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                               PEREGRINE SYSTEMS, INC.
                                          
                               1994 STOCK OPTION PLAN
                                          
                         (AS AMENDED THROUGH JULY 16, 1998)

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

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

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

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

          (h)  "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. 

          (i)  "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: 


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(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.

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

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

          (l)  "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. 

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

          (n)  "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. 

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


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

          (q)  "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.

          (r)  "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. 

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

          (t)  "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.

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

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

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

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

          (y)  "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.

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

          (aa) "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 6,148,000, 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) 4,000,000 Shares.  The Shares 
may be authorized, but unissued, or reacquired Common Stock. 


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     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. 

                   (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; 

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                    (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; 

                  (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. 


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          (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. 

          (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 450,000 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. 


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     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. 

                    (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. 


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     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 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 


                                                                   Page 8 of 11
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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), 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 may be exercised at any time within twelve (12) months following the date
of death (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 acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, 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. 


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     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 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, 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, sale of assets, or
sale or transfer of Common Stock by Mr. Moores as provided above, the


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Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable. 

     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. 

     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 


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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 11



<PAGE>


                              PEREGRINE SYSTEMS, INC.

                    1995 STOCK OPTION PLAN FOR FRENCH EMPLOYEES
                                          
     1.   PURPOSES OF THE PLAN.  The purposes of this 1995 Stock Option Plan 
for French Employees are: 

          -    to attract and retain the best available personnel for positions
               of substantial responsibility,

          -    to provide additional incentive to French Employees, and

          -    to promote the success of the Company's business and the business
               of its French subsidiary.

          This Plan is a sub-plan created under and pursuant to the Peregrine 
Systems, Inc. 1994 Stock Option Plan, which has been approved by the 
shareholders of Peregrine Systems, Inc., and which provides that French 
employees may benefit under this Plan.  Options shall be granted under the 
Plan at the discretion of the Administrator and as reflected in terms of 
written option agreements, and are intended to qualify for preferred 
treatment under French tax laws.  Unless otherwise defined herein, the terms 
defined in the 1994 Stock Option Plan shall have the same defined meanings in 
this Plan. 

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

     (a)  "APPLICABLE LAWS" means the legal requirements relating to the 
administration of stock option plans under French corporate, securities, and 
tax laws. 

     (b)  "DISABILITY" means total and permanent disability, as defined under
Applicable Laws. 

     (c)  "EMPLOYEE" means any person employed by Subsidiary in a salaried 
position, who does not own more than 10% of the voting power of all classes 
of stock of the Company, or any Parent or Subsidiary, and who is a resident 
of the Republic of France. 

     (d)  "FAIR MARKET VALUE" means, as of any date, the dollar 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 Nasdaq 
National Market or The Nasdaq Small Cap 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 and 
reported in THE WALL STREET JOURNAL or such other source as the Administrator 
deems reliable; 

                                                                  Page 1 of 9

<PAGE>

          (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; 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. 

     (e)  "OPTION" means a stock option granted pursuant to the Plan which is 
intended to qualify for preferred tax treatment under applicable French tax 
laws. 

     (f)  "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. 

     (g)  "OPTION PRICE" means the per share price for exercising an Option, 
determined in accordance with subsection 9(a) of the Plan. 

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

     (i)  "OPTIONEE" means a person eligible to participate in the Plan 
pursuant to Section 5 and who holds an outstanding Option. 

     (j)  "PLAN" means this Peregrine Systems, Inc. 1995 Stock Option Plan 
for French Employees. 

     (k)  "SUBSIDIARY" means any participating subsidiary of the Company 
located in the Republic of France. 

     (l)  "U.S. PLAN" means the Peregrine Systems, Inc. 1994 Stock Option 
Plan, as amended. 

