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                                                                    EXHIBIT 10.1


                             PEREGRINE SYSTEMS, INC.

                             1994 STOCK OPTION PLAN

                       (AS AMENDED THROUGH APRIL 17, 2001
           AND APPLICABLE TO OPTIONS GRANTED ON OR AFTER SUCH DATE)(1)


         1.  PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.

         2.  DEFINITIONS. As used herein, the following definitions shall apply:

             (a)  "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

             (b)  "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

             (c)  "BOARD" means the Board of Directors of the Company.

             (d)  "CHANGE OF CONTROL" means the occurrence of any of the
following events:

                  (i)    Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or

                  (ii)   The consummation of the sale or disposition by the
Company of all or substantially all the Company's assets; or


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(1) Options granted prior to April 17, 2001 shall be governed by the terms of
the Plan in effect prior to such date.


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                  (iii)  The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining out-standing or by
being converted into voting securities of the surviving entity or its parent) at
least fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation; or

                  (iv)   A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the April 17, 2001 or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of those directors whose election or nomination was not in
connection with any transaction described in subsections (i), (ii), or (iii)
above, or in connection with an actual or threatened proxy contest relating to
the election of directors to the Company.

             (e)  "CODE" means the Internal Revenue Code of 1986, as amended.

             (f)  "COMMITTEE" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.

             (g)  "COMMON STOCK" means the Common Stock of the Company.

             (h)  "COMPANY" means Peregrine Systems, Inc., a Delaware
corporation.

             (i)  "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services.

             (j)  "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that
the employment or consulting relationship or directorship is not interrupted or
terminated by the Employee, Consultant or Director or the Company, or any Parent
or Subsidiary. Continuous Status as an Employee, Director, or Consultant shall
not be considered interrupted in the case of: (i) any leave of absence approved
by the Company, including sick leave, military leave, or any other personal
leave; provided, however, that for purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract (including certain Company policies) or
statute; provided, further, that on the ninety-first (91st) day of any such
leave (where reemployment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock
Option; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.

             (k)  "DIRECTOR" shall mean a member of the Board.


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             (l)  "DISABILITY" means total and permanent disability as defined
in Section 22(e)(3) of the Code.

             (m)  "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

             (n)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

             (o)  "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:

                  (i)    If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System or the Nasdaq SmallCap Market of the Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported, as quoted on such exchange or system for the
last market trading day prior to the time of determination) as reported in THE
WALL STREET JOURNAL or such other source as the Administrator deems reliable;

                  (ii)   If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems reliable
or;

                  (iii)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

             (p)  "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

             (q)  "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

             (r)  "NOTICE OF GRANT" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.

             (s)  "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

             (t)  "OPTION" means a stock option granted pursuant to the Plan.


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             (u)  "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

             (v)  "OPTIONED STOCK" means the Common Stock subject to an Option.

             (w)  "OPTIONEE" means an Employee, Director, or Consultant who
receives an Option.

             (x)  "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

             (y)  "PLAN" means this 1994 Stock Option Plan, as amended.

             (z)  "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

             (aa) "SERVICE PROVIDER" means an Employee, Officer, Consultant or
Director.

             (bb) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.

             (cc) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

         3.  STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 24,592,000, plus an annual increase, effective January 1
of each calendar year beginning January 1, 1999 and ending January 1, 2003,
equal to such number of additional Shares of Common Stock as may then be
required to fix the number of Shares of Common Stock then available for new
Option grants at an amount not less than the lesser of (i) four percent (4%) of
the Company's then issued and outstanding Common Stock or (ii) 16,000,000
Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

         If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.

         4.  ADMINISTRATION OF THE PLAN.

             (a) PROCEDURE.

                  (i)    MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different Optionees.


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                  (ii)   SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

                  (iii)  RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

                  (iv)   OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.

             (b)  POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

                  (i)    to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(m) of the Plan;

                  (ii)   to select the Consultants, Directors, and Employees to
whom Options may from time to time be granted hereunder;

                  (iii)  to determine whether and to what extent Options are
granted hereunder;

                  (iv)   to modify or amend each Option, including the
discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan;

                  (v)    to approve forms of agreement for use under the Plan;

                  (vi)   to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option of the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;


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                  (vii)  to determine whether and under what circumstances an
Option may be settled in cash under Section 9 instead of Common Stock;

                  (viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;

                  (ix)   to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;

                  (x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and

                  (xi)   to prescribe, amend, and rescind rules and regulations
relating to the Plan, including rules and regulations relating to subplans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws.

             (c)  EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations, and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

         5.  ELIGIBILITY.

             (a)  Nonstatutory Stock Options may be granted to Employees,
Directors, and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee, Director, or Consultant who has been granted an Option
may, if otherwise eligible, be granted additional Options.

