Exhibit
10.6  2003 EQUITY
INCENTIVE PLAN OF PEREGRINE
SYSTEM, INC.  
   TABLE OF CONTENTS  1.
  Purpose
  of this Plan2.
  Definitions and
  Rules of Interpretation2.1
  Definitions2.2
  Rules
  of Interpretation3.
  Shares
  Subject to this Plan; Term of this Plan3.1
  Number
  of Award Shares3.2
  Source of Shares3.3
  Term of this Plan4.
  Administration4.1
  General4.2
  Authority of
  the Board or the Committee4.3
  Scope of
  Discretion5.
  Persons Eligible to
  Receive Awards5.1
  Eligible
  Individuals5.2
  Section
  162(m) Limitation6.
  Terms and Conditions of
  Options6.1
  Price6.2
  Term6.3
  Vesting6.4
  Form and Method of Payment6.5
  Nonassignability of Options6.6
  Substitute
  Options6.7
  Repricings  i 
   7.
  Incentive
  Stock Options8.
  Stock Appreciation Rights,
  Stock Awards and Cash Awards8.1
  Stock
  Appreciation Rights8.2
  Stock Awards8.3
  Cash Awards9.
  Exercise of Awards9.1
  In General9.2
  Time of Exercise9.3
  Issuance
  of Award Shares9.4
  Termination10.
  Certain Transactions
  and Events10.1
  In General10.2
  Changes in Capital
  Structure10.3
  Fundamental
  Transactions10.4
  Changes of Control10.5
  Divestiture10.6
  Dissolution10.7
  Cut-Back to Preserve
  Benefits11.
  Automatic Option Grants
  to Non-Employee Directors and Non-Employee Director Fee Option Grants11.1
  Automatic Option Grants to
  Non-Employee Directors11.2
  Director Fee Option Grants11.3
  Certain
  Transactions and Events11.4
  Limited
  Transferability of Options12.
  Withholding
  and Tax Reporting  ii 
   12.1
  Tax Withholding Alternatives12.2
  Reporting of Dispositions13.
  Compliance
  with Law13.1
  Compliance with Applicable Law13.2
  Financial
  Information14.
  Amendment
  ox Termination of this Plan or Outstanding Awards14.1
  Amendment and Termination14.2
  Stockholder
  Approval14.3
  Effect15.
  Reserved Rights15.1
  Nonexclusively of this Plan15.2
  Unfunded Plan16.
  Special
  Arrangements Regarding Award Shares16.1
  Escrow of Stock Certificates16.2
  Repurchase Rights17.
  Beneficiaries18.
  Miscellaneous18.1
  Governing Law18.2
  Determination of Value18.3
  Reservation of Shares18.4
  Electronic Communications18.5
  Notices  iii 
   2003 EQUITY INCENTIVE PLAN OF PEREGRINE SYSTEM, INC.  1.             Purpose of this Plan  The
purpose of this Amended and Restated Peregrine Systems, Inc. 1994 Stock Option
Plan, hereinafter renamed and referred to as the 2003 Equity Incentive Plan of
Peregrine Systems, Inc. or the Plan, is to enhance the long-term stockholder
value of Peregrine Systems, Inc. by offering opportunities to eligible
individuals to participate in the growth in value of the equity of Peregrine
Systems, Inc. Notwithstanding anything herein to the contrary, the material
terms of Options granted under this Plan, including, but not limited to, the
exercise price, vesting and time period wherein which such Options may be
exercised, are not intended to differ in any material respects from such
Options granted under the this Plan prior to the Effective Date, except as may
be necessary to comply with the California Corporate Securities Law of 1968, as
amended, which effect is likely to be minimal, if any.  2.             Definitions and Rules of
Interpretation  2.1           Definitions.This
Plan uses the following defined terms:  (a)           Administratormeans
the Board, the Committee, or any officer or employee of the Company to whom the
Board or the Committee delegates authority to administer this Plan.  (b)           Affiliatemeans a parent or subsidiary (as each
is defined in Section 424 of the Code) of the Company and any other entity that
the Board or Committee designates as an Affiliate for purposes of this Plan.  (c)           Applicable Law means any and all laws of
whatever jurisdiction, within or without the United States, and the rules of
any stock exchange or quotation system on which Shares are listed or quoted,
applicable to the taking or refraining from taking of any action under this
Plan, including the administration of this Plan and the issuance or transfer of
Awards or Award Shares.  (d)           Awardmeans
a Stock Award, SAR, Cash Award, or Option granted in accordance with the terms
of this Plan. (e)           Award
Agreementmeans
the document evidencing the grant of an Award.  (f)            Award Sharesmeans Shares covered by an outstanding Award or purchased
under an Award.  (g)           Awardeemeans:
(i) a person to whom an Award has been granted, including a holder of a
Substitute Award, (ii) a person to whom an Award has been transferred in
accordance with all applicable requirements of Sections 6.5, 7(h), and 17.  2 
   (h)           Bankruptcy Courtmeans the court of competent jurisdiction that approves the
Plan of Reorganization.  (i)            Boardmeans
the Board of Directors of the Company.  (j)            Business Daymeans any day, other than a Saturday, a Sunday or a legal
holiday as defined in Rule 9006(a) of the Federal Rules of Bankruptcy
Procedure promulgated pursuant to § 28 U.S.C. § 2075.  (k)           Cash Awardmeans the right to receive cash as described in Section 8.3.  (1)           Change in Controlmeans any transaction or event that the Board specifies as
a Change in Control under Section 10.4.  (m)          Codemeans
the Internal Revenue Code of 1986.  (n)           Committeemeans a committee composed of Company Directors appointed in
accordance with the Companys charter documents and Section 4.  (o)           Companymeans Peregrine Systems, Inc., a
Delaware corporation.  (p)           Company Directormeans a Member of the
Board.  (q)           Confirmation Datemeans the date on which the clerk of the Bankruptcy Court
enters a Confirmation Order on the docket of such court.  (r)            Confirmation Ordermeans the order entered by the Bankruptcy
Court approving the Plan of Reorganization.  (s)           Consultantmeans an individual who, or an employee of any entity that, provides
bona fide services to the Company or an Affiliate, but who is not an Employee
and who is compensated for such services.  (t)            Directormeans a member of the Board of Directors of the Company or an
Affiliate.  (u)           Divestituremeans any transaction or event that the Board specifies as a
Divestiture under Section 10.5.  (v)           Domestic Relations Ordermeans a domestic relations order as
defined in, and otherwise meeting the requirements of Section 414(p) of the
Code, except that reference to a plan in that definition shall be to this
Plan.  (w)          Effective Datemeans the date upon which this Amended and Restated
Peregrine Systems, Inc. 1994 Stock Option Plan (renamed the 2003 Equity
Incentive Plan of Peregrine Systems, Inc.) shall become effective, which date
shall be the 10th Business Day after the Confirmation Date, provided, however,
that certain stockholders of the Company have approved this Plan (the Class 11
Stockholders) pursuant to the terms of the Plan of Reorganization.  3 
   (x)            Employeemeans a regular employee of the Company or an Affiliate, including
an officer or Director, who is treated as an employee in the personnel records
of the Company or an Affiliate, but not individuals who are classified by the
Company or an Affiliate as: (i) leased from or otherwise employed by a third
party, (ii) independent contractors, or (iii) intermittent or temporary
workers.  The Companys or an
Affiliates classification of an individual as an Employee (or as not an
Employee) for purposes of this Plan shall not be altered retroactively even
if that classification is changed retroactively for another purpose as a result
of an audit, litigation or otherwise. 
An Awardee shall not cease to be an Employee due to transfers between
locations of the Company, or between the Company and an Affiliate, or to any
successor to the Company or an Affiliate that assumes the Awardees Options
under Section 10.  Neither service as a
Director nor receipt of a directors fee shall be sufficient to make a Director
an Employee.  (y)           Exchange Actmeans the Securities Exchange Act of 1934.  (z)            Executivemeans, if the Company has any
class of any equity, security registered under Section 12 of the Exchange Act,
an individual who is subject to Section 16 of the Exchange Act or who is a
covered employee under Section 162(m) of the Code, in either case because of
the individuals relationship with the Company or an Affiliate.  If the Company does not have any class of
any equity security registered under Section 12 of the Exchange Act,
Executive means any (i) Director, (ii) officer elected or appointed by the
Board, or (iii) beneficial owner of more than 10% of any class of the Companys
equity securities.  (aa)         Expiration Datemeans, with respect to an Award, the date stated in the
Award Agreement as the expiration date of the Award or, if no such date is
stated in the Award Agreement, then the last day of the maximum exercise period
for the Award, disregarding the effect of an Awardees Termination or any other
event that would shorten that period.  (bb)         Fair Market Valuemeans the value of Shares as determined under Section 18.2.  (cc)         Fundamental Transactionmeans any
transaction or event described in Section 10.3.  (dd)         Grant Datemeans the date the Administrator approves the grant of an
Award.  However, if the Administrator
specifies that an Awards Grant Date is a future date or the date on which a
condition is satisfied, the Grant Date for such Award is that future date or
the date that the condition is satisfied.  (ee)         Incentive Stock Optionmeans an Option intended to qualify as an
incentive stock option under Section 422 of the Code and designated as an
Incentive Stock Option in the Award Agreement for that Option.  (ff)           Nonstatutory Optionmeans any Option other than an Incentive
Stock Option.  (gg)         Non-Employee Directormeans any person who
is a member of the Board but is not an Employee of the Company or any Affiliate
of the Company and has not  4 
   been an Employee of the Company or any Affiliate of the Company at any
time during the preceding twelve months. 
Service as a Director does not in itself constitute employment for purposes
of this definition.  (hh)         Objectively Determinable Performance Conditionshall mean a performance condition (i)
that is established (A) at the time an Award is granted or (B) no later than
the earlier of (1) 90 days after the beginning of the period of service to
which it relates, or (2) before the elapse of 25% of the period of service to
which it relates, (ii) that is uncertain of achievement at the time it is
established, and (iii) the achievement of which is determinable by a third
party with knowledge of the relevant facts. 
Examples of measures that may be used in Objectively Determinable
Performance Conditions include net order dollars, net profit dollars, net
profit growth, net revenue dollars, revenue growth, individual performance,
earnings per share, return on assets, return on equity, and other financial
objectives, objective customer satisfaction indicators and efficiency measures,
each with respect to the Company and/or an Affiliate or individual business
unit.  (ii)           Officermeans
an officer of the Company as defined in Rule 16a-l adopted under the Exchange
Act.  (jj)           Optionmeans
a right to purchase Shares of the Company granted under this Plan.  (kk)         Option Pricemeans the price payable under an Option for Shares, not
including any amount payable in respect of withholding or other taxes.  (ll)           Option Sharesmeans Shares covered by an outstanding Option or purchased
under an Option.  (mm)       Planmeans
this Amended and Restated Peregrine Systems, Inc. 1994 Stock Option Plan, hereinafter
renamed and referred to as the 2003 Equity Incentive Plan of Peregrine Systems,
Inc.  (nn)         Plan of Reorganizationmeans the Plan of Reorganization of
Peregrine Systems Inc. and Peregrine Remedy, Inc., for which the Bankruptcy
Court enters a Confirmation Order.  (oo)         Purchase Pricemeans the price payable under a Stock Award for Shares, not
including any amount payable in respect of withholding or other taxes.  (pp)         Reorganization Adjustment Percentagemeans the number of Shares referred to in
Section 5.2 multiplied by a fraction, of which (i) the numerator is 15,000,000
and (ii) the denominator is the total number of Shares issued prior to the
Effective Date, or such number of Shares otherwise deemed appropriate by the
Committee, with the advice of the Companys counsel, to ensure that the
Reorganization Adjustment Percentage complies with applicable tax and
securities laws.  (qq)         Rule 16b-3means Rule 16b-3 adopted under
Section 16(b) of the Exchange Act.  5 
   (rr)           SARor Stock
Appreciation Rightmeans a right to receive cash based on a
change in the Fair Market Value of a specific number of Shares pursuant to an
Award Agreement, as described in Section 8.1.  (ss)         Securities
Actmeans the Securities Act of 1933.  (tt)           Sharemeans a share of the common stock of the
Company or other securities substituted for the common stock under Section 10.  (uu)         Stock
Awardmeans an offer by the Company to sell shares subject to
certain restrictions pursuant to the Award Agreement as described in Section
8.2.  (vv)         Substitute
Awardmeans a Substitute Option, Substitute SAR or Substitute
Stock Award granted in accordance with the terms of this Plan.  (ww)       Substitute
Optionmeans an Option granted in substitution for, or upon the
conversion of, an option granted by another entity to purchase equity
securities in the granting entity.  (xx)          Substitute
SARmeans a SAR granted in substitution for, or upon the
conversion of, a stock appreciation right granted by another entity with
respect to equity securities in the granting entity.  (yy)         Substitute
Stock Awardmeans a Stock Award granted in substitution for, or
upon the conversion of, a stock award granted by another entity to purchase
equity securities in the granting entity.  (zz)          Terminationmeans that the Awardee has ceased to be, with or without any
cause or reason, an Employee, Director or Consultant.  However, unless so determined by the Administrator, or otherwise
provided in this Plan, Termination shall not include a change in status from
an Employee, Consultant or Director to another such status.  An event that causes an Affiliate to cease
being an Affiliate shall be treated as the Termination of that Affiliates
Employees, Directors, and Consultants.  2.2           Rules of Interpretation.Any reference to a Section,
without more, is to a Section of this Plan. 
Captions and titles are used for convenience in this Plan and shall not,
by themselves, determine the meaning of this Plan.  Except when otherwise indicated by the context, the singular
includes the plural and vice versa.  Any
reference to a statute is also a reference to the applicable rules and
regulations adopted under that statute. 
Any reference to a statute, rule or regulation, or to a section of a
statute, rule or regulation, is a reference to that statute, rule, regulation,
or section as amended from time to time, both before and after the Effective
Date of this Plan and including any successor provisions.  3.             Shares Subject to this Plan; Term of this
Plan  3.1           Number of Award Shares.Subject
to adjustment under Section 10, the maximum number of Shares that may be issued
under this Plan after the Effective Date is 2,650,000 which shall not be
increased or decreased by such number of Shares forfeited prior to the
Effective Date.  The maximum number of
Shares referred to in the preceding sentence shall be (i) decreased by such
number of Shares subject to outstanding grants under  6 
    this Plan on the Effective Date (adjusted to
take into account the decrease in the number of Shares as a result of the Plan
of Reorganization), provided, however, that the grant of such awards was made
on or after July 8, 2002, but before the Effective Date and (ii) increased by
any Shares referred to in Subsection 3.1(i) that are subsequently forfeited or
repurchased by the Company or that expire or become unexercisable for any
reason.  The maximum number of Shares shall
be cumulatively increased on January 1 of each year, beginning January 1, 2005
