Exhibit 10.37

 

Settlement Agreement and Release

By and Among

Peregrine Systems, Inc., International Business Machine Corporation, and IBM
Credit Corporation

(the “Agreement”)

 

WHEREAS Peregrine Systems, Inc. (“Peregrine”) and International Business
Machines Corporation (“IBM”) entered into the IBM Global Services International
Master Agreement (the “Master Agreement”) and the International Country
Agreement for the United States of America (the “US Country Agreement”) on June
1, 2001;

 

WHEREAS Peregrine and IBM entered into an agreement referred to as the
“Assignment Agreement” with an Effective Date of June 23, 2002 (the “US
Assignment Agreement”) pursuant to which the Master Agreement and US Country
Agreement were assigned to Peregrine Connectivity, Inc. (nka Inovis, Inc.,
“Inovis”) and, under the terms of the US Assignment Agreement, Peregrine
retained certain payment obligations to IBM and IBM agreed to permit certain
services obligations to Inovis to be passed through to Peregrine;

 

WHEREAS Peregrine and IBM Credit Corporation (“ICC”) entered into an agreement
referred to as the “Supplement #D00066494 to the Term Lease Master Agreement
(#PAH0364)” and an agreement referred to as the “Supplement #C00066484 to the
Term Lease Master Agreement (#PAH0364)” between ICC and Peregrine dated 3/28/02
(the “IGF Agreements”);

 

WHEREAS Peregrine filed a voluntary petition under Chapter 11 of the Bankruptcy
Code, 11 U.S.C §§101, et. seq. (the “Bankruptcy Code”), on September 22, 2002,
in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy
Court”); and,

 

WHEREAS the parties, subject to Bankruptcy Court approval, now wish to (a) amend
the terms of the US Assignment Agreement to provide for (i) the transition to
Peregrine of certain hosting services provided by IBM which are no longer
cost-effective in light of Peregrine’s customer base; and (ii) the termination
of certain purchase obligations of Peregrine, and (b) make such other agreements
as are described below.

 

Now THEREFORE, in consideration of the mutual promises and covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

 

1.                                       On the Effective Date (as defined in
Section 7(a) below), IBM shall provide Transition Services Assistance as
described in the attached Exhibit “A”, attached hereto (the “Transition Services
Assistance”).

 

2.                                       On the Effective Date, IBM hereby
transfers title to the twenty-one (21) servers described in Exhibit “B”,
attached hereto.

 

3.                                       On the Effective Date, IBM hereby
reduces the number of laptops that Peregrine was obligated to take delivery of
under PCR #49 to the US Country Agreement (“PCR #49”) from 1,000 to 676 and
hereby transfers title to the 676 laptops to Peregrine.

 

4.                                       On the Effective Date, the parties
agree to offset the amount of $5,250,311.36 (subject to fluctuations in the
currency exchange rates as of the Effective Date as described in Part 2 of
Exhibit C) owed by IBM or its affiliates to Peregrine or its affiliates under
the invoices listed in Part 2 of Exhibit “C,” attached hereto, against (i) the
amount of $1,766,282.00 owed by Peregrine to ICC under the IGF Agreements, (ii)
the amount of $1,189,000 owed by Peregrine to IBM for the purchase of the
laptops described in Section 3 above, and (iii) the amount of $1,974,944.74 owed
by Peregrine to IBM under the US Assignment Agreement.

 

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5.                                       On the Effective Date:

 

a.               Peregrine will pay to IBM US$1,147,628.31 (the “TSA Payment”)
in immediately available funds for the Transition Services Assistance set forth
in Section 1 above and for the transfer of the titles to the servers described
in Section 2 above; and

 

b.              IBM will pay to Peregrine US$320,084.62, subject to fluctuations
in the currency exchange rates as of the Effective Date as described in Part 2
of Exhibit C, in immediately available funds for the balance of amounts owed to
Peregrine as described in Section 4 above.

