Software & Programming

Exhibit 10.35

INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT, dated as of August 26, 2002 (as may be amended, supplemented or otherwise modified from time to time, the Agreement), is made by and among FOOTHILL CAPITAL CORPORATION, a California corporation, in its capacity as (i) arranger and administrative agent (in such capacity, together with its successors and assigns in such capacity, the Senior Agent) for certain lenders that are signatory to the Senior Loan Agreement defined below (such lenders, each a Senior Lender, and collectively, the Senior Lenders; such Senior Lenders, together with Senior Agent, individually and collectively, the Senior Lender Group), and (ii) as a Senior Lender; ABLECO FINANCE LLC, a Delaware limited liability company, as a Senior Lender, FLEET BUSINESS CREDIT LLC, a Delaware limited liability company, as successor to Sanwa Business Credit Corporation (Fleet), in its capacity as (i) agent (in such capacity, together with its successors and assigns in such capacity, the Junior Agent) for certain creditors that are signatory to the Forbearance Agreement described below (such creditors, each a Junior Creditor, and collectively, the Junior Creditors; such Junior Creditors, together with Junior Agent, individually and collectively, the Junior Creditor Group), and (ii) as a Junior Creditor, WELLS FARGO HSBC TRADE BANK, N.A., a national banking association, as a Junior Creditor, SILICON VALLEY BANK, a California state bank, as a Junior Creditor, and PEREGRINE SYSTEMS, INC., a Delaware corporation (the Parent), and all those subsidiaries of Parent that are party to the Senior Loan Agreement defined below (each individually as a Borrower, and individually and collectively, jointly and severally, as the Borrowers) and those subsidiaries of Parent that are party to any of the Guaranties defined below (each a Guarantor and together with Borrowers, the Obligors).

WITNESSETH:

WHEREAS, the Senior Lender Group and Borrowers have executed and delivered that certain Loan and Security Agreement, dated as June 12, 2002 (as amended, restated, modified, renewed or extended from time to time, the Senior Loan Agreement), pursuant to which (a) the Senior Lender Group has agreed to make loans and other extensions of credit to Borrowers, and (b) Borrowers have granted to Senior Agent, for the benefit of the Senior Lender Group, a security interest in and to that portion of the Collateral (as herein defined) owned by Borrowers in order to secure Borrowers obligations arising in connection with the Senior Loan Agreement and the other Senior Loan Documents (as herein defined);

WHEREAS, certain of Borrowers Affiliates (each a Guarantor) have executed and delivered to Senior Agent those certain Guaranties, dated as of June 12, 2002, in favor of Senior Agent, for the benefit of the Senior Lender Group (each a Senior Guaranty), with respect to the obligations of Borrowers owing to the Senior Lender Group under the Senior Loan Agreement and the other Senior Loan Documents;

WHEREAS, pursuant to certain security and pledge documents executed and delivered in connection with the Senior Loan Agreement and the Senior Guaranties, Guarantors

have granted to Senior Agent, for the benefit of the Senior Lender Group, security interests in and to substantially all of their assets in order to secure their respective obligations under the Senior Guaranties, and the other Senior Loan Documents;

WHEREAS, pursuant to the terms and conditions of that certain Non-Recourse Receivables Purchase Agreement, dated as of September 27, 2000, between Parent and Silicon Valley Bank (as amended from time to time, the SVB Receivables Purchase Agreement), Parent sold certain Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment and obtained certain other extensions of credit from Silicon Valley Bank;

WHEREAS, pursuant to the terms and conditions of that certain Accounts Purchase and Security Agreement, dated as of March 15, 2000, between Parent and Wells Fargo HSBC Trade Bank, N.A., and that certain Payment Purchase Agreement between Peregrine Extricity Inc. and HSBC Trade Bank, N.A. (as each may be amended from tune to time, collectively, the Wells Receivables Purchase Agreements), Parent sold certain Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment to Wells Fargo HSBC Trade Bank, N.A., and granted Wells Fargo HSBC Trade Bank, N.A. a security interest in certain collateral to secure their respective obligations under the Wells Receivables Purchase Agreements;

WHEREAS, pursuant to the terms and conditions of that certain Purchase Agreement, dated as of June 27, 1997, between Parent and Fleet Business Credit, LLC, as successor in interest thereunder to Sanwa Business Credit Corporation, and that certain Purchase Agreement dated December 28, 2001, between Parent and Fleet Business Credit, LLC, (as each may be amended from time to time, the Fleet Receivables Purchase Agreements and together with the Wells Receivables Purchase Agreements and the SVB Receivables Purchase Agreement, the Receivables Purchase Agreements), Parent sold certain Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment, obtained certain other extensions of credit from Fleet Business Credit LLC, and granted Fleet Business Credit LLC a security interest in certain collateral to secure Parents obligations under the Fleet Receivables Purchase Agreements;

WHEREAS, Parent is in default of its obligations under the Receivables Purchase Agreements;

