PEGASYSTEMS INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of December 31, 2021. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2021. Management’s report on and changes in internal control over financial reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the framework in the updated Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) on May 14, 2013. Based on this evaluation, management has concluded that (i) our internal control over financial reporting was effective as of December 31, 2021 and (ii) no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Deloitte & Touche LLP, our independent registered public accounting firm which also audited our consolidated financial statements, has issued an attestation report on our internal control over financial reporting, which is included in Item 8 “Financial Statements and Supplementary Data”. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 64 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE Except as set forth below, information required by this item is incorporated herein by reference from the information contained in our proxy statement for our 2022 annual stockholders meeting (the “2022 proxy statement”) under the headings Executive Compensation, Election of Directors, Corporate Governance, Executive Officers, and Delinquent Section 16(a) Reports, which will be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year. We have adopted a written code of conduct that applies to our Board of Directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. A copy of our code of conduct can be found on our website, www.pega.com. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K and the applicable the NASDAQ Global Select Market rules by posting such information on our website in accordance with such requirements. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference from the information contained in the 2022 proxy statement under the headings “Director Compensation”, “Compensation Discussion and Analysis”, and “Executive Compensation” and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated herein by reference from the information contained in the 2022 proxy statement under the headings “Executive Compensation”, “Equity Compensation Plan Information”, and “Security Ownership of Certain Beneficial Owners and Management”, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated herein by reference from the information contained in the 2022 proxy statement under the headings “Certain Relationships and Related Transactions” and “Determination of Independence” and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated herein by reference from the information contained in the 2022 proxy statement under the heading “Independent Registered Public Accounting Firm Fees and Services” and is incorporated herein by reference. 65 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following are filed as part of this Annual Report: (1) Financial Statements The following consolidated financial statements are included in Item 8: Page Report of Independent Registered Public Accounting Firm 36 Consolidated Balance Sheets as of December 31, 2021 and 2020 38 Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019 39 Consolidated Statements of Comprehensive (Loss) for the years ended December 31, 2021, 2020, and 2019 40 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, and 2019 41 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 42 66 (b) Exhibits Exhibit No. Description Incorporation by Reference Filed Herewith Form Location Filing Date 3.1 Restated Articles of Organization of the Registrant and Amendments thereto 10-Q 3.1 11/4/14 3.2 Amended and Restated Bylaws of Pegasystems Inc 8-K 3.2 6/15/20 4.1 Specimen Certificate Representing the Common Stock S-1 4.1 6/19/96 4.2 Indenture, dated as of February 24, 2020, between Pegasystems Inc. and U.S. Bank National Association, as trustee 8-K 4.1 2/24/20 4.3 Form of certificate representing the 0.75% Convertible Senior Notes due 2025 8-K Exhibit A to 4.1 2/24/20 4.4 Description of Common Stock 10-K 4.2 2/12/20 10.1 2004 Long-Term Incentive Plan (as amended and restated) ++ 8-K 10.1 6/24/20 10.2 Restricted Stock Unit Sub-Plan of the Registrant’s 2004 Long-Term Incentive Plan for French Participants ++ DEF 14A Appendix B to 2016 Proxy