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Sample Business Contracts

1991 Nonqualified Stock Option Plan - Peregrine Systems Inc.

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                               PEREGRINE SYSTEMS, INC.

                         1991 NONQUALIFIED STOCK OPTION PLAN

                                    APRIL 1, 1991


<PAGE>

                               PEREGRINE SYSTEMS, INC.

                                       CONTENTS
         Heading                                                           Page
         -------                                                           ----

1.  PURPOSE                                                                   1

2.  DEFINITIONS                                                               1

3.  ADMINISTRATION                                                            2

4.  ELIGIBILITY                                                               3

5.  NUMBER OF SHARES                                                          4

6.  OPTION PRICE                                                              4

7.  TERM OF PLAN.                                                             4

8.  EXERCISE OF OPTIONS                                                       4

9.  AUTHORIZATION TO ISSUE OPTIONS AND SHAREHOLDER
    APPROVAL                                                                  6

10. STOCK OPTION AGREEMENT                                                    7

11. STOCK BUY-SELL AGREEMENT                                                  7

12. AMENDMENT OR TERMINATION OF THE PLAN                                      7

13. OPTIONS NOT TRANSFERABLE                                                  7

14. RESTRICTIONS ON ISSUANCE OF SHARES                                        8

15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION                                8

16. REPRESENTATIONS AND WARRANTIES                                            8

17. NO ENLARGEMENT OF EMPLOYEE RIGHTS                                         8

18. PRIVILEGES OF STOCK OWNERSHIP                                             9

19. LEGENDS ON OPTIONS AND STOCK CERTIFICATES                                 9

20. AVAILABILITY OF PLAN                                                      9

21. APPLICABLE LAW                                                           10

<PAGE>

                               PEREGRINE SYSTEMS, INC.

                         1991 NONQUALIFIED STOCK OPTION PLAN

    1.        PURPOSE.  The purpose of this Peregrine Systems, Inc. 1991
Nonqualified Stock option Plan (the "Plan") is to permit Peregrine Systems,
Inc., a California corporation (the "Company"), and its Parent Corporation or
Subsidiary Corporation(s), if any, to retain the best available persons for
positions of substantial responsibility and to provide additional incentives for
the accomplishment of key company objectives.  The Plan is intended to
accomplish this purpose by allowing the Company to grant options to purchase
shares of the Company's common stock.  It is intended that all options granted
under this Plan are nonqualified options and shall not qualify as incentive
stock options ("Incentive Stock options") within the meaning of Section 422A(b)
of the Internal Revenue Code of 1986, as amended.

    2.        DEFINITIONS.

              (a)  "Board" shall mean the Board of Directors of the Company.

              (b)  "Committee" shall mean the Stock Option Plan Committee,
which is appointed by the Board.

              (c)  "Company" shall mean Peregrine Systems, Inc., a California
corporation.

              (d)  "Code" shall mean the Internal Revenue Code of 1986, as
amended.

              (e)  "Option" shall mean a right to purchase stock, granted
pursuant to the Plan.

              (f) "Optionee" shall mean an employee of or consultant to the
Company, or of any Subsidiary of the company, to whom an Option is granted under
the Plan.

              (g)  "Option Price" shall mean the purchase price for Stock under
an Option, as determined in Section 6, below.

              (h)  "Plan" shall mean this Peregrine Systems, Inc, 1991
Nonqualified Stock Option Plan.

              (i)  "Stock" shall mean the common stock of the Company.


                                         -2-

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              (j)  "Subsidiary" shall corporation of the company, as defined in
Sections 425(f) and 425(g) of the Code.

    3.        ADMINISTRATION.

              (a)  The Plan shall be administered by the Board or by the
committee as appointed by the Board (For purpose of this Plan document, the term
"Board" shall mean the Committee to the extent that the Board's powers have been
delegated to the Committee.)

              (b)  The Board shall have sole authorize in its absolute 
discretion to (i) determine which employees of or consultants to Company 
shall receive Options; (ii) subject to the express provisions of this Plan, 
to determine the time when Options shall be granted, the terms and conditions 
of Options other than those terms and conditions fixed under this Plan, and 
the number of shares which may be issued upon exercise of the options.  The 
Board shall adopt by resolution such rules and regulations as may be required 
to carry out the purposes of the Plan and shall have authority to do 
everything necessary or appropriate to administer the Plan.  All decisions, 
determinations, and interpretations of the Board shall be final and binding 
on all Optionees. Administration of the Plan with respect to members of the 
Committee shall not be delegated, but shall at all times remain vested in the 
Board.  The Board may from time to time remove members from, or add members 
to, the Committee, and vacancies on the Committee shall be filled by the 
Board.  Furthermore, the Board at any time by resolution may abolish the 
Committee and revest in the Board the administration of the Plan.

              (c)  With respect to Options granted to a key employee or
consultant who is also a member of the Board, the Board shall take on by a vote
sufficient without counting the vote of such of the Board, although such member
of the Board may be counted in determining the presence of a quorum at a meeting
of the Board which authorizes the granting of Options to such member of the
Board.

              (d)  The Committee, if appointed pursuant to this Section 4,
shall report to the Board the name of employees or consultants granted Options,
the number of shares covered by each Option a the terms and conditions of each
such Option.