WHEREAS, pursuant to that certain Forbearance Agreement dated as of August     , 2002 (the Forbearance Agreement and together with the Receivables Purchase Agreements, the Junior Guaranties defined below and all other documents and agreements to be delivered to Junior Creditors or Junior Agent thereunder or in connection therewith, the Junior Credit Documents), Junior Creditors have appointed Junior Agent as their agent and have agreed, among other things, to forbear from collection of certain amounts owing under the Receivables Purchase Agreements, and Parent and Obligors have agreed, among other things, to grant to Junior Agent, for the benefit of the Junior Creditors, in addition to any security interest that may be provided for in the Receivables Purchase Agreements, a security interest in the Collateral to secure Parents obligations under the Receivables Purchase Agreements and the

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obligations of the Obligors under the Forbearance Agreement and the other Junior Credit Documents;

WHEREAS, certain Obligors other than Parent have executed and delivered to, or will substantially contemporaneously herewith execute and deliver to, Junior Agent those certain Guaranties, dated as of August    , 2002, in favor of Junior Creditors (the Junior Guaranties), with respect to the obligations of Parent owing to Junior Creditors under the Receivables Purchase Agreements and the Forbearance Agreement;

WHEREAS, pursuant to certain security and pledge documents executed and delivered in connection with the Junior Credit Documents, Obligors have granted to Junior Agent a security interest in and to substantially all of their assets in order to secure their obligations under the Junior Guaranties and the other Junior Credit Documents; and

WHEREAS, the parties hereto desire to execute and deliver this Agreement (a) to establish the relative priorities of their respective security interests in and liens on the Collateral, and (b) to provide for the orderly sharing among them, in accordance with such priorities, of the proceeds of such Collateral upon any foreclosure or other realization thereon, collection thereof, or other disposition thereof.

NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows:

1.                                    Definitions.

(a) As used in this Agreement, (i) the terms defined in the preamble and recitals shall have the meanings assigned thereto, (ii) initially capitalized terms that are used herein without being defined herein shall have the meanings assigned thereto in the Senior Loan Agreement, and (iii) the following terms shall have the following meanings:

Accounts means all of a Persons now owned or hereafter acquired right, title, and interest with respect to accounts (as that term is defined in the Code), and any and all supporting obligations in respect thereof.

Agreement shall have the meaning set forth in the preamble to this Agreement.

Bankruptcy Code means United States Bankruptcy Code, as in effect from time to time.

Borrower and Borrowers shall have the meaning set forth in the preamble to this Agreement.

Chattel Paper shall have the meaning set forth in the Code.

Code means the New York Uniform Commercial Code, as in effect from time to time.

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Collateral means all assets and all other property of Obligors of any kind or nature, whether real or personal, tangible or intangible, now existing or hereafter created or acquired, wherever located, and any proceeds thereof, at any time subject to (a) a Lien in favor of Senior Agent, for the benefit of the Senior Lender Group, under the Senior Loan Documents to secure the Senior Loan Obligations, or (b) a Lien in favor of Junior Agent, for the benefit of Junior Creditors, or in favor of any Junior Creditor under the Junior Credit Documents, to secure the Junior Obligations (for the avoidance of doubt, not including any Lien in favor of Fleets European affiliate in respect of any accounts or other rights to payment of any Obligor or any subsidiary of any Obligor purchased by Fleets European affiliate and not including any Lien securing any obligations owed by any Obligor in respect of the accounts or other rights to payment of such Obligor to EMC Corporation or PeopleSoft, Inc. purchased by Fleet to the extent such Lien was granted pursuant to the contract to which such account or right to payment relates), including the Junior Creditor First Priority Collateral.

Controlled Collateral shall have the meaning set forth in Section 2(e).

DIP Financing shall have the meaning set forth in Section 6(e).

IBM/SOW Accounts means all Accounts and the proceeds thereof resulting from transactions between Borrower and International Business Machines Corporation pursuant to that certain contract entitled SOW #4901S9001 and dated as of March 29, 2001.

Insolvency Proceeding means (a) any case, action, or proceeding before any court or other governmental authority having jurisdiction over the applicable Person or its assets relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up, or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case whether undertaken under Federal (including the Bankruptcy Code), State, or local law.

Junior Agent shall have the meaning set forth in the preamble to this Agreement.

Junior Credit Documents means the Receivables Purchase Agreements, the Forbearance Agreement, the Junior Guaranties and any other agreements, instruments, and certificates executed and delivered in connection therewith.

Junior Creditor and Junior Creditors shall have the respective meanings set forth in the preamble to this Agreement.

Junior Creditor New Event of Default means a New Event of Default as defined in the Forbearance Agreement in effect as of the date hereof.