     3.   STOCK SUBJECT TO THE PLAN.  Subject to the provisions of Section 12 
of the Plan, the maximum aggregate number of Shares that may be optioned and 
sold under the Plan is that number of Shares of Common Stock which is 
currently available for issuance under the U.S. Plan.  However, at no time 
shall the total number of Options outstanding which may be exercised for 
newly issued Shares of Common Stock exceed that number equal to one-third of 
the Company's voting stock, whether preferred stock of the Company or Common 
Stock.  The Shares may be authorized, but unissued, or reacquired Common 
Stock.  If any Optioned Stock is to consist of reacquired Shares, such 
Optioned Stock must be purchased by the Company prior to the date of grant of 
the corresponding Option and must be reserved and set aside for such purpose. 

                                                                  Page 2 of 9

<PAGE>

          If an Option expires or becomes unexercisable without having been 
exercised in full, the unpurchased Shares which were subject thereto shall 
become available for future grant under the Plan (unless the Plan has 
terminated). 

     4.   ADMINISTRATION OF THE PLAN. 

     (a)  PROCEDURE.  The Plan shall be administered by the Board or a 
committee appointed by the Board. 

     (b    RULE 16b-3 LIMITATIONS.  Notwithstanding the provisions of 
Subsection (a) of this Section 4, in the event that Rule 16b-3 promulgated 
under the Exchange Act, or any successor provision ("Rule 16b-3") provides 
specific requirements for the administrators of plans of this type, and Rule 
16b-3 or such successor provision is applicable to the Plan, the Plan shall 
be administered only by such a body and in such a manner as shall comply with 
the applicable requirements of Rule 16b-3.  Unless permitted by Rule 16b-3, 
no discretion concerning decisions regarding the Plan shall be afforded to 
any committee or person that is not "disinterested" as that term is used in 
Rule 16b-3. 

     (c)  POWERS OF THE ADMINISTRATOR.  Subject to the provisions of the 
Plan, and in the case of a Committee, subject to the specific duties 
delegated by the Board to such Committee, 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(c) of the Plan;

          (ii)   to select the Employees to whom Options may be granted 
hereunder;

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

          (iv)   to determine the number of shares of Common Stock to be 
covered by each Option granted hereunder;

          (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 may 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 or the shares of Common 
Stock relating thereto, based in each case on such factors as the 
Administrator, in its sole discretion, shall determine; 

          (vii)  to construe and interpret the terms of the Plan; 

                                                                  Page 3 of 9

<PAGE>

          (viii) to prescribe, amend and rescind rules and regulations 
relating to the Plan; 

          (ix)   to modify or amend each Option (subject to Section 14(c) of 
the Plan); 

          (x)    to authorize any person to execute on behalf of the Company 
or Subsidiary any instrument required to effect the grant of an Option 
previously granted by the Administrator; 

          (xi)   to determine the terms and restrictions applicable to 
Options; and 

          (xii)  to make all other determinations deemed necessary or 
advisable for administering the Plan. 

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

     (e)  REPORTING TO THE SHAREHOLDERS' MEETING.  In its annual proxy 
statement to the shareholders, the Board shall inform the shareholders as to 
the number and price of the Options granted hereunder, and as to the Shares 
subscribed upon exercise of such Options. 

     5.   ELIGIBILITY.  Options may be granted only to Employees; provided, 
however, that the PRESIDENT DIRECTEUR GENERAL, THE DIRECTEUR GENERAL and 
other directors who are also Employees of a participating Subsidiary may be 
granted Options.  An individual who has been granted an Option may, if 
otherwise eligible, be granted additional Options. 

     6.   LIMITATIONS.  Neither the Plan nor any Option shall confer upon any 
Optionee any right with respect to continuing the Optionee's employment 
relationship with the Company. 

     7.   TERM OF PLAN.  The Plan shall become effective as of the date of 
its adoption by the Board.  It shall continue in effect until the termination 
of the U.S. Plan or the date five years from the date of adoption of the U.S. 
Plan, whichever is sooner, unless terminated earlier under Section 14 of the 
Plan. 

