PEREGRINE SYSTEMS, INC.
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is effective as of November 1, 1995 between Peregrine
Systems, Inc., a Delaware corporation (the "Company"), and Xxxx X. Xxxx (the
"Employee").
WHEREAS, the Employee's participation is considered by the Company to be
important for the Company's growth; and
WHEREAS, in connection with Employee's employment, the Company is willing
to grant to the Employee and the Employee desires to accept shares of Common
Stock according to the terms and conditions contained herein.
THEREFORE, the parties agree as follows:
GRANT OF STOCK. The Company hereby agrees to grant to the Employee and
the Employee hereby agrees to accept an aggregate of 200,000 shares of the
Company's Common Stock (the "Shares") subject to the following restrictions:
Subject to the provisions of paragraph 4, the Shares shall be prohibited
from transfer (which shall include any offer, sale, contract of sale, option to
purchase, short sale or other disposition or distribution) except when the
transfer prohibition lapses as a result of (i) the attainment of targeted
earnings per share ("EPS Target"), but then such lapses shall be limited to the
extent set forth in the table below; (ii) a Change of Control as defined in the
Company's 1994 Stock Option Plan ("Change of Control"); or (iii) October 31,
2006. The Change of Control and October 31, 2006 lapses shall be for all Shares
subject to transfer prohibition at the time. The transfer prohibition under
this Section 2 shall exclude any transfers by will or under the laws of descent.
a) Lapsing resulting from attainment of EPS growth shall be according to
the following table:
Year Ending EPS Target Shares Lapsing
----------- ---------- --------------
3/31/97 [ 33,000
3/31/98 33,000
3/31/99 * 33,000
3/31/00 33,000
3/31/01 33,000
3/31/02 ] 35,000
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200,000
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b) EPS shall be calculated on a fully diluted earnings per share basis
calculated in accordance with generally accepted accounting principles except
that earnings shall not include interest expense attributable to notes payable,
income or loss from extraordinary items, income or loss from discontinued
operations, and cumulative effects of a change in accounting principles.
* Confidential treatment has been requested with respect to certain portions
of this exhibit pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. Omitted portions have been filed
separately with the Commission.
c) With respect to each EPS Target, a missed target for any particular
year may be cured by attaining the EPS Target for the following year; the
attainment of EPS Targets for any succeeding year thereafter shall not cure the
original missed EPS Target, which shall lapse pursuant to Section 2, clause (i)
and clause (ii) above.
a) If, before October 31, 2006, Employee's employment with the Company
terminates, other than because of employee's death or permanent disability,
Employee shall forfeit any Shares with respect to which the prohibition of
transfer has not theretofore lapsed pursuant to paragraph 2; provided that the
Company's Board of Directors may, in its sole discretion, grant such additional
lapsing of such prohibition as it may determine.
b) If, before October 31, 2006, Employee's employment with the Company is
terminated because of Employee's death or permanent disability, the prohibition
of transfer shall continue to lapse in accordance with paragraph 2 as if
Employee's employment had not so terminated.
RIGHT OF FIRST REFUSAL.
The Company is hereby granted the right of first refusal (the "First
Refusal Right"), exercisable in connection with any proposed sale or other
transfer of the Shares as to which the transfer prohibition set forth in Section
2 above shall have lapsed. For purposes of this Section 5, the term "transfer"
shall include any assignment, pledge, encumbrance, or other disposition for the
value of the Shares intended to be made by the Employee.
In the event the Employee desires to accept a bona fide third-party
offer for any or all of the Shares (the shares subject to such offer to be
hereinafter called, solely for the purpose of this Section 5, the "Target
Shares"), such offer may be accepted only in accordance with the provisions
of this Section 5, and only after the Employee has promptly (i) delivered to
the Secretary of the Company written notice (the "Disposition Notice") of the
offer and the basic terms and conditions thereof, including the proposed
purchase price and (ii) provided satisfactory proof that the disposition of
the Target Shares to the third-party offeror would not be in contravention of
the provisions set forth in this Agreement, and, that such third-party
offeror (including any parent company, subsidiary, division, joint venture,
or other affiliate thereof) is not engaged in any business or activity
(including any announced business or activity) which directly or indirectly
competes with the products or services of the Company, as the Company shall
determine in its reasonable discretion.
The Company (or its assignees) shall, for a period of thirty (30) days
following receipt of the Disposition Notice, have the right to repurchase not
less than all of the Target Shares specified in the Disposition Notice upon
substantially the same terms and conditions specified therein. Such right shall
be exercisable by written notice (the "Exercise Notice") delivered to Employee
prior to the expiration of the thirty (30) day exercise period. If such right
is exercised with respect to all the Target Shares specified in the Disposition
Notice, then the Company (or its assignees) shall effect the repurchase of the
Target Shares, including payment of the purchase price, not more than five (5)
business after the delivery of the Exercise Notice; and at such time the
Employee shall deliver to the Company the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed for transfer.
The Target Shares so purchased shall thereupon be canceled and cease to be
issued and outstanding shares of the Company's Common Stock.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the Company
(or it assignees) shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If the Employee and the
Company (or its assignees) cannot agree on such cash value within ten (10) days
after the Company's receipt of the Disposition Notice, the valuation shall be
made by an appraiser of recognized standing selected by the Employee and the
Company (or its assignees), or, if they cannot agree on an appraiser within
twenty (20) days after the Company's receipt of the Disposition Notice, each
shall select an appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose appraisal shall be
determinative of such value. The cost of such appraisal shall be shared equally
by the Employee and the Company. The closing shall then be held on the later of
(i) the fifth business day following delivery of the Exercise Notice or (ii) the
15th day after such cash valuation shall have been made.
