Agreement in the manner specified in the Prospectus under
    the caption "Use of Proceeds";


                                      -10-

<PAGE>

        (i) To use its best efforts to list for quotation the Shares on the
    National Association of Securities Dealers Automated Quotations National
    Market System ("NASDAQ"); and

        (j)   To file with the Commission such reports on Form SR as may be
    required by Rule 463 under the Act; and

        (k) If the Company elects to rely on Rule 462(b), the Company shall file
    a Rule 462(b) Registration Statement with the Commission in compliance with
    Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
    Agreement, and the Company shall at the time of filing either pay to the
    Commission the filing fee for the Rule 462(b) Registration Statement or give
    irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
    under the Act.

    6. (a) The Company covenants and agrees with each Selling Stockholder and
the several Underwriters that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on NASDAQ; and
(v) the filing fees incident to any required review by the National Association
of Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the
cost of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section.

        (b) The Company further covenants and agrees with each of the Selling
Stockholders and the several Underwriters that the Company will pay or cause to
be paid all costs and expenses incident to the performance of such Selling
Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
such Selling Stockholder, (ii) the fees and expenses of the Attorneys-in-Fact
and the Custodian, and (iii) all expenses and taxes incident to the sale and
delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection with clause (iii) of the preceding
sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax,
and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 8 and 11
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.


                                      -11-

<PAGE>

    7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:

        (a) The Prospectus shall have been filed with the Commission pursuant to
    Rule 424(b) within the applicable time period prescribed for such filing by
    the rules and regulations under the Act and in accordance with Section 5(a)
    hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
    Registration Statement shall have become effective by 10:00 p.m.,
    Washington, D.C. time, on the date of this Agreement, no stop order
    suspending the effectiveness of the Registration Statement or any part
    thereof shall have been issued and no proceeding for that purpose shall have
    been initiated or threatened by the Commission; and all requests for
    additional information on the part of the Commission shall have been
    complied with to your reasonable satisfaction;

        (b) Hale and Dorr, counsel for the Underwriters, shall have furnished to
    you such opinion or opinions (a draft of each such written opinion is
    attached as Annex II(a) hereto), dated such Time of Delivery, with respect
    to the matters covered in paragraphs (i), (ii), (vii), (x) and (xii) of
    subsection (c) below as well as such other related matters as you may
    reasonably request, and such counsel shall have received such papers and
    information as they may reasonably request to enable them to pass upon such
    matters;

        (c) Choate, Hall & Stewart, counsel for the Company, shall have
    furnished to you their written opinion (a draft of such opinion is attached
    as Annex II(b) hereto), dated such Time of Delivery, in form and substance
    satisfactory to you, to the effect that:

              (i) The Company has been duly incorporated and is validly existing
        as a corporation in good corporate standing under the laws of The
        Commonwealth of Massachusetts, with corporate power and authority to own
        its properties and conduct its business as described in the Prospectus;

              (ii) The Company has an authorized capitalization as set forth in
        the Prospectus, and all of the issued shares of capital stock of the
        Company (including the Shares being delivered at such Time of Delivery)
        have been duly and validly authorized and issued and are fully paid and
        non-assessable; and the Shares conform to the description of the Stock
        contained in the Prospectus;

              (iii) The Company has been duly qualified as a foreign corporation
        for the transaction of business and is in good standing under the laws
        of each of the States of California, Texas, New York and Illinois, which
        to such counsel's knowledge are the only jurisdictions in which the
        Company owns or leases real property or maintains an office.

              (iv) Each subsidiary of the Company has been duly incorporated and
        is validly existing as a corporation in good corporate standing under
        the laws of its jurisdiction of incorporation; and all of the issued
        shares of capital stock of each



                                      -12-

<PAGE>

        such subsidiary have been duly and validly authorized and issued, are
        fully paid and non-assessable, and (except for directors' qualifying
        shares) are owned directly or indirectly by the Company, free and clear
        of all liens, encumbrances, equities or claims (such counsel being
        entitled to rely in respect of the opinion in this clause upon opinions
        of local counsel and in respect of matters of fact upon certificates of
        officers of the Company or its subsidiaries, provided that such counsel
        shall state that they believe that both you and they are justified in
        relying upon such opinions and certificates);