     8.   TERM OF OPTION.  The term of each Option shall be as stated in the 
Option Agreement; provided, however, that subject to Section 10(d) hereof, 
the maximum term of an Option shall not exceed nine and one-half (9 1/2) years 
from the date of grant of the Option. 

                                                                  Page 4 of 9

<PAGE>

     9.   OPTION EXERCISE PRICE AND CONSIDERATION. 

          (a)    OPTION PRICE.  The Option Price for the Shares to be issued 
pursuant to exercise of an Option shall be determined by the Administrator 
upon the date of grant of the Option and stated in the Option Agreement, but 
in no event shall be lower than ninety-five percent (95%) of the Fair Market 
Value on the date the Option is granted. This Option Price cannot be modified 
while the Option is outstanding. 

          (b)    WAITING PERIOD AND EXERCISE DATES.  At the time an Option is 
granted, the Administrator shall fix the period within which the Option may 
be exercised and shall determine any conditions which must be satisfied 
before the Option may be exercised.  In so doing, the Administrator may 
specify that an Option may not be exercised until the completion of a service 
period. 

          (c)    FORM OF CONSIDERATION.  The Administrator shall determine 
the acceptable form of consideration for exercising an Option, including the 
method of payment.  Such consideration may consist of: 

                 (i)     cash or check (denominated in U.S. Dollars);

                 (ii)    wire transfer (denominated in U.S. Dollars);

                 (iii)   delivery of a properly executed exercise notice 
together with such other documentation as the Administrator and a broker, if 
applicable, shall require to effect an exercise of the Option and delivery to 
the Company of an amount of the sale or loan proceeds required to pay the 
exercise price; or 

                 (iv)    any combination of the foregoing methods of payment. 

     10.  EXERCISE OF OPTION. 

          (a)    PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option 
granted hereunder shall be exercisable according to the terms of the Plan and 
at such times and under such conditions as determined by the Administrator 
and set forth in the Option Agreement. 

                 An Option may not be exercised for a fraction of a Share. 

                 An Option shall be deemed exercised when: 

                 (i)     the Company receives written notice of exercise (in 
accordance with the Option Agreement and in the form attached hereto as 
Exhibit A) from the person entitled to exercise the Option, and full payment 
for the Shares with respect to which the Option is exercised; 

                                                                  Page 5 of 9

<PAGE>

                 (ii)    the Subsidiary receives a written subscription 
agreement to the Shares (in accordance with the Option Agreement and in the 
form attached hereto as Exhibit B) from the person entitled to exercise the 
Option. 

                 Full payment may consist of any consideration and method of 
payment authorized by the Administrator and permitted by the Option Agreement 
and the Plan, and shall be deemed to be definitively made upon receipt of the 
payment by the Subsidiary. Shares issued upon exercise of an Option shall be 
issued in the name of the Optionee or, if requested by the Optionee, in the 
name of the Optionee and his or her spouse. 

                 Until the stock certificate evidencing such Shares is issued 
(as evidenced by the appropriate entry on the books of the Company or of a 
duly authorized transfer agent of the Company), 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 to the Optionee (or cause to be issued) a stock certificate 
evidencing such Shares promptly after the Option is exercised and after full 
payment, as indicated above, is received by the Company. No adjustment will 
be made for a dividend or other right for which the record date is prior to 
the date the stock certificate is issued, except as provided in Section 12 of 
the Plan. 

                 Exercising an Option in any manner shall decrease the number 
of Shares thereafter 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 EMPLOYMENT RELATIONSHIP.  In the event that 
an Optionee's Continuous Status as an Employee terminates (other than upon 
the Optionee's death or Disability), the Optionee may exercise his or her 
Option, but only within thirty (30) days  (or such other period of time not 
exceeding three (3) months as is determined by the Administrator), 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 Option Agreement). 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 that an Optionee's 
Continuous Status as an Employee terminates as a result of the Optionee's 
Disability, the Optionee may exercise his or her Option at any time within 
six (6) months from the date of such termination, but only to the extent that 
the Optionee was entitled to exercise it at the date of such termination (but 
in no event later than the expiration of the term of such Option as set forth 
in the Option Agreement).  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 herein, the Option shall terminate, and the Shares covered by such 
Option shall revert to the Plan. 