and each January 1 thereafter for 10 years, by a number of Shares equal to the
least of (a) 4% of the number of Shares issued and outstanding on the
immediately preceding December 31, (b) 267,000 Shares, and (c) a number of
Shares set by the Board.  When an Award
is granted, the maximum number of Shares that may be issued under this Plan
shall be reduced by the number of Shares covered by that Award.  However, if an Award later terminates or
expires without having been exercised in full, the maximum number of shares
that may be issued under this Plan shall be increased by the number of Shares
that were covered by, but not purchased under, that Award.  By contrast, the repurchase of Shares by the
Company shall not increase the maximum number of Shares that may be issued
under this Plan.  3.2           Source of Shares.Award
Shares may be: (a) Shares that have never been issued, (b) Shares that have
been issued but are no longer outstanding, or (c) Shares that are outstanding
and are acquired to discharge the Companys obligation to deliver Award Shares.  3.3           Term
of this Plan  (a)           This Plan shall be effective on, and
Awards may be granted under this Plan after, the date it has been both adopted
by the Board and approved by the Companys stockholders.  (b)           Subject to the provisions of Section
14, Awards may be granted under this Plan for a period often years from the
date on which the stockholders approve this Plan (or such earlier date as may
be required by Applicable Law).  4.             Administration  4.1           General  (a)           The Board shall have ultimate responsibility for
administering this Plan.  The Board may
delegate certain of its responsibilities to a Committee, which shall consist of
at least two members of the Board.  The
Board or the Committee may further delegate its responsibilities to any
Employee of the Company or any Affiliate. 
Where this Plan specifies that an action is to be taken or a
determination made by the Board, only the Board may take that action or make
that determination.  Where this Plan
specifies that an action is to be taken or a determination made by the
Committee, only the Committee may take that action or make that
determination.  Where this Plan
references the Administrator, the action may be taken or determination made
by the Board, the Committee, or other Administrator.  However, only the Board or the Committee may approve grants of
Awards to Executives, and an Administrator other than the Board or the
Committee may grant Awards only within guidelines established by the Board or
Committee.  Moreover, all actions and
determinations by any Administrator are subject to the provisions of this Plan.  7 
   (b)           So long as the Company has registered an outstanding a
class of equity securities under Section 12 of the Exchange Act, the Committee
shall consist of Company Directors who are Non-Employee Directors as defined
in Rule 16b-3 and, after the expiration of any transition period permitted by
Treasury Regulations Section 1.162 27(h)(3), who are outside directors as
defined in Section 162(m) of the Code.  4.2           Authority of the Board or the Committee.Subject
to the other provisions of this Plan, the Board or the Committee shall have the
authority to:  (a)           grant Awards, including Substitute Awards;  (b)           determine the Fair Market Value of Shares;  (c)           determine the Option Price and the Purchase Price of
Awards;  (d)           select the Awardees;  (e)           determine the times Awards are granted;  (f)            determine the number of Shares subject to each Award;  (g)           determine the methods of payment that may be used to
purchase Award Shares;  (h)           determine the methods of payment that may be used to
satisfy withholding tax obligations;  (i)            determine the other terms of each Award, including but not
limited to the time or times at which Awards may be exercised, whether and
under what conditions an Award is assignable, and whether an Option is a
Nonstatutory Option or an Incentive Stock Option;  (j)            modify or amend any Award;  (k)           authorize any person to sign any Award Agreement or other
document related to this Plan on behalf of the Company;  (1)           determine the form of any Award Agreement or other
document related to this Plan, and whether that document, including signatures,
may be in electronic form;  (m)          interpret this Plan and any Award Agreement or document
related to this Plan;  (n)           correct any defect, remedy any omission, or reconcile any
inconsistency in this Plan, any Award Agreement or any other document related
to this Plan;  (o)           adopt, amend, and revoke rules and regulations under this
Plan, including rules and regulations relating to sub-plans and Plan addenda;  8 
   (p)           adopt, amend, and revoke special rules and procedures
which may be inconsistent with the terms of this Plan, set forth (if the
Administrator so chooses) in sub-plans regarding (for example) the operation
and administration of this Plan and the terms of Awards, if and to the extent
necessary or useful to accommodate non-U.S. 
Applicable Laws and practices as they apply to Awards and Award Shares
held by, or granted or issued to, persons working or resident outside of the
United States or employed by Affiliates incorporated outside the United States;  (q)           determine whether a transaction or event should be treated
as a Change in Control, a Divestiture or neither;  (r)            determine the effect of a Fundamental Transaction and, if
the Board determines that a transaction or event should be treated as a Change
in Control or a Divestiture, then the effect of that Change in Control or
Divestiture; and  (s)           make all other determinations the Administrator deems
necessary or advisable for the administration of this Plan.  4.3           Scope of Discretion.Subject
to the provisions of this Section 4.3, on all matters for which this Plan
confers the authority, right or power on the Board, the Committee, or other
Administrator to make decisions, that body may make those decisions in its sole
and absolute discretion.  Those
decisions will be final, binding and conclusive.  In making its decisions, the Board, Committee or other
Administrator need not treat all persons eligible to receive Awards, all
Awardees, all Awards or all Award Shares the same way.  Notwithstanding anything herein to the
contrary, and except as provided in Section 14.3, the discretion of the Board,
Committee or other Administrator is subject to the specific provisions and
specific limitations of this Plan, as well as all rights conferred on specific
Awardees by Award Agreements and other agreements.  5.             Persons Eligible to Receive Awards  5.1           Eligible Individuals.Awards (including Substitute
Awards) may be granted to, and only to, Employees, Directors and Consultants,
including to prospective Employees, Directors and Consultants conditioned on
the beginning of their service for the Company or an Affiliate.  However, Incentive Stock Options may only be
granted to Employees, as provided in Section 7(g).  5.2           Section 162(m) Limitation.Subject to the provisions of this
Section 5.2, for so long as the Company is a publicly held corporation within
the meaning of Section 162(m) of the Code: (i) no Employee may be granted one
or more Options within any fiscal year of the Company under this Plan to
purchase more than 900,000 Shares under Options, as adjusted by the
Reorganization Adjustment Percentage on the Effective Date, and subject to
further adjustment pursuant to Section 10, (ii) Options may be granted to an
Executive only by the Committee (and, notwithstanding anything to the contrary
in Section 4.1(a), not by the Board). 
If an Option is cancelled without being exercised or if the Option Price
of an Option is reduced, that cancelled or repriced Option shall continue to be
counted against the limit on Options that may be granted to any individual
under this Section 5.2.  9 
   6.             Terms and Conditions of Options  The following rules apply to all Options:  6.1Price.No
Option, whether or not intended as qualified incentive based compensation within
the meaning of Section 162(m) of the Code, may have an Option Price less than
100% of the Fair Market Value of the Shares on the Grant Date.  If an Option is granted to a person who, at
the Grant Date, owns more than 10% of the voting power of the Company or any
corporate Affiliate, that Option shall have an Option Price equal to or greater
than 110% of the Fair Market Value of the Shares on the Grant Date.  Notwithstanding anything herein to the
contrary, Options may be granted with an Option Price of less than 100% of the
Fair Market Value on the Grant Date pursuant to a Fundamental Transaction,
Change in Control or other corporate transaction.  In no event will the Option Price of any Option be less than the
par value of the Shares issuable under the Option if that is required by
Applicable Law.  The Option Price of an
Incentive Stock Option shall be subject to Section 7(f).  6.2           Term.No
Option shall be exercisable after its Expiration Date.  No Option may have an Expiration Date that
is more than ten years after its Grant Date. 
Additional provisions regarding the term of Incentive Stock Options are
provided in Sections 7(a) and 7(e).  6.3           Vesting.Options
shall be exercisable: (a) on the Grant Date, or (b) in accordance with a
schedule related to the Grant Date, the date the Optionees directorship,
employment or consultancy begins, or a different date specified in the Option
Agreement.  Notwithstanding the
foregoing, to the extent required by Applicable Law, Options shall be
exercisable at the rate of at least 20% per year over 5 years from the date the
option is granted, subject to reasonable conditions such as continued
employment.  Additional provisions
regarding the vesting of Incentive Stock Options are provided in Section
7(c).  No Option granted to an
individual who is subject to the overtime pay provisions of the Fair Labor
Standards Act may be exercised before the expiration of six months after the
Grant Date.  6.4           Form and Method of Payment  (a)           The Administrator shall determine the acceptable form and
method of payment for exercising an Option.  (b)           Acceptable forms of payment for all Option Shares are
cash, check or wire transfer, denominated in U.S. dollars except as specified
by the Administrator for non-U.S. Employees or non-U.S. sub-plans.  (c)           In addition, the Administrator may permit payment to be
made by any of the following methods:  (i)              other Shares, or
the designation of other Shares, which (A) are mature shares for purposes of
avoiding variable accounting treatment under generally accepted accounting
principles (generally mature shares are those that have been owned by the
Optionee for more than six months on the date of surrender), and (B) have a
Fair Market  10 
   Value on the date of surrender equal to the
Option Price of the Shares as to which the Option is being exercised;  (ii)           provided that a public market exists for the Shares,
consideration received by the Company under a procedure under which a licensed
broker-dealer advances funds on behalf of an Optionee or sells Option Shares on
behalf of an Optionee (a Cashless
Exercise Procedure),provided that if the Company extends or
arranges for the extension of credit to an Optionee under any Cashless Exercise
Procedure, no Officer or Director may participate in that Cashless Exercise
Procedure;  (iii)          cancellation of any debt owed by the Company or any
Affiliate to the Optionee by the Company including without limitation waiver of
compensation due or accrued for services previously rendered to the Company;
and  (iv)          any combination of the methods of payment permitted by any
paragraph of this Section 6.4.  (d)           The Administrator may also permit any other form or method
of payment for Option Shares permitted by Applicable Law.  6.5           Nonassignability of Options.Except
as determined by the Administrator, no Option shall be assignable or otherwise
transferable by the Optionee except by will or by the laws of descent and
distribution.  However, Options may be
transferred and exercised in accordance with a Domestic Relations Order and may
be exercised by a guardian or conservator appointed to act for the
Optionee.  Incentive Stock Options may
only be assigned in compliance with Section 7(h).  6.6           Substitute Options.The Board may cause the Company
to grant Substitute Options in connection with the acquisition by the Company
or an Affiliate of equity securities of any entity (including by merger, tender
offer, or other similar transaction) or of all or a portion of the assets of
any entity.  Any such substitution shall
be effective on the effective date of the acquisition.  Substitute Options may be Nonstatutory
Options or Incentive Stock Options. 
Unless and to the extent specified otherwise by the Board, Substitute
Options shall have the same terms and conditions as the options they replace,
except that (subject to the provisions of Section 10) Substitute Options shall
be Options to purchase Shares rather than equity securities of the granting
entity and shall have an Option Price determined by the Board.  6.7           Repricings.Other
than in accordance with Section 10, Options may not be repriced without
stockholder approval if the effect of the repricing would be to reduce the
effective Option Price of the Options.  7.             Incentive Stock Options  The following rules apply only to Incentive Stock Options and only to
the extent these rules are more restrictive than the rules that would otherwise
apply under this Plan.  With the consent
of the Optionee, or where this Plan provides that an action may be taken
notwithstanding any other provision of this Plan, the Administrator may deviate
from the requirements of this Section, notwithstanding that any Incentive Stock
Option modified by the Administrator will thereafter be treated as a
Nonstatutory Option.  11 
   (a)           The Expiration Date of an Incentive Stock Option shall not
be later than ten years from its Grant Date, with the result that no Incentive
Stock Option may be exercised after the expiration of ten years from its Grant
Date.  (b)           No Incentive Stock Option may be granted more than ten
years from the date this Plan was approved by the Board.  (c)           Options intended to be incentive stock options under
Section 422 of the Code that are granted to any single Optionee under all
incentive stock option plans of the Company and its Affiliates, including
incentive stock options granted under this Plan, may not vest at a rate of more
than $100,000 in Fair Market Value of stock (measured on the grant dates of the
options) during any calendar year.  For
this purpose, an option vests with respect to a given share of stock the first
time its holder may purchase that share, notwithstanding any right of the
Company to repurchase that share. 
Unless the administrator of that option plan specifies otherwise in the
related agreement governing the option, this vesting limitation shall be
applied by, to the extent necessary to satisfy this $100,000 rule, treating
certain stock options that were intended to be incentive stock options under
Section 422 of the Code as Nonstatutory Options.  The stock options or portions of stock options to be reclassified
as Nonstatutory Options are those with the highest option prices, whether
granted under this Plan or any other equity compensation plan of the Company or
any Affiliate that permits that treatment. 
This Section 7(c) shall not cause an Incentive Stock Option to vest
before its original vesting date or cause an Incentive Stock Option that has
already vested to cease to be vested.  (d)           In order for an Inceptive Stock Option to be exercised for
any form of payment other than those described in Section 6.4(b), that right
must be stated at the time of grant in the Option Agreement relating to that
Incentive Stock Option.  (e)           Any Incentive Stock Option granted to a Ten Percent
Stockholder, must have an Expiration Date that is not later than five years
from its Grant Date, with the result that no such Option may be exercised after
