Exhibit
10.12  AMENDED
EMPLOYMENT AGREEMENT  This Employment
Agreement (as amended, the Agreement), is made and entered into, effective as
of June 24, 2002, by and among PEREGRINE SYSTEMS, INC., a Delaware
Corporation (the Company or Peregrine), and KENNETH A. SEXTON (the
Employee).  Recitals  A.            The Company provides software
products and services for infrastructure management.  B.            The Company desires to employ the
Employee, and the Employee desires to work for the Company, upon the terms and
conditions stated herein.  NOW, THEREFORE, in
consideration of the mutual promises contained herein, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:  Agreements  Section 1.              Employment.  The Company hereby employs the Employee as
Executive Vice President and Chief Financial Officer of Peregrine to perform
such duties as are customarily performed by the Executive Vice President and
the Chief Financial Officer of a company.  Section 2.              Term.  The term of this Agreement commenced on
June 24, 2002, and shall continue until May 31, 2005, unless
terminated sooner pursuant to the terms of this Agreement (the Term).  The Term will be automatically extended for
a one year period effective June 1, 2005, and every June 1 thereafter
(the Anniversary Date), unless the Company provides written notice to the
Employee of the Companys intent not to extend the Term more than 90 days
before the Anniversary Date.  Section 3.              Compensation/Benefits.  (A)          Base Salary During the Term, the Employee shall be
entitled to a minimum base salary at the annual rate of $275,000, payable in
installments, less required legal deductions, in accordance, with the Companys
policy governing salary payments to employees generally, as it may be amended
from time to time by the Company (Base Salary).  The Base Salary will be reviewed on an annual basis and may be
increased from time to time during the Term at the discretion of Peregrines
Board of Directors.  (B)          Bonuses  (i)            MICP/Performance
Bonus.  The Employee shall be
entitled to receive a bonus for achieving certain results (the Performance
Bonus) in the pending chapter 11 bankruptcy cases of the Company and its
debtor affiliate Peregrine Remedy, Inc. (Case No. 02-12740 (JKF) (jointly
administered)) (the Chapter 11 Cases), the amount of  
   such bonus to be a
minimum of $125,000 payable in accordance with Section 3(B)(1) below
(Earned Performance Bonus) and additional amount(s), if any, payable in
accordance with Section 3(B)(2) below (Variable Performance Bonus).  The aggregate amount of the Performance
Bonus shall be determined in accordance with the following formula:  (Unsecured Creditor Recovery)2x [nine (9) / number of
months in bankruptcy] x $1,250,000.  In
no event shall the Employee be entitled to a Performance Bonus of less than the
Earned Performance Bonus.  Example:  For purposes of illustration only, the
Employee would be entitled to a Performance Bonus in the aggregate amount of
$200,000 in the event that a plan of reorganization for the Company is
confirmed and becomes effective as of June 28, 2003 (270 days after the
petition date) and pursuant thereto, unsecured creditors will receive a 40%
recovery [(.40)2 x
(9/9) x $1,250,000 = $200,000].  (1)           The Earned Performance Bonus shall be
paid to Employee in two (2) installment payments of $62,500 each in cash from
the Company due on (i) January 21, 2003 (or as soon as practicable
thereafter) and (ii) the Plan Effective Date (as defined below); provided
that payment(s) of the Earned Performance Bonus shall be counted towards the
aggregate Performance Bonus that may become due and payable to Employee;
provided further that, irrespective of the aggregate amount of the Performance
Bonus, the Employee shall be entitled to receive and keep the payments
contemplated by this subsection (1).  (2)           For purposes of the formula set forth
in paragraph (i) above, Unsecured Creditor Recovery means the
percentage distribution scheduled to be recovered by holders of allowed general
unsecured claims as a class, on account of such claims, pursuant to a confirmed
plan of reorganization in the Chapter 11 Cases (Confirmed Chapter 11
Plan).  The Company and official
Committee of Unsecured Creditors in the Chapter 11 Cases (Creditors