    4.        ELIGIBILITY.

              (a)  Options under this Plan may be granted to employees of or
consultants to the Company.  The determination as to whether an employee or
consultant is eligible to receive Options hereunder shall be made by the Board
in its sole discretion (except that grants of options to any member of the Board
shall be made by a majority vote of disinterested directors), and the decision
of the Board shall be binding and final.  For purposes of the Plan, the term
"consultant" shall mean any person, including an advisor, who is engaged by the
Company or any parent or subsidiary of the Company to render services and is
compensated for such services, and any member of the Company's Board of
Directors.


                                         -3-

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    5.        NUMBER OF SHARES.  The maximum aggregate number of shares which
may be optioned and sold under this Plan is Five Hundred Thousand (500,000)
shares of authorized but unissued Stock of the Company, In the event that
Options granted under this Plan shall terminate or expire without being
exercised, in whole or in part, the shares subject to such unexercised Options
shall again become available for the granting of Options under this Plan.

    6.        OPTION PRICE.  The Board shall in its sole discretion determine
the Option Price for shares of Stock to be issued under this Plan.  The fair
market value of shares of Stock for all purposes of this Plan shall be
determined by the Board in tits sole discretion, exercised in good faith.

    7.        TERM OF PLAN.  The Plan shall be effective as of April 1, 1991,
and shall continue in effect until April 1, 1991 2001 unless terminated earlier,
No Option may be granted hereunder after April 1, 2001.

    8.        EXERCISE OF OPTIONS.  Subject to the limitations set forth herein
and/or any applicable Stock Option Agreement entered into hereunder, options
granted under this Plan shall be exercisable in accordance with the following
rules:

              (a)  GENERAL.  Subject to the other provisions of this Section 8,
options shall vest and become exercisable at such times and in such installments
as the Board shall provide in an individual stock option agreement to be entered
by the Company and each Optionee, Notwithstanding the foregoing, the Board may
in its own discretion, accelerate the time at which an Option or installment
thereof may be exercised.  For purposes of this Plan, any vested installment of
an option granted hereunder shall be referred to as an "Accrued Installment."

              (b)  TERMINATION OF OPTIONS.  All installments of an Option shall
expire and terminate on such date as the Board shall determine, but in no event
later than ten (10) years from the date such Option was granted ("Option
Termination Date"), Unless provided otherwise in this Section 8 or in the


                                         -4-

<PAGE>

Stock Option Agreement pursuant to which an option is granted, an Option may be
exercised when Accrued Installments accrue as provided in such Stock Option
Agreement and at any time thereafter until, and including, the day before the
Option Termination Date,

              (c)  SALE OR REORGANIZATION.

                   (i)   Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company goes out of existence or becomes a
subsidiary of another corporation, or upon a sale of substantially all the
property or more than eighty percent (80%) of the then outstanding stock of the
Company (other than a reorganization, merger, consolidation, sale or similar
transaction effected solely for the purpose of reincorporating the Company in
another jurisdiction), an Option shall become immediately vested and exercisable
with respect to the full number of shares subject to that Option during the
period commencing as of me date an agreement providing for such transaction is
executed and ending as of the earlier of:

                        (A) The applicable expiration date for such Option as
provided for in the Stock Option Agreement; or

                        (B) The date on which the disposition of assets or
stock contemplated by any such agreement is consummated.

                   (ii)  Upon the consummation of any transaction specified in
Section 8(c)(i) above, this Plan and any unexercised Options issued hereunder
(or any unexercised portion thereof) shall terminate and cease to be effective,
unless provision is made in connection with such transaction for assumption of
such Options previously granted or the substitution for such Options of new
options covering the securities of a successor corporation or an affiliate
thereof, with appropriate adjustments as to the number and kind of securities
and prices.

              (d)  TERMINATION OF EMPLOYMENT OR CONSULTANCY OTHER THAN OR
DISABILITY.  In the event that the employment or consultancy of an Optionee
Company is terminated for any reason other than death or permanent and total
disability, Indents under the Option which have not accrued as of the
termination date shall expire and become unexercisable as of the termination
date.  All Accrued Installments as of the termination date shall remain
exercisable for a period not to exceed thirty (30) days following the
termination date; PROVIDED, HOWEVER, that the Board of Directors may in its
discretion extend the period of exercisability of the Option beyond a
termination of such Optionee's employment or consultancy until a date not later
than the Option Termination Date.

              (e)  DEATH OR DISABILITY OF OPTIONEE WHILE EMPLOYED.  In the
event that the employment of an Optionee with the Company is terminated by
reason of death or permanent and


                                         -5-

<PAGE>

total disability, any unexercised Accrued Installments of Options granted
hereunder to such Optionee shall expire and become unexerciseable as of the
earlier of

                   (i)   The applicable Options Termination Date; or

                   (ii)  The first anniversary of termination of employment or
consultancy of such Optionee by reason of his death or permanent and total
disability.  Any such Accrued Installments of a deceased Optionee may be
exercised prior to their expiration only by the person or persons to whom the
Optionee's Option rights pass by will or by laws of descent and distribution.
Any installments under such a deceased or disabled Optionee's Option that have
not accrued as of the date of his termination of employment or consultancy due
to death or permanent and total disability shall expire and become
unexerciseable as of said termination date. For purpose of this Plan, the term
"permanent and total disability" shall be defined under Internal Revenue Code
Section 105(d)(4).

              (f)  EXERCISE OF OPTIONS.  An Option may be exercised in
accordance with this Section 8 as to all or any portion of the shares covered by
an Accrued Installment of the option from time to time during the applicable
option period, except that an Option shall not be exercisable with respect to
fractions of a share.

