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                                                                   Exhibit 10.26

                              TRANSITION AGREEMENT

                                       AND

                          GENERAL RELEASE OF ALL CLAIMS


     1.  This Agreement is made between Kevin Mosher ("Employee") and Portal
Software, Inc., on behalf of itself and its subsidiaries, owners, agents,
employees and any persons related to or acting on behalf of the company
(hereinafter generally referred to as "Portal").

     2.  It is recognized herein that Employee's employment with Portal will
terminate effective December 14, 2002 (the "Termination Date"), and that Portal
and Employee desire to effectuate an efficient transition of Employee's
knowledge and responsibilities and to provide certain separation benefits to
Employee to aid in Employee's transition to other employment

     3.  Between the date hereof and January 31, 2002, Employee shall do the
following upon Portal's request to facilitate an effective transition of
accounts and responsibilities:

                    (i)  Participate with Sales management in calls with key
                         customers to effectuate relationship transfer;

                    (ii) Provide Employee's advice and knowledge regarding
                         Portal's currently existing sales prospects, Sales
                         personnel performace, and pending projects.

     4.  In recognition of Employee's past services rendered to Portal, Portal
will issue on or before December 10, 2001 and deliver to Employee a number of
shares of Portal Common Stock having a fair market value of $100,000. Such
shares of stock will be issued as fully vested and fully paid shares under
Portal's 1999 Stock Incentive Plan. Fair market value shall mean the average
closing price of Portal Common Stock over December 5, December 6 and December 7,
2001.

     5.  As severance, Portal will pay to Employee (i) $63,000 on the date the
above-mentioned shares are issued and (ii) $35,000 on May 1, 2002. Stock option
vesting will cease as of the close of business on November 7, 2001. If Employee
fails to return Portal property in accordance with the terms of this Agreement
and the Nondisclosure Agreement, Portal shall have the right to offset against
payments or benefits owing to Employee hereunder the replacement value of any
and all such unreturned property.

     6.  All required and authorized payroll deductions will be withheld from
the amounts to be paid to Employee under this Agreement (including amounts
required to be withheld from the stock issuance); in particular the amounts
required to withheld from the stock portion of the payment above shall be
withheld from the cash amount paid at that time. Employee's ability to exercise
Employee's vested options following the Termination Date shall be governed by
the provisions of Employee's stock option agreements and the provisions of the
stock option plans

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pursuant to which such options were originally granted. As of the Termination
Date, Employee will be entitled to receive a refund of any accrued but unused
Employee Stock Purchase Plan (ESPP) contributions.

     7.  Employee agrees that Employee shall be paid for all accrued but unused
vacation upon the Termination Date. Employee may elect optional health insurance
continuation under COBRA following the Termination Date. Portal shall pay the
first 11 months of premiums for such COBRA coverage.

     8.  All reasonable and proper unreimbursed travel and business expenses to
which Employee is entitled to reimbursement as of the Termination Date will be
promptly paid to Employee after submission of expense reports in accordance with
standard Portal policy.

     9.  Employee and Portal desire to settle fully and finally any existing or
potential differences between them including, without limitation, all tort,
contractual, discrimination, statutory and common law claims related in any way
to Employee's employment and/or the termination of employment with Portal.

     10. In exchange for the above promises and agreements, including Portal's
retention of Employee as an employee until the Termination Date, Employee
personally and for Employee's heirs, legal representatives, estates and
successors in interest does hereby completely release and forever discharge
Portal, its officers, directors, agents, employees, attorneys, successors and
assigns (collectively, "Released Parties") from any and all claims, rights,
demands, actions, obligations, liabilities, and causes of action of any and
every kind, nature and character whatsoever, whether known or unknown, whether
based on a tort, contract, statute, or any other theory of recovery, and whether
for compensatory or punitive damages which Employee may now have, has ever had,
or may in the future have, arising or in any way connected with Employee's
employment with Portal, or the manner in which that employment terminated,
including without limitation all wrongful discharge actions; all actions arising
under the Americans with Disabilities Act, the Age Discrimination in Employment
Act (if applicable), Title VII of the Civil Rights Act of 1991, California Fair
Employment and Housing Act, or any other federal or state statute which may be
held applicable; all actions for breach of contract or the covenant of good
faith and fair dealing; all tort claims; and any and all claims for
compensation, wages, bonuses, severance pay, commissions, vacation pay, or
reimbursement for expenses, attorneys' fees and costs, except for claims for
                                                       ------
workers' compensation insurance benefits under the terms of any workers'
compensation insurance policy or fund, unemployment or any unemployment or state
disability insurance benefits pursuant to the terms of applicable state law, and
continued participation in certain of the Company's group benefit plans pursuant
to the federal law known as COBRA.

