<SUBMISSION>
<ACCESSION-NUMBER>0001299933-05-006539
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20051208
<ITEMS>1.01
<ITEMS>9.01
<FILING-DATE>20051214
<DATE-OF-FILING-DATE-CHANGE>20051214
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PEGASYSTEMS INC
<CIK>0001013857
<ASSIGNED-SIC>7374
<IRS-NUMBER>042787865
<STATE-OF-INCORPORATION>MA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-11859
<FILM-NUMBER>051263349
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>101 MAIN ST
<CITY>CAMBRIDGE
<STATE>MA
<ZIP>02142-1590
<PHONE>6173749600
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>101 MAIN ST
<CITY>CAMBRIDGE
<STATE>MA
<ZIP>02142-1590
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>htm_8906.htm
<DESCRIPTION>LIVE FILING
<TEXT>
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<TITLE> Pegasystems Inc.  (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	December 8, 2005
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	Pegasystems Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Massachusetts
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	1-11859
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	04-2787865
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_____________________<BR>
	(State or other jurisdiction
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_____________<BR>
	(Commission
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______________<BR>
	(I.R.S. Employer
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	of incorporation)
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	File Number)
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	Identification No.)
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	101 Main Street, Cambridge, Massachusetts
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	02142
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_________________________________<BR>
	(Address of principal executive offices)
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	&nbsp;
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___________<BR>
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	Registrant&#146;s telephone number, including area code:
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	617-374-9600
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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<P><FONT SIZE="2">
[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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	Item 1.01 Entry into a Material Definitive Agreement.
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On December 8, 2005, the Compensation Committee of the Board of Directors of Pegasystems Inc. (the "Company") approved the 2006 Section 16 Officers Corporate Incentive Compensation Plan (the "Incentive Plan"), along with the incentive bonus targets and increases in base salaries for the Company&#x2019;s executive officers.  The Incentive Plan period runs from January 1, 2006 to December 31, 2006.  The target bonus for each of the Company's Section 16 Officers (the "Executive Officers"), which is a percentage of base salary (ranging from 40% to 100%), was determined by the Compensation Committee based on the salary level and position of each such Executive Officer within the Company and based on benchmarking against companies of similar size or in the Company&#x2019;s industry.   <br><br>For each Executive Officer, the level of attainment of the target bonus is measured entirely against corporate performance.  Corporate performance is measured based on two factors: (1) the extent to which the Company achieves the corporate financial goals approved by the Board of Directors in connection with setting the 2006 annual budget (70%); and (2) the qualitative strategic goals approved by the Board of Directors in connection with the Company&#x2019;s long term strategic business plan (30%).  For purposes of the Incentive Plan, the Company&#x2019;s financial and strategic performance will be measured at year end.  <br><br>The Incentive Plan bonus formula allows for 100% payment when 100% of the target is met.  No bonus is paid if less than 70% of the target is met.  Between 70% and 100% attainment of the performance targets, payment is made at the actual level of attainment.  If the performance target is exceeded, for every 1% above the target, 2% is added to the bonus payment, up to a maximum of 200% of the incentive bonus target.  The foregoing summary description of the Incentive Plan is qualified in its entirety by reference to Exhibit 99.1 to this Current Report on Form 8-K.  <br><br>The 2006 base salaries and individual target bonuses for Company&#x2019;s Executive Officers are attached as Exhibit 99.2 to this Current Report on Form 8-K.  Additional information regarding compensation of the Executive Officers can be found in the Company&#x2019;s proxy statements mailed to stockholders in connection with the Company&#x2019;s Annual Meetings of Stockholders. <br><br>In addition, on December 8, 2005, the Compensation Committee approved the grant of options to purchase shares of the Company&#x2019;s common stock to three of the Company&#x2019;s Executive Officers.  These grants are fully vested as of the date of grant and have an exercise price of $8.67, representing a 20% premium to the fair market value of the Company&#x2019;s common stock on the date of grant, measured as the average of the high and low trading prices of the common stock on such date.  Mr. Sullivan received an option to purchase 35,000 shares, and Messrs. Kra and Pyle each received options to purchase 20,000 shares.  Each of these grants was made pursuant to a Notice of Grant of Stock Options and Option Agreement in the form filed as Exhibit 99.3 to this Current Report on Form 8-K.<br><br>
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	Item 9.01 Financial Statements and Exhibits.
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Exhibit 99.1    2006 Section 16 Officers Corporate Incentive Compensation Plan.<br><br>Exhibit 99.2    2006 Section 16 Officers Base Salaries and Target Bonus Percentages.<br><br>Exhibit 99.3    Form of Employee Stock Option Agreement, with Immediate Vesting.
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<B>
	SIGNATURES
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	Pursuant to the requirements of the Securities Exchange Act of 1934, the
	registrant has duly caused this report to be signed on its behalf by the
	undersigned hereunto duly authorized.
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	Pegasystems Inc.
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	&nbsp;&nbsp;
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<I>
	December 14, 2005
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<I>
	By:
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<I>
	/s/ Shawn S. Hoyt
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<I>
	Name: Shawn S. Hoyt
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<I>
	Title: General Counsel and Secretary
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	Exhibit&nbsp;Index
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	Exhibit No.
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	Description
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	99.1
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	&nbsp;
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<FONT SIZE="2">
2006 Section 16 Officers Corporate Incentive Compensation Plan
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	99.2
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	&nbsp;
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<FONT SIZE="2">
2006 Section 16 Officers Base Compensation and Target Bonus Percentages
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	99.3
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	&nbsp;
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Form of Employee Stock Option Agreement, with Immediate Vesting
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<TYPE>EX-99.1
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<P align="right" style="font-size: 10pt"><FONT style="font-size: 11pt">Exhibit&nbsp;99.1</FONT>