the expiration of five years from the Grant Date.  A Ten Percent
Stockholderis any person who, directly or by attribution under
Section 424(d) of the Code, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or of any
Affiliate on the Grant Date.  (f)            The Option Price of an Incentive Stock Option shall never
be less than the Fair Market Value of the Shares at the Grant Date.  The Option Price for the Shares covered by
an Incentive Stock Option granted to a Ten Percent Stockholder shall never be
less than 110% of the Fair Market Value of the Shares at the Grant Date.  (g)           Incentive Stock Options may be granted only to
Employees.  If an Optionee changes
status from an Employee to a Consultant, that Optionees Incentive Stock
Options become Nonstatutory Options if not exercised within the time period
described in Section 7(i) (determined by treating the change in status as a
Termination solely for the purposes of this Section 7(g)).  (h)            No rights under an Incentive Stock Option may be
transferred by the Optionee, other than by will or the laws of descent and
distribution.  During the life of the  12 
   Optionee, an Incentive Stock Option may be
exercised only by the Optionee.  The
Companys compliance with a Domestic Relations Order, or the exercise of an
Incentive Stock Option by a guardian or conservator appointed to act for the
Optionee, shall not violate this Section 7(h).  (i)            An Incentive Stock Option shall be treated as a
Nonstatutory Option if it remains exercisable after, and is not exercised
within, the three month period beginning with the Optionees Termination for
any reason other than the Optionees death or disability (as defined in Section
22(e) of the Code).   In the case of
Termination due to death, an Incentive Stock Option shall continue to be
treated as an Incentive Stock Option if it remains exercisable after, and is
not exercised within, the three month period after the Optionees Termination
provided it is exercised before the Expiration Date.  In the case of Termination due to disability, an Incentive Stock
Option shall be treated as a Nonstatutory Option if it remains exercisable
after, and is not exercised within, one year after the Optionees Termination.  (j)             An Incentive Stock Option may only be modified by the
Board.  8.             Stock
Appreciation Rights, Stock
Awards and Cash Awards  8.1           Stock AppreciationRights  The following rules apply to SARs:  (a)           General.SARs may be granted either
alone, in addition to, or in tandem with other Awards granted under this
Plan.  The Administrator may grant SARs
to eligible participants subject to terms and conditions not inconsistent with
this Plan and determined by the Administrator. 
The specific terms and conditions applicable to the Awardee shall be
provided for in the Award Agreement. 
SARs shall be exercisable, in whole or in part, at such tunes as the
Administrator shall specify in the Award Agreement.  (b)           Exercise
of SARs.Upon the
exercise of an SAR, in whole or in part, an Awardee shall be entitled to a
payment in an amount equal to the excess of the Fair Market Value of a fixed
number of Shares covered by the exercised portion of the SAR on the date of
exercise, over the Fair Market Value of the Shares covered by the exercised
portion of the SAR on the Grant Date. 
The amount due to the Awardee upon the exercise of a SAR shall be paid
in cash or Shares over the period or periods specified in the Award
Agreement.  An Award Agreement may place
limits on the amount that may be paid over any specified period or periods upon
the exercise of a SAR, on an aggregate basis or as to any Awardee.  A SAR shall be considered exercised when the
Company receives written notice of exercise in accordance with the terms of the
Award Agreement from the person entitled to exercise the SAR.  If a SAR has been granted in tandem with an
Option, upon the exercise of the SAR, the number of shares that may be
purchased pursuant to the Option shall be reduced by the number of shares with
respect to which the SAR is exercised.  (c)Nonassignability of SARs.Except as determined by theAdministrator, no SAR shall be assignable or
otherwise transferable by the Awardee except by will or by the laws of descent
and distribution.  Notwithstanding
anything herein to the  13 
   contrary,
SARs may be transferred and exercised in accordance with a Domestic Relations
Order.  (d)           Substitute
SARs.The Board may
cause the Company to grant Substitute SARs in connection with the acquisition
by the Company or an Affiliate of equity securities of any entity (including by
merger) or all or a portion of the assets of any entity.  Any such substitution shall be effective on
the effective date of the acquisition. 
Unless and to the extent specified otherwise by the Board, Substitute
SARs shall have the same terms and conditions as the options they replace,
except that (subject to the provisions of Section 10) Substitute SARs shall be
exercisable with respect to the Fair Market Value of Shares rather than equity
securities of the granting entity and shall be on terms that, as determined by
the Board in its sole and absolute discretion, properly reflects the
substitution.  8.2           Stock
Awards  The following rules apply to all Stock Awards:  (a)           General.The specific terms and
conditions of a Stock Award applicable to the Awardee shall be provided for in
the Award Agreement.  The Award
Agreement shall state the number of Shares that the Awardee shall be entitled
to receive or purchase, the terms and conditions on which the Shares shall
vest, the price to be paid and, if applicable, the time within which the
Awardee must accept such offer.  The
offer shall be accepted by execution of the Award Agreement.  The Administrator may require that all
Shares subject to a right of repurchase or risk of forfeiture be held in escrow
until such repurchase right or risk of forfeiture lapses.  (b)           Right
of Repurchase.If so
provided in the Award Agreement, Award Shares acquired pursuant to a Stock
Award may be subject to repurchase by the Company or an Affiliate if not vested
in accordance with the Award Agreement.  (c)           Form
of Payment.The
Administrator shall determine the acceptable form and method of payment for
exercising a Stock Award.  Acceptable
forms of payment for all Award Shares are cash, check or wire transfer,
denominated in U.S.  dollars except as
specified by the Administrator for non-U.S. 
Employees or non-U.S. subplans. 
In addition, the Administrator may permit payment to be made by any of
the methods permitted with respect to the exercise of Options pursuant to
Section 6.4.  (d)           Nonassignability
of Stock Awards.Except
as determined by the Administrator, no Stock Award shall be assignable or
otherwise transferable by the Awardee except by will or by the laws of descent
and distribution.  Notwithstanding
anything to the contrary herein, Stock Awards may be transferred and exercised
in accordance with a Domestic Relations Order.  (e)           Substitute
Stock Award.The Board
may cause the Company to grant Substitute Stock Awards in connection with the
acquisition by the Company or an Affiliate of equity securities of any entity
(including by merger) or all or a portion of the assets of any entity.  Unless and to the extent specified otherwise
by the Board, Substitute Stock Awards shall have the same terms and conditions
as the stock awards they replace, except that (subject to the provisions of
Section 10) Substitute Stock Awards shall be Stock Awards to  14 
   purchase Shares rather than equity securities
of the granting entity and shall have a Purchase Price that, as determined by
the Board in its sole and absolute discretion, properly reflects the
substitution.  Any such Substituted
Stock Award shall be effective on the effective date of the acquisition.  8.3           Cash
Awards  The following rules apply to all Cash Awards:  Cash Awards may be granted either alone, in addition to, or in tandem
with other Awards granted under this Plan. 
After the Administrator determines that it will offer a Cash Award, it
shall advise the Awardee, by means of an Award Agreement, of the terms,
conditions and restrictions related to the Cash Award.  9.             Exercise of Awards  9.1           In
General.An Award shall be exercisable in
accordance with this Plan and the Award Agreement under which it is granted.  9.2           Time
of Exercise.Options and Stock Awards shall be
considered exercised when the Company receives: (a) written notice of exercise
from the person entitled to exercise the Option or Stock Award, (b) full
payment, or provision for payment, in a form and method approved by the
Administrator, for the Shares for which the Option or Stock Award is being
exercised, and (c) with respect to Nonstatutory Options, payment, or provision
for payment, in a form approved by the Administrator, of all applicable
withholding taxes due upon exercise.  An
Award may not be exercised for a fraction of a Share.  SARs shall be considered exercised when the Company receives
written notice of the exercise from the person entitled to exercise the SAR.  9.3Issuance of Award Shares.The Company shall issue Award
Shares in the name of the person properly exercising the Award.  If the Awardee is that person and so
requests, the Award Shares shall be issued in the name of the Awardee and the
Awardees spouse.  The Company shall
endeavor to issue Award Shares promptly after an Award is exercised or after
the Grant Date of a Stock Award, as applicable.  Until Award Shares are actually issued, as evidenced by the
appropriate entry on the stock register of the Company or its transfer agent,
the Awardee will not have the rights of a stockholder with respect to those
Award Shares, even though the Awardee has completed all the steps necessary to
exercise the Award.  No adjustment shall
be made for any dividend, distribution, or other right for which the record
date precedes the date the Award Shares are issued, except as provided in
Section 10.  9.4           Termination  (a)In General.Except
as provided in an Award Agreement or in writing by the Board or Committee,
including in an Award Agreement, and as otherwise provided in Sections 9.4(b),
(c), (d) and (e) after an Awardees Termination, the Awardees Awards shall be
exercisable to the extent (but only to the extent) they are vested on the date
of that Termination and only during the three months after the Termination, but
in no event after the Expiration Date. 
To the extent the Awardee does not exercise an Award within the time
specified for exercise, the Award shall automatically terminate.  15 
   (b)           Leaves
of Absence.Unless
otherwise provided in the Award Agreement, no Award may be exercised more than
three months after the beginning of a leave of absence, other than a personal
or medical leave approved by an authorized representative of the Company with
employment guaranteed upon return. 
Awards shall not continue to vest during a leave of absence, unless
otherwise determined by the Administrator with respect to an approved personal
or medical leave with employment guaranteed upon return.  (c)           Death
or Disability.Unless
otherwise provided by the Board or Committee, if an Awardees Termination is
due to disability (as determined by the Administrator with respect to all
Awards other than Incentive Stock Options and as defined by Section 22(e) of
the Code with respect to Incentive Stock Options), all Awards of that Awardee
to the extent exercisable at the date of that Termination may be exercised for
six months after that Termination, but in no event after the Expiration
Date.  In the case of Termination due to
disability, if a guardian or conservator has been appointed to act for the
Awardee and been granted this authority as part of that appointment, that
guardian or conservator may exercise the Award on behalf of the Awardee.  Unless otherwise provided by the Board or
Committee, if an Awardees Termination is due to death, all Awards of that
Awardee to the extent exercisable at the date of that Termination may be
exercised for one year after that Termination, but in no event after the
Expiration Date.  In the case of
Termination due to death, an Award may be exercised as provided in Section
17.  Death or disability occurring after
an Awardees Termination shall not cause the Termination to be treated as
having occurred due to death or disability. 
To the extent an Award is not so exercised within the time specified for
its exercise, the Award shall automatically terminate.  (d)           Divestiture.If an Awardees Termination
is due to a Divestiture, the Board may take any one or more of the actions
described in Section 10.3 or 10.4 with respect to the Awardees Awards.  (e)           Termination
for Cause.In the
discretion of the Board or Committee, which may be exercised on the date of
grant, or at a date later in time, if an Awardees Termination is due to Cause,
all of the Awardees Awards, other than options, shall automatically terminate
and cease to be exercisable at the time of Termination and the Board or
Committee may rescind any and all exercises of Awards, other than Options, by
the Awardee that occurred after the first event constituting Cause.  Cause means employment related dishonesty,
fraud, misconduct or disclosure or misuse of confidential information, or other
employment related conduct that is likely to cause significant injury to the
Company, an Affiliate, or any of their respective employees, officers or
directors (including, without limitation, commission of a felony or similar
offense), in each case as determined by the Board or Committee.  Cause shall not require that a civil
judgment or criminal conviction have been entered against or guilty plea shall
have been made by the Awardee regarding any of the matters referred to in the
previous sentence.  Accordingly, the
Board or Committee shall be entitled to determine Cause based on the Board or
Committees good faith belief.  If the
Awardee is criminally charged with a felony or similar offense, that shall be a
sufficient, but not a necessary, basis for such a belief.  (f)            Board
or Committee Discretion.Notwithstanding
the provisions of Section 9.4(a)-(e), the Board or Committee shall have
complete discretion, exercisable either at the time an Award is granted at any
time while the Award remains outstanding, to:  16 
   (i)            extend the period of time for which the Award is to
remain exercisable, following the Awardees Termination, from the limited
exercise period otherwise in effect for that Award to such greater period of
time as the Board or Committee shall deem appropriate, but in no event beyond
the Expiration Date; and/or  (ii)           permit the Award to be exercised, during the applicable
post-Termination exercise period, not only with respect to the number of vested
Shares for which such Award may be exercisable at the time of the Awardees
Termination but also with respect to one or more additional installments in
which the Awardee would have vested had the Awardee not been subject to
Termination.  (g)           Consulting
or Employment Relationship.Nothing
in this Plan or in any Award Agreement, and no Award or the fact that Award
Shares remain subject to repurchase rights, shall: (A) interfere with or limit
the right of the Company or any Affiliate to terminate the employment or
consultancy of any Awardee at any time, whether with or without cause or
reason, and with or without the payment of severance or any other compensation
or payment, or (B) interfere with the application of any provision in any of
the Companys or any Affiliates charter documents or Applicable Law relating
to the election, appointment, term of office, or removal of a Director.  10.          Certain
Transactions and Events  10.1         In General.Except
as provided in this Section 10, no change in the capital structure of the
Company, merger, sale or other disposition of assets or a subsidiary, change in
control, issuance by the Company of shares of any class of securities or
securities convertible into shares of any class of securities, exchange or
conversion of securities, or other transaction or event shall require or be the
occasion for any adjustments of the type described in this Section 10.  Additional provisions with respect to the