Committee) shall agree to the value of the Unsecured Creditor Recovery.  For purposes of the formula set forth in
paragraph (i) above, the number of months in bankruptcy means the
quotient of (the number of calendar days elapsed from September 22, 2002
(Petition Date) until the effective date of a Confirmed Chapter 11 Plan)
divided by 30.  (3)           In the event that this Agreement is
terminated pursuant to Sections 7(D) or 7(E) or for any reason other than Cause
within one year following a Change of Control and prior to the effective date
of a Confirmed Chapter 11 Plan but a Confirmed Chapter 11 Plan is
subsequently approved within ninety (90) days of the date of such termination,
then Employee shall nonetheless be entitled to receipt of a Variable
Performance Bonus computed as if this Agreement had not been terminated prior
to the effective date of such Confirmed Chapter 11 Plan.  In addition, if Employee has earned a
Performance Bonus hereunder but this Agreement is terminated pursuant to
Sections 7(D) or 7(E) or for any reason other than Cause within one year
following a Change of Control and prior to receipt by Employee of the full
Performance Bonus, then the unpaid component of the Performance Bonus shall
continue to be paid to Employee in accordance with this Section 3(B).  (ii)           Stay/Emergence
Bonus.  The Employee
shall be entitled to receive on the Plan Effective Date a bonus in the
following applicable amount (Emergence Bonus) depending on the timing of the
effective date (Plan Effective Date) of a Confirmed  2 
   Chapter 11
Plan:  If the Plan Effective Date occurs
by April 30, 2003, Employee shall be entitled to an Emergence Bonus of
$175,000; if the Plan Effective Date occurs after April 30, 2003 but no
later than May 31, 2003, the Emergence Bonus shall be $150,000; if the
Plan Effective Date occurs after May 31, 2003 but no later than
June 30, 2003, the Emergence Bonus shall be $125,000; if the Plan
Effective Date occurs after June 30, 2003 but no later than
September 30, 2003, the Emergence Bonus shall be $62,500; and if the Plan
Effective Date is after September 30, 2003, Employee shall not be entitled
to any Emergence Bonus.  (iii)          The Performance
Bonus and/or the Emergence Bonus shall be referred to herein collectively as
the Bonuses or each separately as a Bonus. 
The provisions herein relating to the Bonuses are deemed to be and
constitute modifications to the Companys Incentive Bonus Plan for Restructure
Transaction effective as of August 22, 2002, as may have been previously
modified, amended or supplemented.  (iv)          Post-Chapter 11 Annual Target
Bonus.During each year (or
portion thereof) of the Term subsequent to the Plan Effective Date, the
Employee shall participate in each bonus or other incentive plan established
for senior executives.  (All payments
made pursuant to such plans shall be referred to as a Post-Chapter 11
Bonus.)  Each fiscal year (or portion
thereof) subsequent to the Plan Effective Date, the Company shall establish a
target bonus to be payable to the Employee for reaching certain specified goals
and objectives, in the minimum annual amount of $275,000 (Post-Chapter 1l
Annual Target Bonus).  For the period
from the Plan Effective Date through March 31, 2004 (the end of the
Companys fiscal year), the Post-Chapter 11 Annual Target Bonus is
established at $275,000 or proportionate share thereof based on the timing of
the occurrence of the Plan Effective Date.  (C)          Benefits  The Employee shall be entitled to
participate in the incentive, vacation, savings, and retirement plans and
policies generally applicable to other senior executives of the Company, as
they may be amended from time to time (Benefits).  Notwithstanding the foregoing, the Employee shall be entitled to
at least six (6) weeks of vacation per twelve (12) month period.  The Employee shall also be entitled to
participate in all welfare benefit plans and policies generally provided by the
Company to other senior executives, as they may be amended from time to time,
including group medical, prescription, dental, disability, salary continuation,
life, accidental death and travel insurance plans (Welfare Benefits).  (D)          Share Options  (i)            In conjunction with
the execution of this Agreement, the Company has granted to Employee options to