              (v) Any real property and buildings held under lease by the
        Company and its subsidiaries are held by them under valid, subsisting
        and enforceable (except to the extent that the rights and remedies
        created thereby may be limited by applicable bankruptcy, insolvency,
        reorganization and similar laws affecting rights and remedies of
        creditors and that the remedy of specific performance is subject to the
        discretion of a court) leases with such exceptions as are not material
        and do not interfere with the use made and proposed to be made of such
        property and buildings by the Company and its subsidiaries (in giving
        the opinion in this clause, such counsel may rely in respect of matters
        of fact, upon certificates of officers of the Company or its
        subsidiaries, provided that such counsel shall state that they believe
        that both you and they are justified in relying upon such certificates);

              (vi) To such counsel's knowledge and other than as set forth in
        the Prospectus, there are no legal or governmental proceedings pending
        to which the Company or any of its subsidiaries is a party or of which
        any property of the Company or any of its subsidiaries is the subject
        which would individually or in the aggregate reasonably be expected to
        have a material adverse effect on the current or future consolidated
        financial position, stockholders' equity or results of operations of the
        Company and its subsidiaries; and, to such counsel's knowledge, no such
        proceedings are threatened or contemplated by governmental authorities
        or threatened by others;

              (vii)   This Agreement has been duly authorized, executed and
        delivered by the Company;

              (viii) The issue and sale of the Shares being delivered at such
        Time of Delivery to be sold by the Company and the compliance by the
        Company with all of the provisions of this Agreement and the
        consummation of the transactions herein contemplated will not conflict
        with or result in a breach or violation of any of the terms or
        provisions of, or constitute a default under, any indenture, mortgage,
        deed of trust, loan agreement or other material agreement or instrument
        known to such counsel to which the Company or any of its subsidiaries is
        a party or by which the Company or any of its subsidiaries is bound or
        to which any of the property or assets of the Company or any of its
        subsidiaries is subject, nor will such action result in any violation of
        the provisions of the Articles of Organization or By-laws of the Company
        or any statute or any order, rule or regulation known to such counsel of
        any court or governmental agency or body having jurisdiction over the
        Company or any of its subsidiaries or any of their properties;

              (ix) No consent, approval, authorization, order, registration or
        qualification of or with any such court or governmental agency or body
        is required



                                      -13-

<PAGE>

        for the issue and sale of the Shares or the consummation by the Company
        of the transactions contemplated by this Agreement, except the
        registration under the Act of the Shares, and such consents, approvals,
        authorizations, registrations or qualifications as may be required under
        state securities or Blue Sky laws in connection with the purchase and
        distribution of the Shares by the Underwriters or under the rules of the
        National Association of Securities Dealers, Inc.;

              (x) The statements set forth in the Prospectus under the caption
        "Description of Capital Stock", insofar as they purport to constitute a
        summary of the terms of the Stock and under the caption "Underwriting",
        insofar as they purport to describe the provisions of the laws and
        documents referred to therein, are accurate and complete summaries of
        such terms and provisions in all material respects;

              (xi) The Company is not an "investment company" or an entity
        controlled by an "investment company", as such terms are defined in the
        Investment Company Act; and

              (xii) The Registration Statement and the Prospectus and any
        further amendments and supplements thereto made by the Company prior to
        such Time of Delivery (other than the financial statements and related
        schedules therein, as to which such counsel need express no belief)
        comply as to form in all material respects with the requirements of the
        Act and the rules and regulations thereunder; although they do not
        assume any responsibility for the accuracy, completeness or fairness of
        the statements contained in the Registration Statement or the
        Prospectus, except for those referred to in the opinion in subsection
        (x) of this Section 7(c), no facts have come to their attention that
        have caused them to believe that, as of its effective date, the
        Registration Statement or any further amendment thereto made by the
        Company prior to such Time of Delivery (other than the financial
        statements and related schedules therein, as to which such counsel need
        express no belief) contained an untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or
        necessary to make the statements therein not misleading or that, as of
        its date, the Prospectus or any further amendment or supplement thereto
        made by the Company prior to such Time of Delivery (other than the
        financial statements and related schedules therein, as to which such
        counsel need express no belief) contained an untrue statement of a
        material fact or omitted to state a material fact necessary to make the
        statements therein, in the light of the circumstances under which they
        were made, not misleading or that, as of such Time of Delivery, either
        the Registration Statement or the Prospectus or any further amendment or
        supplement thereto made by the Company prior to such Time of Delivery
        (other than the financial statements and related schedules therein, as
        to which such counsel need express no belief) contains an untrue
        statement of a material fact or omits to state a material fact necessary
        to make the statements therein, in the light of the circumstances under
        which they were made, not misleading; and they do not know of any
        amendment to the Registration Statement required to be filed or of any
        contracts or other documents of a character required to be filed as an
        exhibit to the Registration Statement or required to be described in the
        Registration Statement or the Prospectus which are not filed or
        described as required.



