Document:

Exhibit 10.28

 

PEREGRINE SYSTEMS, INC.

 

KEY EMPLOYEE RETENTION PLAN

 

1.             Purpose of the
Plan.  The purpose of this Key
Employee Retention Plan is to aid in the retention of certain key employees of
Peregrine Systems, Inc. (the “Company”) and its subsidiaries, by providing a
retention bonus for such employees in consideration of their continued
employment pending the restructuring of the Company in bankruptcy.

 

2.                                       Effective
Date and Termination of Plan; Survival of Provisions.

 

(a)           Effective Date.  The effective date of the Plan (the
“Effective Date”) shall be the date the Company commences the Chapter 11 Case,
subject to subsequent approval of the Plan by the Bankruptcy Court.  In the event the Plan is not approved by the
Bankruptcy Court, the Plan shall be null and void ab initio, and the Company
shall have no obligation to make, and shall not make, any payments hereunder.

 

(b)           Termination Date.  The Plan shall terminate upon the first to
occur of (i) Confirmation of a Plan of Reorganization, (ii) a Change of Control
of the Company, or (iii) the Dissolution or Liquidation of the Company (the
“Termination Date”).

 

(c)           Survival of
Provisions.  Notwithstanding Section
2(b), the provisions of the Plan shall survive to the extent necessary to
provide for the payment and administration of benefits and claims accrued on or
prior to the date of termination of the Plan.

 

3.             Definitions.  As used herein, the following definitions
shall apply:

 

(a)           “Administrative
Committee” means the Compensation Committee of the Board of Directors, or
any person, committee or other entity designated from time to time by the
Compensation Committee to administer the Plan and determine benefit eligibility
hereunder, in whole or in part.

 

(b)           “Applicable Laws”
means all applicable federal, state and local laws, rules and regulations.

 

(c)           “Applicable Pro Rata
Fraction” means, for purposes of determining the amount of any pro rata
retention bonus payable to a Participant hereunder, as provided in Sections
4(a)(ii) and 4(b)(iii) below, a fraction, (x) the numerator of which shall be
the number of days between the Effective Date of the Plan and the date of the
Participant’s Qualifying Termination of Employment, and (y) the denominator of
which shall be the

 

 

number of days between the Effective Date of the Plan and the date on
which the applicable Payment Event occurs.

 

(d)           “Bankruptcy Code”
means title 11 of the United States Code, as amended from time to time, as
applicable to the Chapter 11 Case.

 

(e)           “Bankruptcy Court”
means the United States Bankruptcy Court for the District of Delaware or such
other court as may have jurisdiction over the Chapter 11 Case and, to the
extent of any reference under section 157 of title 28 of the United States
Code, the unit of such District Court under section 157 of title 28 of the
United States Code.

 

(f)            “Beneficiary”
means the person(s), trust(s) or estate designated by a Participant in writing
to receive any benefits payable under this Plan in the event of the death of
such Participant.

 

(g)           “Board” means
the Board of Directors of the Company.

 

(h)           “Change of Control”
means the consummation of a Sale of the Company’s Assets.

 

(i)            “Chapter 11 Case”
means any case under Chapter 11 of the Bankruptcy Code that is commenced by the
Company.

 

(j)            “Chapter 11 Plan”
means any plan of reorganization for the Company under Chapter 11 of the
Bankruptcy Code, proposed and/or supported by the Company in the Chapter 11
Case.

 

(k)           “Company” means
Peregrine Systems, Inc., a Delaware corporation (or any successors thereto as provided
in Section 7(d) below).

 

(l)            “Confirmation of a
Plan of Reorganization” means the entry of a Final Order by the Bankruptcy
Court confirming a Chapter 11 Plan pursuant to section 1129 of the Bankruptcy
Code.

 

(m)          “Disability”
shall have the meaning set forth in the Company’s long-term disability plan, as
in effect as of the Effective Date. 
Notwithstanding the foregoing, if an employment or severance agreement
between the Participant and the Company or any subsidiary, as in effect as of
immediately prior to commencement of the Chapter 11 Case, contains a different
definition of “Disability,” such other definition as in effect as of such time
shall apply for purposes of this Plan, regardless whether such employment or
severance agreement is subsequently approved or rejected by the Bankruptcy
Court.

 

(n)           “Dissolution or
Liquidation” means the entry of a Final Order by the Bankruptcy Court
dismissing or converting the Chapter 11 Case to a case under Chapter 7 of the
Bankruptcy Code, pursuant to section 1112 of the Bankruptcy Code.

 

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(o)           “Employee” means
a full-time employee of the Company or any subsidiary.

 

(p)           “ERISA” means
the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

(q)           “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.

 

(r)            “Final Order”
means an order of the Bankruptcy Court as to which the time to appeal, to
petition for certiorari, or to move for reargument or rehearing has expired and
as to which no appeal, petition for certiorari or other proceedings for
reargument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargue or rehear shall have been waived in
writing in form and substance satisfactory to the Company or, in the event an
appeal, writ of certiorari, reargument or rehearing thereof has been sought,
such order of the Bankruptcy Court shall have been affirmed by the highest
court to which such order was appealed, or certiorai, reargument or rehearing
shall have been denied and the time to take any further appeal, petition for
certiorari, or move for reargument or rehearing shall have expired; provided,
however, that the possibility that a motion under Rule 59 or Rule 60 of
the Federal Rules of Procedure, or any analogous rule under the Federal Rules
of Bankruptcy Procedure, may be filed with respect to such order shall not
cause such order not to be a Final Order.

 

(s)           “MICP-Eligible
Participant” means any Participant who, as of the Effective Date of the
Plan, has been approved for participation in the Company’s Fiscal 2003
Management Incentive Compensation Plan.

 

(t)            “MICP-Ineligible
Participant” means any Participant who, as of the Effective Date of the
Plan, has not been approved for participation in the Company’s Fiscal 2003
Management Incentive Compensation Plan.

 

(u)           “Notice of
Participation” means a notice provided to an Employee that he or she has
been designated by the Administrative Committee as a Participant in the Plan,
and setting forth the Retention Bonus Amount the Employee would be entitled to
receive upon the occurrence of a Payment Event during the Term of the Plan.

