Document:

EX-10.4

 Exhibit 10.4 
  

					
		  	

	  	PEGASYSTEMS INC.
	  	  	One Rogers Street
	  	  	Cambridge, MA 02142-1209 USA

 Notice of Grant of Award and Award Agreement 

You have been granted an award of Restricted Stock Units pursuant to the terms of the Pegasystems Inc. Amended and Restated 2004 Long-Term Incentive Plan (the
“Plan”). 
 If you have not yet completed the acceptance process for any of your awards, you may complete the acceptance process by
(A) reviewing your award details, (B) reviewing your award documents listed in this Section B of your Online Award Acceptance (the “Award Documents”), and (C) confirming your acceptance of your award. 

By accepting this award, you agree that this award is granted and governed by the terms and conditions of the Plan, this notice, and all your Award Documents
listed herein and incorporated by reference. This notice, together with your Award Documents and your electronic acceptance, collectively comprise your total agreement (the “Award Agreement”). 

 

			
	 Pegasystems Inc.

		
	By:	 	

		 	Alan Trefler, Chairman and
		 	Chief Executive Officer

  

					
	        PHONE 617.374 9600	  	         FAX 617.374.9620

 
	  	         WWW.PEGA.COM

 

 Exhibit A 

Notice of Grant of Award and Award Agreement for {Non-} U.S. Employees 

1.    Conversion of Restricted Stock Units to Common Stock. Each restricted stock unit (“RSU”)
granted in the Notice of Grant of Award and Award Agreement {for Non-U.S. Employees} (of which this Exhibit A is a part) (the “Award Agreement”) represents the right of the person receiving
such grant (the “Recipient”) to receive one share of the common stock (“Common Stock”) of Pegasystems Inc. (the “Company”) subject to the vesting requirements listed in the Award Agreement and to the other terms and
conditions of this Award Agreement. On each vesting date listed in the Award Agreement, the Company will issue such number of shares of Common Stock as are equal to the applicable number of RSUs vesting on such date, less such number of shares of
Common Stock as are required to be withheld to satisfy Recipient’s tax withholding obligations. The Recipient shall not be entitled to receive any dividends declared on shares of Common Stock for any periods prior to the relevant vesting date,
nor shall the Recipient be entitled to any dividend equivalent payouts. 
 2.    Vesting. RSUs will
vest on the dates listed in the Award Agreement if the Recipient remains in the active employment of the Company {and/or the Recipient’s employer (the “Employer”)} in good standing from the date of grant through the applicable vesting
date. RSUs will cease to vest immediately upon the cessation of Recipient’s active employment with the Company, for any reason. 

3.    Recipient’s Agreement. The Recipient agrees to all the terms stated in the Award 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 Award Agreement), a copy of which is attached and of which the Recipient acknowledges receipt. 

4.    Withholding. The Recipient consents to fulfill all withholding obligations for all applicable
payroll and income taxes with respect to the Award 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 satisfy such withholding obligations by
withholding such number of shares of Common Stock as are equal in value to the amount of the required withholding. 
 {4.     
Withholding. Regardless of any action the Company and/or the Employer take with respect to any or all income tax (including U.S. federal, state and local tax and/or non-U.S. tax),
social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Recipient acknowledges that the ultimate
liability for all Tax-Related Items legally due by the Recipient is and remains the Recipient’s responsibility and that the Company and/or the Employer (i) make no representations or undertakings
regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant of the RSUs, the vesting of the RSUs, the delivery of shares of Common Stock, the subsequent
sale of any shares of Common Stock acquired at vesting and the receipt of any dividends or dividend equivalents; and (ii) do not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Recipient’s
liability for Tax-Related Items. 
 Prior to the relevant taxable event, the Recipient shall pay or
make arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer. In this regard, the Recipient authorizes the Company and/or the Employer to withhold
all applicable Tax-Related Items legally payable by the Recipient from any wages or other cash compensation paid to the Recipient by the Company and/or the Employer. Alternatively, or in addition, if
permissible under local law, the Recipient authorizes the Company and/or the Employer, at its discretion and pursuant to such procedures as it may specify from time to time, to satisfy the obligations with regard to all Tax-Related Items legally payable by the Recipient by one or a combination of the following: (i) withholding otherwise deliverable shares of Common Stock, provided that the Company only withholds the amount of
shares of Common Stock necessary to satisfy the minimum withholding amount; (ii) arranging for the sale of shares of Common Stock otherwise deliverable to the 

 
Recipient (on the Recipient’s behalf and at the Recipient’s direction pursuant to this authorization); or (iii) withholding from the proceeds of the sale of shares of Common Stock
acquired upon vesting of the Award. If the obligation for Tax-Related Items is satisfied by withholding a number of shares of Common Stock as described herein, the Recipient is deemed to have been issued the
full number of shares of Common Stock subject to the Award, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items due as a result of
any aspect of the Award. The Recipient shall pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold as a result of the
Recipient’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to deliver to the Recipient any shares of Common Stock pursuant to the Award if the Recipient fails to comply with the
Recipient’s obligations in connection with the Tax-Related Items as described in this section.} 

5.    Rights as Shareholders. The Recipient shall have no rights as a shareholder of the Company with
respect to any of the RSUs until the issuance of shares of Common Stock at the time of vesting, and then only with respect to those shares of Common Stock issued. 

6.    Non-Transferability. The Award may not be transferred in
any manner other than as permitted in Section 13(j) of the Plan {by will or by the laws of descent and distribution}. The terms of the Award shall be binding upon the executors, administrators, heirs and successors of the Recipient. 

7.    Compliance with Securities, Tax and Other Law. No shares of Common Stock may be issued if the
issuance of shares would constitute a violation of any applicable federal or state securities law or any other law or valid regulation. As a condition to issuance of Common Stock, the Company may require the Recipient, or any person acquiring the
right to receive the Common Stock, to make any representation or warranty that the Company deems to be necessary under any applicable securities, tax, or other law or regulation. 

8.    Adjustments upon Changes in Capitalization. In the event of any change in the shares subject to
the Plan or to any Award granted under the Plan by reason of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination or exchange of shares of Common Stock, or other change in the structure of the Company,
the number of RSUs and the number of shares of Common Stock shall be appropriately adjusted by the Company and such adjustment shall be final, binding and conclusive. 

9.    No Right to Employment. The granting of the Award does not confer upon the Recipient the right to
continue in the service of the Company {and/or the Employer}, or affect in any way the right and power of the Company {and/or the Employer} to terminate the service of the Recipient at any time with or without assigning a reason therefor, to the
same extent as the Company {and/or the Employer} might have done if the Award had not been granted. 
 10.    No
Guarantee. The Company offers no guarantee or assurance that the Company’s stock has any value at the time of this grant or will have any value or liquidity at any future time. 

11.    Standards Letter {Employment Agreement}. In consideration for this Award, the Recipient reaffirms the
terms of the Recipient’s Standards Letter {Employment Agreement} with Pegasystems {the Employer}, including but not limited to the provisions {(if any)} related to competition and solicitation. The Recipient further agrees that to the extent
the nature of the Company’s {Employer’s} business has evolved since the date of the Standards Letter {Employment Agreement} the covenants shall also apply to the business as evolved. 