                                      -14-

<PAGE>

        (d) Choate, Hall & Stewart, counsel for each of the Selling
    Stockholders, shall have furnished to you their written opinion with respect
    to each of the Selling Stockholders (such opinion to be incorporated in the
    opinion attached as Annex II(b) hereto), dated such Time of Delivery, in
    form and substance satisfactory to you, to the effect that:

              (i) A Power of Attorney and a Custody Agreement have been duly
        executed and delivered by such Selling Stockholder and constitute valid
        and binding agreements of such Selling Stockholder in accordance with
        their terms (except to the extent that the rights and remedies created
        thereby may be limited by applicable bankruptcy, insolvency,
        reorganization and similar laws affecting rights and remedies of
        creditors and that the remedy of specific performance is subject to the
        discretion of a court);

              (ii) This Agreement has been duly executed and delivered by or on
        behalf of such Selling Stockholder; and the sale of the Shares to be
        sold by such Selling Stockholder hereunder and the compliance by such
        Selling Stockholder with all of the provisions of this Agreement, the
        Power of Attorney and the Custody Agreement and the consummation of the
        transactions herein and therein contemplated will not conflict with or
        result in a breach or violation of any terms or provisions of, or
        constitute a default under, any statute, indenture, mortgage, deed of
        trust, loan agreement or other agreement or instrument known to such
        counsel to which such Selling Stockholder is a party or by which such
        Selling Stockholder is bound or to which any of the property or assets
        of such Selling Stockholder is subject, nor will such action result in
        any violation of any order, rule or regulation known to such counsel of
        any court or governmental agency or body having jurisdiction over such
        Selling Stockholder or the property of such Selling Stockholder;

              (iii) No consent, approval, authorization or order of any court or
        governmental agency or body is required for the consummation of the
        transactions contemplated by this Agreement in connection with the
        Shares to be sold by such Selling Stockholder hereunder, except such as
        have been obtained under the Act and such as may be required under state
        securities or Blue Sky laws in connection with the purchase and
        distribution of such Shares by the Underwriters or under the rules of
        the National Association of Securities Dealers, Inc.;

              (iv) Immediately prior to such Time of Delivery, such Selling
        Stockholder was the sole registered and, to such counsel's knowledge,
        beneficial, owner of the Shares to be sold at such Time of Delivery by
        such Selling Stockholder under this Agreement, and, to such counsel's
        knowledge, had full right, power and authority to sell, assign, transfer
        and deliver the Shares to be sold by such Selling Stockholder hereunder;
        and

              (v) Immediately prior to the Time of Delivery, each Selling
        Stockholder was the sole registered owner of the Shares to be sold by
        such Selling Stockholder. Upon registration of the Shares in the names
        of the Underwriters in the stock records of the Company, the
        Underwriters will have acquired the Shares, free and clear of any liens,
        encumbrances, equities or claims (assuming that the Underwriters are
        without notice of any adverse claim, as defined in the Uniform


                                      -15-

<PAGE>

        Commercial Code, and are otherwise bona fide purchasers for the purposes
        of the Code and that such Underwriters' rights are not limited by
        subsection (4) of Section 8-302 of the Uniform Commercial Code).

        (e) On the date of the Prospectus at a time prior to the execution of
    this Agreement, at 9:30 a.m., New York City time, on the effective date of
    any post-effective amendment to the Registration Statement filed subsequent
    to the date of this Agreement and also at each Time of Delivery, Ernst &
    Young LLP shall have furnished to you a letter or letters, dated the
    respective dates of delivery thereof, in form and substance satisfactory to
    you, to the effect set forth in Annex I hereto (the executed copy of the
    letter delivered prior to the execution of this Agreement is attached as
    Annex I(d) hereto and a draft of the form of letter to be delivered on the
    effective date of any post-effective amendment to the Registration Statement
    and as of each Time of Delivery is attached as Annex I(e) hereto);