 

(v)           “Partial Sale of the
Company’s Business” means any lease, sale, transfer or other disposition of
some portion of the Company’s business that does not constitute a Sale of the
Company’s Assets (as defined below).

 

(w)          “Participant”
means any Employee designated by action of the Administrative Committee as a
Participant in the Plan.

 

(x)            “Payment Event”
means the occurrence of (i) Confirmation of a Plan of Reorganization or (ii) a
Change of Control of the Company (each, an “Emergence

 

3

 

Event”), in either case during the Term of the Plan; provided,
that if a Dissolution or Liquidation of the Company shall occur prior to the
occurrence of an Emergence Event, no Payment Event shall occur and, except as
may become payable pursuant to Section 4(b)(i) below, no retention bonus shall
be payable under the Plan.

 

(y)           “Plan” means
this Peregrine Systems, Inc. Key Employee Retention Plan, as amended from time
to time.

 

(z)            “Qualifying
Termination of Employment” means, with respect to any Participant, the
termination of the Participant’s employment with the Company during the Term of
the Plan (i) by reason of the Participant’s death or Disability, (ii) by reason
of a Partial Sale of the Company’s Business (but only if such termination of
employment is not a Qualifying Termination of Employment under the Company’s
Key Employee Severance Plan) or (iii) as otherwise set forth in the
Participant’s Notice of Participation. 
Termination of a Participant’s employment for any other reason shall not
constitute a Qualifying Termination of Employment.

 

(aa)         “Retention Bonus
Amount” means the amount of the cash retention bonus that a Participant
would be eligible to receive upon a Payment Event, as set forth in the
Participant’s Notice of Participation.

 

(bb)         “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 and
need not be determined for the purposes of all Participants but may be
determined on a case by case basis for each individual Participant.  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 determined by the Board.

 

(cc)         “Term of the Plan”
means the period commencing on the Effective Date of the Plan and ending upon
the Termination Date of the Plan, as provided in Section 2(b) above.

 

4.             Payment of
Retention Bonuses.

 

(a)           Entitlement of
MICP-Eligible Participants to Retention Bonus.  Retention bonuses shall be payable under the Plan to
MICP-Eligible Participants as follows:

 

4

 

(i)            Upon
the occurrence of a Payment Event during the Term of the Plan, each
MICP-Eligible Participant whose employment with the Company has not terminated
prior to the date of such Payment Event shall be entitled to receive the full
Retention Bonus Amount set forth in his or her Notice of Participation.

 

(ii)           If
a MICP-Eligible Participant incurs a Qualifying Termination of Employment during
the Term of the Plan and prior to the occurrence of a Payment Event, then, upon
the subsequent occurrence of a Payment Event during the Term of the Plan, such
Participant (or Beneficiary, as applicable) shall be entitled to receive a pro
rata retention bonus.  Such pro rata
retention bonus shall be determined by multiplying the Retention Bonus Amount
set forth in the Participant’s Notice of Participation by the Applicable Pro
Rata Fraction.  If, in contrast, no
Payment Event occurs subsequent to such Qualifying Termination of Employment,
no pro rata retention bonus shall be payable under this subsection.

 

(iii)          If,
prior to the occurrence of a Payment Event, a MICP-Eligible Participant’s
employment with the Company shall terminate for any reason other than a
Qualifying Termination of Employment, no retention bonus shall be payable to
such Participant hereunder.

 

(b)           Entitlement of
MICP-Ineligible Participants to Retention Bonus.  Retention bonuses shall be payable under the Plan to
MICP-Ineligible Participants as follows:

 

(i)            If
neither a Payment Event nor the Dissolution or Liquidation of the Company shall
have occurred prior to January 15, 2003, then on such date (or as soon as
reasonably practicable thereafter) the Company shall pay to each MICP-Ineligible
Participant whose employment with the Company has not terminated prior to such
date a lump sum amount equal to twenty-five percent (25%) of his or her
Retention Bonus Amount; provided, that if any MICP-Ineligible
Participant incurs a Qualifying Termination Event prior to January 15, 2003,
then the Company shall instead pay to such Participant on such date (or as soon
as reasonably practicable thereafter) an amount equal to twenty-five percent
(25%) of the amount of the pro rata retention bonus such Participant would be
entitled to receive upon a subsequent Payment Event pursuant to Section
4(b)(iii) below, as reasonably estimated by the Company.  Any Participant entitled to receive partial
payment of a retention bonus under this Section 4(b)(i) shall be entitled to
retain such payment in the event no Payment Event subsequently occurs.

 

(ii)           Upon
the occurrence of a Payment Event during the Term of the Plan, each
MICP-Ineligible Participant whose employment with the Company has not
terminated prior to the date of such Payment Event shall be entitled to receive
the full Retention Bonus Amount set forth in his or her Notice of
Participation,

 

5

 

less, if applicable, any amount that has
previously become payable to such Participant pursuant to Section 4(b)(i)
above.

 

(iii)          If
a MICP-Ineligible Participant incurs a Qualifying Termination of Employment
during the Term of the Plan and prior to the occurrence of a Payment Event,
then, upon the subsequent occurrence of a Payment Event during the Term of the
Plan, such Participant (or Beneficiary, as applicable) shall be entitled to
receive a pro rata retention bonus. 
Such pro rata retention bonus shall be determined by multiplying the
Retention Bonus Amount set forth in the Participant’s Notice of Participation
by the Applicable Pro Rata Fraction, and then reducing such amount (but not
below zero) by any portion of the Retention Bonus Amount that has previously
become payable to such Participant pursuant to Section 4(b)(i) above.  If, in contrast, no Payment Event occurs
subsequent to such Qualifying Termination of Employment, no pro rata retention
bonus shall be payable under this subsection.

 

(iv)          If,
prior to the occurrence of a Payment Event, a MICP-Ineligible Participant’s
employment with the Company shall terminate for any reason other than a
Qualifying Termination of Employment, no retention bonus shall be payable to
such Participant hereunder, except such as may previously have become payable
to such Participant under Section 4(b)(i) above.