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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 12pt"><B>Section&nbsp;16 Officers Corporate Incentive Compensation Plan</B></FONT></DIV></TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 12pt">&nbsp;</FONT></DIV></TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 9pt"><B>Plan Period: January 1- December&nbsp;31, 2006<BR>
Applies to Officers of the Company under Section&nbsp;16(a) of the Securities Exchange Act of 1934 (&#147;Section&nbsp;16 Officers&#148;)</B></FONT></DIV></TD>
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<P align="left" style="font-size: 9pt"><FONT style="font-size: 10pt"><B>General Purpose &#038; Structure</B>
</FONT>

<P align="left" style="font-size: 10pt"><FONT style="font-size: 9pt">This corporate incentive plan is designed to provide the potential for variable pay to Section
16 Officers of Pegasystems Inc. (the &#147;Company&#148;) when fully achieving annual goals that align and
support the Company&#146;s financial and strategic business objectives. Annual goals will be
established by the Company&#146;s senior management and Board of Directors (or the Compensation
Committee of the Company&#146;s Board of Directors), and evaluated regularly to ensure that the goals
are effective in supporting and/or achieving the Company&#146;s overall financial and strategic
objectives.
</FONT>

<P align="left" style="font-size: 9pt">Based on each Section&nbsp;16 Officer&#146;s position and role, he or she is eligible for a Target Incentive
Opportunity, which is calculated as a percentage of his or her actual, earned base salary for the
year. The Target Incentive Opportunity for each Section&nbsp;16 Officer is determined by the
Compensation Committee of the Company&#146;s Board of Directors, which takes into account surveyed
market values, and is approved at the beginning of the plan year.


<P align="left" style="font-size: 9pt"><FONT style="font-size: 10pt"><B>Corporate Goal Performance</B>
</FONT>

<P align="left" style="font-size: 10pt"><FONT style="font-size: 9pt">When the Company meets its financial and strategic goals relating to revenue, license bookings
and profitability (referred to as <B>Target</B>), it will provide incentive compensation under this Plan
at target incentive levels. Should the corporate performance come in <U>below</U> Target but
<U>above <B>Threshold</B></U> (which is defined as above <B>70</B>% of Target), the incentive payment will be
calculated based on the level of actual performance relative to Target<B>. </B>Should corporate
performance fall <U>below</U> Threshold, incentive compensation will not be paid out.
</FONT>

<P align="left" style="font-size: 9pt">If corporate performance comes in above Target, the Company will provide an enhanced incentive
under this Plan, with an accelerated incentive payment rate used for the portion that exceeds
Target. From 101% of Target, the accelerator will be 2.0 times the normal incentive payment rate.
In no event will the incentive payout exceed 200% of the Target Incentive Opportunity for the
Section&nbsp;16 Officer.