 {12.    Acknowledgment of Nature of Plan and Award. In
accepting the Award, the Recipient acknowledges that: 
 (a)    the Plan is established voluntarily by the Company, it
is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Award Agreement; 

(b)    the Award is voluntary and occasional and does not create any contractual or other right to receive future awards
of RSUs, or benefits in lieu of RSUs, even if RSUs have been awarded repeatedly in the past; 
 (c)    all decisions
with respect to future awards, if any, will be at the sole discretion of the Company; 
 (d)    the Recipient’s
participation in the Plan is voluntary; 
 (e)    the Award is an extraordinary item that does not constitute
compensation for services of any kind rendered to the Company or any Related Company, and which is outside the scope of the service or employment contract, if any; 

(f)    the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to,
calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or
relating in any way to, past services for the Company or any Related Company; 
 (g)    in the event that the Recipient
is not an Employee of the Company or any Related Company, the Award and the Recipient’s participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or any Related Company; 

(h)    the future value of the underlying shares of Common Stock is unknown and cannot be predicted with any certainty;

 (i)    in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination
of the Award or from any diminution in value of the Award or shares of Common Stock acquired upon vesting of the Award resulting from termination of the Recipient’s service by the Company or any Related Company (for any reason whatsoever and
whether or not in breach of local labor laws) and the Recipient irrevocably releases the Company and any Related Company from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent
jurisdiction to have arisen, then, by signing the Award Agreement, the Recipient shall be deemed irrevocably to have waived the Recipient’s entitlement to pursue such claim; 

(j)    in the event of termination of the Recipient’s service (whether or not in breach of local labor laws), the
Recipient’s right to receive an Award and vest in the Award under the Plan, if any, will terminate effective as of the date that the Recipient is no longer actively employed and will not be extended by any notice period mandated under local law
(e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); the Administrator shall have the exclusive discretion to determine when the Recipient is no longer actively employed for
purposes of the Award; 
 (k)    the Company is not providing any tax, legal or financial advice, nor is the Company
making any recommendations regarding the Recipient’s participation in the Plan or the Recipient’s acquisition or sale of the underlying shares of Common Stock; and 

(l)    the Recipient is hereby advised to consult with the Recipient’s personal tax, legal and financial advisors
regarding the Recipient’s participation in the Plan before taking any action related to the Plan. 

 13.    Data Privacy Notice and Consent. The Recipient
hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Recipient’s personal data as described in this Award Agreement and any other RSU grant materials by and among, as applicable,
the Employer, the Company and its Subsidiaries for the exclusive purpose of implementing, administering and managing the Recipient’s participation in the Plan. 

The Recipient understands that the Company and the Employer may hold certain personal information about the Recipient, including, but
not limited to, the Recipient’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of
all RSUs or any other entitlement to shares of stock awarded, granted, canceled, vested, exercised, unvested or outstanding in the Recipient’s favor, for the exclusive purpose of implementing, administering and managing the Plan
(“Data”). 
 The Recipient understands that Data will be transferred to a third party stock plan service provider(s)
as may be selected by the Company, which is assisting the Company with the implementation, administration and management of the Plan. The Recipient understands the recipients of the Data may be located in the Recipient’s country, in the United
States or elsewhere, and that the data recipients’ country may have different data privacy laws and protections than the Recipient’s country. The Recipient understands that the Recipient may request a list with the names and addresses of
any potential recipients of the Data by contacting the Recipient’s local human resources representative. The Recipient authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with
implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Recipient’s participation in the Plan.
The Recipient understands that Data will be held only as long as is necessary to implement, administer and manage the Recipient’s participation in the Plan. The Recipient understands that the Recipient may, at any time, view Data, request
additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Recipient’s local human resources
representative. The Recipient understands, however, that refusing or withdrawing the Recipient’s consent may affect the Recipient’s ability to participate in the Plan. For more information on the consequences of the Recipient’s
refusal to consent or withdrawal of consent, the Recipient understands that the Recipient may contact the Recipient’s local human resources representative.} 

12.    {14} Amendment and Termination of Award. The Company may amend, modify or
terminate any outstanding Award, provided that the Recipient’s consent to such action shall be required unless it occurs pursuant to a Sale of the Company or the Committee determines that the action would not materially and adversely affect the
Recipient. 
 {15.    Language. If the Recipient has received this Award Agreement or any other document related to
the Plan translated into a language other than English and if the translated version is different from the English version, the English version will control.} 

16. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the
Award or future awards made under the Plan by electronic means or request that the Recipient consent to participate in the Plan by electronic means. The Recipient hereby consents to receive such documents by electronic delivery and agrees to
participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.} 

 13.    {17}Governing Law and Venue. The Award 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. 

For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this Award or this
Award Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of The Commonwealth of Massachusetts and agree that such litigation shall be conducted only in the courts of Middlesex County, Massachusetts, or the federal
courts for the United States for the district of Massachusetts, and no other courts, where this Award of RSUs is made and/or to be performed. 

14.    {18}Severability. In the event any one or more of the provisions of the Award Agreement shall
for any reason be held to be invalid, illegal or unenforceable, the remaining provisions of the Award 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. 

15.    {19}Definitions. All capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Plan. 
 {20.    Exhibit B. Notwithstanding any provision herein, the
Recipient’s participation in the Plan shall be subject to any special terms and conditions as set forth in Exhibit B for the Recipient’s country of residence, if any. The Exhibit B constitutes part of this Award Agreement.} 

 {Exhibit B 

To Notice of Grant of Award and Award Agreement for Non-U.S. Employees 

This Exhibit B includes additional terms and conditions that govern the RSUs granted to the Recipient if the Recipient resides in the countries contained
herein. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Notice of Grant of Award and Award Agreement for Non-U.S. Employees (of which this Exhibit B is a
part) or the Plan. 
 This Exhibit B also includes information regarding exchange controls and certain other issues of which the Recipient should be
aware with respect to the Recipient’s participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of December 2009, unless otherwise notated. Such laws are
often complex and change frequently. As a result, the Company strongly recommends that the Recipient not rely on the information noted herein as the only source of information relating to the consequences of the Recipient’s participation in the
Plan because the information may be out of date at the time the Recipient acquires shares of Common Stock or sells shares of Common Stock the Recipient acquires under the Plan. 

In addition, the information is general in nature and may not apply to the Recipient’s particular situation, and the Company is not in a position to
assure the Recipient of any particular result. Accordingly, the Recipient is strongly advised to seek appropriate professional advice as to how the relevant laws in the Recipient’s country apply to the Recipient’s specific
situation. 
 If the Recipient is a citizen or resident of another country, or is considered a resident of another country for local law purposes,
the information contained in this Exhibit B may not be applicable to the Recipient. 
 Australia 

Withholding 
 This provision supplements Section 8
(Withholding): 
 Prior to the relevant taxable event, the Recipient will provide the Company with their Australian Tax File Number (TFN) or Australian
Business Number (ABN). Failure to do so will result in the requirement for the Company to withhold Australian tax at the rate of 46.5%. 
 Reform to the
taxation of Employee share schemes 
 With effect from 1 July 2009, RSUs shall be taxed up front, unless there is a “real risk of
forfeiture”. Where there is a “real risk of forfeiture,” RSUs shall generally be taxed at the earliest of: 
  

	 	•	 	Vesting of the award (when it is no longer subject to forfeiture) 

  

	 	•	 	Cessation of employment 

  

	 	•	 	7 years after grant 

 Canada 

Vesting of RSUs 
 Income tax arises on the fair market
value of the shares on vesting. No deferral election is possible for RSUs. 
 For further clarity, any shares issued of the Common Stock of the Company
under an RSU shall be issued solely in the name of the Recipient and not in the name of any other person, including a person with whom the Recipient is dealing at non-arm’s length. 

 The Recipient shall receive shares of the Common Stock of the Company and under no circumstances shall the
Administrator elect to have the Recipient receive cash (or any other security) in lieu of the Common Stock of the Company. To this effect, section 13(e) of the Plan (and any other similar section) do not apply in Canada. 