 

(c)           Retention Bonus
Amount Paid as a Lump Sum.  Any
retention bonus amounts payable pursuant to Section 4(a) or 4(b) above shall be
paid as a lump sum on the date of the Payment Event or as soon as reasonably
practicable thereafter; provided, that any retention bonus amounts
payable to MICP-Ineligible Participants pursuant to Section 4(b)(i) above shall
be paid as provided in such subsection. 
Any retention bonus payment under this Plan shall be subject to all
applicable withholdings.

 

(d)           No Retention Bonus
Payment in the Event of a Dissolution or Liquidation of the Company.  Notwithstanding anything herein to the
contrary, except as may become payable pursuant to Section 4(b)(i) with respect
to MICP-Ineligible Participants, if a Dissolution or Liquidation of the Company
shall occur prior to the occurrence of a Payment Event, then no retention
bonuses shall be payable hereunder.

 

(e)           No Duplication of
Benefits.  No Employee who is
eligible to receive a Restructure Transaction Incentive Bonus (or similar
bonus) pursuant to a separate and effective agreement with the Company shall be
eligible to be a Participant or otherwise receive any retention bonus
hereunder.

 

5.             Administration of
the Plan.

 

(a)           Administrative
Committee. The Plan shall be administered by the Administrative Committee.

 

6

 

(b)           Meetings and
Committee Action.  The
Administrative Committee shall hold meetings upon such notice, at such place or
places, and at such time or times, as it may from time to time determine. A
majority of the Administrative Committee may act by meeting (whether in person
or by telephone) or by writing executed without a meeting.  The Administrative Committee may authorize
one or more of its members or any agent to execute or deliver any instrument or
make any payment on its behalf, and may employ such clerical personnel as it
may require in carrying out the provisions of the Plan.

 

(c)           Selection of
Participants and Determination of Retention Bonus Amounts and Qualifying
Terminations of Employment.  The
Administrative Committee shall have the sole and absolute discretion to
determine the following:

 

(i)            Which
Employees shall be Participants in the Plan;

 

(ii)           The
Retention Bonus Amount applicable to each Participant; and

 

(iii)          What
events shall be deemed a Qualifying Termination of Employment with respect to
each Participant.

 

The Administrative Committee
need not designate all Employees at a particular level of employment within the
Company or any subsidiary to be Participants in the Plan; it need not apply an
identical formula for determining the Retention Bonus Amount payable to all
Participants in the Plan, or to all Participants at the same level of
employment; and it need not provide that identical events shall constitute a
Qualifying Termination of Employment with respect to all Participants in the
Plan or to each Participant at the same level of employment.

 

In the event that, through
clerical error or otherwise, an individual Notice of Participation does not
accurately reflect the determination of the Administrative Committee as
provided above, the determination of the Administrative Committee shall
control.

 

(d)           Powers of the
Administrative Committee.  Subject
to the provisions hereof:  (A) the
Administrative Committee shall have complete control of the administration of
the Plan, with all powers necessary to enable it properly to carry out its
duties; (B) the Administrative Committee shall be authorized to interpret the
Plan and shall have the discretion to determine all questions arising in the
administration, construction and application of the Plan; and (C) the decisions
of the Administrative Committee upon all matters within the scope of its
authority shall be conclusive and binding on all parties.

 

(e)           Rules and
Regulations.   Subject to the
limitations of this Section 5 and Section 6 below, the Administrative
Committee, from time to time, shall establish such supplemental rules and
regulations for the administration of the Plan and the transaction of its
business as it deems necessary.

 

7

 

(f)            Reports. The
Administrative Committee shall be responsible for the preparation and delivery
of all reports, notices, plan summaries and plan descriptions required to be
filed with any governmental office or to be given to any Participant or
Beneficiary.

 

(g)           Claims Procedure.  The following claims procedures shall apply
with respect to claims for payments or benefits under the Plan; provided,
that if final regulations adopted by the Department of Labor under Section 503
of ERISA shall become effective and apply to claims under the Plan, the
procedures set forth below shall be deemed amended to the extent required to
comply with such regulations.

 

(i)            All
claims for benefits shall be in writing and shall be filed with the
Administrative Committee.

 

(ii)           If
the Administrative Committee wholly or partially denies a Participant’s claim
for benefits, the Administrative Committee shall give the Participant written
notice within sixty (60) days after receipt of the claim setting forth:

 

(A)          the
specific reason(s) for the denial;

 

(B)           specific
reference to pertinent Plan provisions on which the denial is based;

 

(C)           a
description of any additional material or information which must be submitted
to perfect the claim, and an explanation of why such material or information is
necessary; and

 

(D)          an
explanation of the Plan’s review procedure.

 

(iii)          In
the event of a benefit claim denial, the Administrative Committee (or its
designee) shall serve as Claim Reviewer. The Participant shall have sixty (60)
days after the day on which such written notice of denial is provided by the
Administrative Committee, in which to apply (in person or by authorized
representative) in writing to the Claim Reviewer for a full and fair review of
the denial of his or her claim.  In
connection with such review, the Participant (or his or her representative)
shall be afforded a reasonable opportunity to review pertinent documents, and
may submit issues and comments in writing.

 

(iv)          The
Claim Reviewer shall issue its decision on review within sixty (60) days after
the Claim Reviewer’s receipt of the Participant’s written request.  The decision of the Claim Reviewer shall be
in writing and shall set forth specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based.

 

8

 

(v)           If
the decision of the Claim Reviewer is adverse to the Participant, any further
appeal by the Participant shall, to the extent permitted by Applicable Laws, be
subject to binding arbitration in accordance with the procedures set forth in
the Company’s form of Invention and Non-Disclosure, and Arbitration Agreement,
except that each party shall bear its own attorneys fees in such arbitration
proceeding.

 

(h)           Employment of
Professional Assistance. The Administrative Committee shall be empowered,
on behalf of the Plan, to engage accountants, legal counsel and such other
personnel as it deems necessary or advisable to assist it in the performance of
its duties under the Plan, such engagement and compensation of said personnel
to be subject to Bankruptcy Court approval, if and to the extent so required.  The functions of any such persons engaged by
the Administrative Committee shall be limited to the specific services and
duties for which they are engaged, and such persons shall have no other duties,
obligations or responsibilities under the Plan. Such persons shall exercise no
discretionary authority or discretionary control respecting the management of
the Plan.  All reasonable expenses
thereof shall be borne by the Company.