 

6.               After the Effective Date, Peregrine and IBM will make prompt
payment on any future undisputed invoices that each party may owe to the other
after December 1, 2002, and IBM will make prompt payment on any undisputed
currently outstanding Peregrine invoices.  Attached as Exhibit “D” to this
Agreement is a partial list of worldwide Invoices of receivables due to
Peregrine or its affiliates from IBM or its affiliates.  Upon the Effective
Date, IBM will notify Peregrine in writing whether each listed invoice is
disputed or undisputed.  Any undisputed invoices will be paid within thirty (30)
days after the Effective Date.  For any disputed invoices, IBM will provide to
Peregrine a reasonable description of the nature of the dispute and identify an
IBM contact responsible for the handling of the dispute.  IBM and Peregrine will
work together in good faith to resolve such disputes in a timely manner.  If
Peregrine seeks to escalate any disputed invoices, then Peregrine will first
contact the IBM Client Executive for the Worldwide Peregrine Systems Alliance
(“IBM/Peregrine Alliance Manager”), presently Frank P. Sung.  If within a
reasonable time period Peregrine does not feel that its concerns were adequately
addressed by the IBM/Peregrine Alliance Manager, then Peregrine may contact (i)
for US invoices, Mike Lindberg, the Director of Strategic Solution Offerings, or
(ii) for invoices related to Europe, the Middle East and Africa (“EMEA”), an
equivalent or higher level IBM executive in EMEA, to be identified by IBM to
Peregrine for this purpose (each an “IBM Escalation Executive”).  Each IBM
Escalation Executive will work in good faith with Peregrine to resolve each
escalated issue or have it resolved in an equitable and timely manner.

 

7.                                       Additional Terms and Conditions:

 

a.               This Agreement is contingent upon Peregrine obtaining the
Bankruptcy Court’s approval of this Agreement no later than December 16, 2002,
and the Effective Date will be the eleventh (11th) day following the entry by
the Bankruptcy Court of an order approving this Agreement (“Effective Date”),
provided that such order has not been modified, reversed or stayed on appeal
(“Approval Order”).  In calculating the Effective Date, Bankruptcy Rule 9006
shall apply.

 

b.              Peregrine will continue to pay $275,956.71 per month, in
advance, starting January 1, 2003, for IBM’s performance of its obligations
under the US Assignment Agreement until the earlier of (i) such time that the
Transition Services Assistance described in the attached Exhibit A is completed
by IBM, or (ii) 90 days after IBM’s receipt of the TSA Payment.  IBM and
Peregrine will use reasonable efforts to complete the Transition Services
Assistance within 45 days of receiving the TSA Payment.  IBM will pro-rate
and/or refund as appropriate the charges described in this section thru the date
that the Transition Services Assistance is actually completed.

 

c.               Except for obligations expressly created or preserved pursuant
to this Agreement, each party hereto (each, a “Releasing Party”) hereby releases
and discharges forever the other party.  Its directors, officers, affiliates,
agents, employees, and attorneys, its successors and assigns, from any and all
claims, debts, defenses, suits, warranties, damages, interests, actions, or
causes of actions now has or may have arising out of (a) Peregrine Continuing
Obligations, as defined in Exhibit “A” of the US Assignment Agreement including,
but not limited to, the Peregrine Services Purchase Commitment defined in PCR#1
to the US Country Agreement, (b) the IGF

 

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Agreements, and (o) the Services, Equipment or other deliverables relating to
the aforementioned agreements (each as respectively defined therein).

 

d.              In the event of a failure by Peregrine to make any required
payments due to IBM under this Agreement, in addition to any other remedies
available to IBM against Peregrine, IBM shall be entitled to withhold services
under this Agreement and under the US Assignment Agreement for which Peregrine
is the intended Service Recipient.

 

e.               The parties agree to cooperate in good faith to ensure the
delivery of services, the payment of fees and the timely discharge of all other
contractual obligations by the appropriate party charged therewith in accordance
with the terms of this Agreement and the US Assignment Agreement.  Peregrine
acknowledges that in the event that the provision of services contemplated by
this Agreement require modifications to the manner in which IBM provides
services, IBM reserves the right to treat such modified services as New Services
under the US Country Agreement and reasonably revise charges accordingly
pursuant to the procedures described for New Services in the US Country
Agreement.