purchase 900,000 shares of common stock of the Company (the Initial Grant)
upon the terms of a Stock option Agreement between the Company and Employee
substantially in the form of Exhibit A-1.  The Companys 1994 Stock Option Plan, as amended July 8,
2002 (the Stock Option Plan), pursuant to which the share options were
granted to Employee, is attached hereto as Exhibit A-2.  Such options and additional options to
purchase common stock of the Company which are at any time or from time to time
outstanding and unexercised are collectively referred to herein as Outstanding
Share Options.  3 
   (ii)           Any options granted
to Employee by the Company after the Initial Grant shall be on the same terms
as the options granted pursuant to a Stock Option Agreement substantially in
the form of Exhibit A-1, except as adjusted to reflect factors
associated with the later date or dates of such grant or grants.  (iii)          Employee acknowledges
that changes to the Stock Option Agreement may be required to conform the terms
of the Initial Grant and any future grants to statutory and regulatory
requirements that have been or may be enacted, including but not limited to
changes required by the Sarbanes-Oxley Act and regulations promulgated
thereunder.  (iv)          Option grants
pursuant to this Section D maybe subject to forfeiture to the extent that
such a forfeiture is required federal, state or local laws or regulations.  (E)           Restricted Shares  (i)            In conjunction with
the execution of this Agreement, the Company has issued 100,000 shares of its
common stock (the Initial Restricted Stock) to Employee pursuant to the terms
of the Restricted Stock Plan attached hereto as Exhibit B.  (ii)           Any restricted
common stock of the Company issued to Employee after the Initial Restricted
Stock shall be on the same terms as the Initial Restricted Stock, except as a
adjusted to reflect factors associated with the later date or dates of such
restricted stock issuance or issuances.  (iii)          Issuances of
restricted shares pursuant to this Section E may be subject to forfeiture
to the extent that such a forfeiture is required by applicable federal, state
or local laws or regulations.  Section 4.              Expenses/Costs.The Company shall
reimburse the Employee for all reasonable and necessary business expenses
incurred by him in the performance of his duties hereunder, in accordance with
Company policies and procedures, as they may be amended from time to time and
subject to submission of proper documentation of each expense.  Such business expenses will include the
Employees (a) living cost (including hotel or apartment rental and car
rental) incurred in the San Diego area, (b) travel cost (Business or First
Class air travel) from Ohio to the Companys offices (Commuting Cost), and
(c) miscellaneous office costs at Employees residence in Ohio and when
traveling away from such residence. 
Simultaneously with the execution of this Agreement, the Company has
advanced Twenty-Five Thousand Dollars ($25,000) to Employee for Commuting Costs
(the Advance).  Employee will advise
the Company in writing when the unused portion of the Advance is Ten Thousand
Dollars ($10,000) or less, and the Company shall promptly advance funds to
Employee to increase the Advance to $25,000, to the extent that continuing to
advance funds for commuting costs does not constitute an improper loan to the
Employee pursuant to the provisions of the Sarbanes-Oxley Act, regulations
promulgated thereunder or otherwise violate applicable federal, state or local
laws.  This process shall be repeated,
without limit, during the term of this Agreement.  If the Employee determines to move his principal residence to the
San Diego, California, area, the Company will provide the Employee with
relocation reimbursement and assistance equal to or better than the then most
favorable provisions for any employee.  4 
   Section 5.              No Set Offs.The Companys obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Employee or others; provided, however, that this provision shall
not apply to advances provided to Employee by the Company or to forfeiture of
bonuses, to the extent that such a forfeiture is required by applicable
federal, state or local laws or regulations. 