In the event the Exercise Notice is not given to Employee within
thirty (30) days following the date of the Company's receipt of the Disposition
Notice, Employee shall have a period of thirty (30) days thereafter, in which to
sell or otherwise dispose of the Target Shares upon terms and conditions
(including the purchase price) no more favorable to the third-party Employee
than those specified in the Disposition Notice; provided, however, that any such
sale or disposition must not be effected in contravention of the provisions of
this Agreement. In the event Employee does not sell or otherwise dispose of the
Target Shares within the specified thirty (30) day period, the Company's First
Refusal Right shall continue to be applicable to any subsequent disposition of
the Target Shares by Employee until such right lapses in accordance with Section
5(g).
In the event of any stock dividend, stock split, recapitalization or
other transaction affecting the Company's outstanding Common Stock as a class
effected without receipt of consideration, then any new, substituted or
additional securities or other property which is by reason of such transaction
distributed with respect to the Target Shares shall be immediately subject to
the Company's First Refusal Right hereunder.
The First Refusal Right under this Section 5 shall lapse and cease to
have effect upon the earliest to occur of (i) the first date on which shares of
the Company's Common Stock are held of record by more than five hundred (500)
persons, (ii) a determination is made by the Company's Board of Directors that a
public market exists for the outstanding shares of the Company's Common Stock or
(iii) a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, covering the offer and sale of
the Company's Common Stock in the aggregate amount of at least $7,500,000.
However, the market stand-off provisions of Section 8 shall continue to remain
in full force and effect following the lapse of the First Refusal Right
hereunder.
INVESTMENT REPRESENTATIONS. In connection with the purchase of the Shares,
the Employee represents to the Company the following:
The Employee is purchasing these securities for investment for the
Employee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
The Employee understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Employee's investment intent as expressed herein. In this connection, the
Employee understands that, in view of the Securities and Exchange Commission
("Commission"), the statutory basis for such exemption may not be present if the
Employee's representations meant that the Employee's present intention was to
hold these securities for a minimum capital gains period under the tax statutes,
for a deferred sales, for a market rise, for a sale if the market does not rise,
or for a year or any other fixed period in the future.
The Employee further acknowledges and understands that the securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The
Employee further acknowledges and understands that the Company is under no
obligation to register the securities. The Employee understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.
THE EMPLOYEE FURTHER ACKNOWLEDGES AND UNDERSTANDS THAT THE ISSUANCE OF
THE SHARES HEREUNDER SATISFIES IN FULL ALL OF THE COMPANY'S OBLIGATIONS TO ISSUE
SHARES TO THE EMPLOYEE TO DATE.
STOCK CERTIFICATE LEGENDS. The share certificate evidencing the Shares
issued hereunder shall be endorsed with the following legends.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A RESTRICTION ON TRANSFER
AND A RIGHT OF FIRST REFUSAL ("RIGHT OF FIRST REFUSAL") BY THE COMPANY PURSUANT
TO THE PROVISIONS OF AN AGREEMENT BETWEEN THE COMPANY AND THE HOLDER OF SUCH
SHARES, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH
THE TERMS OF SUCH RIGHT OF FIRST REFUSAL.
Any legend required by any applicable state securities laws.
MARKET STAND-OFF AGREEMENT. The Employee hereby agrees, if so requested by
the managing underwriters in such offering, that, without the prior written
consent of such managing underwriters, the Employee will not offer, sell,
contract to sell, grant any option to purchase, make any short sale, or
otherwise dispose of or make a distribution of any capital stock of the Company
held by or on behalf of the Employee or beneficially owned by the Employee in
accordance with the rules and regulations of the Securities and Exchange
Commission for a period of up to 180 days after the date of the final prospectus
relating to the Company's initial public offering.
ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares,
purchase price of Shares, and any earnings per share targets in this Agreement
shall be appropriately adjusted to reflect any stock split, stock dividend, or
similar change in the Shares which may be made by the Company after date of this
Agreement.
TAX CONSEQUENCES. The Employee has reviewed with the Employee's own tax
advisors the federal, state, local, and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Employee is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. The Employee understands that the Employee
(and not the Company) shall be responsible for the Employee's own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement.
GENERAL PROVISIONS.
This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Employee and may only be
modified or amended in writing signed by both parties.
Any notice, demand, or request required or permitted to be given by
either the Company or the Employee pursuant to the terms of this Agreement shall
be in writing and shall be deemed given when delivered personally or deposited
in the U.S. mail, First Class with postage prepaid, and addressed to the parties
at the addresses of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing.
The rights and benefits of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Employee
under this Agreement may only be assigned with the prior written consent of the
Company.
Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent that party thereafter from enforcing each and every
other provision of this Agreement. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.
The Employee agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
EMPLOYEE ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A CONSULTANT OR EMPLOYEE FOR ANY PERIOD OR AT
ALL, AND SHALL NOT INTERFERE WITH EMPLOYEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE EMPLOYEE'S CONSULTING RELATIONSHIP OR EMPLOYMENT WITH THE COMPANY AT
ANY TIME, WITH OR WITHOUT CAUSE.
Employee has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
PEREGRINE SYSTEMS, INC.: EMPLOYEE:
A Delaware corporation
By: /s/ Xxxxx Xxxxxx /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
Title: Chief Financial Officer
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Address
00000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000 ------------------------------
