Document:

Exhibit 10.8

 

FIRST AMENDMENT
TO AMENDED AND RESTATED

OFFICE LEASE AND SETTLEMENT AGREEMENT

 

This FIRST AMENDMENT TO AMENDED AND
RESTATED OFFICE LEASE AND SETTLEMENT AGREEMENT (“First Amendment”) is made and entered into as of the
        day of December 2003, by and
between KILROY REALTY, L.P., a Delaware limited partnership (“Landlord”), and PEREGRINE SYSTEMS, INC., a
Delaware corporation (“Tenant”).

 

R E C I T A L S:

 

A.            Landlord and Tenant
entered into that certain Amended and Restated Office Lease and Settlement
Agreement dated for reference purposes as of April 1, 2003 (the “Lease”), whereby Landlord leased to Tenant
and Tenant leased from Landlord a total of 78,037 rentable (73,242 usable)
square feet of space consisting of approximately 27,689 rentable (24,338
usable) square feet of space located on the first (1st) floor,
approximately 24,375 rentable (23,653 usable) square feet of space located on
the second (2nd) floor, and approximately 25,973 rentable (25,251
usable) square feet of space located on the third (3rd) floor
(collectively, the “Existing Premises”)
of that certain office building located at 3611 Valley Centre Drive. San Diego,
California 92130 (the “Building”).

 

B.            Tenant
desires to expand the Existing Premises to include* that certain space
consisting of approximately 26,413 rentable (25,655 usable) square feet of
space comprising the entire fourth (4th)  floor of the Building (the “Expansion Premises”), an delineated on Exhibit A  attached hereto and
made & part hereof, and to make other modifications to the Lease^ and in
connection therewith, Landlord and Tenant desire to amend the Lease as
hereinafter provided.

 

A G R E E M E N T:

 

NOW, THEREFORE, in consideration of the
foregoing recitals and the mutual covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             Capitalized Terms.  All capitalized terms when used herein shall have the same
meaning as is given such terms in the Lease unless expressly superseded by the
terms of this First Amendment.

 

2.             Modification of Premises.  Effective as of January 1, 2004 (the “Expansion Commencement Date”), Tenant shall
lease from Landlord and Landlord shall lease to Tenant the Expansion Premises.
Consequently, effective upon the Expansion Commencement Date, the Existing
Premises shall be increased to include the Expansion Premises.  Landlord and Tenant hereby acknowledge that
such addition of the Expansion Premises to the Existing Premises shall,
effective as of the Expansion Commencement Date, increase the size of the
Premises to approximately 104,450 rentable (98,897 usable) square feet. The
Existing Premises and the Expansion Premises may hereinafter collectively be
referred to as the “Premises.”

 

3.             Lease Term.

 

3.1.          Expansion Term.  The term of Tenant’s lease of the Expansion Premises (the “Expansion Term”) shall expire contentiously
with Tenant’s Lease of the Existing Premises on the Lease Expiration Date,
unless sooner terminated as provided in the Lease, as hereby amended.

 

3.2.          Right of First Refusal.  Subject to the terms and conditions of Section 3.2.3,
below, Landlord hereby grants to the Tenant originally named in the Lease (the
“Original Tenant”), and any
Permitted Affiliate (but only to the extent such Permitted Affiliate has, in
Landlord’s reasonable determination, financial strength equal to or greater
than Original Tenant), an ongoing right of first refusal with respect to the
approximately 13,498 rentable square feet of space located on the fifth (5th)
floor of the Building commonly known as Suite 550

 

 

(the “First Refusal Space”),
which First Refusal Space is delineated on Exhibit
B attached hereto, and which First Refusal Space is currently
occupied in its entirety by Clifford Chance Limited Partnership (the (the “Superior Right Holder”). The right of first
refusal set forth in this Section 3.2 shall be subordinate to all rights
of the Superior Right Holder.

 

3.2.1        Procedure far Lease.

 

3.2.1.1     Procedure for Offer.  Landlord shall notify Tenant (the “First Refusal Notice”) from time-to-time
when and if Landlord receives a “bona-fide third-party offer” for all of the
First Refusal Space.  Pursuant to each
First Refusal Notice, Landlord shall offer to lease to Tenant the applicable
First Refusal Space, The First Refusal Notice shall describe the First Refusal
Space, and the lease term, rent and other fundamental economic terms and
conditions, Including the method of measurement of rentable and usable square
feet, upon which Landlord proposes to lease such First Refusal Space pursuant
to the bona-fide third-party offer.  
For purposes of  this Section
3.2.1.1, a “bona-fide third-party offer”
shall mean a counter-offer received by Landlord to lease First Refusal Space
from a qualified third party which Landlord would otherwise be willing to
accept.   For purposes of example only,
the following would each constitute a bona-fide third-party offer:

 

(i)            Landlord
receives a  request for proposal
from a qualified third party.  Landlord
responds to the request for proposal with a lease proposal and subsequently
receives a written bona-fide counter proposal from the qualified third party.

 

(ii)           Landlord receives a written offer
to lease from a qualified third patty. 
Landlord responds to the offer with a written counter offer and
subsequently receives a bona-fide counter to Landlord’s counter offer from the
qualified third party.