In no event shall the Employee be obligated to take any action by way of
mitigation of the amounts payable hereunder, and unless provided otherwise
hereunder, such amounts shall not be reduced whether or not the Employee
obtains other employment.  The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees
and expenses which the Employee may reasonably incur as a result of any dispute
or contest under or effort to enforce this Agreement; provided, however, that
if the Company shall prevail in such contest through a final judgment in its
favor, from and after such final judgment the Company shall not be obligated to
pay any such fees and expenses and the Employee shall reimburse the Company,
within thirty (30) days thereafter, an amount equal to the aggregate of such
fees and expenses theretofore paid by the Company.  Section 6.              Protection
of the Company.  (A)          Invention and Non-Disclosure
Agreement (INDA) 
The Employee agrees to be bound by the terms and conditions of the
Companys INDA, as modified by the Company and the Employee for purposes of
this Agreement, and attached hereto as Exhibit C.  In the event of any conflict or
inconsistency between this Agreement and the INDA, the provisions of this
Agreement shall govern.  (B)          Other Positions  The Employee has advised the Company of
entities for whom Employee currently serves as a director or in an advisory
capacity.  The Company recognizes that
the Employee may hold the aforementioned positions, and such other similar
positions (including consultant positions) as may become available, and that
nothing in this Agreement shall restrict the Employee from serving in any of
such positions for any entity, provided such entity is not materially engaged
in activities that are in competition with the Company.  Section 7.              Termination.  (A)          Automatic Termination  This Agreement shall terminate automatically
upon the death of the Employee or the Employees Disability (as defined
below).  In the event of a termination
under this Section based upon death, the Companys only obligation (except as
otherwise required by law or as set forth in any applicable Welfare Benefits
plan) shall be to continue payment of the Base Salary to the Employees family
for twelve (12) months following the termination.  In the event of a termination under this Section based upon
Disability, all Company obligations to the Employee shall terminate, except as
otherwise provided by law or as set forth in any applicable Welfare Benefits
plan.  For the purposes of this
Agreement, Disability shall mean the inability of the Employee to perform the
essential functions of his job, with or without reasonable accommodation, on a
full time basis for at least 180 days during any 240-day period or the
determination (evidenced by a written report or certificate) by a physician
selected by the Company or its insurers, and acceptable to the Employee or the
Employees legal representative, that the Employee is incapable of performing
the essential functions of his job, with or without  5 
   reasonable
accommodation, on a full time basis for at least 180 days during the
ensuing 240 days.  (B)          For Cause  This Agreement may be terminated at any time
by the Company immediately for Cause for any one of the following
reasons:  (i) the active
participation of Employee in materially gross and fraudulent conduct against
the Company; (ii) the conviction of Employee of a felony where
imprisonment is imposed or for any crime involving moral turpitude or
dishonesty against the Company, its employees or any person or entity important
to the business of the Company; (iii) any act of gross negligence, gross
insubordination or flagrant dereliction of duty by the Employee in the
performance of his duties hereunder; or (iv) gross and negligent
misconduct by the Employee which materially jeopardizes the Companys right or
ability to operate its business.  Upon
an event constituting Cause, the Company shall deliver to the Employee
written notice of such conduct setting forth in detail the basis for the
termination and the Employee shall immediately be terminated.  In the event of a termination under this
Section, Employees right to the Base Salary, Bonuses, Benefits, and Welfare
Benefits shall cease as of the effective date of the termination, unless
otherwise required by law.  (C)          Voluntary ResignationThe Employee may terminate
this Agreement at any time upon six (6) months written notice.  In the event of a termination under this
Section, Employees right to the Base Salary, earned Bonuses, if any, Benefits,
and Welfare Benefits shall cease as of the effective date of the termination,
unless otherwise required by law.  Upon
receipt of a notice of termination hereunder, the Company may, at its option,
relieve Employee of any or all of his duties and in which instance Employees
right to Base Salary and Welfare Benefits shall cease upon Employees first day
of reemployment, or upon the effective date of Employees termination as set
forth in Employees written notice (not to exceed six (6) months), whichever
occurs first.  (D)          Without Cause  During the Term, this Agreement may be
terminated by the Company without Cause at any time.  Notification by the Company to Employee
pursuant to Section 2 of this Agreement that the Company does not intend
to extend the Term shall be deemed a termination of this Agreement without
Cause as of the last day of such Term.  (E)           Good Reason  The Employee may terminate this Agreement at
any time upon thirty (30) days written notice after (i) any material
change in the Employees position or responsibilities; (ii) the Companys
decision to discontinue reimbursement of the Employees Commuting Cost; or
(iii) material breach by the Company of its obligations under this
Agreement.  For the purposes of this
Section, a material change in the Employees position or responsibilities shall