              (g)  PAYMENT.  The entire Option Price shall be paid in cash at
the time the Option is exercised; provided, however, that an Optionee may elect
to pay for all or some of his option shares with shares of Stock of the Company
previously acquired and owned at the time of exercise by the Optionee, subject
to all restrictions and limitations of applicable law An Optionee's right to use
Company shares to exercise an option is expressly conditioned upon his making
representations and warranties satisfactory to the Company regarding his title
to the shares used to exercise such Option.  The equivalent dollar value of the
shares used to effect the purchase shall be the fair market value of the shares
as determined by the Board.  As a condition to the exercise of an option, the
Board may in its sole discretion, require the Optionee to pay, in addition to
the purchase price of the shares covered by the option, an amount equal to any
federal, state and local taxes that may be required to be withheld in connection
with the exercise of such Option.

    9.        AUTHORIZATION TO ISSUE OPTIONS AND SHAREHOLDER APPROVAL.  Options
granted under the Plan shall be conditioned upon the Company satisfying
requirements imposed by any regulatory authority.  The grant of Options under
the Plan


                                         -6-

<PAGE>

also is conditioned on approval of the Plan by the stockholders of the Company
as required by applicable law and/or the Company's Articles of Incorporation or
Bylaws, and no Option shall be granted hereunder unless and until the Plan has
been so approved.

    10.       STOCK OPTION AGREEMENT.  The terms and conditions of Options
granted under the Plan shall be evidenced by a Stock Option Agreement executed
by the Company and the person to whom the Option is granted.  Each Stock Option
Agreement shall incorporate this Plan by reference and shall include such
provisions as are determined to be necessary or appropriate by the Board.

    11.       STOCK BUY-SELL AGREEMENT.  As a condition to the granting of any
Option hereunder and the subsequent exercise of any such option, the Board may
require the Optionee to enter into a stock restriction agreement with the
Company for the purpose of limiting the sale or other transfer of ownership of
Stock acquired by the Optionee.

    12.       AMENDMENT OR TERMINATION OF THE PLAN.

              (a)  The Board may amend, suspend and/or terminate the Plan at
any time; provided, however, that except as provided in Section 16 below, the
Board shall not amend the Plan in the following respects without shareholder
approval:

                   (i)   To increase the maximum number of shares subject to
the Plan;

                   (ii)  To change the designation or class of persons eligible
to receive options under the Plan;

                   (iii) To extend the term of the Plan or the maximum option
exercise period; or

                   (iv)  To decrease the minimum price at which shares may be
optioned under the Plan,

              (b)       No amendment, suspension or termination of the Plan
shall adversely affect options granted on or prior to the date hereof, as
evidenced by the execution of a stock option agreement by both the Company and
the Optionee without the consent of such Optionee.

    13.       OPTIONS NOT TRANSFERABLE.  Options granted under this Plan may
not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, either voluntarily or involuntarily by
operation of law, other than by will or the laws of descent or distribution, and


                                         -7-

<PAGE>

may be exercised during the lifetime of an Optionee only by such Optionee.

    14.       RESTRICTIONS ON ISSUANCE OF SHARES.  The Company, during the term
of this Plan, will use its best efforts to seek to obtain from the appropriate
regulatory agencies any requisite authorization in order to issue and sell such
number of shares of its Stock as shall be sufficient to satisfy the requirements
of the Plan, The inability of the Company to obtain from any such regulatory
agency having jurisdiction thereof the authorization deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any shares of its
stock hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of such stock as to which such requisite authorization
shall not have been obtained.

    15.       (a)  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If the
outstanding shares of Stock of the Company are increased, decreased, changed
into or exchanged for a different number of kind of shares of the Company
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or any other increase or decrease in such
shares effected without receipt of consideration by the Company, upon proper
authorization of the Board an appropriate and proportionate adjustment shall be
made in the number or kind of shares, and the per-share option price thereof,
which may be issued in the aggregate and to individual Optionees under this Plan
upon exercise of Options granted under the Plan; provided, however, that no such
adjustment need be made if, upon the advice of counsel, the Board determines
that such adjustments may result in the receipt of federally taxable income to
holders of Options granted hereunder or the holders of Stock or other classes of
the Company's securities.

              (b) Merger Sale of Assets, or Stock Transfer.   In the event of
(i) a merger or consolidation of the Company with or into another corporation
resulting in the outstanding voting securities of the Company immediately prior
thereto representing (either by remaining or by being converted into voting
securities of the surviving entity) less than fifty percent,(50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
(ii) the sale of all or substantially all of the assets of the Company; or (iii)
the sale or other transfer by John Moores and any stockholder affiliated (within
the meaning of the Securities Act) with Mr. Moores, in a single transaction or a
series of related transactions, of shares of Common Stock constituting more than
fifty percent (50%) of the then outstanding Common Stock of the Company to any
person or entity not affiliated with Mr. Moores or the Company, the Optionee
shall fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable.  Notwithstanding the provisions of clause (iii) above, any such
sale or other transfer by Mr. Moores or any stockholder affiliated with Mr.
Moores of shares of Common Stock through a registered public offering of
securities under the Securities Act, or in compliance with the requirements of
paragraphs (c), (d), (e), and (f) of Rule 144 under the Securities Act, shall
not cause the Option to become fully vested and exercisable. If an Option
becomes fully vested and exercisable in the event of a merger or consolidation,
or  sale of assets, or sale or transfer of Common Stock by Mr. Moores as
provided above, the Administrator shall notify the Optionee in writing or
electronically that the Option shall be fully vested and exercisable.