Furthermore, at all times the Recipient should hold less than 10% of the shares of the Common Stock of the Company or any Related Company. 

Withholding 
 The paragraphs below replace Section 4
of Exhibit A to the Award Agreement: 
 Generally, there are Canadian requirements to withhold source deductions on the vesting of RSUs. Although RSU
benefits are considered to be remuneration subject to source deductions, Canada recognizes that requiring additional withholding from cash payments, such as normal salary, as a result of a stock benefit can create hardship for the employee. This
hardship will be created when either the benefit is very large in proportion to the employee’s normal salary or the award vests later in the year. As a result, employers may make withholdings from employees’ cash remuneration to the extent
possible, without imposing actual hardship. Where the non-cash benefit is the only form of income received from that employer, the employer will not be required to withhold tax on the amount of such benefits.

 RSU benefits are also subject to social security taxes in Canada. These benefits are subject to Canada Pension Plan withholdings but not Employment
Insurance withholdings. The province of Ontario will also levy payroll taxes to fund the Canadian health service. 
 The employment benefit will be reported
on the Recipient T4 for the year in which the RSUs vest. The Recipient must report these amounts on his or her individual income tax return for the same year. 

Acknowledgement of nature of plan 
 The paragraphs below
replace Section 11 of Exhibit A to the Award Agreement [new or amended paragraphs are shown in italics at g and i]: 
 In accepting the RSU Award, the
Recipient acknowledges that: 
  

	(a)	the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this
Agreement; 

  

	(b)	the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of RSU Awards, or benefits in lieu of RSUs, even if RSUs have been granted repeatedly in the past;

  

	(c)	all decisions with respect to future RSUs, if any, will be at the sole discretion of the Company; 

  

	(d)	the Recipient’s participation in the Plan is voluntary; 

  

	(e)	the Award is an extraordinary item that does not constitute compensation for services of any kind rendered to the Company or any Related Company, and which is outside the scope of the employment contract, if any;

  

	(f)	the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses,
long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Related Company; 

	(g)	the Company has decided to grant Awards under the Plan to individuals who are Employees of the Company or any Related Company; and under no circumstances, the Employee should be considered a Consultant or a “non-employee Officer or non-employee Director” of the Company or any Related Company; 

 

	(h)	the future value of the underlying shares of Common Stock is unknown and cannot be predicted with any certainty; 

  

	(i)	at all times the Recipient should hold less than 10% of the shares of the Common Stock of the Company or any Related Company; 

 

	(j)	in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or from any diminution in value of the Award or shares of Common Stock acquired resulting from
termination of the Recipient’s service by the Company or any Related Company (for any reason whatsoever and whether or not in breach of local labor laws) and the Recipient irrevocable releases the Company and any Related Company from any such
claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing the Award Agreement, the Recipient shall be deemed irrevocably to have waived the Recipient’s
entitlement to pursue such claim; 

  

	(k)	in the event of termination of the Recipient’s service (whether or not in breach of local labor laws), the Recipient’s right to receive an Award and vest in the Award under the Plan, if any, will terminate
effective as of the date that the Recipient is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period
pursuant to local law); the Administrator shall have the exclusive discretion to determine when the Recipient is no longer actively employed for purposes of the Award; 

 

	(l)	the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Recipient’s participation in the Plan or the Recipient’s acquisition or sale of the
underlying shares of Common Stock; and 

  

	(m)	the Recipient is hereby advised to consult with their personal tax, legal and financial advisors regarding the employee’s participation in the Plan before taking any action related to the Plan. 

France 
 This information is correct as of February
2016. 
 Language Consent 
 By accepting the Award, the
Recipient confirms having read and understood the documents relating to this grant (the Plan, the French RSU Plan and this Agreement) which were provided in English language. The Participant accepts the terms of those documents accordingly. 

En acceptant l’attribution conditionnelle des actions, vous confirmez ainsi avoir lu et compris les documents relatifs à cette attribution (le
Plan, le French RSU Plan et le présent Contrat) qui ont été communiqués en langue anglaise. Vous acceptez ainsi les termes en connaissance de cause. 

Sale of the shares 
 The Shares held by a French
Participant pursuant to a RSU shall not be sold by the latter during certain Closed Periods as provided for by Section L. 225-197-1 of the French Commercial Code, as
interpreted by the French administrative guidelines. 

 The term “Closed Period” shall mean a closed period as set forth in Section L. 225-197-1 of the French Commercial Code, as amended, which is as follows: 
  

	 	•	 	ten (10) or more quotation days preceding and 3 quotation days following the disclosure to the public of the consolidated financial statements or the annual statements of the Company; or 

 

	 	•	 	any period during which the corporate management of the Company (i.e., those involved in the governance of the Company, such as the Board, Committee, supervisory directorate, etc.) possess confidential
information which could, if disclosed to the public, significantly impact the trading price of the Common Stock, until ten (10) quotation days after the day such information is disclosed to the public. 

French Tax Regime 
 The Recipient is solely responsible
for reporting the gain from the sale of Shares pursuant to the vesting of an RSU in his annual personal income tax return and for paying the related income tax. 

The gain is subject to income tax with progressive tax rates. The taxable gain may be reduced by a tax allowance depending on the number of years between the
Vesting Date and the date when the Shares are sold: 
  

	 	•	 	50% between 2 and under 8 years, 

  

	 	•	 	65 % as from 8 years. 

 The gain is subject to social taxes at the current rate of 15.5 % on 100% of
the gain (the social tax at 5.1% is tax deductible from the taxable income of the following year). 
 Exchange Control Information 

If the Recipient retains Shares outside of France or maintains a foreign bank account, the Recipient is required to report such to the French tax authorities
when filing his or her annual tax return. 
 Germany 

Exchange Control Information 
 Cross-border payments in
excess of €12,500 must be reported monthly to the German Federal Bank. If the Recipient uses a German bank to transfer a cross-border payment in excess of €12,500 in connection with the sale of shares of Common Stock acquired under the
Plan, the bank will make the report for the Recipient. In addition, the Recipient must report any receivables or payables or debts in foreign currency exceeding €5,000,000 on a monthly basis. 

Hong Kong 
 Obligation to report the RSUs to the
tax authority 
 The Recipient is obliged to declare the gains realized in relation to RSUs to the Hong Kong Inland Revenue Department (“IRD”)
in their Individual Tax Return for the relevant year of assessment. If the Recipient is eligible to lodge any offshore non-taxable claim on RSU gains, the Recipient is required to lodge such claim in their
Individual Tax Return. Therefore, it is the Recipient’s responsibility to prove to the satisfaction of the IRD on their non-taxable claim lodged with documentary evidence in support. 

The IRD has issued the revised Departmental Interpretation and Practice Note (“DIPN”) No. 38 regarding the employee share-based benefits in
March 2008 which has expressed the IRD’s view on the timing and taxability of the share award benefits. This sets a general guideline for taxpayers in ascertaining the tax treatment of their share award benefits. DIPN is not legally binding and
not a rule of law and the revised DIPN No. 38 may not cover every type of share award benefit. Participants should take individual tax advice on their share award benefits. 

