Exhibit 10.15

 

August 14, 2003

 

Mr. John Mutch
P.O. Box 1590
Rancho Santa Fe, CA 92067

 

Dear John:

 

On behalf of the Board of Directors of Peregrine Systems, Inc. (“PSI”), we would
like to offer you the position of President and Chief Executive Officer of PSI,
effective as of August 18, 2003 (the “Commencement Date”), subject to the
following terms and conditions:

 

1.                                       TITLE; BASE SALARY.  Effective as of
the Commencement Date, you will be employed as President and Chief Executive
Officer of PSI.  You will report to the Board of Directors of PSI (the “Board”).
Your base salary will be at the rate of $400,000 annually, effective as of the
Commencement Date.  So long as you serve as PSI’s Chief Executive Officer, PSI
shall include you on the slate of directors nominated for election at each
annual meeting of PSI stockholders.

 

2.                                       EMPLOYMENT TERM.  The term of your
employment as President and Chief Executive Officer under this letter agreement
(the “Employment Term”) will commence on the Commencement Date and end when it
is terminated in accordance with Section 6.

 

3.                                       BONUS.  You will be eligible for a
target bonus of $350,000 for each fiscal year during the Employment Term
(prorated for fiscal 2004), based on attainment of reasonable bonus objectives
determined by the Board in consultation with you, to be paid in the first
quarter of the subsequent fiscal year.

 

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 polices 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.  However, you will in any
event be eligible for at least three weeks of paid vacation during your first
year of employment and at least four weeks of paid vacation during each
subsequent year of employment.

 

5.                                       OPTIONS.  The Compensation Committee of
the Board of Directors has approved that you be granted an option to purchase up
to 350,000 shares of PSI’s common stock (the “Options”), subject to the
execution of this letter agreement and your executing a

 

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stock option grant agreement consistent with the terms and conditions of the PSI
option plan under which the Options are granted and this letter agreement. 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 such PSI option plan.  The
right to exercise the Options will vest in 48 equal monthly installments
beginning one month from the Commencement Date.  In the case of Termination
without Cause, Termination for Death or Disability or Termination for Good
Reason (all as defined below), all vested Options will be exercisable for 12
months following the date of termination.  In the case of termination of
employment for any other reason, all vested Options will be exercisable for at
least 3 months following the date of termination.  Notwithstanding any
provisions of the PSI option plan or the stock option grant agreement evidencing
the Options to the contrary, if a Change in Control occurs, then the vesting and
exercisability of all shares of common stock issuable pursuant to the Options
will be accelerated in full.  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;

 

(c)                                  a change in the composition of the Board,
as a result of which fewer than 50% of the incumbent directors are directors who
either:

 

(i)                                     Had been directors of PSI immediately
after PSI’s emergence from bankruptcy protection on August 7, 2003 or had been
designated to serve on the Board during the 90-day period after emergence
pursuant to the terms of the confirmed plan of reorganization (the “Original
Directors”); or

 

(ii)                                  Were appointed to the Board, or nominated
for election to the Board, with the affirmative votes of at least a majority of
the aggregate of (A) the Original Directors who were in office at the time of
their appointment or nomination and (B) the directors whose appointment or
nomination was previously approved in a manner consistent with this Paragraph
(ii); or

 

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(d)                                 Any transaction as a result of which any
person (excluding any person who was a stockholder of PSI immediately after
emergence from bankruptcy protection on August 7, 2003) is the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of PSI representing at least 35%
of the total voting power represented by PSI’s then outstanding voting
securities.  For purposes of this Subsection (d), the term “person” shall have
the same meaning as when used in sections 13(d) and 14(d) of such Act but shall
exclude (i) a trustee or other fiduciary holding securities under an employee
benefit plan of PSI or of a parent or subsidiary of PSI and (ii) a corporation
owned directly or indirectly by the stockholders of PSI in substantially the
same proportions as their ownership of the common stock of PSI.

 

6.                                       TERMINATION.  Your employment with PSI
may be terminated by you or by PSI at any time for any reason as follows:

 

(a)                                  You may terminate your employment upon
written notice to the Board at any time in your discretion (“Voluntary
Termination”);

 

(b)                                 PSI may terminate your employment upon
written notice to you at any time following a determination by the Board 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 Board without a
determination that there is Cause for such termination (“Termination without
Cause”);

 

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

 

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

 

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 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 with respect to PSI; or (iv) conviction of a
felony or a crime involving moral turpitude if such felony or crime caused
material harm to the business and affairs of PSI.  No act or failure to act by
you shall be considered “willful” if done or omitted by you

 

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in good faith with reasonable belief that your action or omission was in the
best interests of PSI. For purposes of this letter agreement, “Good Reason”
shall mean (i) a significant reduction of your duties, title, position or
responsibilities relative to your duties, title, position or responsibilities in
effect immediately prior to such reduction (including a material change in your
reporting structure, which shall include, but not be limited to, your no longer
reporting to the Board) that is effected without your consent or agreement; (ii)
a substantial reduction, without good business reasons, of the facilities or
perquisites available to you immediately prior to such reduction if such
reduction is effected without your consent or agreement; (iii) a reduction of
your base salary and target bonus as in effect immediately prior to such
reduction if such reduction is effected without your consent or agreement (other
than any such reduction that is effected on substantially a company-wide basis
in order to reduce PSI’s operating expenses); or (iv) the relocation of your
primary office at PSI to a facility or location that is more than fifty (50)
miles away from your primary office location immediately prior to such
relocation, if such relocation is effected without your consent or agreement.