             (b)  Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares underlying Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) in excess of $100,000,
such excess shall be treated as Nonstatutory Stock Options.

             (c)  For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.


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             (d)  The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company or service as a Director, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment, service as
a Director or consulting relationship at any time, with or without cause.

             (e)  LIMITATIONS.


                  (i)    No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 900,000 Shares.

                  (ii)   The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11(a).

                  (iii)  If an Option is canceled (other than in connection with
a transaction described in Section 11), the canceled Option will be counted
against the limit set forth in Section 5(e)(i). For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

         6.  TERM OF PLAN. The Plan became effective upon its adoption by the
Board of Directors. It shall continue in effect for a term of ten (10) years
from such date, unless sooner terminated under Section 13 of the Plan.

         7.  TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option the term shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.

         8.  OPTION EXERCISE PRICE AND CONSIDERATION.

             (a)  The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:

                  (i)    In the case of an Incentive Stock Option

                         (A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.


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                         (B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

                  (ii)   In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. However, in the
case of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

                  (iii)  Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.

             (b)  The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan; (6) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws, or (7) any combination of the
foregoing methods of payment. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.

         9.  EXERCISE OF OPTION.

             (a)  PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. All Options granted hereunder shall be exercisable at the rate of at least
20% per year over five years from the date the Option is granted. An Option may
not be exercised for a fraction of a Share.

                  An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized


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transfer agent of the Company) of such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly upon exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in Section
11 of the Plan.

                  Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

             (b)  TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR, OR
CONSULTANT. In the event that an Optionee's Continuous Status as an Employee,
Director, or Consultant terminates (but not in the event of a change of status
from Employee to Consultant (in which case an Employee's Incentive Stock Option
shall automatically convert to a Nonstatutory Stock Option on the ninety-first
(91st) day following such change of status) or from Consultant to Employee)
other than upon the Optionee's death or disability, the Optionee may exercise
his or her Option, within 90 days of the date of termination, and only to the
extent that the Optionee was entitled to exercise it at the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant); provided, however, that (i) the Administrator may
in its discretion extend the period of exercisability of the Option beyond a
termination of an Optionee's Continuous Status as an Employee, Director, or
Consultant until a date not later than the expiration of the term of such Option
as set forth in the Notice of Grant and (ii) the Administrator may in its
discretion extend the termination date for the purpose of vesting accrual to a
date beyond the actual termination date of employment (the "deemed termination
date") (but in no event may the deemed termination date be later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the event the Administrator shall exercise such discretion to extend the term of
an Option, such Option shall be exercisable during such extended term to the
extent it was exercisable at the date of such termination or the deemed
termination date, as applicable. Similarly, in the event the Administrator shall
exercise such discretion to extend the termination date of an Optionee, such
Option shall be exercisable during such term (or such extended term if
applicable) to the extent it would be exercisable at the deemed termination
date. If at the date of termination the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall revert to the Plan. If after termination the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

             (c)  DISABILITY OF OPTIONEE. In the event of termination of an
Optionee's Continuous Status as an Employee, Director, or Consultant as a result
of his or her Disability, Optionee may, but only within six (6) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement),


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exercise the Option to the extent otherwise entitled to exercise it at the date
of such termination. To the extent that Optionee is not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

             (d)  DEATH OF OPTIONEE. In the event of the death of an Optionee,
the Option shall vest and become exercisable as to all of the Shares subject
thereto and may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance.
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Optionee's termination.
The Option may be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the Option under the
Optionnee's will or the laws of descent or distribution. If the Option is not so
exercised with the specified time, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

             (e)  BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

         10. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise, by the
Administrator, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

         11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

             (a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt


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of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding, and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.

             (b)  DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.

             (c)  MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, 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. If an Option
is not assumed or substituted (and already was exercisable or becomes fully
vested and exercisable in lieu of assumption or substitution), the Administrator
shall notify the Optionee in writing or electronically that the Option shall be
fully vested and exercisable for a period of fifteen (15) days from the date of
such notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

         12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.


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         13. AMENDMENT AND TERMINATION OF THE PLAN.

             (a)  AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Applicable Laws,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.

             (b)  EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company. Termination of the Plan shall not affect the Administrator's ability to
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.

         14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

             As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased 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 by any of
the aforementioned relevant provisions of law.

         15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

             The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

         16. AGREEMENTS. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.

         17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws.


                                                                   Page 12 of 12

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                             PEREGRINE SYSTEMS, INC.