 Reporting requirement 

Upon the commencement of Hong Kong employment/assignment of the Recipient, the employer (the “Employer”) is obliged to file the Commencement Notice
(Form IR 56E) for reporting the term of employment and RSU details to the IRD within 3 months from the date of commencement of employment. Annual Employer’s Return (Form IR 56B) is required to be filed to the IRD by end of April to report the
remuneration paid/accrued to the Recipient, including the RSU gains, for each year ended 31 March. Further to the filing of the said Forms, the IRD will normally create a tax file for the Recipient and issue the annual Individual Tax Return to the
Recipient (usually in May) to ascertain their tax position. If there is no Individual Tax Return issued by the IRD to the Recipient for reporting the RSU gain in the year of award or of vesting, as appropriate, the Recipient is obliged to
voluntarily inform the IRD on this tax chargeability arising from the exercise as well as other Hong Kong taxable employment income within four months after the end of the basis period during which the year of assessment is concerned (i.e. the
informing deadline is 31 July given the fiscal year ends on 31 March). 
 Leaving Hong Kong 

If the RSU benefit is taxable in Hong Kong even if it is received after the Recipient permanently departs from Hong Kong, the Employer should report the
RSU gains by filing the Departure Notice (Form IR 56G) and provide a copy for the Recipient. The Recipient also needs to discharge their voluntary informing chargeability obligation as mentioned above not later than 4 months after the end of the
year of assessment in which the RSU gains are derived. Even if the Employer fails to submit the Departure Notice to report the taxable RSU gain, the Recipient still needs to comply with his or her own reporting obligation. 

Withholding 
 The paragraphs below supplement
Section 4 (Withholding) of Exhibit A to the RSU Award Agreement. 
 The Employer is not required to withhold the Recipient’s share gains unless
the Recipient permanently departs from Hong Kong. The Employer is statutorily required to withhold money payment from the Recipient for a period of one month after the Departure Notification (Form IR 56G) was filed to the IRD, unless consent (by the
issue of a Letter of Release to the employer with a copy to the Recipient after they have settled all their tax liabilities) is given by the IRD. If the Recipient derives share gains and there is money paid to them by the Employer, the Employer has
the withholding obligation. 
 To facilitate finalizing the salary-related tax liabilities prior to permanent departure, the Recipient is allowed, as a
concession, to elect to have the tax liabilities finalized on the basis of a deemed vesting of the share awards. The Recipient may elect to be assessed on either (i) the deemed value on a day within 7 days before the submission of the
Recipient’s tax return for the final year of assessment in which the Recipient departs or (ii) the deemed value on the date of departure if the election is made within 3 months from the date of permanent departure from Hong Kong. 

Once an election is accepted by the IRD and the assessment is made accordingly, the election cannot be withdrawn. A subsequent request to revise the
assessment will not be entertained unless the assessment is objected to within the statutory time allowed for objection. 
 If the actual share award gain
is higher than the amount assessed under deemed vesting, the IRD has indicated in DIPN No. 38 that it will not seek to increase the assessment for the sole reason that the value upon vesting has increased. 

India 
 No country specific terms and conditions
apply. 

 Italy 

This information is correct as of August 2011. 
 Purpose

 The Plan is discretionary in nature and is offered only to individual employees and/or specific categories of employees. 

Nature of Plan 
 This provision supplements
Section 11 (Acknowledgement of Nature of Plan and Award) of Exhibit A to the Award Agreement: 
 The Recipient understands that the Company has
unilaterally, gratuitously and discretionally decided to grant RSUs under the Plan to individuals who may be employees of the Company or its Subsidiaries throughout the world. The decision is a limited decision that is entered into upon the express
assumption and condition that any grant will not bind the Company or any Related Company. Consequently, the Recipient understands that the RSU is granted on the assumption and condition that the RSU and any shares of Common Stock acquired upon
vesting of the RSU are not a part of any employment contract (either with the Company or any Related Company) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever.
Further, the Recipient understands that the Recipient will not be entitled to continue vesting in any RSU once the Recipient’s service with the Company or any Related Company ceases. In addition, the Recipient understands that this award would
not be made to the Recipient but for the assumptions and conditions referred to above; thus, the Recipient acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any
reason, then any grant of or right to the RSU shall be null and void. 
 It is a condition of participation in the Plan that the Recipient expressly agrees
to the terms of the Plan, including the provisions in this Exhibit B. 
 RSUs Payable Only in Shares of Common Stock 

Notwithstanding any discretion in the Plan or anything contrary in the Award Agreement, if the Recipient is resident in Italy, the award of RSUs does not
provide any right for the Recipient to receive a cash payment and the RSUs are payable in shares of Common Stock only. 
 Securities Reporting 

Individuals in Italy are required to report assets held abroad on their annual tax returns (Form RW) if the value of such assets exceeds 10,000 Euros at the
end of the calendar year. The Italian tax authorities have taken the position that vested RSUs in a foreign company are considered ‘assets held abroad’. 

Employees must therefore also report vested RSUs in their annual tax returns (Form Unico, Schedule RW) if the threshold is exceeded. 

In addition, employees must report in Section III of Form RW the transfer of money exceeding 10,000 Euros: 

 

	 	•	 	From Italy to another jurisdiction; 

  

	 	•	 	From another jurisdiction to Italy; 

  

	 	•	 	Between non-Italian jurisdictions, if the transfer relates to investments held overseas. 

This also applies to transfers to countries that have adopted the Euro. 

 Japan 

This information is correct as of August 2009. 
 Exchange
Control Information 
 Although there are no restrictions on the transfer of funds outside Japan, certain reporting obligations to the tax authorities or
the Ministry of Finance may be required. 
 Recipients must notify the Ministry of Finance of share purchases in excess of 30,000,000 Yen. An additional
notification is required for purchase of shares with a value in excess of 100,000,000 Yen. 
 Japanese banks including Japanese branches of foreign banks
have to report transfers of funds of more than 1,000,000 Yen in and out of Japan to the government automatically. Sometimes the tax authorities check individual tax returns to these records. 

Netherlands 
 By participating in the Plan the
Recipient acknowledges that his or her Award can cease to vest on termination of employment under the terms of the Plan. It is a condition of participation in the Plan that the Recipient agrees to these terms. 

New Zealand 
 This information is correct as of
April 2017. 
 Disclosure required under the Financial Markets Conduct Act 2013 

If you are receiving this offer in New Zealand please read the following in addition to the other documents which are provided to you by Pegasystems Inc. 

Warning 
 This is an offer of Restricted Stock Units. Upon
the vesting of the Restricted Stock Units, you will be granted Common Stock in Pegasystems Inc. Common Stock gives you a stake in the ownership of Pegasystems Inc. You may receive a return if dividends are paid. 

If Pegasystems Inc. runs into financial difficulties and is wound up, you will be paid only after all creditors and holders of preferred shares have been
paid. You may lose some or all of your investment. 
 New Zealand law normally requires people who offer financial products to give information to investors
before they invest. This information is designed to help investors to make an informed decision. 
 The usual rules do not apply to this offer because it is
made under an employee share purchase scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment. 

Ask questions, read all documents carefully, and seek independent financial advice before committing yourself. 

Pegasystems Inc. intends to quote the stock on the NASDAQ Stock Market. This means you may be able to sell them on the NASDAQ Stock Market if there are
interested buyers. You may get less than you invested. The price will depend on the demand for the shares. 