 

(i)            Indemnification of
Members of Administrative Committee. 
To the extent not insured against by an insurance company pursuant to
the provisions of any applicable insurance policy and to the extent permitted
by Applicable Laws, the Company shall indemnify and hold harmless each member
of the Administrative Committee against any personal liability or expense
incurred by him or her as a result of any act or omission in his or her
capacity as a member of the Administrative Committee, except for his or her own
gross negligence or willful misconduct.

 

(j)            Application of
ERISA.  To the extent the Plan is subject
to the provisions of ERISA, the Plan shall be administered in accordance
therewith.

 

6.             Amendment of Plan.  The Board of Directors shall have the right
to amend the Plan in any manner not materially adverse to the rights of
Participants; provided, that subject to Section 5(c) above, a
Participant’s Notice of Participation shall not be amended after it has been
issued to the Participant except with the prior written consent of the
Participant.

 

7.             General Provisions

 

(a)           Nonalienation of Benefits.  None of the payments, benefits or rights of a Participant shall be subject to any claim of any creditor, and, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, levy, execution, trustee’s process, or any other legal or equitable process available to any creditor of such Participant.  Except as provided in Section 7(d) below, any attempt by a Participant to alienate, anticipate, sell, transfer, commute, pledge, encumber, assign or charge any payments, benefits or rights, contingent or otherwise, under this Plan, shall be null and void.  Payments hereunder shall not be considered assets of a Participant in the event of the Participant’s insolvency or bankruptcy.

 

9

 

(b)           No Contract of
Employment.  Neither the
establishment of the Plan, nor any modification thereof, nor the creation of
any fund, trust or account, nor the payment of any benefits shall be construed
as giving any Participant or any other person the right to be retained in the
service of the Company or its subsidiaries, and each Participant shall remain
subject to discharge, with or without cause (but subject to the terms of this
Plan and any written employment contract between the Participant and the
Company or any subsidiary) to the same extent as if the Plan had never been
adopted.

 

(c)           Severability of
Provisions.  The invalidity or
unenforceability of any provision of this Plan shall not affect the validity or
enforceability of any other provision of this Plan.  If any provision of this Plan shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Plan, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.

 

(d)                                 Successors.
 

(i)            No
rights or obligations of any Participant under this Plan may be assigned or
transferred by the Participant other than rights to payments or benefits
hereunder, which may be transferred only by will or the laws of descent and
distribution.  Each Participant shall
have the right to designate a Beneficiary to receive such Participant’s unpaid
benefits under Section 4 in the event of the Participant’s death.  If no designated Beneficiary survives the
Participant or if the Participant fails to designate a Beneficiary, payment of
such benefits shall be made pursuant to will or the laws of descent and
distribution.  In the event of a Participant’s
death or a judicial determination of his incompetence, reference in this Plan
to the Participant shall be deemed, where appropriate, to refer to the
Participant’s Beneficiary or Beneficiaries, estate or other legal
representative(s).

 

(ii)           The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree to perform this Plan
in the same manner and to the same extent that the Company would have been
required to perform it if no such succession had taken place. As used in this
Plan, the “Company” shall mean both the Company as defined above and any
successor to its business and/or assets (by merger, purchase or otherwise) or
which otherwise becomes bound by all the terms and provisions of this Plan by
operation of law or otherwise.

 

(e)           Headings and
Captions. The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.

 

(f)            Unfunded Plan.  The Plan is intended to constitute an
“unfunded” plan for the payment of retention amounts.  Except as may otherwise be provided by order of the

 

10

 

Bankruptcy Court, with respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any Participant
any rights that are greater than those of a general creditor of the Company.

 

(g)           Notices.  Any notice or other communication required
or permitted pursuant to the terms of this Plan shall be in writing and shall
be deemed to have been duly given when delivered personally, or sent by
certified or registered mail, postage prepaid, return receipt requested, or
sent by telegram, telex, telecopy, facsimile or similar form of
telecommunication, and shall be deemed to have been given when received.  Any such notice shall be addressed as
follows:

 

If to the Company:

 

Peregrine
Systems, Inc.

3611 Valley
Centre Drive

San Diego, CA
92130

 

Attn:       Senior Vice President,
Human Resources

General
Counsel

 

If to a Participant:

 

At the most
recent address set forth in the Company’s records.

 

(h)           Controlling Law.  This Plan shall be construed and enforced
according to the internal laws of the state of California, without reference to
any conflicts of laws provisions, to the extent not preempted by ERISA or other
Federal law, which shall otherwise control.

 

(i)            Withholding.  The Company may withhold from amounts payable under this Plan all federal, state, local and foreign taxes that are required to be withheld by Applicable Laws.

 

11Exhibit 10.29

 

PEREGRINE SYSTEMS, INC.

 

KEY EMPLOYEE SEVERANCE PLAN

 

1.             Purpose of the
Plan.  The purpose of this Key
Employee Severance Plan is to aid in the retention of certain key employees of
Peregrine Systems, Inc. (the “Company”) and its subsidiaries, by providing
severance benefits for such employees in the event their employment is
terminated under the circumstances specified herein.  The Plan has been adopted in connection with the Company’s filing
for protection from creditors under the Federal bankruptcy laws, and is
intended to provide benefits only to certain key employees whose employment
terminates in connection with such filing, as provided herein.  The Plan shall remain in effect only during
the limited time period set forth in Section 2 below, and is not intended to
establish a general policy of severance benefits that would apply after the
term of the Plan has expired.

 

2.                                       Effective
Date and Termination of Plan; Survival of Provisions.

 

(a)           Effective Date.  The effective date of the Plan (the
“Effective Date”) shall be the date the Company commences the Chapter 11 Case,
subject to subsequent approval of the Plan by the Bankruptcy Court.  In the event the Plan is not approved by the
Bankruptcy Court, the Plan shall be null and void ab initio, and the Company
shall have no obligation to make, and shall not make, any payments hereunder.