     11. Employee understands and hereby agrees that by signing this Agreement
and by accepting the payment described above, Employee gives up any and all
rights Employee may have to file any claim or action which Employee may now
have, has ever had, or may in the future have, with respect to any matter
pertaining to or arising from Employee's employment or termination of employment
with Portal. In addition, Employee hereby waives any and all rights or benefits
which Employee may have under the terms of section 1542 of the California Civil
Code, which section is set forth as follows:


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     Section 1542:  A general release does not extend to claims which the
                    creditor does not know or suspect to exist in his favor at
                    the time of executing the release, which if known by him
                    must have materially affected his settlement with debtor.

     12. Employee represents that Employee does not have pending against Portal
or any employee, agent, official, or director of Portal any claim, charge, or
action in or within any federal, state, or local court or administrative agency.
Employee agrees, to the extent necessary to effectuate the provisions of this
Agreement, within ten (10) days after the execution of this Agreement, to cause
to be dismissed, withdrawn or discontinued all complaints or proceedings
instituted by Employee against Portal with any state or federal administrative
agency or judicial body, with copies of relevant documents delivered to Portal
within the same time period. Employee also agrees not to initiate, assist,
support, join, participate in, encourage, or actively cooperate in the pursuit
of any employment-related legal claims against Portal or its employees or
agents, whether the claims are brought on Employee's own behalf or on behalf of
any other person or entity. Nothing in this Section 12 will preclude Employee
from testifying truthfully in any legal proceeding pursuant to subpoena or other
legal process.

     13. It is understood and agreed that this is a compromise settlement of a
disputed claim or potential disputed claims, and that the furnishing of the
consideration for this Severance Agreement and General Release of All Claims
shall not be deemed or construed as an admission of any wrongdoing, deficiency,
liability or responsibility at any time for any purpose.

     14. Employee agrees to hereby waive any alleged right to employment
or re-employment with Portal.

     15. Employee understands and acknowledges Employee's continuing obligations
to Portal under the Proprietary Information and Inventions Agreement (or any
similar predecessor agreement) previously executed by Employee ("Nondisclosure
Agreement"). Further, Employee agrees that Employee will not directly or
indirectly, either for Employee or for any other person or business entity: (a)
during the period from the date hereof until the date twelve (12) months from
the Termination Date, solicit or encourage any employee of Portal (whether
through recruiting, interviewing participating in the extension of an employment
offer or any other means) to either: (i) terminate his or her employment with
Portal, or (ii) accept employment with any subsequent employer with whom
Employee is affiliated or associated in any way or (b) during the period from
the date hereof until the date six (6) months from the Termination Date, divert
or take away (or attempt to divert or take away) any of Portal's customers or
clients whom Employee may have called upon, solicited or performed services for,
within the last twelve (12) months of Employee's employment or engagement with
Portal; (provided, however, that the provisions of this Section shall not be
construed to prevent Employee from being gainfully employed). In the event of
any breach by Employee of this Section 15, Section 3 or Section 17, Portal shall
immediately cease making any payments or providing any benefits to Employee
under this Agreement and the waivers and release that Employee agreed to in this
Agreement shall remain in full force and effect at all times in the future.

     16. Employee and Portal both agree that now and forever they will keep the
terms and monetary severance amount of the Agreement completely confidential,
and that they will not


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<PAGE>

disclose such to any other person or indirectly. As an exception to the
foregoing, and the only exception, the parties may disclose the terms and
monetary amount of this Agreement to their attorneys, tax advisors, accountants
and immediate family members (defined as and limited to parents, spouse,
siblings and children) who shall be advised of its confidentiality.
Notwithstanding the foregoing, the parties may make such disclosures of the
terms and monetary amount of the Agreement as are required by law or as
necessary for legitimate enforcement or compliance purposes.