    16.       REPRESENTATIONS AND WARRANTIES.  As a condition to the granting
and the exercise of any portion of an option, the Company may require the person
receiving or exercising such Option to make any representation and/or warranty
to the Company as may, in the judgment of counsel to the company, be required
under any applicable law or regulation, including but not limited to a
representation and warranty that the Option and/or shares are being acquired
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required under the Securities Act of 1933 or any other applicable law,
regulation, or rule of any governmental agency,

    17.       NO ENLARGEMENT OF EMPLOYEE OR CONSULTANT RIGHTS.  This Plan is
purely voluntary on the part of the Company and while the Company hopes to
continue the Plan indefinitely the continuance


                                         -8-

<PAGE>

of the Plan shall not be deemed to constitute a contract between the Company and
any employee or consultant, or to be consideration for or a condition of
employment or consultancy of any employee.  Nothing contained in the Plan shall
be deemed to give any employee or consultant right to be retained in the employ
of the Company or to interfere with the right of the Company to discharge or
retire any employee or consultant thereof at any time.  No employee or
consultant shall have any right to or interest in options authorized hereunder
prior to the grant of such an Option to such employee or consultant and upon
such grant he shall have only such rights and interests as are expressly
provided herein, subject, however, to all applicable provisions of the Company's
Articles of Incorporation and Bylaws, as the same may be amended from time to
time.

    18.       PRIVILEGES STOCK OWNERSHIP.  No person entitled to exercise any
Option granted under the Plan shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of Stock issuable upon
exercise of such shares shall have been issued.  No adjustments shall be made
for dividends or other rights for which the record date is prior to the date of
issuance of such certificate, except as provided in Section 15.

    19.       LEGENDS ON OPTIONS AND STOCK CERTIFICATES Unless an appropriate
registration statement is filed pursuant to the Federal Securities Act of 1933,
as amended with respect to the shares of Stock issuable under this Plan, each
certificate representing such Stock shall be endorsed with the following legend
or its equivalent:

              Neither the Option pursuant to which the shares represented by
              this certificate are issued nor said shares have been registered
              under the Federal Securities Act of 1933, as amended ("Act"),
              Transfer or sale of such securities or any interest therein is
              unlawful except after registration, or pursuant to an exemption
              from the registration requirements, as provided in the Act and
              the regulations thereunder and except as otherwise provided in
              Peregrine system, Inc.'s Nonqualified Stock option Plan.

In addition to the foregoing legend, each Stock option Agreement and each
certificate representing shares of Stock acquired upon exercise of an Option
shall be endorsed with all legends, if any, required by applicable state
securities laws to be placed on the Stock Option Agreement and/or the
certificate.

    20.       AVAILABILITY OF PLAN.  A copy of this Plan shall be delivered to
the secretary of the Company and shall be


                                         -9-

<PAGE>

shown by the Secretary to any eligible person making reasonable inquiry
concerning the Plan.

    21.       APPLICABLE LAW.  This Plan shall be governed by and construed in
accordance with the internal substantive laws of the State of California,
without reference to conflicts of law principles.

              IN WITNESS WHEREOF, pursuant to the due authorization and
adoption of this Plan by the Board on March 19, 1991, the Company has caused
this Plan to be duly executed by its duly authorized officers, effective as of
the date of such Board adoption.

                                       PEREGRINE SYSTEMS, INC.



                                       By: /s/ James W. Butler
                                           James W. Butler,
                                           President



                                       By: /s/ Deborah S. Mings
                                           Deborah S. Mings,
                                           Secretary


                                         -10-

<PAGE>

                               PEREGRINE SYSTEMS, INC.
                                STOCK OPTION AGREEMENT
                         1991 NONQUALIFIED STOCK OPTION PLAN

<PAGE>


                               PEREGRINE SYSTEMS, INC.
                                STOCK OPTION AGREEMENT


              This AGREEMENT is made effective as of the _________ day of
______, 19____ ("Option Grant Date"), by and between PEREGRINE SYSTEMS, INC., a
California corporation, ("Company) and ("Optionee").

                                       RECITALS

         WHEREAS, the Board of Directors of the Company has established the
Peregrine Systems, Inc. 1991 Nonqualified Stock option Plan ("Plan") effective
as of April 1. 1991.

         WHEREAS, pursuant to the provisions of said Plan, the Board of
Directors of the Company, by action duly taken on __________, 19______, granted
to the Optionee an option or options ("Option(s)") to purchase shares of the
common stock of the Company ("Common Stock") on the terms and conditions set
forth herein.


                                      AGREEMENT


         NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:

         1.        THE OPTION(s), The Optionee at the optionee's option and on
the terms and conditions set forth herein, may purchase all or any part of an
aggregate of __________shares of common Stock at the price per share set forth
in Section 2 below ("Option Price").

         2.        OPTION PRICE AND EXERCISE DATES.  The option(s) shall be
exercisable at the option Price as to the specified number of shares ("Optioned
Shares") on and after the "Start" dates and on or before the "Terminate" dates
set forth below:


                        Option              Exercise            Dates
Number of Shares        Price               Start               Terminate
----------------        --------            -----------         ------------



----------------        --------            -----------         ------------



----------------        --------            -----------         ------------



----------------        --------            -----------         ------------



----------------        --------            -----------         ------------

                                         -2-
<PAGE>

Optionee acknowledges that he understands he has no right whatsoever to exercise
the Option(s) granted hereunder with respect to any Optioned Shares covered by
any installment except as provided above, Optionee further understands that the
Option(s) granted hereunder shall expire and become unexerciseable as provided
in Section 3(c) below.