<P align="left" style="font-size: 9pt">Pay out for this plan shall be made after the close of the Plan year, but no later than March
15<sup>th</sup> of the subsequent year.


<P align="left" style="font-size: 9pt">Notwithstanding the above, Pegasystems reserves the right in its sole discretion to either increase
or decrease individual payout amounts.


<P align="left" style="font-size: 9pt">In addition, the Chief Executive Officer and the Compensation Committee of the Company&#146;s Board of
Directors may utilize management discretion and judgment to evaluate the individuals&#146; contribution
towards Corporate goal achievement and performance to determine the final payment amounts.


<P align="left" style="font-size: 9pt"><FONT style="font-size: 10pt"><B>Eligibility</B>
</FONT>

<P align="left" style="font-size: 10pt"><FONT style="font-size: 9pt">Only active, full time Section&nbsp;16 Officers are potentially eligible for this plan. Those hired
after November 1st of the Plan year will need the Chief Executive Officer&#146;s approval to
participate.
</FONT>

<P align="left" style="font-size: 9pt">In order to receive any payments under this plan, a Section&nbsp;16 Officer must: A) Be actively
employed by Pegasystems Inc at the time of pay out, and B) Sign an acknowledgement that he/she has
read, understood, and agreed to this plan and requirements for participation.

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    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 9pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 10pt"><B>Other Provisions</B></FONT></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 10pt">&nbsp;</FONT></DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This short-term (one year) incentive plan supersedes all other annual incentive plans for the eligible Section&nbsp;16
Officers as of the effective date and will remain in effect only for the plan year indicated.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employees that are transferred into Section&nbsp;16 Officer status or join as a Section&nbsp;16 Officer during the Plan year
will have a prorated payment based on time in their Section&nbsp;16 Officer position<I>.</I></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This plan is based on the company&#146;s current position and goals, as well as market conditions, and is subject to
change. Pegasystems reserves the sole right to modify, revoke, suspend, or terminate this plan at any time, with five
days written notice.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of actual termination of employment for any reason, incentive that has not yet been paid will not be paid.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The language in this policy is not intended to create, nor is it to be construed to create a contract of employment
between Pegasystems and any of its employees. Employment at Pegasystems is at-will, which means the Section&nbsp;16
Officer or Pegasystems can terminate the employment at any time for any reason or no reason with or without notice (to
the extent permitted by law or superseded by the applicable Section&nbsp;16 Officer&#146;s Employment Agreement).</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This plan and the individual payments to Section&nbsp;16 Officers are subject to receiving the approval of the Compensation
Committee of the Company&#146;s Board of Directors.</TD>
</TR>



</TABLE>

<P align="center" style="font-size: 10pt; display: none">1
<!-- PAGEBREAK -->


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt">



</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>By signing below, you are affirming that you have read and understand the terms of your plan. Your signature also
serves as reaffirmation that as a Pegasystems&#146; employee you are agree to abide by Pegasystems&#146; policies, as well as
the terms of your Standards Letter (or employment agreement for applicable employees outside of the United States)
with Pegasystems and your obligations thereunder, including restrictions on competition and solicitation.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 9pt"><FONT style="font-size: 10pt">Approved By:
</FONT>

<P align="left" style="font-size: 10pt">Chief Executive Officer, Alan Trefler
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>Date:<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>


<P align="left" style="font-size: 10pt">VP of HR, Carmelina Procaccini
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>Date:<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>


<P align="left" style="font-size: 10pt">CFO, Chris
Sullivan<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>Date:<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>


<P align="left" style="font-size: 10pt">Please indicate that you have read, understood, and agree to this plan by signing below. Return
the signed original, within three weeks to C.J. Stabeno in the Human Resources Department.