foregoing transactions are set forth in Section 143.  10.2         Changes in Capital Structure.In the event of any
stock split, reverse stock split, recapitalization, combination or
reclassification of stock, stock dividend, spin-off, or similar change to the
capital structure of the Company (not including a Fundamental Transaction or
Change in Control), the Board shall make whatever adjustments it concludes are
appropriate to: (a) the number and type of Awards that may be granted under
this Plan, (b) the number and type of Options that may be granted to any
individual under this Plan, (c) the terms of any SAR, (d) the Purchase Price of
any Stock Award, (e) the Option Price and number and class of securities
issuable under each outstanding Option, (f) the repurchase price of any
securities substituted for Award Shares that are subject to repurchase rights,
and (g) the Objectively Determinable Performance Conditions, if
applicable.  The specific adjustments
shall be determined by the Board. 
Unless the Board specifies otherwise, any securities issuable as a
result of any such adjustment shall be rounded down to the next lower whole
security.  The Board need not adopt the
same rules for each Award or each Awardee.  10.3         Fundamental Transactions.Except for grants to Non-Employee
Directors pursuant to Section 11.1 herein, if the Company merges with another
entity in a transaction in which the Company is not the surviving entity or if,
as a result of any other transaction or event, other securities are substituted
for the Shares or Shares may no longer be issued  17 
   pursuant to Awards (each a Fundamental Transaction),then,
notwithstanding any other provision of this Plan, the Board shall do one or
more of the following contingent on the closing or completion of the
Fundamental Transaction: (a) arrange for the substitution, in exchange for
Awards, of options to purchase equity securities other than Shares (including,
if appropriate, equity securities of an entity other than the Company) (an
assumption of Awards) on such terms and conditions as the Board determines are
appropriate, (b) accelerate the vesting and termination of outstanding Awards,
in whole or in part, so that Awards can be exercised before or otherwise in
connection with the closing or completion of the Fundamental Transaction or
event but then terminate, (c) cancel or arrange for the cancellation of Awards
in exchange for cash payments to Awardees, and (d) either arrange for any
restrictions in favor of the Company with respect to Award Shares to apply to
the securities issued in substitution for Shares or terminate such restrictions
on Award Shares.  The Board need not
adopt the same rules for each Award or each Awardee.  10.4         Changes
of Control.The Board may also, but need not,
specify that other transactions or events constitute a Change in Control.The
Board may do that either before or after the transaction or event occurs.  Examples of transactions or events that the
Board may treat as Changes of Control are: (a) the Company or an Affiliate is a
party to a merger, consolidation, amalgamation, or other transaction in which
the beneficial stockholders of the Company, immediately before the transaction,
beneficially own securities representing 50% or less of the total combined
voting power or value of the Company immediately after the transaction, (b) any
person or entity, including a group as contemplated by Section 13(d)(3) of
the Exchange Act, acquires securities holding 30% or more of the total combined
voting power or value of the Company, or (c) as a result of or in connection
with a contested election of Company Directors, the persons who were Company
Directors immediately before the election cease to constitute a majority of the
Board.  In connection with a Change in
Control, notwithstanding any other provision of this Plan, the Board may, but
need not, take any one or more of the actions described in Section 10.3.  In addition, the Board may extend the date
for the exercise of Awards (but not beyond their original Expiration Date).  The Board need not adopt the same rules for
each Award or each Awardee.  10.5         Divestiture.If
the Company or an Affiliate sells or otherwise transfers equity securities of
an Affiliate to a person or entity other than the Company or an Affiliate, or
leases, exchanges or transfers all or any portion of its assets to such a
person or entity, then the Board may specify that such transaction or event
constitutes a Divestiture.In connection with a
Divestiture, notwithstanding any other provision of this Plan, the Board may,
but need not, take one or more of the actions described in Section 10.3 or 10.4
with respect to Awards or Award Shares held by, for example, Employees,
Directors or Consultants for whom that transaction or event results in a
Termination.  The Board need not adopt
the same rules for each Award or each Awardee.  10.6         Dissolution.If
the Company adopts a plan of dissolution, the Board may cause Awards to be
fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the
Companys repurchase rights on Award Shares to lapse upon completion of the
dissolution.  The Board need not adopt
the same rules for each Award or each Awardee. 
Notwithstanding anything herein to the contrary, in the event of a
dissolution of the Company, to the extent not  18 
   exercised before the earlier of the
completion of the dissolution or their Expiration Date, Awards shall terminate
immediately prior to the dissolution.  10.7        Cut-Back to Preserve Benefits.If
the Administrator determines that the net after tax amount to be realized by
any Awardee, taking into account any accelerated vesting, termination of
repurchase rights, or cash payments to that Awardee in connection with any
transaction or event set forth in this Section 10 would be greater if one or
more of those steps were not taken or payments were not made with respect to
that Awardees Awards or Award Shares, then, at the election of the Awardee, to
such extent, one or more of those steps shall not be taken and payments shall
not be made.  11.          Automatic Option Grants to Non-Employee
Directors and Non-Employee Director Fee Option Grants  11.1         Automatic OptionGrants to Non-Employee Directors  (a)           Grant
Dates.Option grants to
Non-Employee Directors shall be made on the dates specified below:  (i)            Each Non-Employee Director who is then serving as a
member of the Board on the Effective Date (the Current Directors)and each
Non-Employee Director who is first elected or appointed to the Board at any
time after the Effective Date, shall automatically be granted, on the Effective
Date or the date of such initial election or appointment, respectively, a
Nonstatutory Option to purchase an amount of Shares to be determined by the
Board (the Initial
Grant).  (ii)           Commencing in 2004, on the date of each annual
stockholders meeting, each individual who is to continue to serve as a
Non-Employee Director shall automatically be granted a Nonstatutory Option to
purchase an amount of Shares determined by the Board (the Annual Grant),provided,
however, that such individual has served as a Non-Employee Director for, at
least six (6) months.  (b)Exercise Price.  (i)            The Option Price shall be equal to
one hundred percent (100%) of the Fair Market Value of the Shares on the Option
grant date.  (ii)           The Option Price shall be payable in
one or more of the alternative forms authorized pursuant to Section 6.4.  Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the Option Price must be
made on the date of exercise.  (c)           Option
Term.Each option shall
have a term of ten (10) years measured from the Option grant date.  (d)Exercise and Vesting of Options.Except as otherwise
determined by the whole Board, the Shares underlying each Option granted
pursuant to Section 11.1 shall vest and be exercisable as set forth below.  19 
   (i)            Initial
Grant.The Shares
underlying each Option issued pursuant to the Initial Grant shall vest and be
exercisable as to 4.1666% of the Shares at the end of each full succeeding
month from the date of grant, rounded down to the nearest whole Share, for so
long as the Non-Employee Director continuously remains a Director of, or a Consultant
to, the Company.  (ii)           Annual
Grant.The Shares
underlying each Option issued pursuant to the Annual Grant shall vest and be
exercisable as to 8.3333% of the Shares at the end of each full succeeding
month from the date of grant, rounded down to the nearest whole Share, for so
long as the Non-Employee Director continuously remains a Director of, or a
Consultant to, the Company.  (e)           Termination
of Board Service.The
following provisions shall govern the exercise of any Options held by the
Awardee at the time the Awardee ceases to serve as a Non-Employee Director:  (i)In General.Except
as otherwise provided in Section 11.3, after cessation of service as a Director
(the Cessation Date),the
Awardees Options shall be exercisable to the extent (but only to the extent)
they are vested on the Cessation Date and only during the three months after
such Cessation Date, but in no event after the Expiration Date.  To the extent the Awardee does not exercise
an Option within the time specified for exercise, the Award shall automatically
terminate.  (ii)           Death
or Disability.If an Awardees cessation of
service on the Board is due to death or disability (as determined by the
Board), all Options of that Awardee, to the extent exercisable upon such
Cessation Date, may be exercised for one year after the Cessation Date, but in
no event after the Expiration Date.  In
the case of a cessation of service due to death, an Option may be exercised as
provided in Section 17.  In the case of
a cessation of service due to disability, if a guardian or conservator has been
appointed to act for the Awardee and been granted this authority as part of
that appointment, that guardian or conservator may exercise the Option on
behalf of the Awardee.  Death or
disability occurring after an Awardees cessation of service shall not cause
the cessation of service to be treated as having occurred due to death or
disability.  To the extent an Option is
not so exercised within the time specified for its exercise, the Option shall
automatically terminate.  11.2Director Fee Option Grants  (a)           Option
Grants.The Board shall
have the sole and exclusive authority to determine the calendar year or years
for which the Director fee option grant program (the Director Fee Option Program)is
to be in effect.  For each such calendar
year the program is in effect, each Non-Employee Director may elect to apply
all or any portion of the annual retainer fee otherwise payable in cash, for
his or her service on the Board for that year, to the acquisition of a special
Option grant under this Director Fee Option Program.  Such election must be filed with the Companys Chief Financial
Officer prior to first day of the calendar year for which the annual retainer
fee which is the subject of that election is otherwise payable.  Each Non-Employee Director who files such a
timely election shall automatically be granted an Option under this Director
Fee Option Program on the first trading day in  20 
   January in the calendar year for which the
annual retainer fee which is the subject of that election would otherwise be
payable in cash.  (b)           Option
Terms.Each Option shall
be a Nonstatutory Option governed by the terms and conditions specified below.  (i)Exercise
Price.  A.            The Purchase Price shall be thirty three and one third
percent (33-1/3%) of the Fair Market Value per Share on the Option grant date.  B.            The Purchase Price shall become immediately due upon
exercise of the Option and shall be payable in one or more of the alternative
forms authorized pursuant to Section 6.4 of this Plan.  Except to the extent the sale and remittance
procedure specified thereunder is utilized, payment of the Purchase Price must
be made on the date that the Option is exercised.  (ii)           Number
of Option Shares.The
number of Shares subject to the Option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):  X = A÷ (B x 66-2/3%), where  X is the number of Option
Shares,  A is the portion of the
annual retainer fee subject to the Non-Employee Directors election, and  B is the Fair Market Value
of a Share on the option grant date.  (iii)          Exercise
and Term of Options.The
Option shall become exercisable in a series of twelve (12) equal monthly
installments upon the Awardees completion of each month of Board service over
the twelve (12) month period measured from the grant date.  Each Option shall have a maximum term often
(10) years measured from the Option grant date.  (iv)          Termination
of Board Service.Should
the Awardee ceaseBoard
service for any treason (other than death or permanent disability) while
holding one or more Options under this Director Fee Option Program, then each
such Option shall remain exercisable, for any or all of the Shares for which
the Option is exercisable at the time of such cessation of Board service, until
the earlier of (x) the expiration of the ten (10) year Option term or (y) the
expiration of the three (3) year period measured from the date of such cessation
of Board service.  However, each Option
held by the Awardee under this Director Fee Option Program at the time of his
or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all Shares for which the Option is
not otherwise at that time exercisable.  (v)           Death
or Permanent Disability.Should
the Awardees service as a Board member cease by reason of death or permanent
disability, then each  21 
   Option held by such Awardee under this
Director Fee Option Program shall immediately become exercisable for all the
Shares at the time subject to that Option, and the Option may be exercised for
any or all of those Shares as fully vested Shares until the earlier of (x) the
expiration of the ten (10) year option term or (y) the expiration of the three
(3) year period measured from the date of such cessation of Board service.  Should the Awardee die after cessation of his or her Board service but
while holding one or more Options under this Director Fee Option Program, then
each such Option may be exercised, for any or all of the shares for which the
Option is exercisable at the time of the Awardees cessation of Board service
(less any Shares subsequently purchased by the Awardee prior to death), by the
personal representative of the Awardees estate or by the person or persons to
whom the Option is transferred pursuant to the Awardees will or in accordance
with the laws of descent and distribution or by the designated beneficiary or
beneficiaries of such option.  Such
right of exercise shall lapse, and the Option shall terminate, upon the earlier
of (xx) the expiration of the ten (10) year Option term or (yy) the three (3)
year period measured from the date of the Awardees cessation of Board service.  11.3         Certain Transactions andEvents  (a)           In the event of a Fundamental Transaction while the
Awardee remains a Non-Employee Director, the Shares at the time subject to each
outstanding Option held by such Awardee pursuant to Section 11, but not
otherwise vested, shall automatically vest in full so that each such Option
shall, immediately prior to the effective date of the Fundamental Transaction,
become exercisable for all the Shares as fully vested Shares and may be
exercised for any or all of those vested Shares.  Immediately following the consummation of the Fundamental
Transaction, each Option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or Affiliate thereof).  (b)           In the event of a Change in Control while the Awardee
remains a Non-Employee Director, the Shares at the time subject to each
outstanding Option held by such Awardee pursuant to Section 11, but not
otherwise vested, shall automatically vest in full so that each such Option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the Shares as fully vested Shares and may be exercised for
any or all of those vested Shares.  Each
such Option shall remain exercisable for such fully vested Shares until the
expiration or sooner termination of the Option term in connection with a Change