Statement 4/18/16 10.3 2006 Employee Stock Purchase Plan, as amended on October 29, 2020 ++ 10-K 10.3 2/17/21 10.4 Form of Employee Stock Option Agreement, as amended ++ 10-Q 10.3 5/10/17 10.5 Form of Global Stock Option Agreement ++ 10-K 10.5 2/17/21 10.6 Form of Restricted Stock Unit Agreement, as amended ++ 10-Q 10.4 5/10/17 10.7 Form of Global Restricted Stock Unit Agreement ++ 10-K 10.7 2/17/21 10.8 Form of Non-Employee Director Stock Option Agreement ++ 10-Q 10.2 10/29/04 10.9 Form of Director Indemnification Agreement ++ 8-K 99.1 4/11/05 10.10 Offer Letter between the Registrant and Douglas I. Kra dated October 19, 2004 ++ 10-K 10.20 2/17/04 10.11 Offer Letter, dated April 27, 2020, between Pegasystems Inc. and Hayden Stafford ++ 10-Q 10.3 7/28/20 10.12 Offer Letter between the Registrant and Kenneth Stillwell dated June 1, 2016 ++ 8-K 99.1 6/14/16 10.13 Compensation program for non-employee members of the Registrant’s Board of Directors, effective August 5, 2019 ++ 8-K Item 1.01 8/9/19 10.14 2021 Section 16 Officers/FLT Member Corporate Incentive Compensation Plan ++ 8-K 99.1 2/8/21 10.15 2 0 22 Section 16 Officers/FLT Member Corporate Incentive Compensation Plan ++ 8-K 99.1 2/7/22 10.16 Credit Agreement dated as of November 5, 2019 with PNC Bank, National Association 10-Q 10.1 11/7/19 10.17 Amendment to Loan Documents, dated February 18, 2020, between Pegasystems Inc. and PNC Bank, National Association 8-K 10.3 2/24/20 10.18 Amendment 2 to Loan Documents, dated July 22, 2020, between Pegasystems Inc. and PNC Bank, National Association 10-Q 10.2 7/28/20 10.19 Amendment to Loan Documents, dated as of September 30, 2020, between Pegasystems Inc. and PNC Bank, National Association 10-Q 10.3 10/28/20 10.20 Form of Side Letter to Base Call Option Transaction 10-Q 10.1 10/28/20 10.21 Form of Side Letter to Additional Call Option Transaction 10-Q 10.2 10/28/20 10.22 Form of Confirmation of Base Call Option Transaction 8-K 10.1 2/24/20 10.23 Form of Confirmation of Additional Call Option Transaction 8-K 10.2 2/24/20 10.24 Sublease, dated March 31, 2021 for Office Space at One Main Street, Cambridge, MA 10-Q 10.1 7/28/21 10.25 Lease between Pegasystems Inc. and 275 Wyman LLC** 8-K 10.1 7/9/21 21.1 Subsidiaries of the Registrant. X 23.1 Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP. X 31.1 Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer. X 31.2 Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer. X 32 Certification pursuant to 18 U.S.C. Section 1350 of the Chief Executive Officer and the Chief Financial Officer. X 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Label Linkbase Document. X 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document. X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) X ++ Management contracts and compensatory plan or arrangements required to be filed pursuant to Item 15(b) of Form 10-K. ** Certain portions of this exhibit are considered confidential and have been omitted as allowed under SEC rules and regulations 67 (c) Financial Statement Schedules All financial statement schedules are omitted because the required information is not present or not present in sufficient amounts to require submission of the schedule or because the information is reflected in the consolidated financial statements or notes thereto. ITEM 16. FORM 10-K SUMMARY Omitted at Registrant’s option. 68 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. Pegasystems Inc. Date: February 16, 2022 By: /s/ KENNETH STILLWELL Kenneth Stillwell Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on February 16, 2022 by the following persons on behalf of the Registrant and in the capacities indicated. Signature Title /s/ ALAN TREFLER Chairman and Chief Executive Officer (Principal Executive Officer) Alan Trefler /s/ KENNETH STILLWELL Chief Operating Officer and Chief Financial Officer Kenneth Stillwell (Principal Financial Officer) /s/ EFSTATHIOS KOUNINIS Chief Accounting Officer, Vice President of Finance, and Treasurer (Principal Accounting Officer) Efstathios Kouninis /s/ PETER GYENES Director Peter Gyenes /s/ RICHARD JONES Director Richard Jones /s/ CHRISTOPHER LAFOND Director Christopher Lafond /s/ DIANNE LEDINGHAM Director Dianne Ledingham /s/ SHARON ROWLANDS Director Sharon Rowlands /s/ LARRY WEBER Director Larry Weber 69