<P align="left" style="font-size: 10pt"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
<BR>
Print Name Signature Date


<P align="left" style="font-size: 10pt">CC: Employee file


<P align="left" style="font-size: 10pt; text-indent: 2%">Incentive file </FONT><FONT style="font-size: 12pt">
</FONT>


<P align="center" style="font-size: 10pt; display: none">2


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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>exhibit2.htm
<DESCRIPTION>EX-99.2
<TEXT>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 3.2//EN">
<HTML>
<HEAD>
<TITLE> EX-99.2 </TITLE>
</HEAD>
<BODY TEXT="#000000" BGCOLOR="#FFFFFF" ALINK="#0000FF" HLINK="#FF0000" VLINK="#800080">

<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="right" style="font-size: 10pt"><FONT style="font-size: 11pt">Exhibit&nbsp;99.2</FONT>



<P align="center" style="font-size: 11pt"><FONT style="font-size: 10pt"><U><B>2006 Section&nbsp;16 Officers Base Salaries and Target Bonus Percentages</B></U></FONT>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Name of Executive</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Officer</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006 Base Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006 Target Bonus*</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Chief Executive<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Officer and<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Alan Trefler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Chairman<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Vice President,<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Douglas Kra</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Global Services<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Senior Vice<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">President,<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Michael Pyle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Engineering<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Senior Vice<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">President, Chief<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Financial Officer<BR></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Christopher Sullivan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">and Treasurer<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">265,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">*(as a percentage of Base Salary)


<P align="left" style="font-size: 10pt">In addition, the Compensation Committee determined the 2006 base salary and target bonus for
Richard Jones. Mr.&nbsp;Jones is a Director of the Company and an employee, but not an Executive
Officer. Mr.&nbsp;Jones&#146; base salary is $150,000, and his target bonus is 50%.



<P align="center" style="font-size: 10pt; display: none">


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>exhibit3.htm
<DESCRIPTION>EX-99.3
<TEXT>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 3.2//EN">
<HTML>
<HEAD>
<TITLE> EX-99.3 </TITLE>
</HEAD>
<BODY TEXT="#000000" BGCOLOR="#FFFFFF" ALINK="#0000FF" HLINK="#FF0000" VLINK="#800080">

<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="right" style="font-size: 10pt"><FONT style="font-size: 11pt">Exhibit&nbsp;99.3</FONT>



<P align="center" style="font-size: 11pt"><FONT style="font-size: 10pt"><U><B>Pegasystems Inc</B></U><B>.</B></FONT>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 10pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Notice of Grant of Stock Options and Option Agreement</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 10pt">Pegasystems Inc.<BR>
ID: 04-2787865<BR>
101 Main Street<BR>
Cambridge, MA 02142</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>First MI Last</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Address 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>0000XXXX</B></TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Address 2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option Number: Plan:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 10pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>City, State Country Zip Code</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><FONT style="font-size: 7pt"><B>ID:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><FONT style="font-size: 7pt"><B>XXXXX</B></FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 7pt">Effective X/X/20XX, you (the &#147;Optionee&#148;) have been granted a Non-Qualified Stock Option (the
&#147;Option&#148;) to buy XXX shares of Pegasystems Inc. (the &#147;Company&#148;) common stock at an exercise price
of $X.XXXX per share (the &#147;Exercise Price&#148;), pursuant to the Pegasystems Inc. 2004 Long-Term
Incentive Plan (the &#147;Plan&#148;).


<P align="left" style="font-size: 7pt">The total exercise price of the shares granted is $X,XXX.XX.


<P align="left" style="font-size: 7pt">Shares subject to this Option will vest as of the Effective Date.


<P align="left" style="font-size: 7pt">The undersigned Optionee agrees to all of the terms of the Plan and all those set forth on Exhibit
A attached hereto and incorporated herein by reference.


<P align="left" style="font-size: 7pt">IN WITNESS WHEREOF, the Company and the Optionee have executed this instrument as of the date set
forth above.