in Control.  (c)           Each Option which is assumed in connection with a
Fundamental Transaction shall be appropriately adjusted, immediately after such
Fundamental Transaction, to apply to the number and class of securities which
would have been issuable to the Awardee in consummation of such Fundamental
Transaction had the Option been exercised immediately prior to such Fundamental
Transaction.  Appropriate adjustments
shall also be made to the Option Price payable per share under each outstanding
Option, provided the aggregate Option Price payable for such securities shall
remain the same.  To the extent the
actual holders of the Companys outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Fundamental
Transaction, the successor corporation may, in connection with the assumption
of the outstanding Options granted pursuant to Section 11, substitute one or
more shares of its own common  22 
   stock with a fair market value equivalent to
the cash consideration paid per share of Common Stock in such Fundamental
Transaction.  (d)           The grant of Options pursuant to Section 11 shall in no
way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.  (e)           The remaining terms of each Option granted pursuant to
Section 11 shall, as applicable, be the same as terms in effect for Awards
granted under this Plan. 
Notwithstanding the foregoing, the provisions of Section 9.4 and Section
10 shall not apply to Options granted pursuant to Section 11.  11.4Limited Transferabilityof Options.Each Option granted pursuant to
Section 11 may be assigned in whole or in part during the Awardees lifetime to
one or more members of the Awardees family or to a trust established
exclusively for one or more such family members or to an entity in which the
Awardee is majority owner or to the Awardees former spouse, to the extent such
assignment is in connection with the Awardees estate or financial plan or
pursuant to a Domestic Relations Order. 
The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the Option pursuant to the assignment.  The terms applicable to the assigned portion
shall be the same as those in effect for the Option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Administrator may deem appropriate. 
The Awardee may also designate one or more persons as the beneficiary or
beneficiaries of his or her outstanding Options under Section 11, and those
Options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Awardees death while
holding those Options.  Such beneficiary
or beneficiaries shall take the transferred Options subject to all the terms
and conditions of the applicable Award Agreement evidencing each such
transferred Option, including (without limitation) the limited time period
during which the Option may be exercised following the Awardees death.  12.          Withholding and TaxReporting  12.1Tax WithholdingAlternatives  (a)           General.Whenever
Award Shares are issued or become free of restrictions, the Company may require
the Awardee to remit to the Company an amount sufficient to satisfy any
applicable tax withholding requirement, whether the related tax is imposed on
the Awardee or the Company.  The Company
shall have no obligation to deliver Award Shares or release Award Shares from
an escrow or permit a transfer of Award Shares until the Awardee has satisfied
those tax withholding obligations. 
Whenever payment in satisfaction of Awards is made in cash, the payment
will be reduced by an amount sufficient to satisfy all tax withholding
requirements.  (b)Method of Payment.The Awardee shall pay any required withholding
using the forms of consideration described in Section 6.4(b), except that, in
the discretion of the Administrator, the Company may also permit the Awardee to
use any of the forms of payment described in Section 6.4(c).  The Administrator, in its sole discretion,
may  23 
   also permit Award Shares to be withheld to
pay required withholding.  If the
Administrator permits Award Shares to be withheld, the Fair Market Value of the
Award Shares withheld, as determined as of the date of withholding, shall not
exceed the amount determined by the applicable minimum statutory withholding
rates.  12.2Reporting of Dispositions.Any holder of Option Shares
acquired under an Incentive Stock Option shall promptly notify the
Administrator, following such procedures as the Administrator may require, of
the sale or other disposition of any of those Option Shares if the disposition
occurs during: (a) the longer of two years after the Grant Date of the
Incentive Stock Option and one year after the date the Incentive Stock Option
was exercised, or (b) such other period as the Administrator has established.  13.          Compliance with Law  13.1         Compliance
withApplicable Law.The grant of Awards and the
issuance and subsequent transfer of Award Shares shall be subject to compliance
with all Applicable Law, including all applicable securities laws.  Awards may not be exercised, and Award Shares
may not be transferred, in violation of Applicable Law.  Thus, for example, Awards may not be
exercised unless: (a) a registration statement under the Securities Act is then
in effect with respect to the related Award Shares, or (b) in the opinion of legal
counsel to the Company, those Award Shares may be issued in accordance with an
applicable exemption from the registration requirements of the Securities Act
and any other applicable securities laws. 
The failure or inability of the Company to obtain from any regulatory
body the authority considered by the Companys legal counsel to be necessary or
useful for the lawful issuance of any Award Shares or their subsequent transfer
shall relieve the Company of any liability for failing to issue those Award
Shares or permitting their transfer.  As
a condition to the exercise of any Award or the transfer of any Award Shares,
the Company may require the Awardee to satisfy any requirements or
qualifications that may be necessary or appropriate to comply with or evidence
compliance with any Applicable Law.  13.2         Financial Information.The Company shall furnish its
annual financial statements to each Awardee during the period the Awardee holds
any Option Stock Award or Award.  Those
statements shall include a balance sheet and income statement, and shall be
delivered as soon as is practical after the end of the Companys fiscal
year.  This section does not apply to
Awardees who are key Employees and whose duties afford them access to those
financial statements.  14.          Amendment ox Terminationof this Plan or Outstanding Awards  14.1         Amendment and Termination.The Board may at any time amend,
suspend, or terminate this Plan.  14.2         Stockholder Approval.The Company shall obtain the
approval of the Companys stockholders for any amendment to this Plan if stockholder
approval is necessary or desirable to comply with any Applicable Law or with
the requirements applicable to the grant of Awards intended to be Incentive
Stock Options.  The Board may also, but
need not, require that the Companys stockholders approve any other amendments
to this Plan.  24 
   14.3         Effect.No
amendment, suspension, or termination of this Plan, and no modification of any
Award even in the absence of an amendment, suspension, or termination of this
Plan, shall impair any existing contractual rights of any Awardee unless the
affected Awardee consents to the amendment, suspension, termination, or
modification.  Notwithstanding anything
herein to the contrary, no such consent shall be required if the Board
determines, in its sole and absolute discretion, that the amendment,
suspension, termination, or modification: (a) is required or advisable in order
for the Company, this Plan or the Award to satisfy Applicable Law, to meet the
requirements of any accounting standard or to avoid any adverse accounting
treatment, or (b) in connection with any transaction or event described in
Section 10, is in the best interests of the Company or its stockholders.  The Board may, but need not, take the tax or
accounting consequences to affected Awardees into consideration in acting under
the preceding sentence.  Those decisions
shall be final, binding and conclusive. 
Termination of this Plan shall not affect the Administrators ability to
exercise the powers granted to it under this Plan with respect to Awards
granted before the termination of Award Shares issued under such Awards even if
those Award Shares are issued after the termination.  15.          Reserved Rights  15.1Nonexclusivityof this Plan.This Plan shall not limit the power of the Company or
any Affiliate to adopt other incentive arrangements including, for example, the
grant or issuance of stock options, stock, or other equity based rights under
other plans.  15.2         Unfunded
Plan.This Plan shall be unfunded.  Although bookkeeping accounts may be
established with respect to Awardees, any such accounts will be used merely as
a convenience.  The Company shall not be
required to segregate any assets on account of this Plan, the grant of Awards,
or the issuance of Award Shares.  The
Company and the Administrator shall not be deemed to be a trustee of stock or
cash to be awarded under this Plan.  Any
obligations of the Company to any Awardee shall be based solely upon contracts
entered into under this Plan, such as Award Agreements.  No such obligations shall be deemed to be
secured by any pledge or other encumbrance on any assets of the Company.  Neither the Company nor the Administrator
shall be required to give any security or bond for the performance of any such
obligations.  16.          Special ArrangementsRegarding Award Shares  16.1Escrow of Stock Certificates.To enforce any restrictions on Award Shares, the
Administrator may require their holder to deposit the certificates representing
Award Shares, with stock powers or other transfer instruments approved by the
Administrator endorsed in blank, with the Company or an agent of the Company to
hold in escrow until the restrictions have lapsed or terminated.  The Administrator may also cause a legend or
legends referencing the restrictions to be placed on the certificates.  16.2         Repurchase
Rights  (a)General.If
a Stock Award is subject to vesting conditions, the Company shall have the
right, during the 90 days after the Awardees Termination, to repurchase any or
all of the Award Shares that were unvested as of the date of that
Termination.  The repurchase price shall
be determined by the Administrator in accordance  25 
   with this Section 16.2 which shall be either
(i) the Purchase Price for the Award Shares (minus the amount of any cash
dividends paid or payable with respect to the Award Shares for which the record
date precedes the repurchase) or (ii) the lower of (A) the Purchase Price for
the Shares or (B) the Fair Market Value of those Award Shares as of the date of
the Termination.  The repurchase price
shall be paid in cash.  The Company may
assign this right of repurchase.  (b)           Procedure.The Company or its assignee
may choose to give the Awardee a written notice of exercise of its repurchase
rights under this Section 16.2. 
However, the Companys failure to give such a notice shall not affect
its rights to repurchase Award Shares.  The
Company must, however, tender the repurchase price during the period specified
in this Section 16.2 for exercising its repurchase rights in order to exercise
such rights.  17.          Beneficiaries  An Awardee may file a written designation of one or more beneficiaries
who are to receive the Awardees rights under the Awardees Awards after the
Awardees death.  An Awardee may change
such a designation at any time by written notice.  If an Awardee designates a beneficiary, the beneficiary may
exercise the Awardees Awards after the Awardees death.  If an Awardee dies when the Awardee has no
living beneficiary designated under this Plan, the Company shall allow the
executor or administrator of the Awardees estate to exercise the Award or, if
there is none, the person entitled to exercise the Option under the Awardees
will or the laws of descent and distribution. 
In any case, no Award may be exercised after its Expiration Date.  18.          Miscellaneous  18.1         Governing
Law.This Plan, the Award Agreements and all other
agreements entered into under this Plan, and all actions taken under this Plan
or in connection with Awards or Award Shares, shall be governed by the laws of
the State of Delaware.  18.2         Determinationof Value.  Fair Market Value shall be determined as follows:  (a)Listed Stock.If the Shares are traded on any established stock
exchange or quoted on a national market system, Fair Market Value shall be the
closing sales price for the Shares as quoted on that stock exchange or system
for the date the value is to be determined (the Value Date)as reported in The Wall Street Journal or
a similar publication.  If no sales are
reported as having occurred on the Value Date, Fair Market Value shall be that
closing sales price for the last preceding trading day on which sales of Shares
are reported as having occurred.  If no
sales are reported as having occurred during the five trading days before the
Value Date, Fair Market Value shall be the closing bid for Shares on the Value
Date.  If Shares are listed on multiple
exchanges or systems, Fair Market Value shall be based on sales or bid prices
on the primary exchange or system on which Shares are traded or quoted.  (b)Stock Quoted by Securities Dealer.If Shares are
regularly quoted by a recognized securities dealer but selling prices are not
reported on any established stock  26 
   exchange or quoted on a national market
system, Fair Market Value shall be the mean between the high bid and low asked
prices on the Value Date.  If no prices
are quoted for the Value Date, Fair Market Value shall be the mean between the
high bid and low asked prices on the last preceding trading day on which any
bid and asked prices were quoted.  (c)           No
Established Market.If
Shares are not traded on any established stock exchange or quoted on a national
market system and are not quoted by a recognized securities dealer, the
Administrator (following guidelines established by the Board or Committee) will
determine Fair Market Value in good faith. 
The Administrator will consider the following factors, and any others it
considers significant, in determining Fair Market Value: (i) the price at which
other securities of the Company have been issued to purchasers other than
Employees, Directors, or Consultants, (ii) the Companys stockholders equity,
prospective earning power, dividend paying capacity, and non-operating assets,
if any, and (iii) any other relevant factors, including the economic outlook
for the Company and the Companys industry, the Companys position in that
industry, the Companys goodwill and other intellectual property, and the
values of securities of other businesses in the same industry.  Notwithstanding anything in Section 18 to
the contrary, in the event that the Shares are not traded on any established stock
exchange or quoted on a national market system and are not quoted by a
recognized securities dealer after the Effective Date, the Administrator shall
take into account the valuation of the Company by the Bankruptcy Court in
making a determination as to the Fair Market Value of the Shares.  18.3Reservationof Shares.During the term of this Plan, the Company shall at all times
reserve and keep available such number of Shares as are still issuable under
this Plan.  18.4Electronic Communications.Any Award Agreement, notice of
exercise of an Award, or other document required or permitted by this Plan may
be delivered in writing or, to the extent determined by the Administrator,
electronically.  Signatures may also be
electronic if permitted by the Administrator.  18.5        Notices.Unless the Administrator
specifies otherwise, any notice to the Company under any Option Agreement or
with respect to any Awards or Award Shares shall be in writing (or, if so
authorized by Section 18.4, communicated electronically), shall be addressed to
the Secretary of the Company, and shall only be effective when received by the
Secretary of the Company.  Adopted by the Board on:  Approved by the stockholders on:  Effective date of this Plan:  27 
   [PEREGRINE SYSTEMS, INC.  LETTERHEAD]  Re:
  Grant of
  [Incentive][Nonstatutory] Stock OptionOption Shares:
  
