Settlement Agreement

ACCRUE SOFTWARE, INC.



SETTLEMENT AGREEMENT AND MUTUAL RELEASE



This Settlement Agreement and Mutual Release ("Agreement") is made by and between Accrue Software, Inc., a Delaware corporation (the "Company"), and Simon P. Roy ("Employee").



WHEREAS, Employee is employed by the Company; and





WHEREAS, the Company and Employee have mutually agreed to terminate the existing employment relationship and to release each other from any claims arising from or related to the employment relationship.





NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Employee (collectively referred to as the "Parties") hereby agree as follows:



1. RESIGNATION; CONTINUATION OF EMPLOYMENT.



(a) Employee and the Company agree to the following terms with respect to continuation of Employee's employment by the Company:



(i) that Employee shall continue to work as President and Chief Executive Officer of the Company and shall remain a Director of the Company until the earlier of the Termination D ate (as defined below) or the date he is requested to resign by the Company's Board of Directors, at which time Employee agrees to resign each such position.



(ii) that Employee shall continue to work as a full-time employee of the Compan y until the later of April 1, 1998 or such period of time thereafter as requested by the Company's Board of Directors, but not later than June 1, 1998 (the "Employment Dates"), provided, however, that the Company may terminate Employee's employment earlie r than the Employment Dates as provided in Section 2 hereof. The date on which Employee's employment relationship with the Company terminates shall be the "Termination Date";



(iii) that until the Termination Date Employee shall be entitled to receive his current base salary (less applicable withholding), plus accrual of vacation, in accordance with the Company's regular payroll practices; and



(iv) that as a condition to Employee's continued employment with the Company, Employee agrees to devote his full-time and business attention to the Company.



2. SEVERANCE PAYMENT. In consideration for the release of claims set forth below and other obligations under this Agreement, the Company agrees to pay Employee a lump sum severance payment of $112,500 (less applicable tax withholding) within thirty (30) days of the Termination Date; provided, however, in the event the Company terminates Employee's employment for Cause (as defined below) or Employee voluntarily terminates h is employment prior to the applicable Employment Date, then Employee shall be entitled only to a lump sum



severance payment of $75,000. "Cause" for purposes of this Agreement shall mean Employee's failure to devote his full-time and business attention to t he Company, Employee's breach of this Agreement, the Confidentiality Agreement, or the Company's employee policies which continues uncured for ten (10) days following notice thereof, Employee being convicted of a felony, or committing an act of dishonesty , fraud or intentional illegal conduct against the Company, Employee's misappropriation of Company property, or Employee's commencement of employment with another employer while he is an employee of the Company. As additional consideration for the release of claims set forth below and other obligations under this Agreement, the Company hereby transfer to Employee all right, title and interest in and to the notebook computer designated to Employee as of the date of this Agreement.



3. EMPLOYEE BENEFITS.



(a) Employee shall continue to receive the Company's medical insurance benefits at Company expense until the Termination Date, which date shall be the "qualifying event" date under the Consolidated Omnibus Budget Reconciliation Act of 1985 , as amended ("COBRA"). Following such date, Employee shall have the right to continue coverage under the Company's medical insurance programs as provided by COBRA. Such continued coverage shall be provided at the Company's expense until the earlier of tw elve months following the Termination Date or the date on which Employee commences full or part-time employment with a new employer which provides comparable medical insurance benefits.



(b) Except as otherwise provided above, Employee shall not be entitled to participate in any of the Company's benefit plans or programs offered to employees or officers of the Company, including, but not limited to, any accrual of vacation, after the Termination Date.



4. STOCK OPTIONS. Under the terms of t he Stock Option Agreements issued to Employee over the course of his employment with the Company, Employee was granted options to purchase 250,000 (the "September 1996 Option") and 168,847 (the "June 1997 Option") shares of the Company's Common Stock unde r the Company's 1996 Stock Plan (collectively, the "Options" or "Stock Option Agreements"). The Parties acknowledge and agree that as of December 1, 1997, the September 1996 Option had vested as to 93,750 shares, of which 67,708 shares were exercised effec t ive as of June 27, 1997, and the June 1997 Option had vested as to 21,106 shares, of which no shares were exercised. In consideration for the release of claims set forth below and other obligations under this Agreement, the Parties agree that, the Options shall continue to vest at the rate and under the terms set forth in the Stock Option Agreements until the Termination Date. The Parties further agree that on the Termination Date, the Options shall vest with respect to the number of shares under each Opti o n that would have vested on the date nine (9) months after the Termination Date if Employee's employment had continued with the Company through the date nine (9) months after the Termination Date; provided, however, in the event the Company terminates Emp l oyee's employment for Cause or Employee voluntarily terminates his employment prior to the applicable Employment Date, then the Options shall vest only with respect to the number of shares under each Option that would have vested on the date that is six ( 6) months after the Termination Date if Employee's employment had continued with the Company through the date six (6) months after the Termination Date. Employee





acknowledges and agrees that if the Options are not exercised within thirty (30) days of the Termination Date, they will terminate. Employee further acknowledges and agrees that except as set forth in this Section 4, Employee shall not be entitled to acce l eration of vesting under the Options, including acceleration of vesting upon change of control as set forth in the Stock Option Agreements. Employee further acknowledges and agrees that he shall remain bound by all other terms of the Stock Option Agreemen ts.