 

3.2.1.2     Procedure for
Acceptance.  If Tenant wishes
to exercise Tenant’s right of first refusal with respect to the First Refusal
Space described in the First Refusal Notice, then within five (5) business days
of delivery of the First Refusal Notice to Tenant, Tenant shall deliver notice
to Landlord of Tenant’s exercise of its right of first refusal with respect to
all of the First Refusal Space described in the First Refusal Notice at the
rent, for the term and upon the other fundamental economic terms and conditions
contained in such First Refusal Notice. 
If Tenant does not so notify Landlord within such five (5) day period of
Tenant’s exercise of its first refusal right, then Landlord shall be free to
negotiate and enter into a lease for the First Refusal Space to anyone whom it
desires on the net-effective economic terms and the fundamental non-economic
terms which are no more than five percent (5.0%) more beneficial to such party
than those set forth in the First Refusal Notice.  If Landlord does not execute a lease with a third party for all
or any portion of the First Refusal Space within one hundred eighty-five (185)
days following the delivery to Tenant of the First Offer Notice, then Tenant
shall again have a right of first refusal for the such First Refusal Space
pursuant to the provisions of this Section 3.2, which provisions shall
again become applicable in their entirety. To the extent Landlord enters into
any lease of First Refusal Space with any such third party in accordance with
the foregoing (“Third Party Lease”),
Tenant’s rights under this Section 3.2 shall be subordinate to the
rights of the tenant under the Third Party Lease with respect to the space
leased and encumbered pursuant to the provisions of the Third Party Lease, all
extensions and renewals thereof, all pure expansion options contained therein
which are stated as Landlord delivery obligations within a certain time frame
for a Certain amount of space, and all right of first offer expansions
contained therein.

 

3.2.2        Amendment to Lease.  If Tenant timely exercises Tenant’s right of first refusal to
tease First Refusal Space as set forth herein, Landlord and Tenant shall within
thirty (30) days thereafter execute an amendment to this Lease (the “First Refusal Space Amendment”) for such
First Refusal Space pursuant to this Section 3.2.2.  Tenant’s lease of such First Refusal Space shall
be upon the express terms set forth in the First Refusal Notice, but otherwise
upon the Terms and conditions set forth in this Lease and this Section 3.2;
provided, however, Landlord shall make a determination as to whether, and if so
to what extent, Tenant must provide Landlord with financial security, such as a
letter of credit or guaranty, for Tenant’s rent obligations incurred in
connection with Tenant’s lease of such First Refusal Space.  Notwithstanding the foregoing, Landlord may,
at its sole option, require that a separate lease be executed by Landlord and
Tenant in connection with Tenant’s lease of the First Refusal Space, in

 

 

which
event such lease (the “First Refusal Space
Lease”) shall be on the same Terms and conditions as the initial Premises,
except as provided in this Section 3.2 and in this Lease, including, but
not limited to, Landlord’s right to make a determination as to whether, and if
so to what extent, Tenant must provide Landlord with financial security, such
as a letter of credit or guaranty, for Tenant’s rent obligations incurred in
connection with Tenant(1) s lease of such First Refusal Space.  Such determination shall be made by
reviewing the extent of financial security then generally being imposed in
comparable leases in the Comparable Buildings upon tenants of comparable
financial condition and credit history to the then existing financial condition
and credit history of Tenant (with appropriate adjustments to account for
differences in the then-existing financial condition of Tenant and such other
tenants). The First Refusal Space Lease, if applicable, shall be executed by
Landlord and Tenant within thirty (30) days following Tenant’s exercise of its
right to lease the First Refusal Space.

 

3.2.3        Termination
of First Refusal Right. 
The rights contained in this Section 3.2.3 shall
be personal to the Original Tenant and its Permitted Affiliates (and not any
other assignee, sublessee or other transferee of the Original Tenant’s interest
in this Lease) if the Original Tenant and/or its Permitted Affiliate occupies
at least sixty percent (60%) of the then existing Premises.  The right to lease First Refusal Space as
provided in this Section 3.2 may not be exercised if, as of the date of
the attempted exercise of the expansion option by Tenant, or as of the
scheduled date of delivery of such First Refusal Space to Tenant, Tenant is in
default under this Lease (beyond any applicable notice and cure periods) or
Tenant has previously been in economic default under this Lease (beyond any
applicable notice and cure periods) more than once during the previous twelve
(12) month period.

 

4.             Base Rent

 

4.1.          Existing Premises.  Notwithstanding anything to the contrary in the Lease as hereby
amended, Tenant shall continue to pay Base Rent for the Existing Premises in
accordance with the terms of Article 3 of the Lease.

 

4.2.          Expansion Premises.  Commencing on the Expansion Commencement Date and continuing
throughout the Expansion Term, Tenant shall pay to Landlord monthly
installments of Base Rent for the Expansion Premises as follows:

 

	
  Period During

  Expansion Term

  	
   

  	
  Annual

  Base Rent

  	
   

  	
  Monthly Installment

  of Base Rent

  	
   

  	
  Approximate
  Monthly

  Rental Rate per

  Rentable Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expansion
  Commencement Date through April 30, 2004*

  	
   

  	
  $

  	
  499,205.76

  	
  *

  	
  $

  	
  41,600.48

  	
  *

  	
  $

  	
  3.1500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May
  1, 2004 through June 3 0, 2004*

  	
   

  	
  $

  	
  531,654.12

  	
  *

  	
  $

  	
  44,304.51

  	
  *

  	
  $

  	
  3.3547

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  July
  1, 2004 through April 30, 2006

  	
   

  	
  $

  	
  1,063,308.12

  	
   

  	
  $

  	
  88,609.01

  	
   

  	
  $

  	
  3.3547

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May
  1, 2006 through April 30, 2008

  	
   

  	
  $

  	
  1,132,423.20

  	
   

  	
  $

  	
  94,368.60

  	
   

  	
  $

  	
  3,5728

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May
  1, 2008 through April 30, 2010

  	
   

  	
  $

  	
  1,206,030.72

  	
   

  	
  $

  	
  100,502.56

  	
   

  	
  $

  	
  3.8050

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May
  1, 2010 through April 30, 2012

  	
   

  	
  $

  	
  1,284,422.64

  	
   

  	
  $

  	
  107,035.22

  	
   

  	
  $

  	
  4.0524

  	
   

  

 

*              This
schedule of Base Rent takes into account the “Rent Credit” to which Tenant is
entitled with respect to the Expansion Premises pursuant to the express terms
and conditions of Section 4.3, below.