 Financial information 

You have the right to receive from Pegasystems Inc., free of charge, a copy of its latest annual report or similar document and relevant financial statements
if you ask for the same. You may obtain an electronic copy of these documents by downloading them from http://pega.ir.edgar-online.com. If you have any difficulties in accessing or downloading the same, please contact the Chief Financial Officer,
Pegasystems Inc., One Rogers Street, Cambridge, Massachusetts 02142. Telephone: (617) 374-9600. 
 Withholding

 This provision supplements Section 4 Withholding. The Employer is required to report on the employee share scheme benefit in its Employer Monthly
Schedule as the benefit accrues to the Recipient. However, the Employer has the choice as to whether or not it deducts tax on the employee share scheme benefit – unless the Employer elects to do this, the obligation to return the tax on the
benefit (and file a return including the same) remains with the Recipient. Further, reforms to the tax rules applicable to employee shares schemes have been proposed, which may alter how the benefit is calculated and when the taxing point(s) arises.
Going forward, Recipients will need to monitor these developments. 
 Poland 

Securities reporting 
 If the Recipient holds more than
€10,000 of foreign securities (including following the grant of Awards) the Recipient must declare details of the shares (whether or not the shares have vested) to the National Bank of Poland. The form of declaration must be submitted within 30
days of the end of the year. 
 Singapore 

Leaving Singapore 
 With effect from January 1, 2003,
Recipients who are foreign citizens or are Singapore Permanent residents leaving Singapore permanently are taxed on a “deemed exercise” basis for any options or units or shares granted or issued during Singapore employment. This would also
include any unvested or restricted options or units or shares granted whilst exercising employment in Singapore. 
 As per the deemed exercise rule, all
Awards, units, or stock which have been granted during Singapore employment are deemed to have been exercised, irrespective whether the Awards have vested or not. The taxable value is the fair market value (which would be the fair market value one
month prior to the date of departure). 
 Director withholding 

Independent Directors who are Non Resident in Singapore and have received Awards by virtue of their being on the Board of the Singapore Company will be subject
to tax in Singapore and liable for tax withholding. 
 Spain 

This provision supplements Section 11 (Acknowledgment of Nature of Plan and Award) of Exhibit A to the Award Agreement: 

In accepting the RSUs, the Recipient consents to participation in the Plan and acknowledges that the Recipient has received a copy of the Plan. 

The Recipient understands that the Company has unilaterally, gratuitously and discretionally decided to 

 
grant RSUs under the Plan to individuals who may be employees of the Company or its Subsidiaries throughout the world. The decision is a limited decision that is entered into upon the express
assumption and condition that any grant will not bind the Company or any Related Company. Consequently, the Recipient understands that the RSUs are granted on the assumption and condition that the RSUs and any shares of Common Stock acquired upon
vesting of the RSUs are not a part of any employment contract (either with the Company or any Related Company) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever.
Further, the Recipient understands that the Recipient will not be entitled to continue vesting in any RSUs once the Recipient’s employment with the Company or any Related Company ceases. In addition, the Recipient understands that this grant
would not be made to the Recipient but for the assumptions and conditions referred to above; thus, the Recipient acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any
reason, then any grant of or right to the RSUs shall be null and void. 
 Exchange Control Information 

The Recipient must declare the acquisition of shares of Common Stock to the Dirección General de Política Comercial e Inversiones Exteriores (the
DGPCIE) of the Ministerio de Economía for statistical purposes. 
 As the shares are listed on a stock exchange the acquisition will be filled in a
form D-5B. The form will be declared to the Registro de Inversiones of the Dirección General de Política Comercial e Inversiones Exteriores of the Ministerio de Industria, Turismo y Comercio.

 The Recipient must also declare ownership of any shares of Common Stock with the Directorate of Foreign Transactions each January whilst the shares of
Common Stock are owned in the following cases: 
  

	 	•	 	The shares of the company are listed on the stock exchange. 

  

	 	•	 	The shareholding in the company has to be at least 10% or more. 

  

	 	•	 	The investment is more than 1,502,530.26 Euros. 

 Foreign currency payments (i.e., dividends or sale proceeds)
have to be declared when the amount exceeds 6,010.12 Euros on form B3. 
 The information provided to the financial institution is the following: 

 

	 	•	 	The Recipient’s name, address, and fiscal identification number 

  

	 	•	 	Non resident’s name, address and fiscal identification number. 

  

	 	•	 	The amount of the payment, payment method, currency of origin and value in euros. 

  

	 	•	 	The reasons for the payment. 

 A payment is made by bank transfer the following information should be provided
to the financial institution when the amount exceeds 50,000 Euros: 
  

	 	•	 	Resident name, address and fiscal identification number. 

  

	 	•	 	Non resident name, address and fiscal identification number. 

  

	 	•	 	The amount, currency of origin and value of payment in euros. 

  

	 	•	 	The reason for the payment. 

 Switzerland 

This information is correct as of April 2017 
 Acknowledgment
of Nature of Plan and Award 
 The paragraphs below are added to Section 12 (Acknowledgement of Nature of Plan and Award) of Exhibit A to the Award
Agreement: 
 The Recipient understands that the Company has unilaterally and discretionally decided to grant Awards under the Plan to individuals who may
be employees of the Company or its Subsidiaries throughout the world. 

 The Company has the absolute right to decide whether or not Awards shall be granted to an employee. Within its
absolute discretion, the Company may in particular take into account (i) the financial results of the Company, of the department for which the Employee works as well as of the stand-alone financial results of the Company, and (ii) the
individual performance as well as the behavior of the Employee during the financial period. Even though Awards have been granted to an Employee at several occasions, whether consecutive or not, the Employee may not infer any entitlement to any
future grant of Awards. The grant of Awards is conditional upon the employment agreement not having been unilaterally terminated. 
 The grant of Awards is
entirely discretionary and does not create any obligation upon the Company to pay future bonus even though the Employee receives Awards at several consecutive occasions. No pro rate amount will be paid. Even the existing Awards are discretionary and
the right to vest the Awards might be terminated. 
 Withholding 

The paragraphs below replace Section 4 (Withholding) of Exhibit A to the Award Agreement: 

The Recipient shall be exclusively responsible for getting advice and obtaining any and all information about the tax consequences in connection with the
Plan, in particular with the promise to grant, the grant, the holding and the exercise of Award, as well as with the issuance and transfer of shares. 
 Any
social contributions levied at the promise to grant, at the grant or at exercise of the Award, and at the delivery and transfer of shares shall be borne by the Company and the Recipient as provided by law. 

The Recipient shall bear any and all tax and social security (employee’s withholdings) related to the grant or the exercise of Awards, and shall
reimburse to the Company any such tax and social security which may have been paid by the Company. However, the stamp duty on issuance of the shares shall be borne by the Company. 

The taxable benefit at the time the RSUs will be vested corresponds to the market value of the share. The value of the shares for tax purposes will be
communicated by the Company to the Participant upon vesting of the RSU with respect to RSU Awards. The Participant shall pay income taxes on the tax value of the shares as communicated by the Company to the Participant. 

The Company may withhold from any amounts due to the Recipient any sums which the Company is or will be required by applicable law to pay on behalf of the
Recipient in respect of taxes or social security (including withholding taxes). The amounts that the Company is entitled to withhold for that purpose from amounts due to the Recipient who is an Employee of the Company are subject to applicable
mandatory employment law provisions. 
 The Company is entitled to retain the shares resulting from the exercise of the Awards as long as, and to the
extent, the Company has not been reimbursed (or has not been provided with guarantees for such reimbursement) by the Recipient for any amount the Company paid on behalf of the Recipient in respect of taxes or social security. 

Thailand 
 This information is correct as of April
2017. 
 Obligation to Request for Approval on Remittance of Subscription Price Abroad and Declaration of Dividends Received 

 Foreign Exchange Control 

Approval on Declaration of Dividends Received: Generally, once the dividend payment is declared, the employees must immediately remit such dividend into
Thailand, otherwise the BOT approval for this is required. Thus, should the dividend will be re-invested or used for other purpose according to the plan, the approval from BOT must be obtained in advance. 

