8-K

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 14, 2008

Pegasystems Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 1-11859

Massachusetts	04-2787865
(State or other jurisdiction of	(IRS Employer
incorporation)	Identification No.)

101 Main 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 14, 2008, the Compensation Committee of the Board of Directors of Pegasystems Inc. (the “Company”) approved the 2008 Section 16 Officers Corporate Incentive Compensation Plan (the “Incentive Plan”) and the 2008 base salaries and target bonus payments for the Company’s executive officers (the “Executive Officers”). Aggregate 2008 target bonus payments for Executive Officers is $696,750 (the “Aggregate Target Bonus Amount”).

The Incentive Plan covers the period from January 1, 2008 through December 31, 2008 (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 2008 annual budget. The second category is comprised of the qualitative strategic goals approved by the Board of Directors as part of the Company’s 2008 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 two times the percentage amount of such excess (but in no event more than 200%).

Each Executive Officer is entitled to a bonus amount equal to 50% of his or her target bonus multiplied by the Funding Percentage (the “Corporate Bonus Amount”), plus an additional bonus amount of up to the Corporate Bonus Amount based upon his or her level of contribution to the Company’s strategic goals, as determined by the Company’s Chief Executive Officer in his discretion.

For 2008, the Company will permit each Executive Officer to elect to receive a portion of his or her 2008 bonus equal to 50% of his or her target bonus 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 2007 financial results and will vest 100% on the Incentive Plan payout date in 2009 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 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 2008 base salaries and target bonus payments for the Executive Officers are attached as Exhibit 99.2 to this Current Report on Form 8-K.

Item 7.01. Regulation FD Disclosure

On February 14, 2008, the Company issued a press release announcing an expansion of its current share repurchase program (the “Current Repurchase Program”). Under this expansion, an additional $15 million in repurchases of the Company’s common stock has been approved, over and above the initial $10 million authorization, and the expiration date of the Current Repurchase Program has been extended from June 30, 2008 to December 31, 2008. This expansion will become effective on the second trading day following the release of the Company’s financial results for the fourth quarter and full year 2007.

The Company has established a pre-arranged stock repurchase plan, intended to comply with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and of Rule 10b-18 of the Exchange Act (the “10b5-1 Plan”). The 10b5-1 Plan commenced on July 1, 2007 and has been extended to expire on December 31, 2008, subject to conditions specified in the plan agreement. Shares that are repurchased under the 10b5-1 Plan will be repurchased under the Current Repurchase Program.

Any actual repurchases under the Current Repurchase Program will be disclosed in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission for the quarterly periods ending between December 31, 2007 and December 31, 2008.

Item 9.01. Financial Statements and Exhibits

99.1 2008 Section 16 Officers Corporate Incentive Compensation Plan

99.2 2008 Section 16 Officers Base Salaries and Target Bonus Payments

99.3 Press Release issued by Pegasystems Inc. on February 14, 2008

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 21, 2008

By:  /s/  Shawn Hoyt                            

Shawn Hoyt

General Counsel and Secretary

Exhibit Index

Exhibit No.	Description
EX-99.1	2008 Section 16 Officers Corporate Incentive Compensation Plan
EX-99.2	2008 Section 16 Officers Base Salaries and Target Bonus Payments
EX-99.3	Press Release issued by Pegasystems Inc. on February 14, 2008

EX-99.1

Exhibit 99.1

2008 Section 16 Officers Corporate Incentive Compensation Plan (CICP)

Plan Period: January 1 – December 31, 2008
Applies to Officers of the Company under Section 16(a) of the Securities Exchange Act of 1934 (“Section 16 Officers”)
Employee Name: «Fname» «Lname»	Unit: «Unit»

General Purpose & Structure

This Corporate Incentive Compensation Plan is designed to provide you with the potential for variable pay in support of the annual financial and strategic business objectives of Pegasystems Inc. (“Pega”). Based on your role, you are eligible for a Target Incentive Opportunity, which is calculated as a percentage of your actual, earned base salary for the year. The Target Incentive Opportunity is designated according to surveyed market values.