    3.        GOVERNING PLAN.  This Agreement hereby incorporates by reference
the Plan and all of the terms and conditions of the Plan as the same may be
amended from time to time hereafter in accordance with the terms thereof, but no
such subsequent amendment shall adversely affect the Optionee's rights under
this Agreement and the Plan except as may be required by applicable law.
Optionee expressly acknowledges and agrees that the provisions of this Agreement
are subject to the Plan; the terms of this Agreement shall in no manner limit or
modify the controlling provisions of the Plan; and in case of any conflict
between the provisions of the Plan and this Agreement, the provisions of the
Plan shall be controlling and binding upon the parties hereto.  The Optionee
also hereby expressly acknowledges, represents and agrees as follows:

              (a)  Acknowledges receipt of a copy of the Plan, a copy of which
is attached hereto and by reference incorporated herein, and represents that
Optionee is familiar with the terms and provisions of said Plan, and hereby
accepts this Agreement subject to all the terms and provisions of said Plan.

              (b)  Agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors (or the Committee, if so
authorized) upon any questions arising under the Plan.

              (c)  Acknowledges that Optionee is familiar with Section 8 of the
Plan regarding the terms and conditions of the Option(s) and represents that
Optionee understands that said Option(s) must be exercised on or before the
earliest of the following dates, whichever is applicable: (i) the "Terminate"
date noted above in Section 2; (ii) the day prior to the day the option shall
expire, as provided in Section 8(b) of the Plan; (iii) the date on which a
transaction specified under Section s(c) of the Plan is consummated; (iv) the
date which is not more than three (3) months following the Optionee's
termination of employment for any reason other than death or total and permanent
disability, as provided under Section 8(d) of the Plan; or (v) the date that is
one year following the Optionee's termination of employment by reason of his
death, or the date that is one year following his termination of employment by
reason of total and permanent disability, whichever is applicable, as provided
in Section 8(e) of the Plan.


                                         -3-

<PAGE>

              (d)  Acknowledges and understands that Optionee shall pay the
entire option Price in cash or shares of the Company's common Stock at the time
the Option(s) are exercised, as permitted by Section 8(h) of the Plan; that use
of Common Stock to pay the exercise price of an Option may have significant
adverse tax consequences for Optionee; and that Optionee should consult with a
competent tax advisor prior to utilizing Common Stock of the Company to exercise
an Option.

              (e)  Acknowledges and understands that the Option(s) granted
hereunder to optionee supersede any and all other options, or promise(s) to
grant options, that may have been previously granted or made at any prior time
to Optionee by the Company, and that any and all other option plans of the
Company, and any unexercised options existing pursuant to those plans,
terminated on the date that the Plan was adopted.

    4.        EXERCISE.

              (a)  In order to exercise an Option, the Optionee shall deliver a
written notice of exercise to the Company at its principal business office,
which notice shall specify the number of shares to be purchased and shall be
accompanied by payment in cash or check made payable to the order of the Company
in the full amount of the option Price of the shares to be purchased.

              (b)  In lieu of paying the total purchase price by cash or check,
the Optionee shall have the right to pay all or any portion of the total
purchase price with shares of Common Stock of the Company held by the Optionee.
The amount of the purchase price deemed paid in this manner shall be the fair
market value as of the date of exercise of the shares surrendered, as determined
by the Board of Directors of the company in its sole discretion, exercised in
good faith.  If the optionee elects to pay all or any portion of the total
purchase price in this manner, he shall accompany his notice of exercise with
the stock certificates he desires to surrender, duly endorsed for transfer to
the Company.

    5.        STOCK BUY-SELL AGREEMENT.  As a condition to the exercise of any
portion of an Option, the Board may require the optionee to enter into a Stock
Buy-Sell Agreement with the company in the form that is in effect at the time of
the exercise.

    6.        REPRESENTATIONS AND WARRANTIES.  Optionee represents and warrants
that Optionee is acquiring this option for his own account and not with any
distribution of this option or the shares of Common Stock which may be acquired
upon exercise


                                         -4-

<PAGE>

of the Option.  As a condition to the exercise of any portion of an Option, the
Company may require the person exercising such Option to make any representation
and/or warranty to the company as may, in the judgment of counsel to the
company, be required under any applicable law or regulation, including but not
limited to a representation and warranty that the shares are being acquired only
for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required under the Securities Act of 1933 or any other applicable law regulation
or rule of any governmental agency.

    7.        OPTIONS NOT TRANSFERABLE.  The Option(s) may be exercised during
the lifetime of the Optionee only by the Optionee, The Optionee's rights and
interests under this Agreement and in and to the Option(s) may not be sold,
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred in
any manner, either voluntarily or involuntarily by operation of law, except by
will or the laws of descent or distribution subject to the provisions of Section
8(e) of the Plan.

    8.        NO ENLARGEMENT OF EMPLOYEE RIGHTS.  Nothing in this Agreement
shall be construed to confer upon the Optionee any right to continued employment
with the Company, or to restrict in any way the right of the Company to
terminate his employment.