 

(b)           Termination Date.  The Plan shall terminate on the date that is
six months following the date of the earlier to occur of (i) Confirmation of a
Plan of Reorganization or (ii) a Change of Control of the Company (each of (i)
and (ii), an “Emergence Event”); provided, that if, prior to the
occurrence of an Emergence Event, the Board of Directors of the Company and the
Bankruptcy Court shall each approve an alternative severance plan (providing
severance benefits comparable to or greater than those provided hereunder) with
respect to the six-month period following the date of the Emergence Event, the
Plan shall instead terminate upon the occurrence of the Emergence Event.  Notwithstanding the foregoing, the Plan
shall terminate six months following the date of any Dissolution or Liquidation
of the Company that occurs prior to the occurrence of an Emergence Event.  The date on which the Plan terminates shall
be referred to as the “Termination Date.”

 

(c)           Survival of
Provisions.  Notwithstanding Section
2(b), the provisions of the Plan shall survive to the extent necessary to
provide for the payment and administration of benefits and claims accrued on or
prior to the date of termination of the Plan.

 

3.             Definitions.  As used herein, the following definitions
shall apply:

 

 

(a)           “Administrative
Committee” means the Compensation Committee of the Board of Directors, or
any person, committee or other entity designated from time to time by the
Compensation Committee to administer the Plan and determine benefit eligibility
hereunder, in whole or in part.

 

(b)           “Applicable Laws”
means all applicable federal, state and local laws, rules and regulations.

 

(c)           “Bankruptcy Code”
means title 11 of the United States Code, as amended from time to time, as
applicable to the Chapter 11 Case.

 

(d)           “Bankruptcy Court”
means the United States Bankruptcy Court for the District of Delaware or such
other court as may have jurisdiction over the Chapter 11 Case and, to the
extent of any reference under section 157 of title 28 of the United States
Code, the unit of such District Court under section 157 of title 28 of the
United States Code.

 

(e)           “Beneficiary”
means the person(s), trust(s) or estate designated by a Participant in writing
to receive any benefits payable under this Plan in the event of the death of
such Participant.

 

(f)            “Board” means
the Board of Directors of the Company.

 

(g)           “Cash Severance
Amount” means the amount of cash severance that a Participant shall be
eligible to receive upon a Qualifying Termination of Employment, as set forth
in the Participant’s Notice of Participation.

 

(h)           “Cause” for
termination of a Participant’s employment means misconduct by the Participant,
as determined by the Administrative Committee, including but not limited to the
following:

 

(i)            Commission of a crime against the Company, its
affiliates, customers or employees, whether prosecuted or not;

 

(ii)           Conviction of any other crime or violation of law,
statute or regulation that creates an inability to perform job duties;

 

(iii)          Failure or inability to perform job duties due to
intoxication by drugs or alcohol during working hours;

 

(iv)          A conflict of interest involving the Participant, not
specifically waived in advance by the Company;

 

(v)           Unauthorized use or disclosure of confidential
information which belongs to the Company, its affiliates, customers or
employees; or

 

2

 

(vi)          Other misconduct including,
but not limited to: falsification of Company records, including timekeeping
records and the employee’s application for employment; non-adherence to the
Company’s policies; illegal discrimination or harassment of another employee,
customer or supplier; theft; unauthorized use or possession of property
belonging to the Company, a co-worker or customer; destruction of Company or
another employee’s property; possession of firearms, controlled substances or
illegal drugs on Company premises or while performing Company business;
gambling on Company premises; concealing serious offenses by another employee;
and any other conduct interfering with work performance or constituting an
unsafe, unethical or unlawful practice.

 

Notwithstanding the foregoing,
if an employment or severance agreement between the Participant and the Company
or any subsidiary, as in effect as of immediately prior to commencement of the
Chapter 11 Case, contains a different definition of “Cause,” such other
definition as in effect as of such time shall apply for purposes of this Plan,
regardless whether such employment or severance agreement is subsequently
approved or rejected by the bankruptcy court.

 

(i)            “Change of Control”
means the consummation of a Sale of the Company’s Assets.

 

(j)            “Chapter 11 Case”
means any case under Chapter 11 of the Bankruptcy Code that is commenced by the
Company.

 

(k)           “Chapter 11 Plan”
means any plan of reorganization for the Company under Chapter 11 of the
Bankruptcy Code, proposed and/or supported by the Company in the Chapter 11
Case.

 

(l)            “COBRA Premium
Payment Period” means that number of months equal to the quotient of (x)
the Participant’s Cash Severance Amount, divided by (y) the Participant’s
Regular Monthly Salary, rounded up to the nearest whole number of months.

 

(m)          “Company” means
Peregrine Systems, Inc., a Delaware corporation (or any successors thereto as
provided in Section 7(d) below).

 

(n)           “Confirmation of a
Plan of Reorganization” means the entry of a Final Order by the Bankruptcy
Court confirming a Chapter 11 Plan pursuant to section 1129 of the Bankruptcy
Code.

 

(o)           “Disability”
shall have the meaning set forth in the Company’s long-term disability plan, as
in effect as of the Effective Date. 
Notwithstanding the foregoing, if an employment or severance agreement
between the Participant and the Company or any subsidiary, as in effect as of
immediately prior to commencement of the Chapter 11 Case, contains a different
definition of “Disability,” such other definition as in effect as of such

 

3

 

time shall apply for purposes of this Plan, regardless whether such
employment or severance agreement is subsequently approved or rejected by the
bankruptcy court.

 

(p)           “Dissolution or
Liquidation” means the entry of a Final Order by the Bankruptcy Court
dismissing or converting the Chapter 11 Case to a case under Chapter 7 of the
Bankruptcy Code, pursuant to section 1112 of the Bankruptcy Code.

 

(q)           “Employee” means
a full-time employee of the Company or any subsidiary.

 

(r)            “ERISA” means
the Employee Retirement Income Security Act of 1974, as amended from time to
time.

 

(s)           “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.

 

(t)            “Final Order”
means an order of the Bankruptcy Court as to which the time to appeal, to
petition for certiorari, or to move for reargument or rehearing has expired and
as to which no appeal, petition for certiorari or other proceedings for
reargument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargue or rehear shall have been waived in
writing in form and substance satisfactory to the Company or, in the event an
appeal, writ of certiorari, reargument or rehearing thereof has been sought,
such order of the Bankruptcy Court shall have been affirmed by the highest
court to which such order was appealed, or certiorai, reargument or rehearing
shall have been denied and the time to take any further appeal, petition for
certiorari, or move for reargument or rehearing shall have expired; provided,
however, that the possibility that a motion under Rule 59 or Rule 60 of
the Federal Rules of Procedure, or any analogous rule under the Federal Rules
of Bankruptcy Procedure, may be filed with respect to such order shall not
cause such order not to be a Final Order.