  Grant Date:Price per share:
  
  Vesting Base Date:Fully-Vested Date:Option control no.:
  
  Expiration Date:  Dear <PR_GIVEN_NAME>:  I am pleased to confirm that the Company has granted you an option to
purchase shares of our common stock under the Peregrine Systems, Inc.  2003 Equity Incentive Plan (the
Plan).  To accept your stock option,
please sign the enclosed copy of this letter agreement, have your spouse sign
the spousal consent, and return them to {department name, mail-stop} {in the
envelope provided}.  General terms  Your Option is intended to be [an incentive][a nonstatutory]
option.  The basic terms of your Option
grant are identified in the information block at the top of this letter
agreement, but other important terms and conditions are described in this
letter agreement and in the Plan.  We
encourage you to carefully review the Plan, a copy of which is [enclosed]
[available on request from our {Stock Administrator} {Human Resources
Department}][and on the intranet
at                     ].  Capitalized words in this letter agreement
which are not defined in this letter agreement are defined in the Plan.  This letter agreement constitutes the Award
Agreement called for in the Plan.  Purchase and payment  Subject to the Plan, [your option vests (becomes exercisable) [to the
extent of 25% of the Option Shares one year after the Vesting Base Date (or, if
no Vesting Base Date is specified, the Grant Date), and then] in cumulative
monthly increments of [2.0833]% of the Option Shares, calculated to the closest
whole Share on each monthly anniversary of the Vesting Base Date, so that all
Shares will become purchasable on the Fully-Vested Date shown above.  Notwithstanding anything to the contrary in this letter agreement, if
you have a Company-initiated Termination without Cause within 12 months after
the occurrence of a Change in Control, one half of the portion of this Option
which would otherwise be unvested as of the date of your Termination under the
provisions set forth above shall become vested as of the date of your
Termination.  Furthermore,
notwithstanding anything to the contrary in this letter agreement, upon the
occurrence of a Change in Control, the Companys Board of Directors may, in its
discretion, take any or all of the steps set forth in Section 10.4 of the Plan,
provided that the vesting of this Option shall be no less favorable to you than
the vesting set forth in the preceding sentence.  Notwithstanding anything to the  
   contrary in this letter agreement, in the
event of a Fundamental Transaction, the Companys Board of Directors may, in
its discretion, take any or all of the steps set forth in Section 10.4 of the
Plan.  If you decide to purchase Shares under this Option, you will be
required to submit a completed exercise agreement on a form approved by the
Company, together with payment for the Option Shares.  You may pay for the Option Shares (plus any associated withholding
taxes) using cash, a check, a wire transfer or any other form of payment listed
in Section 6.4(c) of the Plan and permitted by the Administrator at the time
you wish to exercise.  Shares available
under this Option must be purchased, if at all, no later than the Expiration
Date.  [Specify
any other special provisions, such as acceleration of vesting.]  Acceleration of Vesting  Notwithstanding anything to the contrary in this letter agreement, in
the event of a Change in Control or Fundamental Transaction, the Companys
Board of Directors may, in its discretion, take any or all of the steps set
forth in Sections 10.3 or 10.4 of the Plan.  Your Termination  In the event of your Termination for any reason other than death or
disability (as defined in the Plan), this Option shall cease to be exercisable
three months following your Termination date. 
In the event of your Termination on account of disability, this Option
shall cease to be exercisable six months following your Termination date.  In the event of your Termination on account
of death, this Option shall cease to be exercisable 12 months following your
Termination date.  In no event, however,
may this Option be exercisable past the Expiration Date or for the Option
Shares that were not yet vested as of your Termination date.  Limitations on Transfer  This Option may not be transferred in any manner otherwise than by will
or by the laws of descent or distribution or to a beneficiary designated
pursuant to the Plan, and may be exercised during your lifetime only by
you.  Subject to all of the other terms
and conditions of this letter agreement, following your death, this Option may,
to the extent it is vested and exercisable by you in accordance with its terms on
the date of death, be exercised by your beneficiary or other person entitled to
exercise this Option under the Plan in the event of your death.  Notwithstanding the first sentence of this
paragraph, (i) if this Option is a Nonqualified Stock Option, this Option may
be assigned pursuant to a qualified domestic relations order as defined by the
Code, and exercised by your spouse who obtained such Option pursuant to such
qualified domestic relations order, and (ii) this Option may be assigned, in
connection with the your estate plan, in whole or in part, during your lifetime
to one or more members of your immediate family or to a trust established
exclusively for one or more of such immediate family members.  Rights under the assigned portion may be
exercised by the person or persons who acquire a proprietary interest in such
Option pursuant to the assignment.  The
terms applicable to the assigned portion shall be the same as those in effect
for the Option immediately before such assignment and shall be set forth in  2 
   such documents issued to the assignee as the
Administrator deems appropriate.  For
purposes of this paragraph, the term immediate family means your spouse,
children, stepchildren, grandchildren and parents.  Community Property  Without prejudice to the actual rights of the spouses as between each
other, for all purposes of this letter agreement, you shall be treated as agent
and attorney-in-fact for that interest held or claimed by your spouse with
respect to this Option and the parties hereto shall act in all matters as if
you were the sole owner of this Option. 
This appointment is coupled with an interest and is irrevocable.  Restrictions on Exercise  No Shares will be issued pursuant to the exercise of this Option unless
and until there shall have been full compliance with all applicable
requirements of the Securities Act of 1933, as amended (whether by registration
or satisfaction of exemption conditions), all applicable laws, and all
applicable listing requirements of any national securities exchange or other
market system on which the Shares are then listed.  As a condition to the exercise of this Option, the Company may
require you to make any representation and warranty to the Company as may be
necessary or appropriate, in the judgment of the Administrator, to comply with
any applicable law.  You understand and
acknowledge that, because the Company has recently emerged from a bankruptcy
reorganization, the Company has not filed all reports under Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, that would enable it to be
eligible to file a Registration Statement on Form S-8 relating to this
Option.  Accordingly, you understand and
acknowledge that a considerable period of time may pass before the Company is
eligible to use Form S-8 with respect to this Option, and that the
exercisability of this Option may be deferred for such period.  Disqualifying Dispositions of ISO Stock  You acknowledge that if the
Option Shares acquired by exercise of an Incentive Stock Option is disposed of
within two years after the Grant Date or within one year after such exercise,
immediately prior to the disposition, you will promptly notify the Company in
writing of the date and terms of the disposition and will provide such other
information regarding the disposition as the Company may reasonably require.  Equitable Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this
agreement, damages alone will be an inadequate remedy, and such breach will
cause the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this agreement.  3 
   Arbitration  General.Any
controversy, dispute, or claim between the parties to this letter agreement,
including any claim arising out of, in connection with, or in relation to the
formation, interpretation, performance or breach of this letter agreement, the
exercise of the Option or the disposition of the Option Shares, shall be
settled exclusively by arbitration, before a single arbitrator, in accordance
with these provisions and the then most applicable rules of the American
Arbitration Association.  Judgment upon
any award rendered by the arbitrator may be entered by any state or federal
court having jurisdiction thereof.  Such
arbitration shall be administered by the American Arbitration Association.  Arbitration shall be the exclusive remedy
for determining any such dispute, regardless of its nature.  Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court for provisional relief, including
a temporary restraining order or a preliminary injunction, on the ground that
the award to which the applicant may be entitled in arbitration may be rendered
ineffectual without provisional relief. 
Unless mutually agreed by the parties otherwise, any arbitration shall
take place in the City of San Diego, California.  Selection of Arbitrator.In the event
the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at
random from the Independent (or Gold Card) list of retired judges or, at
your option, from a list of nine persons (which shall be retired judges or
corporate or litigation attorneys experienced in stock options and buy-sell
agreements) provided by the office of the American Arbitration Association
having jurisdiction over San Diego, California.  If the parties are unable to agree upon an arbitrator from the
list so drawn, then the parties shall each strike names alternately from the
list, with the first to strike being determined by lot.  After each party has used four strikes, the
remaining name on the list shall be the arbitrator.  If such person is unable to serve for any reason, the parties
shall repeat this process until an arbitrator is selected.  Applicability of Arbitration; Remedial Authority.This agreement
to resolve any disputes by binding arbitration shall extend to claims against
any parent, subsidiary or affiliate of each party, and, when acting within such
capacity, any officer, director, shareholder, employee or agent of each party,
or of any of the above, and shall apply as well to claims arising out of state
and federal statutes and local ordinances as well as to claims arising under
the common law.  In the event of a
dispute subject to this paragraph the parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator.  The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief)
shall be the same as, but no greater than, would be the remedial power of a
court having jurisdiction over the parties and their dispute.  The arbitrator shall, upon an appropriate
motion, dismiss any claim without an evidentiary hearing if the party bringing
the motion establishes that he or it would be entitled to summary judgment if
the matter had been pursued in court litigation.  In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these
procedures shall govern.  Fees and Costs.Any filing or
administrative fees shall be borne initially by the party requesting
arbitration.  The Company shall be
responsible for the costs and fees of the arbitration, unless you wish to
contribute (up to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the
prevailing party in such arbitration, as determined by the arbitrator, and in
any enforcement or other court proceedings, shall be entitled, to the extent  4 
   permitted by law, to reimbursement from the
other party for all of the prevailing partys costs (including but not limited
to the arbitrators compensation), expenses, and attorneys fees.  Award Final and Binding.The arbitrator
shall render an award and written opinion, and the award shall be final and
binding upon the parties.  If any of
these arbitration provisions, or of this agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this agreement, and this
agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration provisions of this
agreement are not absolutely binding, then the parties intend any arbitration
decision and award to be fully admissible in evidence in any subsequent action,
given great weight by any finder of fact, and treated as determinative to the
maximum extent permitted by law.  Miscellaneous Provisions  Successors and Assigns.Subject to the
limitations set forth in this letter agreement, the benefits and obligations of
this letter agreement will be binding on the executors, administrators, heirs,
legal representatives, successors, and assigns of the parties.  Governing Law.This letter
agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware excluding those laws that direct the application of the
laws of another jurisdiction.  Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this letter agreement.  Notices.All notices
and other communications under this letter agreement shall be in writing.  Unless and until you are notified in writing
to the contrary, all notices, communications, and documents directed to the
Company and related to the agreement, if not delivered by hand or by
telecopier, shall be mailed, addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator 3611
Valley Center Drive San
Diego, CA 92130  Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this letter
agreement, if not delivered by hand or by telecopier, shall be mailed to your
last known address as shown on the Companys books.  Notices and communications shall be mailed by first class mail,
postage prepaid.  All mailings and
deliveries related to this letter agreement shall be deemed received when
actually received, if by hand delivery or telecopier, and three business days
after mailing, if by mail.  The
Administrator may, by  5 
   notice to you in the form set forth above,
specify that future notices and communications may be sent electronically in a
manner acceptable to the Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this letter agreement,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before
submitting this letter agreement to the Company.  6 
   This is not an employment contract.This letter
agreement is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and look forward to your continued contribution.  Sincerely,John MutchCEO  I accept
this option and agree to the terms of this offer letter agreement and the Plan.  , 200Optionee signature
  