    9.        RELEASE.  Optionee for himself or herself and on behalf of any
present or former spouse and any other person claiming by or through any of them
hereby releases, discharges and forever acquits the Company and each of its
present or former officers, directors, shareholders, agents, accountants,
attorneys and employees from any and all demands, debts, liabilities, duties,
causes of action or any other claims of any kind or character, whether known or
unknown, suspected or unsuspected, which now exists or which may be alleged to
now exist or which has existed or may be alleged to have existed, arising out of
optionee's employment by the Company, Optionee agrees and expressly intends that
the release set forth in this Section 9 shall include a release of unknown or
unsuspected claims optionee expressly acknowledges that unknown or unsuspected
claims may exist which, if know or suspected by Optionee, might have materially
affected this Agreement between the parties.  However, as a material inducement
for the Company's promises as set forth herein, Optionee offers and intends to
release all such unknown or unsuspected claims In this regard, Optionee
acknowledges that he or she is aware of the provisions of Civil Code Section
1542 and, being fully advised by counsel, knowingly waives the benefit of such
provisions.  The provisions of Civil


                                         -5-

<PAGE>

Code Section 1542 which are being waived by Optionee are 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.

         10.       WITHHOLDING OF TAXES.  Optionee authorizes the Company to
withhold, in accordance with any applicable law, from any compensation payable
to him any taxes required to be withheld by federal, state or local law as a
result of the grant of the Option(s) or the issuance of stock pursuant to the
exercise of such Option(s).

         11.       LAWS APPLICABLE TO CONSTRUCTION.  This Agreement shall be
construed and enforced in accordance with the internal substantive laws of the
State of California without reference to conflicts of law principles.

         12.       AGREEMENT BINDING ON SUCCESSORS.  The terms of this
Agreement shall be binding upon the executors, administrators, heirs,
successors, transferees and assignees of the Optionee.

         13.       COSTS OF LITIGATION.  In any action at law or in equity to
enforce any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the court in a final
judgement or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred by the successful party or
parties (including without limitation costs, expenses and fees on any appeals),
and if the successful party recovers judgement in any such action or proceeding
such costs, expenses and attorneys' fees shall be included as part of the
judgement.

         14.       NECESSARY ACTS.  The Optionee agrees to perform all acts and
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this Agreement, including but not limited to all acts and
documents related to compliance with federal and/or state securities laws.

         15.       COUNTERPARTS.  For convenience, this Agreement may be
executed in any number of identical counterparts, each of which shall be deemed
a complete original in itself and may be introduced in evidence or used for any
other purposes without the production of any other counterparts.

         16.       INVALID PROVISIONS.  In the event that any provision of this
Agreement is found to be invalid or otherwise


                                         -6-

<PAGE>

unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein
invalid or unenforceable, and all such other provisions shall be given full
force and effect to the same extent as though the invalid and unenforceable
provision was not contained herein.

         IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement effective as of the date first written above.


PEREGRINE SYSTEMS, INC.                OPTIONEE



--------------------------             ---------------------------------------
James W. Butler,                       Signature
President


                                       ---------------------------------------
                                       Printed Name


                                       ---------------------------------------
--------------------------             Street Address
Nicholas J. Brox,
Secretary                              
                                       ---------------------------------------
                                       City and State


                                       ---------------------------------------
                                       Social Security Number


                                         -7-

<PAGE>

         By his or her signature below, the spouse of the Optionee, if such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of said Agreement and said Plan.



                                       ---------------------------------------
                                       Spouse's Signature



                                       ---------------------------------------
                                       Printed Name



                                       Dated:
                                             ------------------------


         By his or her signature below, the optionee represents that he or she
is not legally married as of the date of execution of this Agreement.



                                       ---------------------------------------
                                       Optionee's Signature


                                       Dated:
                                             ------------------------



                                         -8-

<PAGE>


                               PEREGRINE SYSTEMS, INC.

                          EMPLOYEE STOCK BUY-SELL AGREEMENT


<PAGE>

                          EMPLOYEE STOCK BUY-SELL AGREEMENT

         This Employee Stock Buy-Sell Agreement ("Agreement") is entered into
as of __________, 19____ by and between Peregrine Systems, Inc., a California
corporation, ("Company") and ____________________("Employee").


                                          I

                                RIGHT OF FIRST REFUSAL

         1.01      COMPANY ELECTION TO PURCHASE.  Employee (hereinafter
referred to as "Transferor") shall not sell, assign or transfer any capital
stock of the Company (the "Shares"), or any interest therein, however acquired,
to any person, firm or corporation without the written consent of the Company
unless the Transferor shall have first offered to sell such Shares as
hereinafter provided.

         1.02      OFFER BY TRANSFEROR.  Should Transferor desire to transfer
Shares, the Transferor shall give written notice to the Company of his or her
intention to transfer such Shares (hereinafter referred to as "Transferor's
Notice") and shall specify therein the name and address of the transferee, the
relationship of the transferee to the Transferor, the terms of such transfer and
the number of Shares to be transferred (hereinafter referred to as "Tendered
Shares"), The Transferor's Notice shall be accompanied by an offer to sell to
the Company all of the Tendered Shares (hereinafter referred to as the "Offer"),
and shall specify a date for the closing of the purchase by the Company which
shall not be less than forty-five (45) nor more than sixty (60) days after the
date of the giving of such Transferor's Notice and Offer, The Offer shall be
made on the same terms as to the proposed transferee; provided, however, that
the purchase price must be a bona fide purchase price determined as a result of
arms-length negotiation, and the time for payment of the purchase price shall be
as provided in Section 3.02, below.