Junior Creditor First Priority Collateral means (a) Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment purchased prior to

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June 1, 2002, by Silicon Valley Bank pursuant to the terms of the SVB Account Receivables Purchase Agreement and listed on Schedule A attached hereto and incorporated herein by this reference, and any and all identifiable proceeds thereof, (b) Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment purchased prior to June 1, 2002, by Wells Fargo HSBC Trade Bank, N.A. pursuant to the terms of the Wells Receivables Purchase Agreements and listed on Schedule B attached hereto and incorporated herein by this reference, and any and all identifiable proceeds thereof, (c) Accounts, Payment Intangibles, Chattel Paper, Promissory Notes, and other rights to payment purchased prior to June 1, 2002, by Fleet Business Credit LLC pursuant to the terms of the Fleet Receivables Purchase Agreements and listed on Schedule C attached hereto and incorporated herein by this reference, and any and all identifiable proceeds thereof, and (d) any collateral subject to the grant of any lien or security interest set forth in the Receivables Purchase Agreements to the extent that such collateral secures a Purchasers right to receive the payments assigned to such Junior Creditor as set forth on Schedule A, B or C hereto, as applicable, or to enforce its rights and remedies with respect thereto and all identifiable proceeds thereof, excluding however, from all of the above categories, Ongoing Maintenance Accounts and all IBM/SOW Accounts (other than the IBM/SOW Account owing from IBM with respect to the Florida Power and Light receivable arising on or about April 9, 2002 in an amount of approximately $725,000) to the extent that such IBM/SOW Accounts secure payments received from and after August 1, 2002, in an aggregate amount in excess of $2,374,857.87. The inclusion of any rights to payment or other property on more than one of Schedules A, B or C shall not be construed in any way to mean that such property is not Junior Creditor First Priority Collateral, instead, Junior Creditors intend to resolve, among themselves, any such overlapping claims by them to the same property.

Junior Creditor Group shall have the meaning set forth in the preamble to this Agreement.

Junior Creditor Liens means the Liens in and to the Collateral granted pursuant to the Junior Credit Documents to secure the Junior Obligations.

Junior Guaranties shall have the meaning set forth in the recitals to this Agreement.

Junior Obligations means all of the obligations, liabilities, and indebtedness of Borrowers under or in connection with the Junior Credit Documents, irrespective of whether on account of principal, premium, interest, fees, costs, or expenses and including without limitation, premiums, interest, fees, costs, or expenses which would accrue and become due but for the commencement of an Insolvency Proceeding, whether or not such premiums, interest, fees, costs, or expenses are allowed or are allowable in whole or in part in any such Insolvency Proceeding. For the avoidance of doubt, Junior Obligations shall not include any obligations, liabilities or indebtedness of any Obligor as an account debtor or obligor under any accounts or rights to payment purchased by Fleet from EMC Corporation or PeopleSoft, Inc., nor any obligations, liabilities, or indebtedness of any Obligor to Fleets European affiliate.

Lien means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the

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common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale, or trust receipt.

Ongoing Maintenance Accounts means Accounts of any Obligor for annual maintenance or other services other than (a) such Accounts that were included as part of bundled payments that relate not only to annual maintenance or other services but also to license fees, where a Junior Creditor purchased such bundled payment, and (b) such Accounts for annual maintenance or other services as are capable of being specifically calculated from the terms of the contracts (as amended through the date hereof) or initial invoices relating to such Accounts where it is clear from the subject transaction documents that a Junior Creditor, in addition to the purchase of Accounts, if any, arising from license fees owing to an Obligor as reflected in such contract (as amended through the date hereof) or initial invoice, purchased such Account relating to annual maintenance or other services by giving value to any such Obligor in an amount consistent with other purchases of Accounts by Junior Creditors. Without limiting the generality of the foregoing, Ongoing Maintenance Accounts shall include indeterminate future Accounts for annual maintenance or other services with respect to which value was not advanced by a Junior Creditor, and shall not include Accounts for annual maintenance or other services where it is clear from the transaction documents that a Junior Creditor purchased such Accounts by giving value to any such Obligor in an amount consistent with other purchases of Accounts by Junior Creditors.

Parent shall have the meaning set forth in the preamble to this Agreement.

Payment Intangible shall have the meaning set forth in the Code.

Promissory Note shall have the meaning set forth in the Code.

Qualified Offer shall have the meaning set forth in the Forbearance Agreement as in effect on the date hereof.

Receivables Purchase Agreements shall have the meaning set forth in the recitals to this Agreement.

Senior Agent shall have the meaning set forth in the preamble to this Agreement.

Senior Guaranties shall have the meaning set forth in the recitals to this Agreement.

Senior Lender First Priority Collateral means all of the Collateral, other than the Junior Creditor First Priority Collateral.

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Senior Lender and Senior Lenders shall have the respective meanings set forth in the preamble to this Agreement.

Senior Liens means the Liens in and to the Collateral granted pursuant to the Senior Loan Documents to secure the Senior Loan Obligations.

Senior Loan Agreement shall have the meaning set forth in the recitals of this Agreement.