Exhibit 10.25

 

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December 9, 2003

 

Mr. David Sugishita

5910 Deerland Court

San Jose, CA 95124

 

Dear David:

 

On behalf of Peregrine Systems, we would like to offer you the position of
Executive Vice President and Chief Financial Officer reporting to John Mutch,
CEO, effective with both the resignation of Peregrine’s current CFO, Ken Sexton,
and the filing of the Fiscal Year 2003 10K and 10Qs and Fiscal Year 2004 10Q for
Ql, Q2, and Q3. In the event the conditions listed above are not met by April
30, 2004 and you decide to terminate your employment, you will be entitled to a
Separation Benefit equal to one month base salary for every full month employed.
Upon your appointment to Executive Vice President and Chief Financial Officer,
you will need to coordinate the Company’s Form 10K for Fiscal Year 2004.  In
your capacity as Executive Vice President and Chief Financial Officer, in order
to coordinate the filing of the 2004 10K, you agree to review the Company’s 2003
10K and 10Qs, as well as the Company’s 10Qs for Ql, Q2, and Q3 of fiscal 2004.
However, as part of your employment agreement, you cannot be terminated in the
event you reasonably determine that you cannot certify the results in the
Company’s 2004 10K.

 

In the interim, beginning December 10, 2003 (Commencement Date) you will join
the Company as Executive Vice President, Special Projects reporting directly to
me. In this capacity, you will provide financial guidance and direction limited
to only prospective financial activities. In your capacity as EVP Special
Projects, you will not be responsible, accountable or associated in any manner
with past financial statements including, but not limited to, preparing,
reviewing, auditing, discussing, commenting, and signing documents

 

1.               BASE SALARY.  Your starting salary will be $12,500 per
semi-monthly pay period effective December 10, 2003.

 

2.               EMPLOYMENT TERM.  The term of your employment under this letter
agreement (the “Employment Term”) will commence on December 10, 2003 and end
when it is terminated in accordance with Section 6.

 

3.               BONUS.  Additionally, you will be eligible to participate in
the Management Incentive Compensation Plan (MICP) with an annual target of
$175,000. This

 

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bonus is paid semi-annually, prorated from your hire date. A copy of the summary
plan description is attached.

 

4.               benefits.  You will be eligible to participate in PSI’s
employee benefit plans of general application, including, without limitation,
those plans covering medical, disability and life insurance in accordance with
the rules established for individual participation in any such plan and under
applicable law. You will be eligible for vacation and sick leave in accordance
with PSI policies in effect during the term of this letter agreement and will
receive such other benefits as PSI generally provides to its other employees of
comparable position and experience.

 

a.               During your first eighteen (18) months of employment you will
be provided a monthly housing allowance of $5,000, which will be grossed up to
cover all applicable federal, state and local withholding taxes.

 

i.                  At the conclusion of your first eighteen (18) months of
employment, we will mutually assess continuation of the housing allowance or
your relocation to the San Diego area.

 

b.              If the mutual decision is made for you to relocate to San Diego,
we would expect that move to occur within the six months following the first
eighteen (18) months of employment. PSI will continue to pay the $5,000 housing
allowance (which will be tax grossed up to cover all applicable taxes) until you
move to a San Diego residence. Peregrine will hire Relocation Coordinates to
evaluate your relocation needs and to provide the company with a cost estimate
(currently anticipated to be approximately $350,000). Peregrine will reimburse
your relocation expenses (to a mutually agreed upon limit after Relocation
Coordinates reviews) and will gross-up those items that are taxable to you.

 

5.               OPTIONS.  Subject to formal approval by the Compensation
Committee of the Board of Directors, you will be granted an option to purchase
up to 150,000 shares of Peregrine Systems, Inc. (PSI) common stock, subject to
execution of this letter agreement and your executing a stock option agreement
consistent with the terms and conditions of the 2003 Equity Incentive Plan
(“Plan”). The date of grant of the Options will be the Commencement Date and the
exercise price per share of the Options will be the fair market value of PSI’s
common stock on the Commencement Date as determined under the Plan. The right to
exercise the Options will vest 25% after the first 12 months, and in 24 equal
monthly installments thereafter. All vested Options will be exercisable for 180
days following the date of termination. Notwithstanding any provisions of the
2003 Equity Incentive Plan or the stock option grant agreement evidencing the
Options to the contrary, if a Change in Control occurs, then the vesting and

 

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exercisability of all shares of common stock issuable pursuant to the Options
will be accelerated in full upon public announcement of the closing of a Change
in Control. A “Change in Control” means:

 

(a)          the consummation of a merger or consolidation of PSI with or into
another entity or any other corporate reorganization, if persons who were not
stockholders of PSI immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (i) the continuing or surviving entity and (ii) any direct or indirect
parent corporation of such continuing or surviving entity.