         1.03      ACCEPTANCE OF OFFER.  Within thirty (30) days after the
receipt of the Transferor's Notice and offer, the company may, at its option,
elect to purchase all of the Tendered Shares, The Company shall exercise its
election to so purchase by giving notice thereof to the Transferor.

         1.04      FAILURE TO PURCHASE ALL TENDERED SHARES.  If the Company
does not elect to purchase all of the Tendered Shares, then none of the Tendered
Shares shall be purchased by the Company, and this Agreement shall terminate.


                                          1

<PAGE>

                                          II

                       PURCHASE UPON TERMINATION OF EMPLOYMENT

         2.01      COMPANY ELECTION TO PURCHASE.  If at any time Employee shall
cease to be employed by the Company for any reason, whether voluntarily or
involuntarily, with cause or without cause, and if at such time Employee holds
5,000 or fewer Shares, the company shall have the right to purchase all, but not
less than all, of the capital stock of the Company Employee may then own,
however such Shares were acquired, including without limitation through the
exercise of stock options, award of stock bonuses, or the purchase of capital
stock of the Company, at a purchase price determined in accordance with the
provisions of Section 2.02.

         2.02      DETERMINATION OF PURCHASE PRICE.

         (a)  The per Share purchase price of Employee's Shares shall be
determined by the Board of Directors and the price stated in the notice pursuant
to Section 2.03, unless the Employee files written notice of objection (the
"Arbitration Notice") with the Company within 10 days (i) specifying the price
which the Employee contends represents the fair value of his Shares of the
Company's Common Stock, and (ii) naming an arbitrator with experience in the
valuation of Shares of privately-held computer software companies.

         (b)  If the Employee gives the Arbitration Notice pursuant to Section
2.02(a), the Company shall within 10 days appoint a second arbitrator with
experience in the valuation of Shares of privately-held computer software
companies and the two arbitrators shall select a third arbitrator, The
arbitrators shall determine the purchase price of the Employee's Shares of the
Company's Common Stock, which shall be the fair value per Share of Employee's
Shares of the Company's Common Stock, pursuant to the rules of the American
Arbitration Association and acting by majority vote, The decision of the
arbitrators shall be final, binding and unappealable by either the Employee or
the Company and both Employee and the Company consent to entry of judgement
based on the arbitrator's decision.  The cost of arbitration shall be borne
solely by the Employee unless in the arbitrators judgement it should be borne by
the Company.

         2.03      NOTICE AND ELECTION TO PURCHASE FORMER EMPLOYEE SHARES.  No
later than forty-five (45) days after the Termination date, the Company shall
give Employee notice of the Company's election or non-election to purchase all
of Employee's Shares.  If the Company elects to purchase Employee's Shares, the
closing for the transfer shall occur at the offices of the


                                         -2-

<PAGE>

Company no later than the sixtieth (60th) day after the Termination Date.

         2.04      FAILURE TO PURCHASE ALL EMPLOYEE SHARES.  If the Company
does not elect to purchase all of Employee's Shares, then none of Employee's
Shares shall be purchased by the Company, and this Agreement shall terminate.


                                         III

                                  CLOSING PROCEDURES

         3.01      DELIVERY OF SHARES.  At the closing, as determined under
Section 1 or 2. Employee shall deliver the certificate or certificates
representing the Shares to be purchased by the Company, The Share certificate or
certificates shall be duly endorsed for transfer to the Company, Delivery of the
Shares to the Company shall constitute Employee's representation and warranty to
the Company that the Shares are delivered free and clear of all claims,
encumbrances, or other rights or interests of third parties, including without
limitation community property rights of Employee's spouse or former spouses, and
that the Company shall obtain good and marketable title to the Shares upon
delivery of the Shares to the Company.

         3.02      PAYMENT OF PURCHASE PRICE.  If the purchase is made pursuant
to Section 1 and unless the parties agree otherwise the purchase price shall be
paid over a five-year period in equal monthly installments payable on the first
day of each month beginning with the first calendar month following the closing,
In addition, interest of 10% will be paid on the unpaid balance, compounded
monthly.  If the purchase is made pursuant to Section 2, the purchase price
shall be paid in full upon delivery of the share certificates.


                                          IV

                                     TERMINATION

         4.01      TERMINATION OF ENTIRE AGREEMENT. This Agreement shall
terminate:

                   (i)   Upon the mutual agreement of all the parties; or

                   (ii)  Upon the completion of any merger, if the Company is
         not the surviving entity or if the Company is the surviving entity but
         as a result of the  merger becomes subsidiary of another company, or
         the


                                         -3-

<PAGE>

sale of substantially all of the assets or stock of the Company; or

                   (iii) If the company does not elect to purchase Employee's
         Shares in accordance with the provisions of Article I; or

                   (iv)  Upon the effectiveness of any registration statement
         covering Shares of the Company's Common Stock filed pursuant to the
         Securities Act of 1933, as amended.

         4.02      TERMINATION AS TO PARTICULAR SHARES.  Upon the closing of
any public offering of capital stock of the Company, the provisions of this
Agreement shall terminate as to any Shares of capital stock of the Company which
may be sold by Employee in any such public offering, and any person acquiring
any Shares which were subject to this Agreement through any public offering
shall acquire the Shares free and clear of any provisions or restrictions
contained in this Agreement.