        (f)(i) Neither the Company nor any of its subsidiaries shall have
    sustained since the date of the latest audited financial statements included
    in the Prospectus any loss or interference with its business from fire,
    explosion, flood or other calamity, whether or not covered by insurance, or
    from any labor dispute or court or governmental action, order or decree,
    otherwise than as set forth or contemplated in the Prospectus, and (ii)
    since the respective dates as of which information is given in the
    Prospectus there shall not have been any change in the capital stock (other
    than as a result of the exercise of stock options) or long-term debt of the
    Company or any of its subsidiaries or any change, or any development
    involving a prospective change, in or affecting the general affairs,
    management, financial position, stockholders' equity or results of
    operations of the Company and its subsidiaries, otherwise than as set forth
    or contemplated in the Prospectus, the effect of which, in any such case
    described in clause (i) or (ii), is in the judgment of the Representatives
    so material and adverse as to make it impracticable or inadvisable to
    proceed with the public offering or the delivery of the Shares being
    delivered at such Time of Delivery on the terms and in the manner
    contemplated in the Prospectus;

        (g) On or after the date hereof there shall not have occurred any of the
    following: (i) a suspension or material limitation in trading in securities
    generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
    material limitation in trading in the Company's securities on NASDAQ; (iii)
    a general moratorium on commercial banking activities declared by either
    Federal or New York or Massachusetts State authorities; or (iv) the outbreak
    or escalation of hostilities involving the United States or the declaration
    by the United States of a national emergency or war, if the effect of any
    such event specified in this clause (iv) in the judgment of the
    Representatives makes it impracticable or inadvisable to proceed with the
    public offering or the delivery of the Shares being delivered at such Time
    of Delivery on the terms and in the manner contemplated in the Prospectus;

        (h)   The Shares at the such Time of Delivery shall have been duly
    listed for quotation on NASDAQ;

        (i) The Company has obtained and delivered to the Underwriters executed
    copies of an agreement from each stockholder of the Company substantially to
    the


                                      -16-

<PAGE>

    effect set forth in Subsection 1(b)(iv) hereof in form and substance
    satisfactory to you; and

        (j) The Company and the Selling Stockholders shall have furnished or
    caused to be furnished to you at such Time of Delivery certificates of
    officers of the Company and of the Selling Stockholders, respectively,
    satisfactory to you as to the accuracy of the representations and warranties
    of the Company and the Selling Stockholders, respectively, herein at and as
    of such Time of Delivery, as to the performance by the Company and the
    Selling Stockholders of all of their respective obligations hereunder to be
    performed at or prior to such Time of Delivery, and as to such other matters
    as you may reasonably request, and the Company shall have furnished or
    caused to be furnished certificates as to the matters set forth in
    subsections (a) and (f) of this Section; and

        (k) The Company shall have complied with the provisions of Section 5(c)
    hereof with respect to the furnishing of prospectuses on the New York
    Business Day next succeeding the date of this Agreement.

   
    8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company and the Selling Stockholders shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; provided further, that
the liability of a Selling Stockholder pursuant to this subsection (a) shall not
exceed the product of the number of Shares sold by such Selling Stockholder and
the initial public offering price of the Shares as set forth in the Prospectus.
    

    (b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary


                                      -17-

<PAGE>

Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.

    (c) Promptly (but in any event within 30 days) after receipt by an
indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof. No
indemnification under subsection (a) or (b) above shall be available to any
party who shall so fail to give such notice if the party to whom such notice was
not given was unaware of the action to which the notice would have related and
was prejudiced by the failure to give the notice, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.

    (d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.  The relative
benefits received by the



                                      -18-

<PAGE>

   
Company and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company and the
Selling Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint. Notwithstanding the foregoing, the liability of a
Selling Stockholder pursuant to this subsection(d) shall not exceed the product
of the number of Shares sold by such Selling Stockholder and the initial public
offering price of the Shares as set forth in the Prospectus.
    

    (e) The obligations of the Company and the Selling Stockholders under this
Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.

    9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Selling Stockholders shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company and the
Selling Stockholders that you



                                      -19-

<PAGE>

have so arranged for the purchase of such Shares, or the Company and the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Company and the Selling Stockholders shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.

    (b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non- defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

    (c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholders to sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

    10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.