 

On or before the Expansion Commencement Date, Tenant shall pay to Landlord
the Base Rent payable for the Expansion Premises for the first full month of
the Expansion Term.

 

 

4.3.          Abated Base Bent for the Expansion Promises.  Provided that the Original Tenant is not
then in default of the Lease (as hereby amended), and is in occupancy of the
entire Premises (as hereby expanded), then for the period beginning on the
Expansion Commencement Date and ending on June 30, 2004 (the “Rent Abatement Period”), Tenant shall only
be obligated to pay fifty percent (50%) of Base Rent otherwise attributable to
the Expansion Premises during such Rent Abatement Period (the “Rent Credit”).  Tenant acknowledges and agrees that the foregoing Rent Credit has
been granted to Tenant as additional consideration for entering into this First
Amendment and for agreeing to pay the Rent and performing the terms and
conditions otherwise required under the Lease (as hereby amended). If Tenant
shall be in default under the Lease (as hereby amended) and shall fail to cure
such default within any applicable notice and cure periods provided under the
Lease (as hereby amended), then Landlord may at its option elect by notice to
Tenant, and in addition to any other remedies Landlord may have under the Lease
(as hereby amended), one or both of the following remedies: (i) that Tenant
shall immediately become obligated to pay to Landlord all Base Rent abated
hereunder attributable to the Rent Abatement Period, with interest as provided
pursuant to the Lease from the date such Base Rent would have otherwise been due
but for the abatement provided herein, and/or (ii) that the unapplied portion
of the Rent Credit as of such default shall be converted to a credit to be
applicable to the end of the Expansion Term, and Tenant shall immediately be
obligated to begin paying Base Rent for the Expansion Premises in full.

 

5.             Tenant’s Share of Building Direct Expenses.

 

5.1.          Existing Premises.  Notwithstanding anything in the Lease, as hereby amended, to the
contrary, Tenant shall continue to pay Tenant’s Share of Direct Expenses in
Connection with the Existing Premises in accordance with the terms of the
Lease.

 

5.2.          Expansion Premises.  Except as specifically set forth in this Section 5.2,
commencing on the Expansion Commencement Date, tenant shall pay Tenant’s Share
of Building Direct Expenses in connection with the Expansion Premises in
accordance with the terms of Article 4 of the Lease, provided that with
respect to the calculation of Tenant’s Share of Building Direct Expenses in
connection with the Expansion Premises, Tenant’s Share shall equal 20.37%.

 

6.             Expansion Improvements.  Landlord and Tenant acknowledge that Tenant has been occupying
the Premises pursuant to the terms of the Lease, and therefore Tenant continues
to accept the Premises in its presently existing, “as is” condition. Landlord
shall not be obligated to provide or pay for any improvement work or services
related to the improvement of the Premises.

 

7.             Broker. 
Landlord and Tenant hereby warrant to each other that they have had no
dealings with any real estate broker or agent in connection with the
negotiation of this First Amendment, and that they know of no real estate
broker or agent who is entitled to a  commission
in connection with this First Amendment. Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgment’s and costs and
expenses (including, without limitation, reasonable attorneys’ fees) with
respect to any leasing commission or equivalent compensation alleged to be
owing on account of the indemnifying party’s dealings with any real estate
broker or agent. The terms of this Section 7  shall survive the expiration or earlier termination of this
First Amendment.

 

8.             Parking. 
Effective as of the Expansion Commencement Date and continuing
throughout the Expansion Term, Tenant shall be entitled to use up to one
hundred fifteen (115) unreserved parking passes in connection with Tenant’s
lease of the Expansion Premises (the “Expansion
Parking Passes”).   Tenant’s
use of such Expansion Parking Passes shall be in accordance with the provisions
of Article 28 of the Lease.

 

9.             Letter of Credit.  Landlord and Tenant acknowledge that, in accordance with Article
21 of the Lease, Tenant has previously delivered an L-C in the amount of
Two Million Three Hundred and No/100 Dollars ($2,300,000,00) (the “Existing L-C”) to Landlord as security for
the faithful performance by Tenant of the terms, covenants and conditions of
the Lease.  Concurrently with Tenant’s
execution of this First Amendment, Tenant shall replace the Existing L-C by
delivering to Landlord an unconditional, clean, irrevocable L-C in an amount
equal to Three Million Two Hundred Ninety-Eight Thousand Four Hundred Twelve
and No/100

 

 

10.           No Further Modifications.  Except as set forth in this First Amendment,
all of the terms and provisions of the Lease shall apply with respect to the
Expansion Premises and shall remain unmodified and in full force and effect.

 

IN
WITNESS WHERROF, this First Amendment has been executed as of the day and year
first above written.

 

	
  “LANDLORD”

  	
  “TENANT”

  
	
   

  	
   

  
	
  KILROY
  REALTY, L.P.,

  	
  PEREGRINE
  SYSTEMS, INC.,

  
	
  a
  Delaware limited partnership

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
  By:

  	
  Kilroy Realty Corporation,

  	
   

  
	
   

  	
  a Maryland corporation

  	
  By:

  	
  /s/ Mary Lou O'Keefe

  	
   

  
	
   

  	
  General Partner

  	
   

  	
  Its:

  	
  SVP Human Resources

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
  12-9-03

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  	
  By:

  	
  /s/ Ken Sexton

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  	
   

  	
  Its:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
  12-9-03

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:Exhibit
10.9

 

AMENDED
EMPLOYMENT AGREEMENT

 

This
Employment Agreement (as amended, the “Agreement”), is made and entered into,
effective as of June 1, 2002, by and among peregrine systems, inc.,  a Delaware corporation (the “Company” or “Peregrine”), and gary G. greenfield  (the “Employee”).