                                          V

                                  GENERAL PROVISIONS

         5.01      NOTICES.  All notices, demands, requests, consents,
approvals or other communications (collectively "Notices") required or permitted
to be given hereunder or which are given with respect to this Agreement shall be
in writing and may personally served or may be deposited in the United States
mail, registered or certified, return receipt requested, postage prepaid,
addressed as follows:

                   To Company:    Peregrine Systems, Inc.
                                  1959 Palomar Oaks Way
                                  Carlsbad, CA 92009


                   To Employee:
                                  -----------------------------

                                  -----------------------------

                                  -----------------------------

or such other address as such party shall have specified most recently by
written notice.  Notice shall be deemed given on the date of service if
personally served.  Notice mailed as provided herein shall be deemed given on
the third business day following the date so mailed.

         5.02      COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an


                                         -4-

<PAGE>

original, but all of which taken together shall constitute but one and the same
instrument.

         5.03      GOVERNING LAW.  This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the laws of the
State of California.  In the event a judicial proceeding is necessary, the sole
forum for resolving disputes arising under or relating to this Agreement shall
be the Municipal and superior Courts for the County of San Diego, California,
and all related appellate courts and the parties hereby consent to the
jurisdiction of such courts, and that venue shall be in San Diego County,
California.

         5.04      ENTIRE AGREEMENT.  The terms of this Agreement are intended
by the parties as a final expression of their agreement with respect to such
terms as are included in Agreement and may not be contradicted by evidence of
any prior or contemporaneous agreement.  The parties further intend that this
Agreement constituted the complete and exclusive statement of its terms and that
no extrinsic evidence may be introduced in any judicial proceeding involving
this Agreement.

         5.05      MODIFICATION AND AMENDMENTS.  This Agreement may not be
modified, changed or supplemented, nor may any obligations hereunder be waived
or extensions of time for performance granted, except by written instrument
signed by the party to be charged or by its agent duly authorized in writing or
as otherwise expressly permitted herein.

         5.O6      WAIVERS AND EXTENSIONS. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof or of any other agreement or provision
herein contained.  No extension of time for performance of any obligations or
acts shall be deemed an extension of the time for performance of any other
obligations or acts.

         5.07      ATTORNEYS' FEES.  Subject to Section 1.02 regarding
arbitration, should any party institute any action or proceeding to enforce this
Agreement or any provision hereof, or for damages by reason of any alleged
breach of this Agreement or of any provision hereof, or for a declaration of
rights hereunder, the prevailing party in any such action or proceeding shall be
entitled to receive from the other party all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party in connection with
such action or proceeding.

         5.08      TITLES AND HEADINGS.  Titles and headings of sections of
this Agreement are for convenience of reference


                                         -5-

<PAGE>

only and shall not affect the construction of any provision of this Agreement.

         5.09      EXHIBITS. Each of the Exhibits referred to herein and
attached hereto is an integral part of this Agreement and is incorporated herein
by this reference.

         5.10      ASSIGNMENTS. This Agreement and the rights, duties, and
obligations hereunder may not be assigned or delegated by any party without the
prior written consent of the other parties.  Any assignment of rights or
delegation of duties or obligations hereunder made without the written consent
of the other parties hereto shall be void and be of no effect. Notwithstanding
the foregoing, the Company may, without obtaining the consent of the other
parties, assign this Agreement and the rights, duties, and obligations of the
Company hereunder to any person or entity controlling, under common control
with, or controlled by the Company.

         5.11      SUCCESSORS AND ASSIGNS.  This Agreement and the provisions
hereof shall be binding upon each of the parties, their successors and assigns.

         5.12      PARTIAL INVALIDITY.  If any provision of this Agreement is
found to be invalid by any court, the invalidity of such provision shall not
affect the validity of the remaining provisions hereof.

         5.13      SPOUSAL CONSENTS.  Concurrently with the execution of this
Agreement.-Employee has delivered to the company a spousal consent in the form
of Exhibit 1 attached hereto executed by Employee's spouse.

         5.14      LEGEND ON SHARE CERTIFICATES, Each Share certificate
representing Shares held by Employee shall have endorsed on its face the
following words:

         The Shares represented by this certificate are restricted by the
         provisions of an Employee Stock Buy-Sell Agreement dated as of
         _____________, 19___, a copy of which may be inspected at the
         principal office of the Company, and all of the provisions of which
         are incorporated herein.

A copy Of this Agreement shall be delivered to the Secretary, and shall be shown
by the Secretary to any person making inquiry about it


                                         -6-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year reflected below.


"COMPANY"                              "EMPLOYEE"

PEREGRINE SYSTEMS, INC.,
a California corporation               ---------------------------------------

                                       ---------------------------------------
                                       (Printed Name)

---------------------------------
James W. Butler, President



---------------------------------
Nicholas J. Brox, Secretary


                                         -7-

<PAGE>

                             SPOUSAL CONSENT TO AGREEMENT


                   I acknowledge that I have read that certain Employee Stock
Buy-Sell Agreement dated as of ______________, 19_____ ("Agreement") and that I
know its contents.  I am aware that by its provisions my spouse agrees to sell
all Shares of the company, including my community interest in them, on the
conditions specified in the Agreement.  I hereby consent to the sale, approve of
the provisions of the Agreement, and agree that I will bequeath the Shares or
any of them or any interest in them by my will to my spouse if I predecease my
spouse.  I direct that the residuary clause in my will shall not be deemed to
apply to my community interest in the Shares.

Dated:                  , 19
      ------------------    -----


                                       ---------------------------------------
                                       (Signature)


                                       ---------------------------------------
                                       (Printed Name)


                                         -8-