     17. Employee further agrees that Employee shall not disparage Portal, Inc.,
its products, owners, agents, employees, attorneys, and any persons related to
or acting on behalf of Portal. Employee shall be responsible and liable for any
damages caused by any such disparagement. If any prospective employer of
Employee makes a request to Portal for a reference concerning Employee, Portal
will respond to the request by providing only the dates of Employee's employment
and the position(s) held.

     18. The parties agree that any dispute of any kind whatsoever arising from
the subject matter of this Agreement, including claims regarding this Agreement,
shall be resolved under the following procedures:

          a.   The party claiming to be aggrieved shall furnish to the other
               party, within thirty (30) days of the disputed action, a written
               statement of the grievance identifying any witnesses or documents
               that support the grievance and the relief requested or proposed.
               Employee is required to furnish the written statement of
               grievance to Portal's General Counsel, 10200 South De Anza
               Boulevard, Cupertino, CA 95014.

          b.   If the grievance is denied, the parties agree that the dispute
               shall be resolved by final and binding arbitration. A single
               arbitrator shall be mutually selected by the parties. If no
               agreement on the selection is reached within fifteen (15) days,
               then a neutral arbitrator shall be selected under the Expedited
               Labor Arbitration Rules of the American Arbitration Association,
               except that the arbitrator shall be selected by alternately
               striking names from the panel of five (5) neutral labor or
               employment arbitrators designated by the American Arbitration
               Association. The arbitrator shall have the authority to grant the
               requested relief if authorized by law; provided, however, that
               nothing herein shall limit the right of Portal to obtain
               injunctive relief to prevent a violation of the Nondisclosure
               Agreement.

          c.   Arbitration shall be the exclusive and final remedy for any
               dispute between the parties, and the parties agree that no
               dispute shall be submitted to arbitration where the party
               claiming to be aggrieved has not complied with the preliminary
               steps provided for above.

     19. Each party agrees and assumes the risk that any fact with respect to
any matter covered in this Agreement may hereafter be found to be other than or
different from the facts it believes at the time of this Agreement to be true,
and agrees that this Agreement shall be and will remain effective
notwithstanding any such difference in fact. Should any provision of this


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Agreement be declared or be determined by any court to be illegal or invalid,
the validity of the remaining parts or provisions shall not be effected thereby
and said illegal or invalid part, term or provision(s) shall be deemed not to be
a part of this Agreement.

     20. This Agreement and General Release of All Claims incorporates the
entire understanding among the parties, and recites the sole consideration for
the promises exchanged herein and supersedes and cancels any prior or
contemporaneous written or oral agreements. In reaching this Agreement, no party
has relied upon any representation or promise except those expressly set forth
herein. This Agreement shall in all cases be interpreted in accordance with its
fair meaning, and not strictly for or against either party hereto. This
Agreement will be governed by and construed in accordance with California law.

     21. Employee understands and agrees that Employee:

          a.   Has carefully read and fully understands all of the provisions of
               this Agreement;

          b.   Is, through this Agreement, releasing Portal from any and all
               claims Employee may have against the company;

          c.   Knowingly and voluntarily agrees to all of the terms set forth in
               this Agreement;

          d.   Knowingly and voluntarily intends to be legally bound by the
               same.

     22. Acknowledgment of Waiver of Claims Under ADEA. Employee acknowledges
         ---------------------------------------------
that Employee is waiving and releasing any rights Employee may have under the
Age Discrimination in Employment Act of 1967, as amended. Employee further
acknowledges that:

          a.   Employee may have, and has had at least twenty-one (21) days
               after receipt of this Agreement within which Employee may review
               and consider, discuss with an attorney of Employee's own
               choosing, and decide to execute or not execute this Agreement;

          b.   Employee has seven (7) days after the execution of this Agreement
               within which Employee may revoke this Agreement;

          c.   In order to revoke this Agreement, Employee must deliver to
               Portal's general counsel on or before seven (7) days after the
               execution of this Agreement, a letter stating that Employee is
               revoking this Agreement; and


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          d.   That this Agreement shall not become effective or enforceable
               until after the expiration of seven (7) days following the date
               Employee executes this Agreement (the "Effective Date").

Dated:
       ---------------------------       -----------------------------------
                                                       Kevin Mosher

                                         Address: 26653 Snell Lane Los Altos, CA
                                         94022



                                         Portal Software, Inc.

Dated:                                   By:
       ---------------------------           --------------------------------
         (the "Effective Date")          Name:
                                               ------------------------------
                                         Title:
                                                -----------------------------


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