After prescribed period (lock-up period), unless otherwise provided in the plan and subject to the BOT approval, the
dividends and other compensations received under the plan must be remitted into Thailand immediately. 
 Personal Income Tax 

Tax on Award as Share(s) of the Common Stock with Free-of-Charge 

The receipt of any free share(s) of the common stock is treated as the assessable income. The price of the share is subject to tax at progressive income rates
ranging from 5% to 35% depending on the amount of income taxable. 
 Tax on Dividends 

Dividends will also be subject to taxation when such dividends are actually received by employees. Similarly, dividends are subject to tax at progressive
income rates ranging from 5% to 35% depending on the amount of income taxable. 
 Tax on Capital Gains 

Capital gains (defined as the difference between the redemption proceeds and the subscription price/ value of share) are taxed at progressive income rates of
5% to 35%. No employee or employer social charges apply. 
 Employees must file a tax return by March 31 of the calendar year following the calendar
year in which the income was received. Applicable taxes are not withheld by the employer. 
 Turkey 

This information is correct as of April 2017. 
 Tax
Obligations of the Recipients 
 There are no specific rules or regulations relating to employee share plans in Turkey and therefore the tax treatment is
unclear under Turkish law. Under the general tax provisions, restricted stock is taxed upon grant and RSU’s are taxed upon vesting. Additionally, under certain circumstances, Recipients might be subject to stamp tax and some social security
contributions. 
 The gain arising on the sale of the shares must be declared on the Recipient’s annual income tax return and will be subject to income
tax at the Recipient’s applicable rate. There is an income tax exemption for a certain amount of gains in a calendar year but this exemption does not apply to the sale of marketable securities. 

The Income Tax Law describes employment income as benefits paid in cash, in-kind or other ways, represented by money
for services rendered, to persons employed by an employer and working at a certain workplace (Article 61). This definition includes all non-cash benefits provided and payments made (including allowance,
compensation, cash indemnity, funds, increase, advance, dues, attendance fee, premium, bonus and reimbursement or under any other names). Payment as a certain percentage of earnings (provided it is not related to an ownership of a company and
related to the employment of the concerned personnel) must also be included under this definition and considered as employment income. 

 The taxable event for employment income is triggered once the Recipient legally and economically has the right to
dispose of the benefit or payment. Income tax is imposed upon exercise on any “spread” on the shares, which is the excess of the fair market value of the shares on the exercise date, over the aggregate exercise price paid. 

The benefit (that is, the difference between the shares’ price at grant and value at vesting) is subject to withholding tax and must be declared by the
Turkish resident company in the withholding tax return (Article 94, Income Tax Law). The income tax rate is applied at progressive rates ranging between 15% and 35%. 

Exchange Control Information 
 Restricted stock and RSUs
are not subject to any foreign exchange restrictions. Importation of Turkish currency and instruments denominated in Turkish currency shall be free, while their exportation is free under the following principles: 

 

	 	(i)	Residents in Turkey and non-residents shall be free to transfer Turkish currency abroad via banks. 

 

	 	(ii)	Travelers may freely take Turkish currency abroad on their person, up to the equivalent of USD 5,000. 

  

	 	(iii)	Exportation of instruments denominated in Turkish currency shall be free. 

 Non-residents may freely make payments, collect money and make deposits in Turkish currency in Turkey. 
 Banks shall
inform the authorities to be determined by the Ministry about Turkish Lira transfers abroad, excluding payments for exports, imports and invisible transactions that are above the equivalent of USD 50,000, within a 30
day-period starting from the date of transfer. 
 Residents in Turkey are also allowed to accept payment in foreign
currency from non-residents for the transactions that they conduct in Turkey in favor of such non-residents. 

United Kingdom 
 RSUs Payable Only in Shares of
Common Stock 
 Notwithstanding any discretion in the Plan or anything to the contrary in the Award Agreement, if the Recipient is resident and
ordinarily resident in the United Kingdom, the grant of RSUs does not provide any right for the Recipient to receive a cash payment and the RSUs are payable in shares of Common Stock only. 

Withholding 
 The paragraphs below replace Section 4
(Withholding) of Exhibit A to the Award Agreement: 
 Regardless of any action the Company or the Recipient’s employer (the “Employer”) takes
with respect to any or all income tax, primary and secondary Class 1 National Insurance contributions, payroll tax or other tax-related withholding attributable to or payable in connection with or
pursuant to the grant, vesting, release or assignment of any RSUs subject to the Award (“Tax-Related Items”), the Recipient acknowledges that the ultimate liability for all Tax-Related Items legally due by the Recipient is and remains the Recipient’s responsibility. Furthermore, the Company and/or the Employer (i) make no representations or undertakings regarding the
treatment of any Tax-Related Items in connection with any aspect of the RSUs, including the grant of the RSUs, the vesting of the RSUs, the delivery of shares of Common Stock, the subsequent sale of any shares
of Common Stock acquired under the Plan and the receipt of any dividends or dividend equivalents; and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate the Recipient’s liability to Tax-Related Items. 

 As a condition of any RSUs subject to the Award vesting and the issuance of shares of Common Stock in payment of
the RSUs, the Company and/or the Employer shall be entitled to withhold, and the Recipient agrees to pay, or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy, all obligations of the Company and/or the Employer to
account to HM Revenue & Customs (“HMRC”) for any Tax-Related Items by the Due Date, which is 90 days, or such other period as required under U.K. law, after the event giving rise to the Tax-Related Items (the “Chargeable Event”). In this regard, except as provided in the next sentence, such payment shall be made by means of the Company withholding and/or reacquiring a number of shares of
Common Stock issued in payment of (or otherwise issuable in payment of, as the case may be) the RSUs having a Fair Market Value equal to the amount of Tax-Related Items that the Company determines it or the
Employer is required to account to HMRC under applicable tax laws with respect to the RSUs (with such withholding obligation determined based on any applicable minimum statutory withholding rates). In the event that the Company cannot (under
applicable legal, regulatory, listing or other requirements, or otherwise) satisfy such obligation in such method, the Company and/or the Company may satisfy its entitlement to withhold under this Award Agreement by either or a combination of the
following methods: (i) by requiring the Recipient to pay such amount in cash or check; and/or (ii) by deducting such amount out of any other compensation otherwise payable to the Recipient. For these purposes, the Fair Market Value of the
shares of Common Stock to be withheld or repurchased, as applicable, shall be determined on the date that Tax-Related Items are to be determined. 

The Recipient shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the
Employer may be required to account to HMRC with respect to the Chargeable Event that cannot be satisfied by the means previously described. If payment or withholding is not made by the Due Date, the Recipient agrees that the amount of any
uncollected Tax-Related Items shall (assuming the Recipient is not a director or executive officer of the Company (within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as
amended)), constitute a loan owed by the Recipient to the Employer, effective on the Due Date. The Recipient agrees that the loan will bear interest at the then-current HMRC Official Rate and it will be immediately due and repayable, and the Company
and/or the Employer may recover it at any time thereafter by any of the means referred to above. If any of the foregoing methods of collection are not allowed under Applicable Laws or if the Recipient fails to comply with the Recipient’s
obligations in connection with the Tax-Related Items as described in this section, the Company may refuse to deliver the shares of Common Stock acquired under the Plan. 