    11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not



                                      -20-

<PAGE>

delivered by or on behalf of the Company and the Selling Stockholders as
provided herein, the Company and each of the defaulting Selling Stockholders, if
any, pro rata (with the Company's portion based on the number of Shares to be
sold by the Company and all non-defaulting Selling Stockholders hereunder and
the defaulting Selling Stockholder's portion based on the number of Shares to be
sold by such defaulting Selling Stockholder, if any, hereunder) will reimburse
the Underwriters through you for all out-of-pocket expenses approved in writing
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.

    12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys- in-Fact for such Selling Stockholder.

    All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: President; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you on request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.

    13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.

    14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.

    15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.



                                      -21-

<PAGE>

    16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.

    If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholders for examination, upon
request, but without warranty on your part as to the authority of the signers
thereof.

    Any person executing and delivering this Agreement as Attorney-in-Fact for a
Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power-of-Attorney which authorizes such Attorney-in-Fact to take such
action.

                                        Very truly yours,


                                        PEGASYSTEMS INC.

                                        By:
                                           --------------------------------
                                            Name:
                                            Title:

                                        THE PERSONS LISTED AS SELLING
                                        STOCKHOLDERS ON SCHEDULE II HERETO


                                        By:
                                           -------------------------------
                                            Name:
                                            Title:

                                        As Attorney-in-Fact acting on behalf of
                                        each of the Selling Stockholders named
                                        in Schedule II to this Agreement.



                                      -22-

<PAGE>


Accepted as of the date hereof at ....,

    .................................:

Goldman, Sachs & Co.
Cowen & Company
Montgomery Securities

By:
   -------------------------------
        (Goldman, Sachs & Co.)

On behalf of each of the Underwriters



                                      -23-

<PAGE>


                                   SCHEDULE I


                                                           Number of Optional
                                   Total Number of        Shares to be Purchased
                                     Firm Shares               if Maximum
          Underwriter              to be Purchased           Option Exercised



































Total



                                      -24-

<PAGE>



                                   SCHEDULE II

                                                            Number of Optional
                                      Total Number of     Shares to be Purchased
                                       Firm Shares             if Maximum
                                      to be Purchased       Option Exercised

The Company .....................       2,700,000               510,000

The Selling Stockholders(a) .....                                             
Alan Trefler ....................         385,900                    --
Joseph J. Friscia ...............          90,000                    --
Michael R. Pyle .................          64,800                    --
Ira Vishner .....................          69,300                    --
Kenneth W. Olson                           90,000                    --
                                        ---------               -------
Total                                   3,400,000               510,000

(a) All Selling Stockholders are represented by Choate, Hall & Stewart and have
appointed Alan Trefler and Ira Vishner, and each of them, as the
Attorneys-in-Fact for such Selling Stockholder.






                                      -25-

<PAGE>



                                                                         ANNEX I


    Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:

          (i) They are independent certified public accountants with respect to
    the Company and its subsidiaries within the meaning of the Act and the
    applicable published rules and regulations thereunder;

          (ii) In their opinion, the financial statements and any supplementary
    financial information and schedules (and, if applicable, financial forecasts
    and/or pro forma financial information) examined by them and included in the
    Prospectus or the Registration Statement comply as to form in all material
    respects with the applicable accounting requirements of the Act and the
    related published rules and regulations thereunder; and they have made a
    review in accordance with standards established by the American Institute of
    Certified Public Accountants of the unaudited consolidated interim financial
    statements, selected financial data, pro forma financial information,
    financial forecasts and/or condensed financial statements derived from
    audited financial statements of the Company for the periods specified in
    such letter, as indicated in their reports thereon, copies of which have
    been separately furnished to the representatives of the Underwriters (the
    "Representatives");

          (iii) They have made a review in accordance with standards established
    by the American Institute of Certified Public Accountants of the unaudited
    condensed consolidated statements of income, consolidated balance sheets and
    consolidated statements of cash flows included in the Prospectus as
    indicated in their reports thereon copies of which have been separately
    furnished to the Representatives and on the basis of specified procedures
    including inquiries of officials of the Company who have responsibility for
    financial and accounting matters regarding whether the unaudited condensed
    consolidated financial statements referred to in paragraph (vi)(A)(i) below
    comply as to form in all material respects with the applicable accounting
    requirements of the Act and the related published rules and regulations,
    nothing came to their attention that caused them to believe that the
    unaudited condensed consolidated financial statements do not comply as to
    form in all material respects with the applicable accounting requirements of
    the Act and the related published rules and regulations;