  Date  SPOUSAL
CONSENT  By his or her signature below, the spouse of the Optionee agrees to be
bound by all of the terms and conditions of the foregoing letter agreement and
of the Plan.  OPTIONEES SPOUSESignaturePrint Name  7 
   [PEREGRINE SYSTEMS, INC. 
LETTERHEAD]  Re:
      Grant of [Incentive][Nonstatutory] Stock OptionOption Shares:
  
  Grant Date:Price per share:
  
  Vesting Base Date:Fully-Vested Date:Option control no.:
  
  Expiration Date:
  Dear <PR_GIVEN_NAME>:  I am pleased to confirm that
the Company has granted you an option to purchase shares of our common stock
under the Peregrine Systems, Inc.  2003
Equity Incentive Plan (the Plan).  To
accept your stock option, please sign the enclosed copy of this letter agreement,
have your spouse sign the spousal consent, and return them to {department name,
mail-stop}{in the envelope provided}.  General terms  Your Option is intended to
be [an incentive] [a nonstatutory] option. 
The basic terms of your Option grant are identified in the information
block at the top of this letter agreement, but other important terms and
conditions are described in this letter agreement and in the Plan.  We encourage you to carefully review the
Plan, a copy of which is [enclosed] [available on request from our {Stock
Administrator} {Human Resources Department}][and on the intranet
at                ].  Capitalized words in this letter agreement
which are not defined in this letter agreement are defined in the Plan.  This letter agreement constitutes the Award
Agreement called for in the Plan.  Purchase and payment  Subject to the Plan, [your
option vests (becomes exercisable) [to the extent of 25% of the Option Shares
one year after the Vesting Base Date (or, if no Vesting Base Date is specified,
the Grant Date), and then] in cumulative monthly increments of [2.0833]% of the
Option Shares, calculated to the closest whole Share on each monthly
anniversary of the Vesting Base Date, so that all Shares will become
purchasable on the Fully-Vested Date shown above.  If you decide to purchase
Shares under this Option, you will be required to submit a completed exercise
agreement on a form approved by the Company, together with payment for the
Option Shares.  You may pay for the
Option Shares (plus any associated withholding taxes) using cash, a check, a
wire transfer or any other form of payment listed in Section 6.4(c) of the Plan
and permitted by the Administrator at the time you wish to exercise.  Shares available under this Option must be
purchased, if at all, no later than the Expiration Date.  
   [Specify
any other special provisions, such as acceleration of vesting.]  Acceleration of Vesting  Notwithstanding anything to
the contrary in this letter agreement, in the event of a Change in Control or
Fundamental Transaction, the Companys Board of Directors may, in its discretion,
take any or all of the steps set forth in Sections 10.3 or 10.4 of the Plan.  Your Termination  In the event of your
Termination for any reason other than death or disability (as defined in the
Plan), this Option shall cease to be exercisable three months following your
Termination date.  In the event of your
Termination on account of disability, this Option shall cease to be exercisable
six months following your Termination date. 
In the event of your Termination on account of death, this Option shall
cease to be exercisable 12 months following your Termination date.  In no event, however, may this Option be
exercisable past the Expiration Date or for the Option Shares that were not yet
vested as of your Termination date.  Limitations on Transfer  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution or to a beneficiary designated pursuant to the Plan, and may be
exercised during your lifetime only by you. 
Subject to all of the other terms and conditions of this letter
agreement, following your death, this Option may, to the extent it is vested
and exercisable by you in accordance with its terms on the date of death, be
exercised by your beneficiary or other person entitled to exercise this Option
under the Plan in the event of your death. 
Notwithstanding the first sentence of this paragraph, if this Option is
a Nonqualified Stock Option, this Option may be assigned pursuant to a
qualified domestic relations order as defined by the Code, and exercised by
your spouse who obtained such Option pursuant to such qualified domestic
relations order.  Rights under the
assigned portion may be exercised by the person or persons who acquire a
proprietary interest in such Option pursuant to the assignment.  The terms applicable to the assigned portion
shall be the same as those in effect for the Option immediately before such
assignment and shall be set forth in such documents issued to the assignee as
the Administrator deems appropriate.  Community Property  Without
prejudice to the actual rights of the spouses as between each other, for all
purposes of this letter agreement, you shall be treated as agent and
attorney-in-fact for that interest held or claimed by your spouse with respect
to this Option and the parties hereto shall act in all matters as if you were
the sole owner of this Option.  This
appointment is coupled with an interest and is irrevocable.  Restrictions on Exercise  No
Shares will be issued pursuant to the exercise of this Option unless and until
there shall have been full compliance with all applicable requirements of the
Securities Act of 1933, as amended (whether by registration or satisfaction of
exemption conditions), all  2 
   applicable laws, and all applicable listing
requirements of any national securities exchange or other market system on
which the Shares are then listed.  As a
condition to the exercise of this Option, the Company may require you to make
any representation and warranty to the Company as may be necessary or
appropriate, in the judgment of the Administrator, to comply with any
applicable law.  You understand and
acknowledge that, because the Company has recently emerged from a bankruptcy
reorganization, the Company has not filed all reports under Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, that would enable it to be
eligible to file a Registration Statement on Form S-8 relating to this
Option.  Accordingly, you understand and
acknowledge that a considerable period of time may pass before the Company is
eligible to use Form S-8 with respect to this Option, and that the
exercisability of this Option may be deferred for such period.  Disqualifying Dispositions of ISO Stock  You acknowledge that if the
Option Shares acquired by exercise of an Incentive Stock Option is disposed of
within two years after the Grant Date or within one year after such exercise,
immediately prior to the disposition, you will promptly notify the Company in
writing of the date and terms of the disposition and will provide such other
information regarding the disposition as the Company may reasonably require.  Equitable
Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this
agreement, damages alone will be an inadequate remedy, and such breach will
cause the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this agreement.  Arbitration  General.Any controversy, dispute, or claim between
the parties to this letter agreement, including any claim arising out of, in
connection with, or in relation to the formation, interpretation, performance
or breach of this letter agreement, the exercise of the Option or the
disposition of the Option Shares, shall be settled exclusively by arbitration,
before a single arbitrator, in accordance with these provisions and the then
most applicable rules of the American Arbitration Association.  Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof.  Such arbitration shall be
administered by the American Arbitration Association.  Arbitration shall be the exclusive remedy for determining any
such dispute, regardless of its nature. 
Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court for provisional relief, including a temporary restraining
order or a preliminary injunction, on the ground that the award to which the
applicant may be entitled in arbitration may be rendered ineffectual without
provisional relief.  Unless mutually
agreed by the parties otherwise, any arbitration shall take place in the City
of San Diego, California.  Selection of Arbitrator.In the event
the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by  3 
   the parties at random from the Independent
(or Gold Card) list of retired judges or, at your option, from a list of nine
persons (which shall be retired judges or corporate or litigation attorneys
experienced in stock options and buy-sell agreements) provided by the office of
the American Arbitration Association having jurisdiction over San Diego,
California.  If the parties are unable
to agree upon an arbitrator from the list so drawn, then the parties shall each
strike names alternately from the list, with the first to strike being
determined by lot.  After each party has
used four strikes, the remaining name on the list shall be the arbitrator.  If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.  Applicability of Arbitration; Remedial Authority.This agreement
to resolve any disputes by binding arbitration shall extend to claims against
any parent, subsidiary or affiliate of each party, and, when acting within such
capacity, any officer, director, shareholder, employee or agent of each party,
or of any of the above, and shall apply as well to claims arising out of state
and federal statutes and local ordinances as well as to claims arising under
the common law.  In the event of a
dispute subject to this paragraph the parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator.  The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief)
shall be the same as, but no greater than, would be the remedial power of a
court having jurisdiction over the parties and their dispute.  The arbitrator shall, upon an appropriate
motion, dismiss any claim without an evidentiary hearing if the party bringing
the motion establishes that he or it would be entitled to summary judgment if
the matter had been pursued in court litigation.  In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these
procedures shall govern.  Fees and Costs.Any filing or
administrative fees shall be borne initially by the party requesting
arbitration.  The Company shall be
responsible for the costs and fees of the arbitration, unless you wish to
contribute (up to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the
prevailing party in such arbitration, as determined by the arbitrator, and in
any enforcement or other court proceedings, shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing partys costs (including but not limited to the arbitrators
compensation), expenses, and attorneys fees.  Award Final and Binding.The arbitrator
shall render an award and written opinion, and the award shall be final and
binding upon the parties.  If any of
these arbitration provisions, or of this agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this agreement, and this
agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration provisions of this agreement
are not absolutely binding, then the parties intend any arbitration decision
and award to be fully admissible in evidence in any subsequent action, given
great weight by any finder of fact, and treated as determinative to the maximum
extent permitted by law.  4 
   Miscellaneous Provisions  Successors and Assigns.Subject to the
limitations set forth in this letter agreement, the benefits and obligations of
this letter agreement will be binding on the executors, administrators, heirs,
legal representatives, successors, and assigns of the parties.  Governing Law.This letter agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware excluding
those laws that direct the application of the laws of another jurisdiction.  Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this letter agreement.  Notices.All notices and other communications under
this letter agreement shall be in writing. 
Unless and until you are notified in writing to the contrary, all
notices, communications, and documents directed to the Company and related to the
agreement, if not delivered by hand or by telecopier, shall be mailed,
addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator 3611
Valley Center Drive San
Diego, CA 92130  Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this letter
agreement, if not delivered by hand or by telecopier, shall be mailed to your
last known address as shown on the Companys books.  Notices and communications shall be mailed by first class mail,
postage prepaid.  All mailings and
deliveries related to this letter agreement shall be deemed received when
actually received, if by hand delivery or telecopier, and three business days
after mailing, if by mail.  The
Administrator may, by notice to you in the form set forth above, specify that
future notices and communications may be sent electronically in a manner
acceptable to the Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this letter agreement,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before
submitting this letter agreement to the Company.  5 
   This is not an employment contract.This letter
agreement is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and
look forward to your continued contribution.  Sincerely,John MutchCEO  I accept
this option and agree to the terms of this offer letter agreement and the Plan.  , 200Optionee signature
  
  Date  SPOUSAL
CONSENT  By
his or her signature below, the spouse of the Optionee agrees to be bound by
all of the terms and conditions of the foregoing letter agreement and of the
Plan.  OPTIONEES SPOUSESignaturePrint Name  6 
   Grant of Nonstatutory Stock Option  Option Shares:
  
  Grant Date:Price per Share:
  
  Vesting Base Date:Fully Vested Date:Option Control No:
  