 

(u)           “Notice of
Participation” means a notice provided to an Employee that he or she has
been designated by the Administrative Committee as a Participant in the Plan,
and setting forth the Cash Severance Amount the Employee would be entitled to
receive upon a Qualifying Termination of Employment.

 

(v)           “Partial Sale of the
Company’s Business” means any lease, sale, transfer or other disposition of
some portion of the Company’s business that does not constitute a Sale of the
Company’s Assets (as defined below).

 

(w)          “Participant”
means any Employee designated by action of the Administrative Committee as a
Participant in the Plan.

 

(x)            “Plan” means
this Peregrine Systems, Inc. Key Employee Severance Plan, as amended from time
to time.

 

4

 

(y)           “Qualifying
Termination of Employment” means, with respect to any Participant, the
termination of the Participant’s employment with the Company during the Term of
the Plan (i) by the Company without Cause (including a termination of
employment by reason of the Dissolution or Liquidation of the Company), (ii) by
reason of a Partial Sale of the Company’s Business (subject to the proviso
below) or (iii) as otherwise set forth in the Participant’s Notice of
Participation; provided, that if, in connection with a Partial Sale of
the Company’s Business, a Participant is offered reasonably comparable
employment with the purchaser or an affiliate with an annual base salary and
bonus opportunity reasonably comparable to the Participant’s annual base salary
and bonus opportunity with the Company immediately prior to such Partial Sale
of the Company’s Business, then any termination or deemed termination of the
Participant’s employment with the Company in connection with or at any time on
or after the closing of such Partial Sale of the Company’s Business shall not
be deemed a Qualifying Termination of Employment for purposes of this Plan,
regardless whether the Participant accepts such offer of employment or actually
commences employment with the purchaser or an affiliate.  Termination of a Participant’s employment
for any other reason, including without limitation by reason of the
Participant’s death or Disability, shall not constitute a Qualifying
Termination of Employment.

 

(z)            “Regular Monthly
Base Salary” means the Participant’s regular monthly base salary in effect
immediately prior to the date his or her employment is terminated (or, if
higher, the regular monthly base salary in effect on the Effective Date), and
shall be determined without regard to any overtime, bonuses, commissions,
fringe benefits, reimbursements or other irregular payments.

 

(aa)         “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 and need not be determined for the purposes of all Participants but
may be determined on a case by case basis for each individual Participant.  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 determined by the Board.

 

(bb)         “Term of the Plan”
means the period commencing on the Effective Date of the Plan and ending upon
the Termination Date of the Plan, as provided in Section 2(b) above.

 

5

 

4.             Payment of
Severance Benefits.

 

(a)           Entitlement to and
Amount of Cash Severance.  Upon the occurrence
of a Qualifying Termination of Employment, a Participant shall be entitled to
receive the Cash Severance Amount set forth in his or her Notice of
Participation, subject to all applicable withholdings.  If, in contrast, a Participant’s employment
terminates under circumstances not constituting a Qualifying Termination of
Employment, no portion of the Cash Severance Amount shall be payable to such
Participant.

 

(b)           Cash Severance
Amount Paid as Salary Continuation. 
Except as may otherwise be provided in a Participant’s Notice of
Participation or in Section 4(c) below, the Cash Severance Amount shall be paid
on a salary continuation basis, based on the Participant’s Regular Monthly Base
Salary.  Subject to execution and
non-revocation of the release required under Section 4(h) below, salary
continuation payments shall commence upon the later of (i) the Participant’s
next regularly scheduled payroll date immediately following the date of
termination of the Participant’s employment, or (ii) the date the release
required under Section 4(h) below becomes effective.

 

(c)           Lump Sum Payment
upon Liquidation or Dissolution. 
If, prior to the date all salary continuation payments payable under
Section 4(b) have been made to a Participant, the Bankruptcy Court issues a
Final Order providing for the Company’s Dissolution or Liquidation, (i) all
remaining Cash Severance Amounts due to Participants who have previously
incurred a Qualifying Termination of Employment, and (ii) all Cash Severance
Amounts due to Participants who incur a Qualifying Termination of Employment in
connection with or following such Dissolution or Liquidation, shall in each
case be paid as a lump sum, without being discounted to a present value, as
soon as reasonably practicable following issuance of such order.

 

(d)           Commissions.  If the Participant was employed in a
commission-earning sales position, the Company shall comply with its
obligations under the applicable Sales Compensation Plan in providing the
Participant with any sales incentive compensation that may be due to the
Participant following termination of the Participant’s employment with the
Company.

 

(e)                                  Continued
Group Health Insurance.

 

(i)            During
the Participant’s COBRA Premium Payment Period (as defined in Section 3(l)
above), the Company shall pay the full amount of the premiums required to
continue the Participant’s group health coverage under the Company’s group
health plan(s), on the same terms as applied immediately prior to the date of
termination of the Participant’s employment with the Company.  Such payment shall be subject to the
applicable provisions of the Consolidated Omnibus Reconciliation Act of 1985,
as amended (“COBRA”), provided, that the Participant elects such
coverage and otherwise remains eligible for benefits under COBRA during the
remainder of the COBRA Premium Payment Period.

 

6

 

(ii)           Upon
expiration of the Participant’s COBRA Premium Payment Period, the Participant
shall be solely responsible for the continued payment of COBRA premiums, and,
subject to the requirements of ERISA, the Participant’s COBRA coverage shall
terminate upon failure of the Participant to continue to pay the applicable
premiums.

 

(iii)          If
the Company’s group health coverage is eliminated or materially reduced during
a Participant’s COBRA Premium Payment Period, such Participant shall have the
right to receive as a lump sum, without being discounted to a present value, as
soon as reasonably practicable after the effective date of such elimination or
material reduction, the aggregate value of any such premiums the Company would
otherwise have been required to pay on behalf of the Participant during the
remainder of the Participant’s COBRA Premium Payment Period.

