Download PEGASYSTEMS INC (Form: 8-K, Received: 02/18/2014 17:17:33)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 2014
Pegasystems Inc.
(Exact name of registrant as specified in its charter)
Commission File Number: 1-11859
Massachusetts
04-2787865
(State or other jurisdiction
of incorporation)
(IRS Employer
Identification No.)
1 Rogers Street, Cambridge, Massachusetts 02142
(Address of principal executive offices, including zip code)
617-374-9600
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers
(e) On February 11, 2014, the Compensation Committee of the Board of Directors of Pegasystems Inc. (the “Company”) approved the 2014
base salaries and Section 16 Officer/FLT Member Corporate Incentive Compensation Plan (the “Incentive Plan”) and target Incentive Plan and
other bonus payments for the executive officers of the Company listed on Exhibit 99.2 to this Current Report on Form 8-K (the “Executive
Officers”). The aggregate 2014 Incentive Plan payments for Executive Officers are $959,500 (the “Aggregate Target Bonus Amount”).
The Incentive Plan covers the period from January 1, 2014 through December 31, 2014 (the “Incentive Period”). The Incentive Plan
is designed to establish a pool of funds to be available for making bonus payments to the Executive Officers if the Company achieves certain
performance goals during the Incentive Period. For purposes of the Incentive Plan, these goals are divided into two categories. The first
category is comprised of the corporate financial goals related to revenue, bookings and profitability approved by the Board of Directors in
connection with establishing the Company’s 2014 annual budget. The second category is comprised of the qualitative strategic goals approved
by the Board of Directors as part of the Company’s 2014 annual strategic planning. Together, these two categories make up a single
performance goal under the Incentive Plan (the “Corporate Performance Target”), with the financial goals being weighted 70% toward
achievement of the Corporate Performance Target and the strategic goals being weighted 30% toward achievement of the Corporate
Performance Target . The percentage achievement of the Corporate Performance Target (the “Funding Percentage”) determines the extent to
which the Incentive Plan is funded. The Incentive Plan will be funded with an amount equal to the Aggregate Target Bonus Amount multiplied
by the Funding Percentage, except that if the Funding Percentage is less than 70% then the Incentive Plan will not be funded at all. If the
Corporate Performance Target is exceeded, the percentage achievement of the Corporate Performance Target for purposes of funding the
Incentive Plan is deemed equal to 100% plus an enhanced incentive as determined by the Board in its discretion.
Once the Funding Percentage has been determined, the actual incentive payment for each Executive Officer will be adjusted to
reflect the individual’s level of contribution to the Company’s strategic goals, as determined by the Chief Executive Officer, in his discretion.
The Chief Executive Officer and/or the Board reserves the right in his or its sole discretion to either increase or decrease the Funding
Percentage and/or individual payout amounts.
For 2014, the Company will permit each Executive Officer to elect to receive a portion of his or her 2014 bonus equal to 50% of his
or her target Incentive Plan payment in the form of restricted stock units (“RSUs”) instead of in cash. For this purpose, RSUs will be valued at
their fair value on the grant date. If elected, the equity grant will occur during the open trading period following the public release of the
Company’s 2013 financial results and will vest 100% on the Incentive Plan payout date in 2015 for all participants. Vesting is conditioned
upon threshold funding of the Incentive Plan and, with respect to each Executive Officer, on his or her continued active employment with the
Company. If these conditions are not met, the equity grant cannot be exercised by the Executive Officer and will expire.
The Executive Officers are also eligible for additional bonus compensation related to the achievement of certain operational
objectives totaling $136,000, and Leon Trefler is also eligible for sales commissions of $240,000.
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. The 2014 base salaries, target Incentive Plan and other bonus payments for the Executive Officers are attached as Exhibit
99.2 to this Current Report on Form 8-K.
Item 9.01.
Financial Statements and Exhibits
99.1
2014 Section 16 Officer/FLT Member Corporate Incentive Compensation Plan
99.2
2014 Executive Officers Base Salaries and Target Bonus Payments
Signature(s)
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.
Pegasystems Inc.
Date: February 18, 2014
By:
/s/ Janet Mesrobian
Janet Mesrobian
Associate General Counsel and Secretary
Exhibit Index
Exhibit
No.
Description
99.1
2014 Section 16 Officer/FLT Member Corporate Incentive Compensation Plan
99.2
2014 Executive Officers Base Salaries and Target Bonus Payments
Exhibit 99.1
2014 Section 16 Officer/FLT Member
Corporate Incentive Compensation Plan (CICP)
Employee Name: «Fname»«Lname»
Division: «Division»
General Purpose & Structure
This Section 16 Officer/FLT Member Corporate Incentive Compensation Plan (“Plan”) is designed to provide you with the potential for
variable pay based on the achievement of annual financial and strategic business objectives of Pegasystems Inc. (“Pega”) and your individual
performance. Based on your role, you are eligible for an annual Target Incentive Opportunity, which is calculated as a percentage of your
actual, paid base salary for the year. The Target Incentive Opportunity for each Section 16 Officer/FLT member is determined by the
Compensation Committee of the Company’s Board of Directors and is approved at the beginning of the plan year.
Corporate goals will be established by Pega’s senior management and Board of Directors or the Compensation Committee of the Board of
Directors (the “Board”).
Corporate Goal Performance & Funding
The CICP must first be funded by Pega before any incentive payments are made. Funding of the CICP is based on Pega’s attainment of
financial and strategic goals (the “Corporate Goals”) established by the Board. Performance against financial goals will be weighted at 70%
and progress made on strategic goals will be weighted at 30%.