          (iv) They have compared the information in the Prospectus under
    selected captions with the disclosure requirements of Regulation S-K and on
    the basis of limited procedures specified in such letter nothing came to
    their attention as a result of the foregoing procedures that caused them to
    believe that this information does not conform in all material respects with
    the disclosure requirements of Items 301, 302, 402 and 503(d), respectively,
    of Regulation S-K;

          (v) On the basis of limited procedures, not constituting an
    examination in accordance with generally accepted auditing standards,
    consisting of a reading of the unaudited financial statements and other
    information referred to below, a reading of the latest available interim
    financial statements of the Company and its subsidiaries, inspection of the
    minute books of the Company and its subsidiaries since the date of the
    latest audited financial statements included in the Prospectus, inquiries of
    officials of the

<PAGE>

      Company and its subsidiaries responsible for financial and accounting
      matters and such other inquiries and procedures as may be specified in
      such letter, nothing came to their attention that caused them to believe
      that:

                (A) (i) the unaudited consolidated statements of income,
          consolidated balance sheets and consolidated statements of cash flows
          included in the Prospectus do not comply as to form in all material
          respects with the applicable accounting requirements of the Act and
          the related published rules and regulations, or (ii) any material
          modifications should be made to the unaudited condensed consolidated
          statements of income, consolidated balance sheets and consolidated
          statements of cash flows included in the Prospectus for them to be in
          conformity with generally accepted accounting principles;

                (B) any other unaudited income statement data and balance sheet
          items included in the Prospectus do not agree with the corresponding
          items in the unaudited consolidated financial statements from which
          such data and items were derived, and any such unaudited data and
          items were not determined on a basis substantially consistent with the
          basis for the corresponding amounts in the audited consolidated
          financial statements included in the Prospectus;

                (C) the unaudited financial statements which were not included
          in the Prospectus but from which were derived any unaudited condensed
          financial statements referred to in Clause (A) and any unaudited
          income statement data and balance sheet items included in the
          Prospectus and referred to in Clause (B) were not determined on a
          basis substantially consistent with the basis for the audited
          consolidated financial statements included in the Prospectus;

                (D) any unaudited pro forma consolidated condensed financial
          statements included in the Prospectus do not comply as to form in all
          material respects with the applicable accounting requirements of the
          Act and the published rules and regulations thereunder or the pro
          forma adjustments have not been properly applied to the historical
          amounts in the compilation of those statements;

                (E) as of a specified date not more than five days prior to the
          date of such letter, there have been any changes in the consolidated
          capital stock (other than issuances of capital stock upon exercise of
          options which were outstanding on the date of the latest financial
          statements included in the Prospectus) or any increase in the
          consolidated long-term debt of the Company and its subsidiaries, or
          any decreases in consolidated net current assets or stockholders'
          equity or other items specified by the Representatives, or any
          increases in any items specified by the Representatives, in each case
          as compared with amounts shown in the latest balance sheet included in
          the Prospectus, except in each case for changes, increases or
          decreases which the Prospectus discloses have occurred or may occur or
          which are described in such letter; and

                (F) for the period from the date of the latest financial
          statements included in the Prospectus to the specified date referred
          to in Clause (E) there were any decreases in consolidated net revenues
          or operating profit or the total or per share amounts of consolidated
          net income or other items specified by the

<PAGE>

          Representatives, or any increases in any items specified by the
          Representatives, in each case as compared with the comparable period
          of the preceding year and with any other period of corresponding
          length specified by the Representatives, except in each case for
          decreases or increases which the Prospectus discloses have occurred or
          may occur or which are described in such letter; and

        (vi) In addition to the examination referred to in their report(s)
    included in the Prospectus and the limited procedures, inspection of minute
    books, inquiries and other procedures referred to in paragraphs (iii) and
    (vi) above, they have carried out certain specified procedures, not
    constituting an examination in accordance with generally accepted auditing
    standards, with respect to certain amounts, percentages and financial
    information specified by the Representatives, which are derived from the
    general accounting records of the Company and its subsidiaries, which appear
    in the Prospectus, or in Part II of, or in exhibits and schedules to, the
    Registration Statement specified by the Representatives, and have compared
    certain of such amounts, percentages and financial information with the
    accounting records of the Company and its subsidiaries and have found them
    to be in agreement.