 

(b)         The sale, transfer or other disposition of all or substantially all
of the assets of PSI

 

6.               TERMINATION.  Peregrine Systems is an “at-will” employer, and
as such the employer/employee relationship is subject to termination at any time
by either party at any time with or without cause as follows:

 

a)              You may terminate your employment upon written notice to the
Company at any time in your discretion (“Voluntary Termination”) by providing 60
days written notice;

 

b)             PSI may terminate your employment upon written notice to you at
any time following a determination by the CEO that there is “Cause” as defined
below, for such termination (“Termination for Cause”);

 

c)              PSI may terminate your employment upon written notice to you at
any time in the sole discretion of the CEO without a determination that there is
Cause for such termination (“Termination without Cause”) by providing 60 days
written notice;

 

d)             You may terminate your employment upon written notice to the
Company at any time following a determination by you that there is “Good Reason”
as defined below, for such termination (‘Termination for Good Reason”).

 

e)              Your employment will automatically terminate upon your death or
upon your Disability (as defined below) (“Termination for Death or Disability”).

 

For purposes of this letter agreement, the term “Disability” shall mean your
inability to perform your job responsibilities for a period of 180 consecutive
days or 180 days in the aggregate in any 12-month period. For purposes of this
letter agreement, “Cause” means (i) gross negligence or willful misconduct in
the performance of your duties to

 

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PSI (other than as a result of a Disability); (ii) repeated and continued
failure to perform your duties and responsibilities as a PSI employee
(including, but not limited to your compliance with any written policy of PSI)
in good faith after having a reasonable opportunity to cure such failure upon
receiving specific written notice of such failure from PSI; (iii) commission of
any act of fraud or violation of any SEC rules and regulations with respect to
PSI; or (iv) conviction of a felony or a crime involving moral turpitude if such
felony or crime could cause material harm to the business affairs or reputation
of PSI. No act or failure to act by you shall be considered “willful” if done or
omitted by you in good faith with reasonable belief that your action or omission
was in the best interests of PSI. “Good Reason” shall mean (i) without the your
express written consent, the significant reduction of your duties, authority or
responsibilities relative to your duties, authority and responsibilities as in
effect immediately prior to such reduction or the assignment of such reduced
duties, authority or responsibilities such as but not limited to no longer
reporting directly to the CEO, no longer EVP and CFO of a publicly held company
and, in the event, if you are still in your interim position as EVP, Special
Projects, no longer responsible for providing financial guidance and direction
for the Company limited to only prospective financial activities ii) without
your express written consent, a substantial reduction without good business
reasons, of the facilities and perquisites (including office space and location)
available to you immediately prior to such reduction; iii) without your express
written consent, a reduction by the Company in your Base Compensation and Target
Bonus in effect immediately prior to such reduction; iv) material reduction by
the Company in the kind or level of overall benefits package; v) requirement for
you to relocate to a facility or a location more than 50 miles from your then
present location, without your written consent; vi) any purported termination of
you by the Company which is not effected for Disability of for Cause, or any
purported termination of your employment for which the grounds relied upon are
not valid; or vii) the failure of the Company to obtain the assumption of this
agreement by any successors contemplated in Section 13 below.

 

7.               SEPARATION BENEFITS.  Upon termination of your employment with
PSI for any reason, you will receive payment for all salary and unpaid PTO (paid
time off) accrued to the date of your termination of employment. Your benefits
will be continued under PSI’s then existing benefit plans and policies for so
long as provided under the terms of such plans and policies and as required by
applicable law. Under certain circumstances, you will also be entitled to
receive severance benefits as set forth below, but you will not be entitled to
any other compensation, award or damages with respect to your employment or
termination.

 

a.               In the event of your Voluntary Termination or Termination for
Cause, you will not be entitled to any cash severance benefits or additional
vesting of shares of stock options.

 

b.              Subject to your compliance with Section 9, in the event of your
Termination for Good Reason or Termination without Cause, (i) at any time during
the first 12

 

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months following the Commencement Date (the “First Year”), you will be entitled
to a severance payment equal to your annual base salary and bonus target paid in
twenty four semi-monthly installments plus one (1) year of COBRA coverage, paid
by the Company, for medical, dental, and vision insurance subject to the same
coverage levels as in effect prior to termination, (ii) at any time after the
First Year, you will be entitled to a severance payment equal to two (2) times
your annual base salary and bonus target paid in a lump sum cash payment plus
eighteen (18) months of COBRA coverage, paid by the Company, for medical,
dental, and vision insurance subject to the same coverage levels as in effect
prior to termination. Lump sum payment will be due in full on last day of
employment with the Company.