                                                                  Page 6 of 9

<PAGE>

          (d)    DEATH OF OPTIONEE.  In the event of the death of an Optionee 
while an Employee, the Option may be exercised at any time within six (6) 
months following the date of death by the Optionee's estate or by a person 
who acquired the right to exercise the Option by bequest or inheritance, but 
only to the extent that the Optionee was entitled to exercise the Option at 
the date of death. If, at the time of death, the Optionee was 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 death, the 
Optionee's estate or a person who acquired the right to exercise the Option 
by bequest or inheritance does not exercise the Option within the time 
specified herein, the Option shall terminate, and the Shares covered by such 
Option shall immediately revert to the Plan. 

     11.  NON-TRANSFERABILITY OF OPTIONS.  An Option 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. 

     12.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, 
          ASSET SALE OR CHANGE OF CONTROL. 

          (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 of consideration." Such 
adjustment shall be made by the Administrator, 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 Administrator 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 or Stock Purchase 
Right shall terminate immediately prior to the consummation of such proposed 
action. 

          (c)    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

                                                                  Page 7 of 9

<PAGE>

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.

     13.  DATE OF GRANT.  The date of grant of an Option shall be, for all 
purposes, the date on which the Administrator makes the determination 
granting such Option, or such other later date as is determined by the 
Administrator. Notice of the determination shall be provided to each Optionee 
within a reasonable time after the date of such grant. 

     14.  AMENDMENT AND TERMINATION OF THE PLAN. 

          (a)    AMENDMENT AND TERMINATION.  The Administrator may at any 
time amend, alter, suspend or terminate the Plan. 

          (b)    SHAREHOLDER APPROVAL.  The Company shall obtain shareholder 
approval of any Plan amendment to the extent necessary and desirable to 
comply with Applicable Laws.  Such shareholder approval, if required, shall 
be obtained in such a manner and to such a degree as is required by the 
Applicable Laws. 

          (c)    EFFECT OF AMENDMENT OR TERMINATION.  No amendment, 
alteration, suspension or termination of the Plan shall impair the rights of 
any Optionee, unless mutually agreed otherwise between the Optionee and the 
Administrator, which agreement must be in writing and signed by the Optionee 
and a representative of the Administrator. 

                                                                  Page 8 of 9

<PAGE>

     15.  CONDITIONS UPON ISSUANCE OF SHARES. 

          (a)    LEGAL COMPLIANCE.  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 shall comply with Applicable Laws, including, 
without limitation, the requirements of any stock exchange or quotation 
system upon which the Shares may then be listed or quoted, and shall be 
further subject to the approval of counsel for the Company with respect to 
such compliance. 

          (b)    INVESTMENT REPRESENTATIONS.  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 under Applicable Laws. 

     16.  LIABILITY OF COMPANY. 

          (a)    INABILITY TO OBTAIN AUTHORITY.  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. 

          (b)    GRANTS EXCEEDING ALLOTTED SHARES.  If the Optioned Stock 
covered by an Option exceeds, as of the date of grant, the number of Shares 
which may be issued under the Plan without additional shareholder approval, 
such Option shall be void with respect to such excess Optioned Stock, unless 
shareholder approval of an amendment sufficiently increasing the number of 
Shares subject to the Plan is timely obtained in accordance with Section 
14(b) of the Plan. In the event more than one Option is granted which 
exceeds, as of the date of grant, the number of Shares which may be issued 
under the Plan without additional shareholder approval, such Options shall be 
void as set forth in the preceding sentence on a pro rata basis. 

     17.  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. 

                                                                  Page 9 of 9