The CICP will be funded at the full target level if Pega attains 100% of its Corporate Goals (referred to as “ Target ”). Should attainment of
Corporate Goals be below Target but above Threshold (which is defined as above 70 % of Target), the incentive funding will be at the same
actual percentage as performance against Target . Should the level of attainment of the Corporate Goals fall below Threshold , the CICP will
not be funded and no incentive compensation will be paid. If the attainment of Corporate Goals is above Target, Pega will fund an enhanced
incentive as determined by the Board in its discretion.
Once the Corporate funding level has been determined, the actual incentive payment will be adjusted to reflect the individual’s level of
contribution to the Company’s strategic goals, as determined by the Chief Executive Officer, in his discretion.
Notwithstanding the above, the Chief Executive Officer and/or the Board reserves the right in his or its sole discretion to either increase or
decrease the corporate funding and/or individual payout amounts.
EQUITY SELECTION
CICP participants that are covered by the plan for the full calendar year may elect to receive half of their incentive opportunity in restricted
stock units ( RSUs ). If elected by an employee, the equity amount will be equal in value on the date of grant to 50% of his or her Target
Incentive Opportunity, calculated from the employee’s January 2014 base salary. If base salary is in a currency other than USD, the conversion
will be at the exchange rate on the close of the date of the grant. The number of RSUs granted will be determined by dividing 50% of the
employee’s annual Target Incentive Opportunity by the fair value of a RSU on the grant date (rounded down to the nearest whole share). If
elected, the equity grant will occur during the open trading period following the release of the 2013 financial results (expected to be March
2014) and will vest 100% on the plan payout date of the following year (expected to be March 2015) for all participants. Vesting is conditioned
upon Threshold funding of the plan; if Threshold funding does not occur, the equity grant cannot be exercised and will expire. Vesting is also
conditioned upon achieving successful individual performance, generally as evidenced by a current performance evaluation of “Meets
Expectation” or higher. Employees in the US, UK, Canada, Australia, Germany, the Netherlands, Spain, Hong Kong, Singapore, India, Japan,
Poland, and Italy are eligible to participate in the equity selection.
For Example: An employee elects to receive 50% of his or her Target Incentive Opportunity of $10,000 in equity. On the grant date in 2014,
the fair value of one RSU is $45. That employee would receive a grant for 111 RSUs, which will vest 100% on the Plan payout date in 2015.
Annual Target Incentive Opportunity
50% Deferred Equity Component
Fair Value per RSU – Grant Date
Number of RSUs Granted
Pegasystems Confidential & Proprietary
CICP Document
$ 10,000
$ 5,000
$ 45.00
111
Page 1 of 2
2014 Section 16/FLT
IMPORTANT: In order to receive a portion of your payment in RSUs, you must make your electronic election no later than
February 21, 2014.
Pay Out
Cash payout for this Plan shall be made on or before March 15 th for US employees and March 31 st for non-US employees, of the subsequent
year.
Pegasystems reserves the right in its sole discretion to either increase or decrease the corporate funding and/or individual payout amounts.
Eligibility
Only active, full time Section 16 Officers/FLT members are potentially eligible for this Plan. Those hired after November 1 st of the Plan year
will need the Chief Executive Officer’s approval to participate.
To receive any payments under this plan or to vest in RSUs granted under this Plan, an employee must: A) Be actively employed by
Pegasystems at the time of pay out, and B) Be an employee in good standing, which may include, but not limited to, not being on a
performance plan, probation, suspension, notice period or severance period.
Legal Provisions
This annual incentive Plan supersedes all other incentive plans for the eligible employees and will remain in effect only for the plan year
indicated.
This Plan is based on the company’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.
Unless you notify [email protected] by February 21, 2014, you are affirming that you have read, understand, and accept the terms of your
Plan. You agree to abide by Pegasystems’ policies, as well as the terms of your Standards Letter (or employment agreement for applicable
employees outside of the United States) with Pegasystems including restrictions on competition and solicitation.
In the event of actual termination of employment for any reason prior to the incentive payment date, any incentive that has not yet been paid or
vested will be forfeited. The language in this policy is not intended to create, nor is it construed to create a contract of employment with
Pegasystems and any of its employees. You 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).
Exceptions to this Plan may only be made by the CEO, and only if done so in writing.
Incentive Target Percentage:
At target funding, you are eligible for an annual Target Incentive Opportunity of 0 to «Plan_TI»% calculated on actual, paid base salary for
the year.
Please print a copy of this 2014 CICP plan document for your records.
EXHIBIT 99.2
Pegasystems Inc.
2014 Executive Officers Base Salaries and Target Bonus Percentages
All Changes Effective Retroactively to January 1, 2014.
Name
Title
Base Salary
Target Incentive Plan Bonus*
Chief Executive Officer and Chairman
$420,000
90%
Rafeal Brown**
Chief Administrative Officer, Chief Financial
Officer and Senior Vice President
$380,000
50%
Douglas Kra**
Senior Vice President,
Pega Consulting
$330,000
50%
Michael Pyle**
Senior Vice President,
Engineering
$325,000
50%
Leon Trefler**
Senior Vice President,
Sales
$320,000
20%
Alan Trefler
*
Percentage of 2014 base salary
**
In 2014, Rafeal Brown will also be eligible for up to $15,000 in additional incentive compensation for the achievement of operational
objectives to be set by our Chief Executive Officer.
**
In 2014, Douglas Kra will also be eligible for up to $50,000 in additional incentive compensation for the achievement of operational
objectives to be set by our Chief Executive Officer.
**
In 2014, Michael Pyle will also be eligible for up to $21,000 in additional incentive compensation for the achievement of operational
objectives to be set by our Chief Executive Officer.
**
In 2014, Leon Trefler will also be eligible for up to $50,000 in additional incentive compensation for the achievement of operational
objectives to be set by our Chief Executive Officer, as well as target sales commissions of $240,000.