 

Recitals

 

A.            The
Company provides software products and services for infrastructure management.

 

B.            The
Company desires to employ the Employee, and the Employee desires to work for
the Company, upon the terms and conditions stated herein.

 

NOW, THEREFORE, in consideration of the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:

 

Agreements

 

Section 1.              Employment.  The Company hereby employs the Employee as
President and Chief Executive Officer of Peregrine to perform such duties as
are customarily performed by the President and Chief Executive Officer of a
company, including setting strategies and managing the day to day operations of
Peregrine.

 

Section 2.              Term. 
The term of this Agreement commenced on June 1, 2002, and shall continue
until May 31, 2005, unless terminated sooner pursuant to the terms of this
Agreement (the “Term”). The Term will be automatically extended for a one year
period effective June 1, 2005, and every June 1 thereafter (the “Anniversary
Date”), unless the Company provides written notice to the Employee of the
Company’s intent not to extend the Term more than 90 days before the Anniversary
Date.

 

Section 3.              Compensation/Benefits.

 

(A)          Base Salary  During the Term, the Employee shall be entitled to a minimum base
salary at the annual rate of $500,000, payable in installments, less required
legal deductions, in accordance with the Company’s policy governing salary
payments to employees generally, as it may be amended from time to time by the
Company (“Base Salary”). The Base Salary will be reviewed on an annual basis
and may be increased from time to time during the Term at the discretion of
Peregrine’s Board of Directors.

 

1

 

(B)          Bonuses

 

(i)            MlCP/Perfomance Bonus.  The Employee shall be entitled to receive a bonus For achieving
certain results (the “Performance Bonus”) in the pending chapter 11 bankruptcy
cases of the Company and its debtor affiliate Peregrine Remedy, Inc. (Case No,
02-12740 (JKF) (jointly administered)) (the “Chapter 11 Cases”), the amount of
such bonus to be a minimum of $250,000 payable in accordance with Section 3(B)(1)
below (“Earned Performance Bonus”) and additional amount(s), if any, payable in
accordance with Section 3(B)(2) below (“Variable Performance Bonus”). The
aggregate amount of the Performance Bonus shall be determined in accordance
with the following formula: (Unsecured Creditor Recovery)2 x [nine
(9) / number of months in bankruptcy] x $2,500,000. In no event shall the
Employee be entitled to a Performance Bonus of less than the Earned Performance
Bonus. Example: For purposes of
illustration only, the Employee would be entitled to a Performance Bonus in the
aggregate amount of $400,000 in the event that a plan of reorganization for the
Company is confirmed and becomes effective as of June 28, 2003 (270 days after
the petition date) and pursuant thereto, unsecured creditors will receive a 40%
recovery [(.40)2 x (9/9) x $2,500,000 = $400,000].

 

(1)           The Earned Performance Bonus
shall paid to Employee in two (2) installment payments of $125,000 each in cash
from the Company due on (i) January 21, 2003 (or as soon as practicable
thereafter) and (ii) the Plan Effective Date (as defined below); provided that
payment(s) of the Earned Performance Bonus shall be counted towards the
aggregate Performance Bonus that may become due and payable to Employee;
provided further that, irrespective of the aggregate amount of the Performance
Bonus, the Employee shall be entitled to receive and keep the payments
contemplated by this subsection (1).

 

(2)           For purposes of the formula set
forth in paragraph (i) above, “Unsecured Creditor Recovery” means the
percentage distribution scheduled to be recovered by holders of allowed general
unsecured claims as a class, on account of such claims, pursuant to a confirmed
plan of reorganization in the Chapter 11 Cases (“Confirmed Chapter 11 Plan”).
The Company and Official Committee of Unsecured Creditors in the Chapter 11
Cases (“Creditors Committee”) shall agree to the value of the Unsecured
Creditor Recovery. For purposes of the formula set forth in paragraph (i)
above, the “number of months in bankruptcy” means the quotient of (the number
of calendar days elapsed from September 22, 2002 (“Petition Date”) until the
effective date of a Confirmed Chapter 11 Plan) divided by 30.

 

(3)           In the event that this Agreement
is terminated pursuant to Sections 7(D) or 7(E) or for any reason other than
Cause within one year following a Change of Control and prior to the effective
date of a Confirmed Chapter 11 Plan but a Confirmed Chapter 11 Plan is
subsequently approved within ninety (90) days of the date of such termination,
then Employee shall nonetheless be entitled to receipt of a Variable
Performance Bonus computed as if this Agreement had not been terminated prior
to the effective date of such Confirmed Chapter 11 Plan. In addition, if
Employee has earned a Performance Bonus hereunder but this Agreement is
terminated pursuant to Sections 7(D) or 7(E) or for any reason other than Cause
within one year following a Change of Control and prior to receipt by Employee
of the full Performance Bonus, then the unpaid

 

2

 

component of the Performance Bonus shall continue to
be paid to Employee in accordance with this Section 3(B).