 

(f)            Payment in the
Event of Death.  In the event of a
Participant’s death after becoming entitled to receive the Cash Severance
Amount, and such death occurs (i) prior to the date all salary continuation
payments payable under Section 4(b) have been made to such Participant, or (ii)
during such Participant’s COBRA Premium Payment Period, the Participant’s
remaining payments and benefits under this Section 4 shall continue to be paid
or provided to the Participant’s Beneficiary or otherwise in accordance with
the terms of this Section 4, Section 7(d) and Applicable Laws.

 

(g)           Non-Duplication of
Payments and Benefits. 
Notwithstanding anything herein or in any other plan or agreement to the
contrary, in the event a Participant shall be entitled to receive severance,
termination or similar benefits both (i) under this Plan and (ii) under the
Company’s Broad-Based Severance Plan and/or under an individual employment,
severance or other similar agreement between the Company or any subsidiary and
the Participant, the Participant shall only be entitled to elect to receive the
payments and benefits provided under any one such plan or agreement, and an
election to receive any payments or benefits under any one such plan or
agreement shall act as a complete bar and waiver to receiving any payments or
benefits under any other such plan or agreement.

 

(h)           Payment Subject to
Execution of General Release. 
Nothwithstanding anything to the contrary herein, the Participant’s
right to receive any payments or benefits hereunder shall be subject to the
Participant’s execution and non-revocation of a Confidential Separation
Agreement and Release of All Claims, in the form provided by the Company to the
Participant at the time the Participant makes a claim for payments or benefits
under the Plan.

 

5.             Administration of
the Plan.

 

(a)           Administrative
Committee. The Plan shall be administered by the Administrative Committee.

 

7

 

(b)           Meetings and
Committee Action.  The
Administrative Committee shall hold meetings upon such notice, at such place or
places, and at such time or times, as it may from time to time determine. A
majority of the Administrative Committee may act by meeting (whether in person
or by telephone) or by writing executed without a meeting.  The Administrative Committee may authorize
one or more of its members or any agent to execute or deliver any instrument or
make any payment on its behalf, and may employ such clerical personnel as it
may require in carrying out the provisions of the Plan.

 

(c)           Selection of
Participants and Determination of Cash Severance Amounts and Qualifying
Terminations of Employment.  The
Administrative Committee shall have the sole and absolute discretion to
determine the following:

 

(i)            Which
Employees shall be Participants in the Plan;

 

(ii)           The
Cash Severance Amount applicable to each Participant; and

 

(iii)          What
events shall be deemed a Qualifying Termination of Employment with respect to
each Participant.

 

The Administrative Committee
need not designate all Employees at a particular level of employment within the
Company or any subsidiary to be Participants in the Plan; it need not apply an
identical formula for determining the amount of severance benefits to all
Participants in the Plan, or to all Participants at the same level of
employment; and it need not provide that identical events shall constitute a
Qualifying Termination of Employment with respect to all Participants in the
Plan or to each Participant at the same level of employment.

 

In the event that, through
clerical error or otherwise, an individual Notice of Participation does not
accurately reflect the determination of the Administrative Committee as
provided above, the determination of the Administrative Committee shall
control.

 

(d)                                 Powers
of the Administrative Committee.

 

(i)            Prior
to a Change of Control of the Company, subject to the provisions hereof:  (A) the Administrative Committee shall have
complete control of the administration of the Plan, with all powers necessary
to enable it properly to carry out its duties; (B) the Administrative Committee
shall be authorized to interpret the Plan and shall have the discretion to
determine all questions arising in the administration, construction and
application of the Plan; and (C) the decisions of the Administrative Committee
upon all matters within the scope of its authority shall be conclusive and
binding on all parties.

 

(ii)           Following
a Change of Control of the Company, the Administrative Committee shall make
benefits determinations hereunder and all other determinations necessary and
appropriate to the administration of the Plan,

 

8

 

but it is
expressly intended that with respect to any such determination made by the
Administrative Committee after the date of a Change of Control, a “de novo”
standard of review shall apply with respect to any judicial or arbitral review
of such determination.

 

(e)           Rules and
Regulations.   Subject to the
limitations of this Section 5 and Section 6 below, the Administrative
Committee, from time to time, shall establish such supplemental rules and
regulations for the administration of the Plan and the transaction of its
business as it deems necessary.

 

(f)            Reports. The
Administrative Committee shall be responsible for the preparation and delivery
of all reports, notices, plan summaries and plan descriptions required to be
filed with any governmental office or to be given to any Participant or
Beneficiary.

 

(g)           Claims Procedure.  The following claims procedures shall apply
with respect to claims for payments or benefits under the Plan; provided,
that if final regulations adopted by the Department of Labor under Section 503
of ERISA shall become effective and apply to claims under the Plan, the
procedures set forth below shall be deemed amended to the extent required to
comply with such regulations.

 

(i)            All
claims for benefits shall be in writing and shall be filed with the
Administrative Committee.

 

(ii)           If
the Administrative Committee wholly or partially denies a Participant’s claim
for benefits, the Administrative Committee shall give the Participant written
notice within sixty (60) days after receipt of the claim setting forth:

 

(A)          the
specific reason(s) for the denial;

 

(B)           specific
reference to pertinent Plan provisions on which the denial is based;

 

(C)           a
description of any additional material or information which must be submitted
to perfect the claim, and an explanation of why such material or information is
necessary; and

 

(D)          an
explanation of the Plan’s review procedure.

 

(iii)          In
the event of a benefit claim denial, the Administrative Committee (or its
designee) shall serve as Claim Reviewer. The Participant shall have sixty (60)
days after the day on which such written notice of denial is provided by the
Administrative Committee, in which to apply (in person or by authorized
representative) in writing to the Claim Reviewer for a full and fair review of
the denial of his or her claim.  In
connection with such review, the

 

9

 

Participant
(or his or her representative) shall be afforded a reasonable opportunity to
review pertinent documents, and may submit issues and comments in writing.

 

(iv)          The
Claim Reviewer shall issue its decision on review within sixty (60) days after
the Claim Reviewer’s receipt of the Participant’s written request.  The decision of the Claim Reviewer shall be
in writing and shall set forth specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based.