<DIV align="center">
<TABLE style="font-size: 7pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="39%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pegasystems Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alan Trefler, Chairman and</TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 7pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Last</TD>
</TR>
<!-- End Table Body -->
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<P align="left" style="font-size: 7pt"><U><B>Exhibit&nbsp;A to Notice of Grant of Stock Option and Option Agreement </B></U>


<P align="left" style="font-size: 7pt">1.&nbsp;<U><B><I>Exercise Price </I></B></U><B><I>. </I></B>The Exercise Price is equal to Fair Market Value, as defined in Section
2(o) of the Plan, of a share of the Company&#146;s common stock on the date of the Notice of Grant of
Stock Option and Option Agreement (of which this <U>Exhibit&nbsp;A </U>is a part) (the &#147;Option
Agreement&#148;).


<P align="left" style="font-size: 7pt">2.&nbsp;<U><B><I>Option Exercise </I></B></U><B><I>. </I></B>Once vested, the Option shall remain exercisable in whole or in part
at any time through and including the day immediately preceding the date of set forth under the
heading &#147;Expiration&#148; on the Option Agreement (the &#147;Expiration Date&#148;), after which the Option shall
expire and no longer be exercisable.


<P align="left" style="font-size: 7pt">The Option shall be exercisable by notice to the Company which shall:


<P align="left" style="font-size: 7pt">(a)&nbsp;state the election to exercise the Option, the number of shares with respect to which it is
being exercised, the person in whose name the stock certificate or certificates for such shares of
common stock are to be registered, and the address and Social Security number of such person;


<P align="left" style="font-size: 7pt">(b)&nbsp;be signed by the person or persons entitled to exercise the Option, and if the Option is being
exercised by a person or persons other than the Optionee, be accompanied by proof satisfactory to
the Company&#146;s legal counsel of the right of such person or persons to exercise the Option; and


<P align="left" style="font-size: 7pt">(c)&nbsp;be in writing and delivered in person or by certified mail to the Chief Financial Officer of
the Company.


<P align="left" style="font-size: 7pt">Payment of the full purchase price of any shares, with respect to which the Option is being
exercised, shall accompany the notice of exercise of the Option and such payment may be made in
cash or check payable to the Company. The certificate or certificates for shares of common stock as
to which the Option is exercised shall be registered in the name of the person or persons
exercising the Option.


<P align="left" style="font-size: 7pt">3.&nbsp;<U><B><I>Termination of Service </I></B></U><B><I>. </I></B>If the Optionee terminates Service other than by reason of the
Optionee&#146;s death, Disability or Retirement, the Optionee may exercise his or her Option for three
months following such termination to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option).


<P align="left" style="font-size: 7pt"><I>4.&nbsp;</I><U><B><I>Retirement of Optionee </I></B></U><B>. </B>If the Optionee terminates Service as a result of Retirement,
the Optionee may exercise his or her Option for 24&nbsp;months following such termination to the extent
that the Option is vested on the date of termination (but in no event later than the expiration of
the term of the Option).


<P align="left" style="font-size: 7pt"><I>5.&nbsp;</I><U><B><I>Disability of Optionee </I></B></U><B><I>. </I></B>If the Optionee terminates Service as a result of the
Optionee&#146;s Disability, the Optionee may exercise his or her Option for 24&nbsp;months following such
termination to the extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of the Option).


<P align="left" style="font-size: 7pt">6.&nbsp;<U><B><I>Death of Optionee </I></B></U><B><I>. </I></B>If the Optionee dies while a Service Provider, the Option may be
exercised by the Optionee&#146;s estate or by a person who acquires the right to exercise the Option by
bequest or inheritance for 12&nbsp;months following the Optionee&#146;s termination of Service because of
death.


<P align="left" style="font-size: 7pt">7.&nbsp;<U><B><I>Optionee&#146;s Agreement </I></B></U><B><I>. </I></B>The Optionee agrees to all the terms stated in the Option
Agreement (of which this Exhibit is a part), as well as to the terms of the Plan (which shall
control in case of conflict with the Option Agreement), a copy of which is attached and of which
the Optionee acknowledges receipt.