 

c.               Subject to your compliance with section 9, in the event of a
Change of Control in conjunction with either a Termination for Good Reason or
Termination without Cause during and after the subsequent twelve (12) month
period following a Change of Control,, you will be paid a lump sum cash payment
equal to three (3) times both your annual base salary and bonus target plus
eighteen (18) months of COBRA coverage, paid by the Company, for medical,
dental, and vision insurance subject to the same coverage levels as in effect
prior to termination. Lump sum payment will be due in full on last day of
employment with the Company. In the event of your termination by PSI or any
successor corporation for any reason in connection with or during the 12-month
period following a Change of Control, you will only be entitled to the payment
set forth in this Subsection c) (for purposes of clarity, you will not be
entitled to any additional severance payment pursuant to Subsection (b)).

 

8.               280G PAYMENT.

 

a.               In the event of any of the benefits provided for in this
Agreement (including stock options) constitute “parachute payments” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”), and will be subject to the excise tax imposed by Section 4999 of the
Code, then, subject to the provisions of Section 8(d) below, you shall receive
from PSI (A) a cash payment sufficient to pay such excise tax, and (B) an
additional payment sufficient to pay the excise tax and federal and state income
and employment taxes arising from the payments made by PSI to you pursuant to
this sentence,

 

b.              Unless PSI and you otherwise agree in writing, the determination
of your excise tax liability and the amount required to be paid to you by PSI
under this Section 8 shall be made in writing by PSI’s independent accountants
(the “Accountants”), and the amounts to be paid to you by PSI under this Section
8 will be paid to you within thirty (30) days after the Accountants

 

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have finally determined that amount as provided herein (or such shorter time
after the Accountants have finally determined that amount as may be necessary in
order for you to timely pay any withholding or estimated tax obligations arising
from your receipt of any payment under this Section 8). For purposes of making
the calculations required by this Section 8, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 49999 of the Code. PSI and you shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 8. PSI shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 8.

 

c.               In the event that the Internal Revenue Service (“IRS”)
determines that the amount of excise tax payable by you as described above in
this Section 8 is different than the amount of such excise tax as determined by
the Accountants as provided above, then: (A) if the amount of such excise tax
payable by you as determined by the IRS is less than the amount of such excise
tax as computed by the Accountants, you will reimburse PSI for all excess
amounts actually paid to you by PSI under this Section 8 due to the
over-calculation of such excise tax by the Accountants within five (5) business
days after you receive either a refund from the IRS due to such over-calculation
or you receive an economic benefit from the IRS (such as a credit against tax
payable) on account of such over-calculation, provided you reported and paid all
your excise and income tax liabilities resulting from the operation of this
Section 8 consistent with the amounts you were actually paid hereunder; and (B)
if the amount of such excise tax payable by you as determined by the IRS is
greater than the amount of such excise tax as computed by the Accountants, then
PSI will promptly reimburse you for the amounts that PSI underpaid you under
this Section 8 due to the under-calculation of such excise tax by the
Accountants.

 

d.              In the event any of the benefits provided for in this Agreement
or any other benefits approved at any time by the Board or the Compensation
Committee of the Board and otherwise payable to you (including stock options)
constitute “parachute payments” within the meaning of Section 280G of the Code
and will be subject to the excise tax imposed by Section 4999 of the Code, then
you may, at your sole option and discretion, elect to waive, not receive and/or
reduce such benefits to such lesser extent as will result in no portion of such
benefits; being subject to the excise tax

 

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imposed by Section 4999 of the Code in that case PSI’s obligation to make a
payment to you pursuant to the provisions of Section 8 will be correspondingly
reduced.

 

9.               RELEASE.  You agree that the severance payments you may be
entitled to upon Termination for Good Reason, Termination without Cause or upon
a Change of Control (assuming your employment is terminated in connection with
such Change of Control) will not apply unless you (i) have executed a general
release (in a form customarily used by PSI) of all known and unknown claims that
you may then have against PSI and/or persons or entities affiliated with PSI,
(ii) have agreed not to prosecute or bring any legal action or other proceeding
based upon any of such claims and (iii) have agreed to provide reasonable
telephonic transition assistance to PSI (or the surviving corporation) for three
(3) months following termination of employment.