mean the assignment to the Employee of any duties inconsistent in any material
and significant respect with the Employees position, authority, duties or
responsibilities as contemplated herein, except isolated, insubstantial, or
inadvertent action not taken in bad faith, which is remedied by the Company
promptly after written notice from the Employee.  (F)           Change in ControlChange of Control means
the occurrence of any of the following events:  6 
   (i)            Any person (as
such term is used in Sections 13(d) and 14(d) of the Securities and Exchange
Act of 1934, as amended (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
a Sale of the Companys Assets (as defined below); or  (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 outstanding 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 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 means 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.  Sale of the
Companys Assets means the lease, sale or other disposition of all, but not
less than all, of the assets of the Company unless the Board declares that a
transaction involving the sale or other transfer of the securities of a
Subsidiary or the lease, sale or disposition of assets of the Company or a
Subsidiary constitutes a sale of substantially all of the Companys assets,
which determination may be made by the Board in its sole and absolute
discretion.  Further, whether a
transaction is a sale of substantially all of the assets of the Company need
not be determined with reference to the Delaware General Corporation Law or
cases decided thereunder.  By way of
example but not of limitation as to what constitutes a Sale of the Companys
Assets, the sale by the Company of all of the securities of Peregrine Remedy,
Inc. or the lease, sale or disposition of the assets of Peregrine Remedy, Inc.
(including the sale or disposition of assets related to the business of
Peregrine Remedy, Inc. but held by the Company or another of the Companys
subsidiaries) will not be a Sale of the Companys Assets unless it is so deemed
by the Board.  (G)          Termination Pursuant to Sections
7(D), (E) or (F) 
If this Agreement is terminated pursuant to Section 7(D) (Without
Cause) or, Section 7(E) (Good Reason), or because of termination of employment
(including voluntary termination) within one year following a Change of Control
for any reason other than Cause, the Employee shall be entitled to the
following:  (1)           Accrued Obligations.  A lump sum payment equal to the sum of the
unpaid (i) Base Salary through the termination date, (ii) Bonuses, if
any, then  7 
   payable in accordance with Section 3(B), provided
further that any Bonus or portion thereof which was not payable through the
termination date shall continue to be paid in accordance with the provisions of
Section 3(B), and (iii) any compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon) and any
accrued vacation pay.  (2)           Severance Payments.An amount equal to the product of (i) twenty-four (24)
and (ii) the quotient determined by dividing the Base Salary by twelve
(12).  The amount due under this section
Section 7(G)2 shall be paid in twelve (12) substantially equal monthly
installments commencing with the first day of the month following the
termination date, unless the termination arises out of a Change in Control, in
which case the amounts due hereunder shall be paid in a lump sum on the
termination date.  (3)           Welfare Benefits.Continuation of the Welfare Benefits for a period of 18
months following the termination date on terms equal to those which would have
been provided to the Employee (or his family) in accordance with the Welfare
Benefits if the Employees employment had not been terminated; provided,
however, that if the Employee becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility, and for purposes of determining eligibility
(but not the time of commencement of benefits) of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the Employee
shall be considered to have remained employed until the expiration of the
Employment Period and to have retired on the last day of such period.  (H)          Outstanding Share Options: Rights  Notwithstanding anything to the contrary in
the Stock Option Agreement, if this Agreement is terminated pursuant to this
Section 7(D) (Without Cause), 7(E) (Good Reason), or because of
termination of employment (including voluntary termination) within one year
following a Change of Control for any reason other than Cause, all Outstanding
Share Options shall vest immediately as of the time of the earlier of the
termination date or the Change in Control and shall immediately be exercisable
by the Employee and shall remain so exercisable for a period of ninety (90)
days subsequent to such termination of employment.  Notwithstanding
the above, it shall be a term and condition of any option that in the event of
notice being given to shareholders of a resolution for the winding-up of the
Company, the Option shall be capable of exercise within the period of six
months commencing on the date of such notice and the Option shall lapse at the
end of such period or on the winding up of the Company, if earlier.  If the Company is
succeeded by a successor corporation, or if any person (the Offeror) obtains
Control of the Company, then the successor corporation or Offeror may assume,
convert or replace any or all outstanding Options, which action will be binding
on all option holders.  In the
alternative, the successor corporation or Offeror may substitute equivalent
options or provide substantially similar consideration to option holders as was
provided to shareholders (after taking into account the existing provisions of
the Options).  8 
   If such successor corporation or Offeror refuses to
assume or substitute Options, such Options shall accelerate and become
exercisable in full on such conditions as the Board shall determine prior to
such succession or change of Control. 