Based on each Section 16 Officer’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 16 Officer is determined by the Compensation Committee of the Company’s Board of Directors, which takes into account surveyed market values, and is approved at the beginning of the plan year.

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 [Revenue, Bookings and Profit (PBT)] and strategic goals (the “Corporate Goals”). Performance against financial goals will be weighted at 70% of the Corporate Goals and progress made on strategic goals will be weighted at 30% of the Corporate Goals.

The CICP will be funded at the full target level if Pega attains 100% of its aggregated 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 corporate performance come in below Target but above Threshold (which is defined as above 70% of Target), the pool will be funded based on the level of actual performance relative to Target performance. Should corporate performance fall below Threshold, the pool will not be funded.

If corporate performance comes in above Target, the Company will provide funding in excess of the target incentive levels, with an accelerated funding rate used for the portion that exceeds Target. From 101% of Target, the accelerator will be 2.0 times the level of achievement above Target. The level of actual funding compared to Target incentive levels is called the Funding Percentage.

Once the funding for incentive compensation payments under this Plan has been established, fifty percent (50%) of the actual incentive payment to each Section 16 Officer will be made at the Funding Percentage (i.e. Target incentive x Funding Percentage x 0.50). The remaining fifty percent (50%) of the actual incentive payment to each Section 16 Officer will be adjusted by an Individual Performance Adjustment to reflect the individual Section 16 Officer’s level of contribution to the Company’s strategic goals, as determined by the Chief Executive Officer, in his discretion (i.e. Target incentive x Funding Percentage x 0.50 x Individual Performance Adjustment).

Pay out for this Plan shall be made after the close of the Plan year, but no later than March 15^th of the subsequent year.

Notwithstanding the above, Pegasystems reserves the right in its sole discretion to either increase or decrease individual payout amounts.

In addition, the Chief Executive Officer and the Compensation Committee of the Company’s Board of Directors may utilize management discretion and judgment to evaluate the individuals’ contribution towards corporate goal achievement and performance to determine the final payment amounts.

2008 Section 16 Officers Corporate Incentive Compensation Plan (continued)

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 2008 base salary. The number of RSUs granted will be determined by dividing 50% of the employee’s 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 2007 financial results (expected to be March 2008) and will vest 100% on the plan payout date of the following year (expected to be March 2009) 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.

Eligibility

Only active, full time Section 16 Officers are potentially eligible for this plan. Those hired after November 1st of the Plan year will need the Chief Executive Officer’s approval to participate.

In order to receive any payments under this plan, a Section 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.

Legal Provisions

This short-term (one year) incentive plan supersedes all other annual incentive plans for the eligible Section 16 Officers as of the effective date and will remain in effect only for the plan year indicated.

Employees that are transferred into Section 16 Officer status or join as a Section 16 Officer during the Plan year will have a prorated payment based on time in their Section 16 Officer position.

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.

In the event of actual termination of employment for any reason, incentive that has not yet been paid will not be paid.

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 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 16 Officer’s Employment Agreement).

Approved by:

Chief Executive Officer, Alan Trefler                                                                 Date:                             

VP of HR, Carmelina Procaccini                                                                          Date:                            

Chief Financial Officer, Craig Dynes                                                                  Date:                             

Equity Election:

I elect to have 50% of my incentive opportunity in the form of:

___ RSUs

___ I do NOT elect to have 50% of my incentive opportunity in equity.

Please indicate that you have read, understood, and agree to this plan by signing below. This signed document must be returned no later than February 25, 2008.

If not returned by this date your participation will default to 100% cash election.

___________________________________________________ Date: ______________________________________

Signature of: «Fname» «Lname»

cc: Incentive file

EX-99.2

EXHIBIT 99.2

Pegasystems Inc.