Joint Election 
 As a condition of the Recipient’s
participation in the Plan and the vesting of the RSUs, the Recipient agrees to accept any liability for secondary Class 1 National Insurance contributions (the “Employer’s Liability”) which may be payable by the Company and/or
the Employer in connection with the RSUs and any event giving rise to Tax-Related Items. To accomplish the foregoing, the Recipient agrees to execute a joint election with the Company (the
“Election”), the form of such Election being formally approved by HMRC, and any other consent or elections required to accomplish the transfer of the Employer’s Liability to the Recipient. The Recipient further agrees to execute such
other joint elections as may be required between the Recipient and any successor to the Company and/or the Employer. If the Recipient does not enter into the Election when the Recipient accepts the Award Agreement or when otherwise requested by the
Company and/or Employer, or if the Election is revoked at any time by HMRC, the RSUs will cease vesting and become null and void, and no shares of Common Stock will be acquired under the Plan, unless the Recipient agrees to pay an amount equal to
the Employer’s Liability to the Company, the Employer and/or any Related Company. The Recipient further agrees that the Company and/or the Employer may collect the Employer’s Liability by any of the means set forth in the Withholding
section of the Award Agreement.}Exhibit

March 1, 2017

Mr. Douglas L. Ludwig
11 Blyth Dale Road   
Toronto, Ontario M4N 3M3 Canada  
 
RE: Red Lion Hotels Corporation Offer Letter

Dear Doug:

On behalf of Red Lion Hotels Corporation (the “Company”), we are delighted to offer you the position of Executive Vice President, Chief Financial Officer and Treasurer of the Company. In your new position, you will report to the President and CEO of the Company.

As an officer of the Company, the details of your hire, your compensation and any of your acquisitions and dispositions of stock of the Company may in the future be subject to Securities Exchange Commission reporting rules. 

The following outlines the employment package for your position, all of which is conditioned upon government approval of your employment immigration status.

START DATE:  March 20, 2017 or the soonest date following government approval of your employment immigration status.

POSITION: Executive Vice President, Chief Financial Officer and Treasurer. Your responsibilities will be those outlined in your job description, as may be modified, and as may be assigned to you from time to time by the President and CEO. You will also be required, as appropriate and consistent with other senior executives, to attend and participate in (i) necessary senior executive meetings, committees and councils and (ii) meetings of the Board of Directors of the Company.

COMPENSATION: Your position is classified as a salaried exempt position, which means it is exempt from state and federal overtime laws. You will be paid a bi-weekly base salary of $14,423.08, which is equivalent to $375,000 per year, subject to normal withholdings and payroll taxes. You will not be entitled to any additional compensation in the event you are appointed to serve as an officer or director of any of the Company’s direct or indirect subsidiaries or affiliates.

BONUS: In addition to your base salary, you are eligible to earn a bonus if you are actively employed throughout the applicable bonus period, and if you meet the other requirements outlined in any bonus plan as may be approved by the Company from time to time for Executive Vice Presidents of the Company. Bonus targets and goals for achievement of bonuses by executive officers are set by the Compensation Committee of the Board.  Bonus targets for this position are set for 2017 at 70% of base salary.  Any bonus earned by you in 2017 would be prorated for the portion of the year you are employed by the Company.

EQUITY GRANT: At the sole discretion of the Compensation Committee of the Company’s Board, you will receive an annual grant of equity under the Company’s 2015 Stock Incentive Plan (or such successor plan as may be then in effect).  Subject to such discretion, such grant shall be in a value equal to 100% of your base salary, a portion of which shall be issued in the form of restricted stock units (“RSUs”) vesting 25% on each of the first four anniversaries of issuance, and the balance of which shall be issued in the form of performance stock units (“PSUs”) vesting in accordance with performance metrics to be determined by the Compensation Committee in its sole discretion and consistent with the terms and conditions of PSUs issued to the Company’s other executive officers.  In addition, subject to shareholder approval at the Company’s 2017 annual meeting to include additional equity in the Company’s stock incentive plan, you will receive 40,000 Restricted Stock Units in the Company vesting 25% on each of the first four anniversaries of issuance.  Upon the scheduled vesting in the ordinary course of business of any RSUs the Company has granted to you, and except as may then otherwise be required by applicable law, such vested RSUs shall be settled exclusively in the common stock of the Company.

CASH PAYMENT: You will receive a cash payment of $45,000, to be paid after six (6) months of employment, subject to normal withholdings and payroll taxes. In the event you voluntarily terminate your employment with the Company prior to the first anniversary of your Start Date, you will be required to reimburse this cash payment to the Company and you authorize the Company to deduct the entire amount from your final paycheck or from any other funds the Company then owes to you or is holding on your behalf.  Should the amount exceed your final paycheck and other funds the Company then owes you, you agree to promptly reimburse the Company any remaining balance at that time.

TEMPORARY HOUSING: To assist in your travels to Denver, Colorado, you shall receive $20,000, subject to normal withholdings and payroll taxes. In the event you voluntarily terminate your employment with the Company prior to the first anniversary of your Start Date, you will be required to reimburse this cash payment to the Company and you authorize the Company to deduct the entire amount from your final paycheck or from any other funds the Company then owes to you or is holding on your behalf.  Should the amount exceed your final paycheck and other funds the Company then owes you, you agree to promptly reimburse the Company any remaining balance at that time. 

BENEFITS: You will be eligible to participate in all employee benefit programs on the same terms and conditions as any Company Executive Vice President, as they may be modified from time to time, including:

	
		
	•
	Medical and Dental insurance eligible the first of the month following your Start Date

	•
	Employee Assistance Program (EAP)

	•
	Long Term Disability insurance coverage starting the first of the month following your Start Date

	•
	Flexible Spending Account - Section 125 Medical Reimbursement and Dependent Care accounts eligible within 30 days of your Start Date for the following 1st of the month effective date

	•
	AFLAC - Voluntary Cancer Protection, Short Term Disability, Personal Recovery and Accident / Injury Protection Plans available following Start Date and also during open enrollment periods

	•
	Vacation, Holiday, Sick Pay and Disability Programs

	•
	Participation in the Company 401(k) Retirement Savings Plan with a discretionary match made after the end of each calendar year.

	•
	Direct Deposit

	•
	Option to purchase shares of Company stock at a 15% discount through payroll deduction under Red Lion’s Employee Stock Purchase Plan

	•
	Voluntary Term Life and AD&D Insurance coverage eligible the first of the month following your Start Date

	•
	Continuing education reimbursement

	•
	Discounted hotel accommodations for you and your family at Company hotels

A benefit book will be provided to you upon the commencement of your employment, describing the Company’s benefits and eligibility requirements in detail. You will also receive a copy of the Company’s Associate Handbook with information regarding the Company’s policies and procedures. 

SEVERANCE BENEFITS:

UPON TERMINATION WITHOUT CAUSE: If the Company terminates your employment without Cause (defined below), the Company will pay you a lump sum payment equal to one-half (1/2) your base annual salary for the then current fiscal year, provided that as a previous condition to such payment, you shall execute and not revoke during any legally applicable revocation period, a mutually acceptable separation agreement and general release.

UPON CHANGE OF CONTROL AND CONSTRUCTIVE TERMINATION: If, during the term of your employment with the Company, there is a Change of Control (defined below) and there is a Constructive Termination (defined below) of your employment without Cause within twelve (12) months after such Change of Control, you will, in lieu of severance under the preceding paragraph, be entitled to a lump sum payment equal to the sum of (a) your base annual salary for the then current fiscal year, plus (b) an amount equal to (i) your target annual bonus under the then applicable bonus plan for the then current fiscal year, multiplied by (ii) a fraction, the numerator of which is 365 plus the number of days elapsed in the then current fiscal year at the time of the termination and the denominator of which is 365. In addition, (A) the Company shall accelerate vesting on any portion of any equity grant previously made to you under the Company’s 2015 Stock Incentive Plan, or any successor plan, that would otherwise have vested after the date of the termination of your employment; and (B) all Company imposed restrictions under any restricted stock, restricted stock unit or other similar equity-based awards granted to you by the Company shall be terminated upon the termination of your employment, and the Company shall issue all common stock that underlies such awards but has not yet been issued; provided that (i) if the terms of any such award require you to pay monetary consideration for such stock, the stock underlying such award shall be issued only if you pay such consideration, and (ii) if any restrictions under any 

such award are performance-based, such restrictions shall terminate and the stock underlying such award shall be issued only if and to the extent expressly provided in the agreement evidencing the award.