 

f.                 Capitalized terms not otherwise defined herein shall have the
meanings set forth under the Master Agreement, US Country Agreement and the IGF
Agreements.

 

g.              This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which together shall constitute
one and the same Instrument.

 

h.              This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns, including any
subsequently appointed trustee.

 

i.                  By executing this Agreement, each party represents and
acknowledges that it has relled upon the legal advice of counsel of his or its
own choice regarding the settlement and compromise of this case and at all times
relevant to and throughout the negotiation of this Agreement and in connection
with the preparation and execution of this Agreement.

 

j.                  Each party hereto represents and warrants that it has not
heretofore assigned or transferred, or purported to assign or transfer, to any
person, firm, or corporation any claim herein released.  Each party agrees to
indemnify and hold harmless the other party against any claim based on, arising
out of or in connection with any such transfer or assignment or proposed
transfer or assignment.

 

k.               Except as otherwise expressly set forth in this Agreement, the
parties shall bear their own costs and fees.

 

l.                  No delay or omission by any party in exercising any right or
power arising under this Agreement by reason of any default shall be construed
as a waiver of such default or as an acquiescence therein, nor shall any single
or partial exercise thereof preclude any further exercise thereof.  Any party
may, at his or its option, waive in writing any of the conditions or terms
hereof and any such waiver shall not be deemed a waiver of such party’s rights
hereunder, but shall be deemed to have been made pursuant to this Agreement and
not in modification hereof.  No waiver of any default shall be construed as a
waiver of or acquiescence or consent to any proceeding or subsequent default.

 

m.            All notice required or desired to be given hereunder shall be
addressed as follows:

 

If to IBM, to:

Martha Monroe

 

IBM Project Office

 

1277 Lenox Park Blvd.

 

Atlanta, GA 30319

 

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With a copy to:

IBM Corporation

 

Route 100

 

Somers, NY 10589

 

Attention: General Counsel, IGS – Americas

 

 

If to Peregrine, to:

Peregrine Systems, Inc.

 

3811 Valley Canter Drive

 

San Diego, CA 92130

 

Attn: General Counsel,

 

 

With a copy to:

Malher S. Pagay, Esq.

 

Pachuiski, Stang, Ziehl, Young & Jones P.C.

 

10100 Santa Monica Blvd., Suite 1100

 

Los Angeles, California 90067

 

n.              This Agreement shall be deemed to have been executed and
delivered within the State of New York and the rights and obligations of the
parties shall be construed and enforced in accordance with, and governed by, the
laws of the State of New York.

 

o.              Upon completion of all obligations under this Agreement
including, but not limited to, Payment of all amounts due and payable to IBM and
ICC under this Agreement, the US Assignment Agreement, the Master Agreement the
US Country Agreement and the IGF Agreements are terminated with respect to IBM,
ICC and Peregrine.  Except as modified above, the terms and conditions of the US
Assignment Agreement, the Master Agreement, the US Country Agreement and the IGF
Agreements between IBM, ICC and Peregrine shall remain in full force and effect;
provided, however, that if any terms of condition of the immediately
aforementioned agreements conflicts with or is Inconsistent with any term or
condition of this Agreement, then such terms and conditions hereof shall prevail
and be controlling.

 

Agreed to and Accepted by:

 

PEREGRINE SYSTEMS, INC.

INTERNATIONAL BUSINESS MACHINES CORPORATION

 

 

By:

/s/ Ken Sexton

 

By:

/s/ M. Martha Monrde

 

 

 

Print Name:

Ken Sexton

 

Print Name:

M. MARTHA MONRDE

 

 

 

Title:

CEO

 

Title:

GLOBAL PROJECT EXECUTIVE

 

 

 

Date:

12/15/02

 

Date:

12/12/02

 

 

 

 

 

 

INTERNATIONAL BUSINESS MACHINES CREDIT CORPORATION

 

 

 

By:

/s/ Sal Grasso

 

 

 

 

Print Name:

SAL GRASSO

 

 

 

 

Title:

MGR OF CREDIT

 

 

 

 

Date:

12/12/02

 

 

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