5. LOAN. The Company agrees that within thirty (30) days after the Termination Date, or such earlier date on which Employee notifies the Company of his desire to draw down the Loan, the Company will loan Employee an amount equal to the aggregate exercise price of the then vested and unexercised shares under the Options for the sole purpose of permitting Employee to purchase such shares (the "Loan" and "Loan Amount"), or in the event the loan is drawn down prior to thirty (30) days after the Termi n ation Date, the Loan will be based on the aggregate exercise price of the number of shares Employee would vest if Employee remains a full-time employee through June 1, 1998 (such unvested but exercised shares will remain subject to the Company's repurchas e option in accordance with the Option Agreement between Employee and the Company). The Company's obligation to make the Loan will be subject to the execution by Employee of a Loan and Security Agreement which shall provide that interest under the Loan sha l l accrue at the minimum applicable federal rate (as of the date of the Loan) per year, compounded semi-annually, and all outstanding principal and interest under the Loan shall be due and payable in full on the earlier of (i) four (4) years from the Termi n ation Date, (ii) eighteen (18) months following the Company's initial public offering of its Common Stock, or (iii) upon the sale of any shares of the Company's Common Stock held by Employee. The Loan shall be full recourse and secured by the shares of th e Company's Common Stock purchased by Employee upon exercise of the Options.



6. NO OTHER PAYMENTS DUE. The Company agrees that it will continue to pay to Employee the salary described in Section 1(a)(iii) through the Termination Date in accordance wi th the Company's normal payroll practices, and that the Company will pay to Employee on or before the Termination Date all salary and accrued vacation as may then be due to Employee. Employee will execute an acknowledgment of receipt of all such payments as received and an acknowledgment that, in light of the payment by the Company of all wages due, or to become due to Employee, California Labor Code Section 206.5 is not applicable to the Parties hereto. That section provides in pertinent part as follows:



No employer shall require the execution of any release of any claim

or right on account of wages due, or to become due, or made as an

advance on wages to be earned, unless payment of such wages has been



7. RELEASE OF CLAIMS. In consideration for the obligations of both parties set forth in this Agreement, Employee and the Company, on behalf of themselves, and their respective heirs, executors, officers, directors, employees, investors, stockholders, administrators and assigns, hereby fully and forever release each other and their respective heirs, executors, officers, directors, employees, investors, stockholders, administrators and assigns, of and from any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known





or unknown, suspected or unsuspected, that any of them may possess arising from any omissions, acts or facts that have occurred up until and including the date of this Agreement including, without limitation:



(a) any and all claims relating to or arising from Employee's employment relationship with the Company and the termination of that relationship;



(b) any and all claims relating to, or arising from, Employee's right to purchase, or actual purchase of shares of stock of the Company;



(c) any and all claims for wrongful discharge of employment; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; negli gent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; negligence; and defamation;



(d) any and all claims for vio lation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, and t he California Fair Employment and Housing Act;



(e) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and



(f) any and all claims for attorneys' fees and costs.



The Company and Employee agree that the release set forth in this Section 7 shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred or specified under this Agreement.



8. CIVIL CODE SECTION 1542. The Parties represent that they are not aware of any claim by either of them other than the claims that are released by this Agreement. Employee and the Company acknowledge that they have been advise d by legal counsel and are familiar with the provisions of California Civil Code Section 1542, which provides as follows:



A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT

KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE

RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS

SETTLEMENT WITH THE DEBTOR.



Employee and the Company, being aware of said Code section, agree to expressly waive any rights they may have thereunder, as well as under any other statute or common law principles of similar effect.



9. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION. Employee understands and agrees that his obligations to the Company under his existing Proprietary





Information and Inventions Assignment and Confidentiality Agreement between Employee and the Company (the "Confidentiality Agreement"), a copy of which is attached hereto as Exhibit A, shall continue through the Termination Date and shall survive termination of his r elationship with the Company under this Agreement and that Employee shall continue to maintain the confidentiality of all confidential and proprietary information of the Company as provided by the Confidentiality Agreement. Employee agrees that at all tim e s hereafter, he shall not intentionally ...