As used herein, the term “Cause” means: (i) your willful and intentional failure or refusal to perform or observe any of your material duties, responsibilities or obligations, if such breach is not cured within 30 days after notice thereof to you by the Company, which notice shall state that such conduct shall, without cure, constitute Cause; (ii) any willful and intentional act by you involving fraud, theft, embezzlement or dishonesty affecting the Company; or (iii) your conviction of (or a plea of nolo contendere to) an offense which is a felony in the jurisdiction involved. 

“Constructive Termination” shall be deemed to occur if the Company terminates your employment without Cause, or if you voluntarily elect to terminate your employment within thirty (30) days after any of the following events occurring without your consent: (i) there is a significant reduction in your overall scope of duties, authorities and responsibilities (it being understood that a new position within a larger combined company is not a constructive termination if it is in the same area of operations and involves similar scope of management responsibility notwithstanding that you may not retain as senior a position overall within the larger combined company as your prior position within the Company); or (ii) there is a reduction of more than 20% of your base salary or target bonus (other than any such reduction consistent with a general reduction of pay across the Company’s or its successor’s executive staff as a group, as an economic or strategic measure due to poor financial performance by the Company).

As used herein, the term “Change of Control” means the occurrence of any one of the following events:  any merger or consolidation involving the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), adoption of a plan for liquidation of the Company or for sale of all or substantially all of the assets of the Company or other similar transaction or series of transactions involving the Company, or the acquisition of 50% or more of the combined voting power of the outstanding securities of the Company by a “person” or “group” (as those terms are defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934).

The severance amounts hereunder shall, subject to COMPLIANCE WITH SECTION 409A below, be paid to you as soon as practicable following the occurrence of the event that entitles you to such payments.

COMPLIANCE WITH SECTION 409A:  Notwithstanding any other provision of this letter to the contrary, the provision, time and manner of payment or distribution of all compensation and benefits provided by this letter (“Section 409A Deferred Compensation”) that constitute nonqualified deferred compensation subject to and not exempted from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall be subject to, limited by and construed in accordance with the requirements of such section and all regulations and other guidance promulgated by the Secretary of the Treasury pursuant to such section (such section, regulations and other guidance being referred to herein as “Section 409A”), including the following:

(a)    Separation from Service. Payments and benefits constituting Section 409A Deferred Compensation otherwise payable or provided pursuant to this letter upon your Constructive Termination shall be paid or provided only at the time of a termination of your employment that constitutes a Separation from Service. For the purposes of this letter, a “Separation from Service” is a separation from service within the meaning of Treasury Regulation Section 1.409A-1(h).

(b)    Six-Month Delay Applicable to Specified Employees. If, at the time of your Separation from Service, you are a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then any payments and benefits 

constituting Section 409A Deferred Compensation to be paid or provided pursuant to this letter upon your Separation from Service shall be paid or provided commencing on the later of (i) the first business day after the date that is six months after the date of such Separation from Service or, if earlier, the date of your death (in either case, the “Delayed Payment Date”), or (ii) the date or dates on which such Section 409A Deferred Compensation would otherwise be paid or provided in accordance with this letter without regard to this paragraph. All such payments and benefits that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

 
(c)    Installments. Your right to receive any amounts payable hereunder in two or more installments shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment for purposes of Section 409A.

 
(d)    Notice Upon Constructive Termination.  If you voluntarily elect to terminate your employment under circumstances that would otherwise constitute a Constructive Termination under this letter, a Constructive Termination shall not be deemed to have occurred unless (i) you have given the Company written notice that a specified event has occurred giving you the right to voluntarily terminate your employment and have that be treated as a Constructive Termination, (ii) the Company fails to cure such event within a period of thirty (30) days after the receipt of such notice, and (iii) you voluntarily terminate your employment within thirty (30) days following the end of that period.

PROOF OF ELIGIBILITY TO WORK IN U.S.: Our offer is contingent upon your submission of satisfactory proof of your identity and your legal authorization to work in the United States. If you fail to submit this proof, federal law prohibits us from hiring you.  The Company will pay for the costs to secure employment eligibility in the United States.

LOYALTY, NONDISCLOSURE OF CONFIDENTIAL INFORMATION: By accepting this offer, you agree that you will act at all times in the best interest of the Company. You also agree that, except as required for performance of your work, you will not use, disclose or publish any Confidential Information of the Company either during or after your employment, or remove any such information from the Company’s premises. Confidential Information includes, but is not limited to, lists of actual and prospective customers and clients, financial and personnel-related information, projections, operating procedures, budgets, reports, business or marketing plans, compilations of data created by the Company or by third parties for the benefit of the Company. 

NONCOMPETITION AND NONSOLICITATION:  (a)  You agree that during a period after termination of your employment commensurate with the months of base salary you are paid as a benefit in connection with a related severance event, you will not, directly or indirectly, engage or participate or make any financial investments in (other than ownership of up to 5% of the aggregate of any class of securities of any corporation if such securities are listed on a national stock exchange or under section 12(g) of the Securities Exchange Act of 1934) or become employed by, or act as an agent or principal of, or render advisory or other management services to or for, any Competing Business. As used herein the term “Competing Business” means any business which includes hotel ownership, hotel management, hotel services or hotel franchising that competes directly or indirectly with the Company.

(b)     You also agree that during your employment at the Company and during a period after termination of your employment commensurate with the months of base salary you are paid as a benefit in connection with a related severance event, you will not solicit, raid, entice or induce any person that then is or at any time during the twelve-month period prior to the end of your employment was an employee of the Company (other than a person whose 

employment with the Company has been terminated by the Company), to become employed by any person, firm or corporation.

COMPLAINT RESOLUTION: By accepting this offer with the Company, you also agree to continue to familiarize yourself with its policies, including its policies on equal opportunity and anti-harassment, and to promptly report to the appropriate the Company supervisors or officers any matters which require their attention. 

KEY EMPLOYEE STATUS: You are regarded as a key employee under certain federal regulations governing family and medical leave. This status will require that you work closely with us in planning if you develop a need for family or medical leave.

NATURE OF EMPLOYMENT: As explained to you on the application for employment you submitted, the Company is an at-will employer. This means that your employment is not for a set amount of time; either you or the Company may terminate employment at any time, with or without cause. 

BACKGROUND CHECK: The Company has a vital interest in maintaining safe, lawful and efficient working conditions for its employees. With this in mind, employment at the Company is contingent on your satisfactory completion of a background check.

ENTIRE AGREEMENT: This letter contains all of the terms of your employment with the Company, and supersedes any prior understandings or agreements, whether oral or in writing. 

The Company reserves the right, subject to limitations and provisions of applicable law and regulations, to change, interpret, withdraw, or add to any of its policies, benefits, or terms and conditions of employment at its sole discretion, and without prior notice or consideration to any associate. The Company’s policies, benefits or terms and conditions of employment do not create a contract or make any promises of specific treatment. 

We are pleased and proud to be adding your talents to a leadership team that is dedicated to making a difference in the communities we serve, creating fulfilling jobs and environments conducive to success, and providing the foundation for ongoing success of the Company.

Sincerely,

	
	
	/s/ Gregory T. Mount

	Gregory T. Mount

	President and CEO

	Red Lion Hotels Corporation

Accepted as of the date first set forth above:
	
	
	/s/ Douglas L. Ludwig

	Douglas L. Ludwig

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