 

(ii)           Stay/Emergence Bonus.  The Employee shall be entitled to receive on the Plan Effective
Date a bonus in the following applicable amount (“Emergence Bonus”) depending
on the timing of the effective date (“Plan Effective Date”) of a Confirmed
Chapter 11 Plan: If the Plan Effective Date occurs by April 30, 2003, Employee
shall be entitled to an Emergence Bonus of $300,000; if the Plan Effective Date
occurs after April 30, 2003 but no later than May 31, 2003, the Emergence Bonus
shall be $250,000; if the Plan Effective Date occurs after May 31, 2003 but no
later than June 30, 2003, the Emergence Bonus shall be $200,000; if the Plan
Effective Date occurs after June 30, 2003 but no later than September 30, 2003,
the Emergence Bonus shall be $100,000; and if the Plan Effective Date is after
September 30, 2003, Employee shall not be entitled to any Emergence Bonus.

 

(iii)          The Performance Bonus and/or the
Emergence Bonus shall be referred to herein collectively as the “Bonuses” or
each separately as a “Bonus”. The provisions herein relating to the Bonuses are
deemed to be and constitute modifications to the Company’s “Incentive Bonus
Plan for Restructure Transaction” effective as of August 22, 2002, as may have
been previously modified, amended or supplemented.

 

(iv)          Post-Chapter 11 Annual Target Bonus.
During each year (or portion thereof) of the Term subsequent to the Plan
Effective Date, the Employee shall participate in each bonus or other incentive
plan established for senior executives. (All payments made pursuant to such
plans shall be referred to as a “Post-Chapter 11 Bonus”,) Each fiscal year (or
portion thereof) subsequent to the Plan Effective Date, the Company shall
establish a target bonus to be payable to the Employee for reaching certain
specified goals and objectives, in the minimum annual amount of  $500,000 (“Post-Chapter 11 Annual Target
Bonus”). For the period from the Plan Effective Date through March 31, 2004
(the end of the Company’s fiscal year), the Post-Chapter 11 Annual Target Bonus
is established at $500,000 or proportionate share thereof based on the timing
of the occurrence of the Plan Effective Date.

 

(C)          Benefits The Employee shall be entitled to
participate in the incentive, vacation, savings, and retirement plans and
policies generally applicable to other senior executives of the Company, as
they may be amended from time to time (“Benefits”). Notwithstanding the
foregoing, the Employee shall be entitled to at least six (6) weeks of vacation
per twelve (12) month period. The Employee shall also be entitled to
participate in all welfare benefit plans and policies generally provided by the
Company to other senior executives, as they may be amended from time to time,
including group medical, prescription, dental, disability, salary continuation,
life, accidental death and travel insurance plans (“Welfare Benefits”).

 

(D)          Share Options

 

(j)            In
conjunction with the execution of this Agreement, the Company has granted to
Employee options to purchase 900,000 shares of common stock of the Company (the
“Initial Grant”) upon the terms of a Stock Option Agreement between the Company
and Employee substantially in the form of Exhibit A-1. The Company’s
1994 Stock Option Plan, as

 

3

 

amended July 8, 2002 (the “Stock Option Plan”), pursuant to which the
share options were granted to Employee, is attached hereto as Exhibit A-2.
Such options and additional options to purchase common stock of the Company
which are at any time or from time to time outstanding and unexercised are
collectively referred to herein as “Outstanding Share Options.”

 

(ii)           Any
options granted to Employee by the Company after the Initial Grant shall be on
the same terms as the options granted pursuant to a Stock Option Agreement
substantially in the form of Exhibit A-1, except as adjusted to reflect
factors associated with the later date or dates of such grant or grants.

 

(iii)          Employee acknowledges that
changes to the Stock Option Agreement may be required to conform the terms of
the Initial Grant and any future grants to statutory and regulatory
requirements that have been or may be enacted, including but not limited to
changes required by the Sarbanes-Oxley Act and regulations promulgated
thereunder.

 

(iv)          Option grants pursuant to this
Section D may be subject to forfeiture to the extent that such a forfeiture is
required federal, state or local laws or regulations.

 

(E)           Restricted Shares

 

(i)            In
conjunction with the execution of this Agreement, the Company has issued
1,600,000 shares of its common stock (the “Initial Restricted Stock”) to
Employee pursuant to the terms of the Restricted Stock Plan attached hereto as Exhibit B.

 

(ii)           Any restricted common stock of
the Company issued to Employee after the Initial Restricted Stock shall be on
the same terms as the Initial Restricted Stock, except as adjusted to reflect factors
associated with the later date or dates of such restricted stock issuance or
issuances.

 

(iii)          Issuances of restricted shares
pursuant to this Section E may be subject to forfeiture to the extent that such
a forfeiture is required by applicable federal, state or local laws or
regulations.

 

Section 4.              Expenses/Costs.  The Company shall reimburse the Employee for
all reasonable and necessary business expenses incurred by him in the
performance of his duties hereunder, in accordance with Company policies and
procedures, as they may be amended from time to time and subject to submission
of proper documentation of each expense. Such business expenses will include
the Employee’s (a) living cost (including hotel or apartment rental and car
rental) incurred in the San Diego area, (b) travel cost (Business or First
Class air travel) from Maryland to the Company’s offices (“Commuting Cost”),
and (c) secretarial support and miscellaneous office costs at Employee’s
residence in Maryland and when traveling away from such residence.
Simultaneously with the execution of this Agreement, the Company has advanced
Twenty-Five Thousand Dollars ($25,000) to Employee for Commuting Costs (the
“Advance”). Employee will advise the Company in writing when the unused portion
of the Advance is Ten Thousand Dollars ($10,000) or less, and the Company shall
promptly advance funds to Employee to increase the Advance to $25,000, to the
extent that continuing to advance funds for commuting costs does not

 

4

 

constitute an improper loan to the Employee pursuant to the provisions
of the Sarbanes-Oxley Act, regulations promulgated thereunder or otherwise
violate applicable federal, state or local laws. This process shall be
repeated, without limit, during the term of this Agreement. If the Employee
determines to move his principal residence to the San Diego, California, area,
the Company will provide the Employee with relocation reimbursement and
assistance equal to or better than the then most favorable provisions for any
employee.