Any Options not so replaced or exercised shall lapse and cease to be
exercisable.  (I)            Post-Termination Non-Competition
Restrictions  (i)            If the Employees
employment is terminated for reasons other than Section 7(A) (Automatic
Termination), Section 7(B) (For Cause), or Section 7(C) (Voluntary
Resignation), except in the case of voluntary termination within one year
following a Change of Control, for a period of twelve (12) months following the
termination, the Employee shall not (i) engage in competition with the
Company anywhere where the Company sells or offers its products or services; or
(ii) directly or indirectly induce or attempt to induce or otherwise
counsel, advise, solicit or encourage any person to leave the employ of the
Company (Refrain from Competing).  (ii)           Enforcement;
Remedies.  Employee acknowledges and
agrees that (a) a breach or threatened violation of any of the
non-competition restrictions set forth in Section 7(I) will result in
immediate and irreparable harm to the Company, (b) in the event of a
breach or threatened violation of any of the non-competition restrictions set
forth in Section 7(I) , a solely monetary remedy would be inadequate and
difficult to quantify, (c) the Company will be entitled, without the
necessity of proof of actual damages and without the necessity of posting any
bond, to an immediate and permanent injunction restraining and enjoining the
Employee from any actual or threatened violation of any of the non-competition
restrictions set forth in Section 7(I), (d) the foregoing relief and
remedies are in addition to any other legal and equitable relief and remedies
available to the Company at law or in equity (including monetary damages) for
any actual or threatened violation by the Employee of any of the
non-competition restrictions set forth in Section 7(I), and (e) the
Company may pursue any of the foregoing relief and remedies concurrently or
sequentially in any order at any time, and the pursuit by the Company of any of
such relief or remedies shall not be deemed an election of remedies or a waiver
of the right to pursue any other relief or remedy.  (iii)          Nothing in this
Section 7(I) shall prohibit the Employee from pursuing such other business
activities as he shall desire, except as otherwise provided herein.  Section 8.              Additional Payments.If any payments or
distributions to the Employee pursuant to this Agreement would be subject to
the excise tax imposed by Section 4999 of the Code, or any related
interest or penalties (collectively, Excise Tax), then the Employee shall be
entitled to receive an additional payment (a Gross-Up Payment) in an amount
such that after payment by the Employee of all resulting taxes, interest or
penalties, including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. 