<P align="left" style="font-size: 7pt">8.&nbsp;<U><B><I>Withholding </I></B></U><B><I>. </I></B>The Optionee consents to fulfill all withholding obligations for all
applicable payroll and income taxes with respect to the Option when they are due and arrange for
satisfactory payment of all withholding obligations in a manner as set forth in Section 13(h) of
the Plan. The Company may delay issuance of a certificate until proper payment of such taxes has
been made by the Optionee.


<P align="left" style="font-size: 7pt">9.&nbsp;<U><B><I>Rights as Shareholders </I></B></U><B><I>. </I></B>The Optionee shall have no rights as a shareholder of the
Company with respect to any of the shares covered by the Option until the issuance of a stock
certificate or certificates upon the exercise of the Option, and then only with respect to the
shares represented by such certificate or certificates.


<P align="left" style="font-size: 7pt">10.&nbsp;<U><B><I>Non-Transferability </I></B></U><B><I>. </I></B>The Option may not be transferred in any manner other than as
permitted in Section 13(j) of the Plan. The terms of the Option shall be binding upon the
executors, administrators, heirs and successors of the Optionee.


<P align="left" style="font-size: 7pt">11.&nbsp;<U><B><I>Compliance with Securities, Tax and Other Law </I></B></U><B><I>. </I></B>The Option may not be exercised if the
issuance of shares upon such exercise would constitute a violation of any applicable federal or
state securities law or any other law or valid regulation. As a condition to the exercise of the
Option, the Company may require the Optionee, or any person acquiring the right to exercise the
Option, to make any representation or warranty that the Company deems to be necessary under any
applicable securities, tax, or other law or regulation.


<P align="left" style="font-size: 7pt">12.&nbsp;<U><B><I>Adjustments upon Changes in Capitalization </I></B></U><B><I>. </I></B>In the event of any change in the shares
subject to the Plan or to any Option granted under the Plan by reason of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or exchange of shares,
or other change in the structure of the Company, the number of shares subject to each outstanding
Option and/or the Option price with respect to the shares shall be appropriately adjusted by the
Company and such adjustment shall be final, binding and conclusive.


<P align="left" style="font-size: 7pt">13.&nbsp;<U><B><I>No Right to Employment </I></B></U><B><I>. </I></B>The granting of the Option does not confer upon the Optionee
the right to continue in the Service of the Company, or affect in any way the right and power of
the Company to terminate the Service of the Optionee at any time with or without assigning a reason
therefor, to the same extent as the Company might have done if the Option had not been granted.


<P align="left" style="font-size: 7pt">14.&nbsp;<U><B><I>No Guarantee </I></B></U><B><I>. </I></B>The Company offers no guarantee or assurance that the Company&#146;s stock
has any value at the time of this grant or will have any value or liquidity at any future time.


<P align="left" style="font-size: 7pt"><I>15 </I>. <U><B><I>Amendment and Termination of Option </I></B></U><B>. </B>The Company may not, without the consent of the
Optionee, alter or impair any Option granted under the Plan. The Option shall be considered
terminated in whole or in part, to the extent that, in accordance with the provisions of the Plan,
it can no longer be exercised for shares originally subject to the Option.


<P align="left" style="font-size: 7pt">16.&nbsp;<U><B><I>Governing Law </I></B></U><B><I>. </I></B>The Option Agreement shall be governed by and interpreted in accordance
with the laws of The Commonwealth of Massachusetts, without regard to any applicable conflicts of
law provisions thereof.


<P align="left" style="font-size: 7pt">17.&nbsp;<U><B><I>Severability </I></B></U><B><I>. </I></B>In the event any one or more of the provisions of the Option Agreement
shall for any reason be held to be invalid, illegal or unenforceable, the remaining provisions of
the Option Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall
be replaced by a mutually acceptable provision, which being valid, legal and enforceable, comes
closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.


<P align="left" style="font-size: 7pt">18.&nbsp;<U><B><I>Definitions </I></B></U><B><I>. </I></B>All capitalized terms used herein and not otherwise defined shall have
the meanings assigned to such terms in the Plan.



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