 

7.                                        SEPARATION BENEFITS.  Upon termination
of your employment with PSI for any reason, you will receive payment for all
salary and unpaid vacation 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 without Cause, Termination for Death or
Disability or Termination for Good Reason; (i) at any time during the first 12
months following the Commencement Date (the “First Year”), you will be entitled
to a severance payment equal to your base salary plus an amount equal to the
maximum amount of your target bonus; or (ii) at any time after the First Year,
you will be entitled to a severance payment equal to two (2) times your base
salary plus an amount equal to two (2) times your target bonus, in either case
payable within five (5) days after the effective date of your termination;
provided, that any severance payable hereunder in the event of your Termination
for Death or Disability shall be reduced by the proceeds received by you or your
heirs pursuant to insurance policies paid for by PSI.  In addition, in the event
of your Termination without Cause or Termination for Good Reason at any time
after the First Year, all Options that would have vested during the 12 months
following the date of termination shall become immediately exercisable on such
date.

 

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(c)                                  In the event of your Termination for Death
or Disability, all Options that would have vested during the 12 months following
the date of termination shall become immediately exercisable on such date.

 

(d)                                 In the event of your Termination without
Cause, Termination for Good Reason or Termination for Death or Disability, PSI
will reimburse you for any verified payments that you actually make pursuant to
your rights under COBRA (as defined below) in order to continue your coverage
under PSI’s health and medical insurance benefit plans during the Continuation
Period (as defined below).  In addition, during (and only during) the
Continuation Period, PSI will, at its expense continue your coverage under any
life insurance benefits in which you are participating in your capacity as a PSI
employee immediately prior to the date your employment terminated, to the extent
permitted under any such life insurance benefit plan(s) or policy(ies) or
pursuant to any riders thereto that PSI may obtain using commercially reasonable
efforts and without increasing PSI’s cost to maintain such plan(s) or
policy(ies) by more than thirty percent (30%).  For purposes of this letter
agreement, the term “COBRA” shall mean the provisions of Section 4980B of the
Internal Revenue Code of 1986, as amended, adopted as part of the Consolidated
Omnibus Budget Reconciliation Act, which allow former employees of an employer
to continue to receive health and medical benefits, at their expense, for a
specified time period.  For purposes of this letter agreement, the term
“Continuation Period” shall mean that time period beginning on the date your
employment is terminated and ending upon the earlier to occur of (i) eighteen
(18) months after such date, (ii) the first date on or after such date on which
you commence employment with any other employer who provides you with health and
medical insurance benefits or (iii) the first date on which you cease to be
eligible under COBRA to continue your coverage under PSI’s health and medical
insurance benefit plans.

 

(e)                                  Subject to your compliance with Section 9,
in the event of a Change of Control, you will be entitled to a severance payment
equal to three (3) times your base salary plus an amount equal to three (3)
times your target bonus, payable on the effective date of the Change of Control.
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
(e) (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 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 your (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

 

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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 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 4999 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 imposed by Section
4999 of the

 

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Code, and 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 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 transition assistance to PSI
(or the surviving corporation) as requested and without further compensation for
3 months following the 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 the President and Chief Executive Officer 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, take 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 PSI
or any of its affiliates to terminate his or its employment or services with PSI
or any of PSI’s affiliates; or (b) use any confidential or proprietary
information of PSI or any of its affiliates to, 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

 

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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 mature 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 asserts which
becomes bound by this letter agreement.

 

14.                                 LEGAL FEES.  PSI will reimburse you for
reasonable legal fess and costs not to exceed $5,000 that you incur in
connection with the negotiation and drafting of this letter agreement, your
stock option grant agreement and any related agreements.

 

We look forward to your continued contributions as part of the PSI team.

 

 

Sincerely yours,

 

 

 

/s/ James P. Jenkins

 

 

James P. Jenkins

 

Chairman of the Board

 

By signing this letter, I am agreeing to the above:

 

Signature:

 

 

Date:

 

 

 

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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 mature 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 asserts which
becomes bound by this letter agreement.

 

14.                                 LEGAL FEES.  PSI will reimburse you for
reasonable legal fees and costs not to exceed $5,000 that you incur in
connection with the negotiation and drafting of this letter agreement, your
stock option grant agreement and any related agreements.

 

We look forward to your continued contributions as part of the PSI team.

 

 

 

Sincerely yours,

 

 

 

 

 

 

James P. Jenkins

 

Chairman of the Board

 

By signing this letter, I am agreeing to the above:

 

Signature:

/s/ John Mutch

 

Date:

8/14/03

 

 

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