All determinations required to be made under this Subsection shall be
made at the Companys expense by a nationally recognized certified public
accounting firm within fifteen (15) business days of the receipt of notice from
the Employee that a tax, interest or  9 
   penalty hereunder has been claimed or assessed.  Any Gross-Up Payment, as determined pursuant
to this Subsection, shall be paid by the Company to the Employee within five
(5) days of the receipt of the Accounting Firms determination.  Section 9.              Section 9.  Indemnification and Insurance.The Company and the
Employee have entered into a separate Indemnification Agreement, the form of
which is attached hereto.  Such
Indemnification Agreement provides an indemnity in favor of the Employee and an
agreement for the Employee to be covered by Directors and Officers
insurance.  The definition of Change of
Control contained in the Indemnification Agreement shall govern with respect
to the Indemnification Agreement.  The
definition of Change of Control contained in this Agreement shall govern with
respect to all matters affecting the Employee other than matters covered by the
Indemnification Agreement.  Section 10.            Miscellaneous.  (A)          Non-WaiverThe Companys failure at
any time to require the performance by the Employee of any of the terms hereof
shall in no way affect the Companys right thereafter to enforce the same, nor
shall the waiver by the Company of the breach of any term hereof be taken or
held to be a waiver of any succeeding breach.  (B)          Severability  In the event that any provision of this
Agreement conflicts with the law under which this Agreement is to be construed,
or if any such provision is held invalid or unenforceable by a court of
competent jurisdiction or an arbitrator, such provision shall be deleted from
this Agreement and the Agreement shall be construed to give full effect to the
remaining provisions thereof.  (C)          Governing Law  This Agreement shall be interpreted,
construed and governed according to the laws of the state of California,
without regard to the principle of conflicts of laws thereof.  (D)          Headings and Captions  The paragraph headings and captions
contained in this Agreement are for convenience only and shall not be construed
to define, limit or affect the scope or meaning of the provisions hereof.  (E)           Entire Agreement  This Agreement (which expressly includes and
incorporates the terms and conditions contained in the Exhibits hereto)
contains and represents the entire agreement of the parties and supersedes all
prior agreement, representations or understandings, oral or written, express or
implied with respect to the subject matter hereof.  Neither this Agreement, nor any term of Employees employment
with the Company, may be modified or amended in any way unless in a writing
signed by both the Employee and the Companys Chairman of the Board of
Directors.  No representation, promise
or inducement has been made by either party hereto that is not embodied in this
Agreement, and no party shall be bound or liable for any alleged
representation, promise or inducement not specifically set forth herein.  (F)           Assignment  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.  The Employee shall not have
any right to assign, delegate or transfer any duty or obligation to be
performed by him  10 
   hereunder to any
third party, nor to assign or transfer the right, if any, to receive payments
hereunder.  (G)          Notices  All notices required or permitted hereunder
shall be in writing and shall be deemed properly given if delivered personally
or sent by certified or registered mail, postage prepaid, return receipt
requested, or sent by telegram, telex, telecopy or similar form of
telecommunication, and shall be deemed to have been given when received.  Any such notice or communication shall be
addressed:  (1) To the Company, to
(a) Peregrine Systems, 3611 Valley Centre Drive, San Diego California
92130, Attention: Chairman of the Board; and (b) Peregrine Systems, Inc.,
3611 Valley Centre Drive, San Diego California 92130, Attention: Legal
Department; (2) To the Employee, to his home address 520 Bristol Drive,
Aurora, Ohio 44202; or to such other address as the parties shall have
furnished to one another in writing.  (H)          Authority  The execution, delivery and performance of
this Agreement by the Company has been authorized by the Companys Board of
Directors.  (I)            Survival  Notwithstanding the Termination of this
Agreement pursuant to Section 7, the provisions of Section 3(B),
Section 5, Section 6(A), Section 7(G)(2), Section 7(G)(3),
Section 7(H), Section 7(I), Section 8 and Section 9 will
survive the Termination of this Agreement and the termination of the Employees
employment with the Company and those provisions will terminate on the second
anniversary of the Termination or at such earlier time as may be agreed in
writing by the parties hereto or as may otherwise be required by law; provided,
however, the provisions of Section 3(B)(i) (MICP/Performance Bonus) will
survive until the satisfaction of any and all payment obligations of the
Company to Employee pursuant thereto.  [The remainder of this
page is intentionally left blank]  11 
   IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement, to be effective
as of the day and year first above written.  EMPLOYEE:Date:Kenneth A.
  SextonCOMPANY:PEREGRINE
  SYSTEMS, INC.Date:Kenneth A.
  Sexton