 

Section 5.              No Set Offs. 
The Company’s obligations under this Agreement shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others; provided, however,
that this provision shall not apply to advances provided to Employee by the
Company or to forfeiture of bonuses, to the extent that such a forfeiture is
required by applicable federal, state or local laws or regulations. In no event
shall the Employee be obligated to take any action by way of mitigation of the
amounts payable hereunder, and unless provided otherwise hereunder, such
amounts shall not be reduced whether or not the Employee obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which the Employee may reasonably incur as
a result of any dispute or contest under or effort to enforce this Agreement;
provided, however, that if the Company shall prevail in such contest through a
final judgment in its favor, from and after such final judgment the Company
shall not be obligated to pay any such fees and expenses and the Employee shall
reimburse the Company, within thirty (30) days thereafter, an amount equal to
the aggregate of such fees and expenses theretofore paid by the Company.

 

Section 6.              Protection of the Company.

 

(A)          Invention and Non-Disclosure Agreement (“INDA”)  The Employee agrees to be bound by the terms
and conditions of the Company’s INDA, as modified by the Company and the
Employee for purposes of this Agreement, and attached hereto as Exhibit C.
In the event of any conflict or inconsistency between this Agreement and the
INDA, the provisions of this Agreement shall govern.

 

(B)          Other Positions  The Employee has advised the Company of entities for whom
Employee currently serves as a director or in an advisory capacity. The Company
recognizes that the Employee may hold the aforementioned positions, and such
other similar positions (including consultant positions) as may become
available, and that nothing in this Agreement shall restrict the Employee from
serving in any of such positions for any entity, provided such entity is not
materially engaged in activities that are in competition with the Company.

 

Section 7.              Termination.

 

(A)          Automatic Termination  This Agreement shall terminate automatically upon the death of
the Employee or the Employee’s Disability (as defined below). In the event of a
termination under this Section based upon death, the Company’s only obligation
(except as otherwise required by law or as set forth in any applicable Welfare
Benefits plan) shall be to continue payment of the Base Salary to the
Employee’s family for twelve (12) months following the termination. In the
event of a termination under this Section based upon Disability, all

 

5

 

Company obligations to the Employee shall terminate, except as
otherwise provided by law or as set forth in any applicable Welfare Benefits
plan. For the purposes of this Agreement, “Disability” shall mean the inability
of the Employee to perform the essential functions of his job> with or
without reasonable accommodation, on a full time basis for at least 180 days
during any 240-day period or the determination (evidenced by a written report
or certificate) by a physician selected by the Company or its insurers, and
acceptable to the Employee or the Employee’s legal representative, that the
Employee is incapable of performing the essential functions of his job, with or
without reasonable accommodation, on a full time basis for at least 180 days
during the ensuing 240 days.

 

(B)          For “Cause”  This Agreement may be terminated at any time by the Company
immediately for “Cause” for any one of the following reasons: (i) the active
participation of Employee in materially gross and fraudulent conduct against
the Company; (ii) the conviction of Employee of a felony where imprisonment is
imposed or for any crime involving moral turpitude or dishonesty against the
Company, its employees or any person or entity important to the business of the
Company; (iii) any act of gross negligence, gross insubordination or flagrant
dereliction of duty by the Employee in the performance of his duties hereunder;
or (iv) gross and negligent misconduct by the Employee which materially
jeopardizes the Company’s right or ability to operate its business. Upon an
event constituting “Cause,” the Company shall deliver to the Employee written
notice of such conduct setting forth in detail the basis for the termination
and the Employee shall immediately be terminated. In the event of a termination
under this Section, Employee’s right to the Base Salary, Bonuses, Benefits, and
Welfare Benefits shall cease as of the effective date of the termination,
unless otherwise required by law.

 

(C)          Voluntary Resignation  The Employee may terminate this Agreement at any time upon six
(6) months written notice. In the event of a termination under this Section,
Employee’s right to the Base Salary, earned Bonuses, if any, Benefits, and
Welfare Benefits shall cease as of the effective date of the termination,
unless otherwise required by law. Upon receipt of a notice of termination
hereunder, the Company may, at its option, relieve Employee of any or all of
his duties and in which instance Employee’s right to Base Salary and Welfare
Benefits shall cease upon Employee’s first day of reemployment, or upon the
effective date of Employee’s termination as set forth in Employee’s written notice
(not to exceed six (6) months), whichever occurs first.

 

(D)          Without “Cause”  During the Term, this Agreement may be terminated by the Company
without “Cause” at any time. Notification by the Company to Employee pursuant
to Section 2 of this Agreement that the Company does not intend to extend the
Term shall be deemed a termination of this Agreement without “Cause” as of the
last day of such Term.

 

(E)           Good Reason  The Employee may terminate this Agreement at any time upon thirty
(30) days written notice after (i) any material change in the Employee’s
position or responsibilities; (ii) the Company’s decision to discontinue
reimbursement of the Employee’s Commuting Cost, or (iii) material breach by the
Company of its obligations under this Agreement. For the purposes of this
Section, a material change in the Employee’s position or responsibilities shall
mean the assignment to the Employee of any duties inconsistent in any material
and significant respect with the Employee’s position, authority, duties or responsibilities

 

6

 

as
contemplated herein, except isolated, insubstantial, or inadvertent action not
taken in bad faith which is remedied by the Company promptly after written
notice from the Employee.

 

(F)             Change in Control  “Change of Control” means the occurrence of any of the following
events:

(i)            Any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities; or

(ii)               The
consummation of a Sale of the Company’s Assets (as defined below); or 

(iii)              The
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining out-standing or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately
after such merger or consolidation; or a change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors.