2008 Section 16 Officers Base Salaries and Target Bonus Percentages

All Changes Effective Retroactively to January 1, 2008

Name	Title	Base Salary	Target Bonus*
Alan Trefler	Chief Executive Officer and Chairman	$275,000	75%
Craig Dynes	Chief Financial Officer and Senior Vice President	$273,000	50%
Edward Hughes**	Senior Vice President, Global Sales	$260,000	40%
Douglas Kra**	Vice President, Global Services	$250,000	50%
Michael Pyle	Senior Vice President, Engineering	$250,000	50%

* Percentage of 2008 base salary

**In 2008, Edward Hughes will also be eligible for the following additional incentive compensation:

(1) $1,000 per $1 million in 2008 license bookings, for bookings up to the budget for license established by the Board of Directors for 2008.

(2) $4,000 per $1 million in 2008 license bookings, for bookings above the budget for license established by the Board of Directors for 2008.

(3) $50,000 upon the achievement of specific individual performance goals to be established by the CEO, in his discretion.

**In 2008, Douglas Kra will also be eligible for the following additional incentive compensation:

(1) $20,000 upon the achievement of specific individual performance goals to be established by the CEO, in his discretion.

EX-99.3

EXHIBIT 99.3

For Information, contact:

Craig Dynes

Chief Financial Officer

617-866-6020

craig.dynes@pega.com

Pegasystems Expands Current Share Repurchase Program

CAMBRIDGE, Mass., February 14, 2008 — Pegasystems (NASDAQ: PEGA), the leader in Business Process Management, today announced that its Board of Directors has authorized an expansion of the Company’s current share repurchase program (the “Current Repurchase Program”). Under this expansion, an additional $15 million in repurchases of Pegasystems common stock has been approved, over and above the initial $10 million authorization, and the expiration date of the Current Repurchase Program has been extended to December 31, 2008. This expansion will become effective on the second trading day following the release of the Company’s financial results for the fourth quarter and full year 2007. Through February 14, 2008, the Company had repurchased 873,325 shares under the Current Repurchase Program, for an average price of $11.45 per share.

At the Company’s discretion, the purchases will be made from time to time on the open market or in privately negotiated transactions. Shares may be repurchased in such amounts as market conditions warrant, subject to regulatory and other considerations.

The Company has established a pre-arranged stock repurchase plan, intended to comply with the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and of Rule 10b-18 of the Exchange Act (the “10b5-1 Plan”). The 10b5-1 Plan commenced on July 1, 2007 and has been extended to expire on December 31, 2008, subject to conditions specified in the plan agreement. Shares that are repurchased under the 10b5-1 Plan will be repurchased under the Current Repurchase Program.

Any actual repurchases under the Current Repurchase Program will be disclosed in the Company’s annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission for the quarterly periods ending between December 31, 2007 and December 31, 2008.

About Pegasystems

Pegasystems (NASDAQ: PEGA), the leader in Business Process Management, provides software to drive revenue growth, productivity and agility for the world’s most sophisticated organizations. Customers use our award-winning SmartBPM^® suite to improve customer service, reach new markets and boost operational effectiveness.

Our patented SmartBPM technology makes enterprise applications easy to build and change by directly capturing business objectives and eliminating manual programming. SmartBPM unifies business rules and processes into composite applications that leverage existing systems — empowering businesspeople and IT staff to Build for Change^®, deliver value quickly and outperform their competitors.

Pegasystems’ suite is complemented by best-practice frameworks designed for leaders in financial services, insurance, healthcare, government, life sciences, communications, manufacturing and other industries.

Headquartered in Cambridge, MA, Pegasystems has offices in North America, Europe and Asia. Visit us at www.pega.com.

All trademarks are the property of their respective owners.

The information contained in this press release is not a commitment, promise, or legal obligation to deliver any material, code or functionality. The development, release and timing of any features or functionality described remains at the sole discretion of Pegasystems, Pegasystems specifically disclaims any liability with respect to this information.

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