 

10.         CONFIDENTIALITY, NONSOLICITATION. In light of the fact that the
confidential information that you have acquired, and will acquire, is
inextricably bound with your knowledge regarding the conduct of PSI’s business
activities and that therefore you would necessarily use confidential information
if you were to compete with PSI, you agree that during the Employment Term, and
for a period of one year thereafter, you will not provide any services, whether
as an officer, director, proprietor, employee, partner, consultant, advisor,
agent, sales representative or otherwise, nor will you own beneficially
securities of any entity (except that, in the case of any entity whose equity
securities are publicly-held, you may beneficially own up to 2% of the
outstanding equity securities of such entity or any mutual fund holding
securities of such entity) that, directly or indirectly, competes with any of
PSI’s present or future (up to the date of termination) business activities. You
further agree that in light of the nature of PSI’s business, and the life-cycle
of product development, the one-year period provided for above shall apply in
regardless of the nature or reason for your termination and that it is
reasonable and necessary in order to protect the confidential, proprietary and
trade-secret information that you will acquire as a result of being CFO of PSI.
Notwithstanding the foregoing, such restrictions shall not preclude you from
providing any services to a distinct business unit of an entity if such unit
does not compete with PSI’s business activities, regardless of whether any other
distinct business unit of such entity competes with PSI’s business activities.
You also, further and independently, agree that during your employment with PSI,
and for a period of one (1) year after termination of your employment with PSI,
you will not for any reason, whether directly or indirectly: (a) solicit,
recruit, lake away or attempt to take away, any employee or consultant of PSI or
any of its affiliates, or induce (or attempt to induce) any employee or
consultant of

 

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PSI or any of its affiliates to terminate his or its employment or services with
PSI or any of PSI’s affiliates; or (b) directly or indirectly, solicit any
customer of PSI or any of its affiliates or induce any customer of PSI or its
affiliates to terminate its relationship with PSI or any PSI affiliate;
provided, however, that this non-solicitation provision shall not prevent you
from hiring any employee or consultant of PSI or any of its affiliates that you
can demonstrate either (i) approached you independently without any prior direct
or indirect solicitation or encouragement by you or on your part, or (ii)
replied to a solicitation made to the general public without any direct or
indirect solicitation or encouragement by you or on your part.

 

11.         GOVERNING LAW.  This letter agreement will be governed by the
internal laws of the State of California without reference to its conflict of
laws provisions.

 

12.         ENTIRE AGREEMENT.  This letter agreement, your stock option
agreement and your employee invention assignment and confidentiality agreement
with PSI contain the entire agreement and understanding of the parties with
respect to the subject nature hereof. Except as provided in this letter
agreement, no other agreements, representations or understandings (whether oral
or written and whether expressed or implied) which are not expressly set forth
in this letter agreement have been made or entered into by either party with
respect to the subject matter hereof.

 

13.         SUCCESSORS AND ASSIGNS.  This letter agreement will be binding upon
you (and your successors, heirs, and assigns) and any successor (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of PSI’s business and/or assets. For
all purposes of this letter agreement, the term “PSI” shall include any
successor to PSI’s business and/or assets, which become bound by this letter
agreement.

 

14.         INDEMNIFICATION.  Company will indemnify you against all claims, at
the Company’s expense, to the fullest extent by law.

 

15.         MISCELLANEOUS PROVISIONS

 

a.               No Duty to Mitigate. You shall not be required to mitigate the
amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that you may receive from any other source.

 

b.              Waiver. No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by you and by an authorized officer of the Company (other
than you). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

 

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c.               Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

 

d.              Arbitration. Any dispute or controversy arising out of, relating
to or in connection with this Agreement shall be settled exclusively by binding
arbitration in San Diego, California, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator’s award in any court
having jurisdiction. You and the Company shall each pay one-half of the costs
and expenses of such arbitration, and each shall separately pay its counsel fees
and expenses. Punitive damages shall not be awarded.

 

e.               Employment Taxes. All payments made pursuant to this Agreement
will be subject to withholding of applicable income and employment taxes.

 

f.                 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

 

In compliance with the Immigration Control and Reform Act, this offer of
employment is contingent upon your showing proof, within three days of
commencing work, of eligibility and right to work in the United States. Proof is
comprised of original documents that establish your identity and your
eligibility to work in this country.

 

Your employment would not be effective until we receive an executed Invention
and Non-Disclosure, and Arbitration Agreement (“1NDA”), a copy of which is
attached. Additionally, this employment offer is contingent upon your execution
and return of all employment documents as well as satisfactory reference and
background checks.

 

We are anxious to receive your response to this offer as soon as possible. If
you decide to accept, please sign a copy of this letter in the space indicated
below, and return it. If we do not receive your response to this job offer
within five days of receipt of this letter, the offer will be rescinded. If you
have any questions about the offer details outlined in this letter, please call
me.

 

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David, we look forward to having you join the Peregrine Team and to your
contributions to the success of Peregrine.

 

Sincerely,

 

John Mutch

Chief Executive Officer

 

cc:  Compensation Committee

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

 

COMPANY:

Peregrine Systems

 

 

 

 

 

 

By:

/s/ John Mutch

 

 

Title:

CEO

 

 

Date:

12/9/03

 

 

 

EMPLOYEE:

/s/ David M. Sugishita

 

 

David M. Sugishita

 

 

 

Date:

12/9/03

 

 

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