 

“Incumbent
Directors” means directors who either (A) are directors of the Company as of
the April 17, 2001 or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transaction described in
subsections (i), (ii), or (iii) above, or in connection with an actual or
threatened proxy contest relating to the election of directors to the Company,

 

“Sale
of the Company’s Assets” means the lease, sale or other disposition of all, but
not less than all, of the assets of the Company unless the Board declares that
a transaction involving the sale or other transfer of the securities of a Subsidiary
or the lease, sale or disposition of assets of the Company or a Subsidiary
constitutes a sale of substantially all of the Company’s assets, which
determination may be made by the Board in its sole and absolute discretion.
Further, whether a transaction is a sale of substantially all of the assets of
the Company need not be determined with reference to the Delaware General
Corporation Law or cases decided thereunder. By way of example but not of
limitation as to what constitutes a Sale of the Company’s Assets, the sale by
the Company of all of the securities of Peregrine Remedy, Inc. or the lease,
sale or disposition of the assets of Peregrine Remedy, Inc. (including the sale
or disposition of assets related to the business of Peregrine Remedy, Inc. but
held by the Company or another of the Company’s subsidiaries) will not be a
Sale of the Company’s Assets unless it is so deemed by the Board.

 

(G)          Termination Pursuant to Sections 7(D), (E) or (F)   If this Agreement is terminated
pursuant to Section 7(D) (Without Cause) or, Section 7(E) (Good Reason), or
because of termination of employment (including voluntary termination) within
one year following a Change of Control for any reason other than Cause, the
Employee shall be entitled to the 

 

7

 

following:

 

1.             Accrued Obligations.  A lump sum payment equal to the sum of the unpaid (i) Base Salary
through the termination date, (ii) Bonuses, if any, then payable in accordance
with Section 3(B), provided further that any Bonus or portion thereof which was
not payable through the termination date shall continue to be paid in
accordance with the provisions of Section 3(B), and (iii) any compensation
previously deferred by the Employee (together with any accrued interest or
earnings thereon) and any accrued vacation pay.

 

2.             Severance Payments.  An
amount equal to the product of (i) eighteen (18) and (ii) the quotient
determined by dividing the Base Salary by twelve (12). The amount due under
this section Section 7(G)2 shall be paid in twelve (12) substantially equal
monthly installments commencing with the first day of the month following the
termination date, unless the termination arises out of a Change in Control, in
which case the amounts due hereunder shall be paid in a lump sum on the
termination date.

 

3.             Welfare Benefits.  Continuation
of the Welfare Benefits for a period of 18 months following the termination
date on terms equal to those which would have been provided to the Employee (or
his family) in accordance with the Welfare Benefits if the Employee’s
employment had not been terminated; provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer-provided plan, the medical and
other welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility, and for
purposes of determining eligibility (but not the time of commencement of benefits)
of the Employee for retiree benefits pursuant to such plans, practices,
programs and policies, the Employee shall be considered to have remained
employed until the expiration of the Employment Period and to have retired on
the last day of such period.

 

(H)          Outstanding Share Options: Rights  Notwithstanding anything to the
contrary in the Stock Option Agreement, if this Agreement is terminated
pursuant to this Section 7(D) (Without Cause), 7(E) (Good Reason), or because
of termination of employment (including voluntary termination) within one year
following a Change of Control for any reason other than Cause, all Outstanding
Share Options shall vest immediately as of the time of the earlier of the
termination date or the Change in Control and shall immediately be exercisable
by the Employee and shall remain so exercisable for a period of ninety (90)
days subsequent to such termination of employment.

 

Notwithstanding the above, it shall be
a term and condition of any Option that in the event of notice being given to
shareholders of a resolution for the winding-up of the Company, (the Option
shall be capable of exercise within the period of six months commencing on the
date of such notice and the Option shall lapse at the end of such period or on
the winding up of the Company, if earlier.

 

8

 

If the Company is succeeded by a
successor corporation, or if any person (“the Offeror”)
obtains Control of the Company, then the successor corporation or Offeror may
assume, convert or replace any or all outstanding Options, which action will be
binding on all option holders. In the alternative, the successor corporation or
Offeror may substitute equivalent options or provide substantially similar
consideration to option holders as was provided to shareholders (after taking
into account the existing provisions of the Options). If such successor
corporation or Offeror refuses to assume or substitute Options, such Options
shall accelerate and become exercisable in full on such conditions as the Board
shall determine prior to such succession or change of Control. Any Options not
so replaced or exercised shall lapse and cease to be exercisable.

 

(I)            Post-Termination Non-Competition Restrictions

 

(i)            If the
Employee’s employment is terminated for reasons other than Section 7(A)
(Automatic Termination), Section 7(B) (For Cause), or Section 7(C) (Voluntary
Resignation), except in the case of voluntary termination within one year
following a Change of Control, for a period of twelve (12) months following the
termination, the Employee shall not (i) engage in competition with the Company
anywhere where the Company sells or offers its products or services; or (ii)
directly or indirectly induce or attempt to induce or otherwise counsel, advise,
solicit or encourage any person to leave the employ of the Company (“Refrain
from Competing”).