 

(v)           If
the decision of the Claim Reviewer is adverse to the Participant, any further
appeal by the Participant shall, to the extent permitted by Applicable Laws, be
subject to binding arbitration in accordance with the procedures set forth in
the Company’s form of Invention and Non-Disclosure, and Arbitration Agreement,
except that each party shall bear its own attorneys fees in such arbitration
proceeding.

 

(h)           Employment of
Professional Assistance. The Administrative Committee shall be empowered,
on behalf of the Plan, to engage accountants, legal counsel and such other
personnel as it deems necessary or advisable to assist it in the performance of
its duties under the Plan, such engagement and compensation of said personnel
to be subject to Bankruptcy Court approval, if and to the extent so
required.  The functions of any such
persons engaged by the Administrative Committee shall be limited to the
specific services and duties for which they are engaged, and such persons shall
have no other duties, obligations or responsibilities under the Plan. Such
persons shall exercise no discretionary authority or discretionary control
respecting the management of the Plan. 
All reasonable expenses thereof shall be borne by the Company.

 

(i)            Indemnification of
Members of Administrative Committee. 
To the extent not insured against by an insurance company pursuant to
the provisions of any applicable insurance policy and to the extent permitted
by Applicable Laws, the Company shall indemnify and hold harmless each member of
the Administrative Committee against any personal liability or expense incurred
by him or her as a result of any act or omission in his or her capacity as a
member of the Administrative Committee, except for his or her own gross
negligence or willful misconduct.

 

(j)            Application of
ERISA.  To the extent the Plan is
subject to the provisions of ERISA, the Plan shall be administered in
accordance therewith.

 

6.             Amendment of Plan.

 

(a)           Prior to the occurrence
of a Change in Control, the Board of Directors shall have the right to amend
the Plan in any manner not materially adverse to the rights of Participants; provided,
that (i) except as set forth in Section 2(b) above, the Term of the Plan shall
not be reduced and (ii) subject to Section 5(c) above, a Participant’s Notice

 

10

 

of Participation shall not be amended after it has been issued to the
Participant except with the prior written consent of the Participant.

 

(b)           Following the
occurrence of a Change in Control, any attempted alteration, amendment, change,
suspension, substitution, deletion or revocation of the terms of the Plan or
any Notice of Participation in any manner adverse to the rights any Participant
hereunder (without the express written consent of the affected Participant)
shall be null and void.

 

7.             General Provisions

 

(a)           Nonalienation of Benefits.  None of the payments, benefits or rights of a Participant shall be subject to any claim of any creditor, and, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment, levy, execution, trustee’s process, or any other legal or equitable process available to any creditor of such Participant.  Except as provided in Section 7(d) below, any attempt by a Participant to alienate, anticipate, sell, transfer, commute, pledge, encumber, assign or charge any payments, benefits or rights, contingent or otherwise, under this Plan, shall be null and void.  Payments hereunder shall not be considered assets of a Participant in the event of the Participant’s insolvency or bankruptcy.
 

(b)           No Contract of
Employment.  Neither the
establishment of the Plan, nor any modification thereof, nor the creation of
any fund, trust or account, nor the payment of any benefits shall be construed
as giving any Participant or any other person the right to be retained in the
service of the Company or its subsidiaries, and each Participant shall remain
subject to discharge, with or without cause (but subject to the terms of this
Plan and any written employment contract between the Participant and the
Company or any subsidiary) to the same extent as if the Plan had never been
adopted.

 

(c)           Severability of
Provisions.  The invalidity or
unenforceability of any provision of this Plan shall not affect the validity or
enforceability of any other provision of this Plan.  If any provision of this Plan shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Plan, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.

 

(d)                                 Successors.
 

(i)            No
rights or obligations of any Participant under this Plan may be assigned or
transferred by the Participant other than rights to payments or benefits
hereunder, which may be transferred only by will or the laws of descent and
distribution.  Each Participant shall
have the right to designate a Beneficiary to receive such Participant’s unpaid
benefits under Section 4 in the event of the Participant’s death.  If no designated Beneficiary survives the
Participant or if the Participant fails to designate a Beneficiary, payment of
such benefits shall be made pursuant to will or the laws of descent and
distribution.  In the event of a

 

11

 

Participant’s
death or a judicial determination of his incompetence, reference in this Plan
to the Participant shall be deemed, where appropriate, to refer to the
Participant’s Beneficiary or Beneficiaries, estate or other legal
representative(s).

 

(ii)           The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree to perform this Plan
in the same manner and to the same extent that the Company would have been
required to perform it if no such succession had taken place. As used in this
Plan, the “Company” shall mean both the Company as defined above and any
successor to its business and/or assets (by merger, purchase or otherwise) or
which otherwise becomes bound by all the terms and provisions of this Plan by
operation of law or otherwise.

 

(e)           Headings and
Captions. The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.

 

(f)            Unfunded Plan.  The Plan is intended to constitute an
“unfunded” plan for the payment of severance compensation.  Except as may otherwise be provided by order
of the Bankruptcy Court, with respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any Participant
any rights that are greater than those of a general creditor of the Company.

 

(g)           Notices.  Any notice or other communication required
or permitted pursuant to the terms of this Plan shall be in writing and shall
be deemed to have been duly given when delivered personally, or sent by certified
or registered mail, postage prepaid, return receipt requested, or sent by
telegram, telex, telecopy, facsimile or similar form of telecommunication, and
shall be deemed to have been given when received.  Any such notice shall be addressed as follows:

 

If to the Company:

 

Peregrine
Systems, Inc.

3611 Valley
Centre Drive

San Diego, CA
92130

 

Attn:       Senior Vice President,
Human Resources

General
Counsel

 

If to a Participant:

 

At the most
recent address set forth in the Company’s records.

 

(h)           Controlling Law.  This Plan shall be construed and enforced
according to the internal laws of the state of California, without reference to
any conflicts of laws

 

12

 

provisions, to the extent not preempted by ERISA or other Federal law,
which shall otherwise control.

 

(i)            Withholding.  The Company may withhold from amounts payable under this Plan all federal, state, local and foreign taxes that are required to be withheld by Applicable Laws.

 

13

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