                                 1994 STOCK PLAN

                             STOCK OPTION AGREEMENT


         Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.       NOTICE OF STOCK OPTION GRANT

         [OPTIONEE'S NAME]

         You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

        Date of Grant:

        Vesting Commencement Date:

        Exercise Price per Share:

        Total Number of Shares Granted:

        Type of Option:

        Term/Expiration Date:

VESTING SCHEDULE:

         25% of the total number of Shares subject to the Option shall vest
twelve months after the Vesting Commencement Date, and 6.25% of the total number
of Shares subject to the Option shall vest each quarter thereafter, provided
that Shares actually will vest on any such date only if the Optionee is a
Service Provider on such date.

         Notwithstanding the preceding, all of the Shares subject to the Option
shall vest on the date the Optionee ceases to be a Service Provider if (and only
if) the cessation as a Service Provider (1) occurs within 12 months after a
Change of Control, and (2) either was by action (a) of the Company for a reason
other than Cause, or (b) of the Employee for Good Reason.

         For purposes of the preceding paragraph, Cause means (i) any act of
personal dishonesty taken in connection with the Optionee's responsibilities as
a Service Provider that is intended to result in his or her substantial personal
enrichment, (ii) the Optionee's conviction or plea of no contest to a crime that
will have a detrimental effect on the Company's reputation or business, (iii)
willful misconduct by the Optionee that is


                                                                     Page 1 of 5

<Page>


injurious to the Company, or (iv) the Optionee's continued violation of his or
her obligations to the Company after the Optionee has been delivered written
notice of the violation and given a reasonable opportunity to cure. Good Reason
means, without the Optionee's written consent (i) a material reduction in the
Optionee's duties and/or status at the Company, (ii) the Optionee's principal
work location being moved more than 30 miles, (iii) the Company reducing the
Optionee's base salary below his or her salary immediately before the Change of
Control, or (iv) the Company reducing the Optionee's bonus opportunity below his
or her bonus opportunity immediately before the Change of Control.

TERMINATION PERIOD:

         This Option may be exercised for 90 days after termination of
Optionee's Continuous Status as an Employee or Consultant, or such longer period
as may be applicable upon death or disability of Optionee as provided in the
Plan, but in no event later than the Term/Expiration Date as provided above.

II.  AGREEMENT

         1. GRANT OF OPTION. Peregrine Systems, Inc., a Delaware corporation
(the "Company"), hereby grants to the individual named in the Notice of Stock
Option Grant (the "Notice of Grant"), hereafter the Optionee, an option (the
"Option") to purchase the total number of shares of Common Stock (the "Shares")
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price") subject to the terms, definitions,
and provisions of the 1994 Stock Option Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.

         If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d), it shall be treated as a Nonstatutory Stock Option ("NSO").

         2.   EXERCISE OF OPTION.

              (a) RIGHT TO EXERCISE. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan. This Option may not be exercised
for a fraction of a share.

              (b) METHOD OF EXERCISE. This Option shall be exercisable by notice
(in a form and manner satisfactory to the Company) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to


                                                                     Page 2 of 5

<Page>


such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. This Option shall be deemed to be exercised upon receipt
by the Company of such notice accompanied by the Exercise Price.

              No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with Applicable Laws.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

         3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

              (i)   cash; or

              (ii)  check; or

              (iii) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or

              (iv)  consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan.

         4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of Applicable Laws.
As a condition to the exercise of this Option, the Company may require Optionee
to make any representation and warranty to the Company as may be required by any
applicable law or regulation.

         5. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors,
and assigns of the Optionee.

         6. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

         7. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal and local tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.


                                                                     Page 3 of 5

<Page>


OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.

              (i)   EXERCISE OF ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability or local income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.

              (ii)  EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability and local income tax liability upon the
exercise of a Nonstatutory Stock Option. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee, the Company will be
required to withhold from Optionee's compensation or collect from Optionee and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

              (iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and local income tax purposes.
In the case of an ISO, if Shares transferred pursuant to the Option are held for
at least one year after exercise and are disposed of at least two years after
the Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and local income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (1) the
Fair Market Value of the Shares on the date of exercise, or (2) the sale price
of the Shares.

              (iv)  NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

         OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS NOTICE, OR THE STOCK OPTION AGREEMENT, NOR IN THE COMPANY'S


                                                                     Page 4 of 5

<Page>


STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON
OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY
THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME,
WITH OR WITHOUT CAUSE.

         Optionee acknowledges receipt of a copy of the Stock Option Agreement
and Plan and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan or this Option. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE                                        PEREGRINE SYSTEMS, INC.
                                                a Delaware corporation

--------------------------------
Print Name of Optionee

                                                /s/ Stephen P. Gardner
--------------------------------                --------------------------------
Signature of Optionee                           Stephen P. Gardner
                                                Chief Executive Officer

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


--------------------------------
Residential Address


                                                                     Page 5 of 5