 

(ii)           Enforcement; Remedies.  Employee acknowledges and agrees that (a) a
breach or threatened violation of any of the non-competition restrictions set
forth in Section 7(I) will result in immediate and irreparable harm to the
Company, (b) in the event of a breach or threatened violation of any of the
non-competition restrictions set forth in Section 7(I), a solely monetary
remedy would be inadequate and difficult to quantify, (c) the Company will be
entitled, without the necessity of proof of actual damages and without the
necessity of posting any bond, to an immediate and permanent injunction
restraining and enjoining the Employee from any actual or threatened violation
of any of the non-competition restrictions set forth in Section 7(I), (d) the
foregoing relief and remedies are in addition to any other legal and equitable
relief and remedies available to the Company at law or in equity (including
monetary damages) for any actual or threatened violation by the Employee of any
of the non-competition restrictions set forth in Section 7(I), and (e) the
Company may pursue any of the foregoing relief and remedies concurrently or
sequentially in any order at any time, and the pursuit by the Company of any of
such relief or remedies shall not be deemed an election of remedies or a waiver
of the right to pursue any other relief or remedy.

 

(iii)          Nothing in this Section 7(I)
shall prohibit the Employee from pursuing such other business activities as he
shall desire, except as otherwise provided herein.

 

Section 8.              Additional Payments.  If any payments or distributions to the
Employee pursuant to this Agreement would be subject to the excise tax imposed
by Section 4999 of the Code, or any related interest or penalties
(collectively, “Excise Tax”), then the Employee shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by the Employee of all resulting taxes, interest or penalties, including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax

 

9

 

imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. All
determinations required to be made under this Subsection shall be made at the
Company’s expense by a nationally recognized certified public accounting firm
within fifteen (15) business days of the receipt of notice from the Employee
that a tax, interest or penalty hereunder has been claimed or assessed. Any
Gross-Up Payment, as determined pursuant to this Subsection, shall be paid by
the Company to the Employee within five (5) days of the receipt of the
Accounting Firm’s determination.

 

Section 9.              Indemnification and Insurance.  The Company and the Employee have entered
into a separate Indemnification Agreement, the form of which is attached
hereto. Such Indemnification Agreement provides an indemnity in favor of the
Employee and an agreement for the Employee to be covered by Directors and
Officers insurance. The definition of “Change of Control” contained in the
Indemnification Agreement shall govern with respect to the Indemnification
Agreement. The definition of “Change of Control” contained in this Agreement
shall govern with respect to all matters affecting the Employee other than
matters covered by the Indemnification Agreement.

 

Section 10.            Miscellaneous.

 

(A)          Non-Waiver  The Company’s failure at any time to require the performance by
the Employee of any of the terms hereof shall in no way affect the Company’s
right thereafter to enforce the same, nor shall the waiver by the Company of
the breach of any term hereof be taken or held to be a waiver of any succeeding
breach.

 

(B)          Severability  In the event that any provision of this Agreement conflicts with
the law under which this Agreement is to be construed, or if any such provision
is held invalid or unenforceable by a court of competent jurisdiction or an
arbitrator, such provision shall be deleted from this Agreement and the
Agreement shall be construed to give full effect to the remaining provisions
thereof.

 

(C)          Governing Law  This Agreement shall be interpreted, construed and governed
according to the laws of the state of California, without regard to the
principle of conflicts of laws thereof.

 

(D)          Headings and Captions  The paragraph headings and captions contained in this Agreement
are for convenience only and shall not be construed to define, limit or affect
the scope or meaning of the provisions hereof.

 

(E)           Entire Agreement  This Agreement (which expressly includes and incorporates the
terms and conditions contained in the Exhibits hereto) contains and represents
the entire agreement of the parties and supersedes all prior agreements,
representations or understandings, oral or written, express or implied with
respect to the subject matter hereof. Neither this Agreement, nor any term of
Employee’s employment with the Company, may be modified or amended in any way
unless in a writing signed by both the Employee and the Company’s Chairman of
the Board of Directors. No representation, promise or inducement has been made

 

10

 

by either party hereto that is not embodied in this Agreement, and no
party shall be bound or liable for any alleged representation, promise or
inducement not specifically set forth herein.

 

(F)           Assignment  This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The Employee
shall not have any right to assign, delegate or transfer any duty or obligation
to be performed by him hereunder to any third party, nor to assign or transfer the
right, if any, to receive payments hereunder.

 

(G)          Notices 
All notices required or permitted hereunder shall be in writing and
shall be deemed properly given if delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, or sent by
telegram, telex, telecopy or similar form of telecommunication, and shall be
deemed to have been given when received. Any such notice or communication shall
be addressed: (1) To the Company, to (a) Peregrine Systems, 3611 Valley Centre
Drive, San Diego California 92130, Attention: Chairman of the Board; and (b)
Peregrine Systems, Inc., 3611 Valley Centre Drive, San Diego California 92130,
Attention: Legal Department; (2) To the Employee, to his home address 9800 Bent
Cross Drive, Potomac, Maryland 20854; or to such other address as the parties
shall have furnished to one another in writing.

 

(H)          Authority 
The execution, delivery and performance of this Agreement by the Company
has been authorized by the Company’s Board of Directors.

 

(I)            Survival 
Notwithstanding the Termination of this Agreement pursuant to Section 7,
the provisions of Section 3(B), Section 5, Section 6(A), Section 7(G)(2),
Section 7(G)(3), Section 7(H), Section 7(I), Section 8 and Section 9 will
survive the Termination of this Agreement and the termination of the Employee’s
employment with the Company and those provisions will terminate on the second
anniversary of the Termination or at such earlier time as may be agreed in
writing by the parties hereto or as may otherwise be required by law; provided,
however, the provisions of Section 3(B)(i) (MICP/Performance Bonus) will
survive until the satisfaction of any and all payment obligations of the
Company to Employee pursuant thereto.

 

[The remainder of this page is
intentionally left blank]

 

11

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement, to be effective as of the day and year first above
written.

 

	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Gary
  G. Greenfield

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  peregrine systems, inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

[Signature page Gary Greenfield Employment Agreement]

 

12

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