  Expiration Date:
  Dear:  I am pleased to confirm that
the Company has granted you an option to purchase shares of our common stock
under the Peregrine Systems, Inc.  2003
Equity Incentive Plan (the Plan).  To
accept your stock option, please sign the enclosed copy of this letter
agreement and return it to {department name, mail-stop} {in the envelope
provided}.  General terms  It
is intended that your Option will qualify as an approved option for UK tax
purposes.  The Company is currently in
discussions with the UK Inland Revenue regarding the tax treatment of your
Option and you will be notified in due course of the outcome of these
discussions.  The basic terms of your
Option grant are identified in the information block at the top of this letter
agreement, but other important terms and conditions are described in this
letter agreement and in the Plan.  For
the purposes of this letter agreement, Plan includes the terms of the UK
sub-plan adopted by the Company in order to allow the grant of tax-approved
options to UK employees (the UK Sub-Plan). 
We encourage you to carefully review the Plan, a copy of which is
available on the intranet at http://falconnet.peregrine.com/stock_plan_admin/index.cfm?objectID=E752A718-60E3-4892-A72AF8449EA248D2.  Capitalized words in this
letter agreement, which are not defined in this letter agreement, are defined
in the Plan.  This letter agreement
constitutes the Award Agreement called for in the Plan.  If the terms of this letter
agreement differ from the rules of the Plan and/or the UK legislation governing
approved options, the rules and that legislation will take precedence.  Purchase and payment  Subject
to the Plan, your option vests (becomes exercisable) to the extent of 25% of
the Option Shares one year after the Vesting Base Date (or, if no Vesting Base
Date is specified, the Grant Date), and then in cumulative monthly increments
of 2.0833% of the Option Shares, calculated to the closest whole Share on each
monthly anniversary of the Vesting Base Date, so that all Shares will become
purchasable on the Fully-Vested Date shown above.  (You should, however, note that you will not obtain favourable
tax treatment  
   in the UK on the exercise of your option
unless you have held the option for at least 3 years before exercising it.)  Notwithstanding anything to
the contrary in this letter agreement, if a person obtains Control of the
Company in one of the ways specified in clause 10 of the UK-Sub-Plan or a
Fundamental Transaction occurs, the Companys Board of Directors may, in its
discretion, take any or all of the steps set forth in Section 10.3 or 10.4 of
the Plan, provided that the vesting of this Option shall be no less favorable
to you than the vesting set forth in this letter agreement.  If you decide to purchase
Shares under this Option, you will be required to submit a completed exercise
agreement on a form approved by the Company, together with payment for the
Option Shares.  You may pay for the
Option Shares (plus any associated withholding taxes) using cash, a check, a
wire transfer or a promissory note (or any combination of those methods).  Shares available under this Option must be
purchased, if at all, no later than the Expiration Date.  Acceleration of Vesting  Notwithstanding anything to
the contrary in this letter agreement, in the event that a person obtains
Control of the Company in one of the ways specified in clause 10 of the UK
Sub-Plan or a Fundamental Transaction occurs, the Companys Board of Directors
may, in its discretion, take any or all of the steps set forth in Sections 10.3
or 10.4 of the Plan.  Your Termination  In
the event of your Termination for any reason other than death or disability (as
defined in the Plan), this Option shall cease to be exercisable three months
following your Termination date.  In the
event of your Termination on account of disability, this Option shall cease to
be exercisable six months following your Termination date.  In the event of your Termination on account
of death, this Option shall cease to be exercisable 12 months following your
Termination date.  In no event, however,
may this Option be exercisable past the Expiration Date or for the Option
Shares that were not yet vested as of your Termination date.  Limitations on Transfer  This Option may not be
transferred in any manner, and may be exercised during your lifetime only by
you.  Subject to all of the other terms
and conditions of this letter agreement, following your death, this Option may,
to the extent it is vested and exercisable by you in accordance with its terms
on the date of death, be exercised by your personal representatives.  Restrictions on Exercise  No
Shares will be issued pursuant to the exercise of this Option unless and until
there shall have been full compliance with all applicable requirements of the
Securities Act of 1933, as amended (whether by registration or satisfaction of
exemption conditions), all applicable laws, and all applicable listing
requirements of any national securities exchange  2 
   or other market system on which the Shares
are then listed.  As a condition to the
exercise of this Option, the Company may require you to make any representation
and warranty to the Company as may be necessary or appropriate, in the judgment
of the Administrator, to comply with any applicable law.  You understand and acknowledge that, because
the Company has recently emerged from a bankruptcy reorganization, the Company
has not filed all reports under Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, that would enable it to be eligible to file a
Registration Statement on Form S-8 relating to this Option.  Accordingly, you understand and acknowledge
that a considerable period of time may pass before the Company is eligible to
use Form S-8 with respect to this Option, and that the exercisability of this
Option may be deferred for such period.  Equitable Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this
agreement, damages alone will be an inadequate remedy, and such breach will
cause the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this agreement.  Arbitration  General.Any controversy, dispute, or claim between
the parties to this letter agreement, including any claim arising out of, in
connection with, or in relation to the formation, interpretation, performance
or breach of this letter agreement, the exercise of the Option or the disposition
of the Option Shares, shall be settled exclusively by arbitration, before a
single arbitrator, in accordance with these provisions and the then most
applicable rules of the American Arbitration Association.  Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction
thereof.  Such arbitration shall be
administered by the American Arbitration Association.  Arbitration shall be the exclusive remedy for determining any
such dispute, regardless of its nature. 
Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court for provisional relief, including a temporary restraining
order or a preliminary injunction, on the ground that the award to which the
applicant may be entitled in arbitration may be rendered ineffectual without
provisional relief.  Unless mutually
agreed by the parties otherwise, any arbitration shall take place in the City
of San Diego, California.  Selection of Arbitrator.In the event
the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at
random from the Independent (or Gold Card) list of retired judges or, at
your option, from a list of nine persons (which shall be retired judges or
corporate or litigation attorneys experienced in stock options and buy-sell
agreements) provided by the office of the American Arbitration Association
having jurisdiction over San Diego, California.  If the parties are unable to agree upon an arbitrator from the
list so drawn, then the parties shall each strike names alternately from the
list, with the first to strike being determined by lot.  After each party has used four strikes, the
remaining name on the list shall be the arbitrator.  If such person is unable to serve for any reason, the parties
shall repeat this process until an arbitrator is selected.  3 
   Applicability of Arbitration; Remedial Authority.This agreement
to resolve any disputes by binding arbitration shall extend to claims against
any parent, subsidiary or affiliate of each party, and, when acting within such
capacity, any officer, director, shareholder, employee or agent of each party,
or of any of the above, and shall apply as well to claims arising out of state
and federal statutes and local ordinances as well as to claims arising under
the common law.  In the event of a
dispute subject to this paragraph the parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator.  The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief)
shall be the same as, but no greater than, would be the remedial power of a
court having jurisdiction over the parties and their dispute.  The arbitrator shall, upon an appropriate
motion, dismiss any claim without an evidentiary hearing if the party bringing
the motion establishes that he or it would be entitled to summary judgment if
the matter had been pursued in court litigation.  In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these
procedures shall govern.  Fees and Costs.Any filing or
administrative fees shall be borne initially by the party requesting
arbitration.  The Company shall be
responsible for the costs and fees of the arbitration, unless you wish to
contribute (up to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the
prevailing party in such arbitration, as determined by the arbitrator, and in
any enforcement or other court proceedings, shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing partys costs (including but not limited to the arbitrators
compensation), expenses, and attorneys fees.  Award Final and Binding.The arbitrator
shall render an award and written opinion, and the award shall be final and
binding upon the parties.  If any of
these arbitration provisions, or of this agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this agreement, and this
agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration provisions of this
agreement are not absolutely binding, then the parties intend any arbitration
decision and award to be fully admissible in evidence in any subsequent action,
given great weight by any finder of fact, and treated as determinative to the
maximum extent permitted by law.  Miscellaneous Provisions  Successors and Assigns.Subject to the
limitations set forth in this letter agreement, the benefits and obligations of
this letter agreement will be binding on the executors, administrators, heirs,
legal representatives, successors, and assigns of the parties.  Governing Law.This letter agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware excluding
those laws that direct the application of the laws of another jurisdiction.  4 
   Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this letter agreement.  Notices.All notices and other communications under
this letter agreement shall be in writing. 
Unless and until you are notified in writing to the contrary, all
notices, communications, and documents directed to the Company and related to
the agreement, if not delivered by hand or by telecopier, shall be mailed,
addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator 3611
Valley Center Drive San
Diego, CA 92130  Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this letter
agreement, if not delivered by hand or by telecopier, shall be mailed to your
last known address as shown on the Companys books.  Notices and communications shall be mailed by first class mail,
postage prepaid.  All mailings and
deliveries related to this letter agreement shall be deemed received when
actually received, if by hand delivery or telecopier, and three business days
after mailing, if by mail.  The
Administrator may, by notice to you in the form set forth above, specify that
future notices and communications may be sent electronically in a manner
acceptable to the Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this letter agreement,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before submitting
this letter agreement to the Company.  This is not an employment contract.This letter
agreement is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and
look forward to your continued contribution.  Sincerely,/s/ John MutchJohn MutchCEO  I accept
this option and agree to the terms of this offer letter agreement and the Plan.  , 200Optionee signature
  
  Date  5 
   Grant of Nonstatutory Stock Option  Option Shares:
  
  Grant Date:Price per Share:
  
  Vesting Base Date:Fully Vested Date:Option Control No:
  
  Expiration Date:
  Dear:  I am pleased to confirm that
the Company has granted you an option to purchase shares of our common stock
under the Peregrine Systems, Inc.  2003
Equity Incentive Plan (the Plan).  To
accept your stock option, please sign the enclosed copy of this letter
agreement and return it to {department name, mail-stop} {in the envelope
provided}.  General terms  It is intended that your
Option will qualify as an approved option for UK tax purposes.  The Company is currently in discussions with
the UK Inland Revenue regarding the tax treatment of your Option and you will
be notified in due course of the outcome of these discussions.  The basic terms of your Option grant are
identified in the information block at the top of this letter agreement, but
other important terms and conditions are described in this letter agreement and
in the Plan.  For the purposes of this
letter agreement, Plan includes the terms of the UK sub-plan adopted by the
Company in order to allow the grant of tax-approved options to UK employees
(the UK Sub-Plan).  We encourage you
to carefully review the Plan, a copy of which is available on the intranet at
http://falconnet.peregrine.com/stockjplan_admin/index.cfm?obiectID=E752A718-60E3-4892-A72AF8449EA248D2.  Capitalized words in this
letter agreement, which are not defined in this letter agreement, are defined
in the Plan.  This letter agreement
constitutes the Award Agreement called for in the Plan.  If the terms of this letter
agreement differ from the rules of the Plan and/or the UK legislation governing
approved options, the rules and that legislation will take precedence.  Purchase and payment  Subject to the Plan, your
option vests (becomes exercisable) to the extent of 25% of the Option Shares
one year after the Vesting Base Date (or, if no Vesting Base Date is specified,
the Grant Date), and then in cumulative monthly increments of 2.0833% of the
Option Shares, calculated to the closest whole Share on each monthly
anniversary of the Vesting Base Date, so that all Shares will become
purchasable on the Fully-Vested Date shown above.  (You should, however, note that you will not obtain favourable
tax treatment  
   in the UK on the exercise of your option
unless you have held the option for at least 3 years before exercising it.)  Notwithstanding anything to
the contrary in this letter agreement, if you have a Company-initiated
Termination without Cause within twelve (12) months after the occurrence of a
Change in Control, one half of the portion of this Option which would otherwise
be unvested as of the date of your Termination under the provisions set forth
above shall become vested as of the date of your Termination.  If a person obtains Control of the Company
in one of the ways specified in clause 10 of the UK-Sub-Plan or a Fundamental
Transaction occurs, the Companys Board of Directors may, in its discretion,
take any or all of the steps set forth in Section 10.3 or 10.4 of the Plan,
provided that the vesting of this Option shall be no less favorable to you than
the vesting set forth in this letter agreement.  If you decide to purchase Shares
under this Option, you will be required to submit a completed exercise
agreement on a form approved by the Company, together with payment for the
Option Shares.  You may pay for the
Option Shares (plus any associated withholding taxes) using cash, a check, a
wire transfer or a promissory note (or any combination of those methods).  Shares available under this Option must be
purchased, if at all, no later than the Expiration Date.  Acceleration of Vesting  Notwithstanding anything to
the contrary in this letter agreement, in the event that a person obtains
Control of the Company in one of the ways specified in clause 10 of the UK
Sub-Plan or a Fundamental Transaction occurs, the Companys Board of Directors
may, in its discretion, take any or all of the steps set forth in Sections 10.3
or 10.4 of the Plan.  Your Termination  In the event of your
Termination for any reason other than death or disability (as defined in the
Plan), this Option shall cease to be exercisable three months following your
Termination date.  In the event of your
Termination on account of disability, this Option shall cease to be exercisable
six months following your Termination date. 
In the event of your Termination on account of death, this Option shall
cease to be exercisable 12 months following your Termination date.  In no event, however, may this Option be
exercisable past the Expiration Date or for the Option Shares that were not yet
vested as of your Termination date.  Limitations on Transfer  This Option may not be
transferred in any manner, and may be exercised during your lifetime only by
you.  Subject to all of the other terms
and conditions of this letter agreement, following your death, this Option may,
to the extent it is vested and exercisable by you in accordance with its terms
on the date of death, be exercised by your personal representatives.  2 
   Restrictions on Exercise  No Shares will be issued
pursuant to the exercise of this Option unless and until there shall have been
full compliance with all applicable requirements of the Securities Act of 1933,
as amended (whether by registration or satisfaction of exemption conditions),
all applicable laws, and all applicable listing requirements of any national
securities exchange or other market system on which the Shares are then
listed.  As a condition to the exercise
of this Option, the Company may require you to make any representation and
warranty to the Company as may be necessary or appropriate, in the judgment of the
Administrator, to comply with any applicable law.  You understand and acknowledge that, because the Company has
recently emerged from a bankruptcy reorganization, the Company has not filed
all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, that would enable it to be eligible to file a Registration
Statement on Form S-8 relating to this Option. 
Accordingly, you understand and acknowledge that a considerable period
of time may pass before the Company is eligible to use Form S-8 with respect to
this Option, and that the exercisability of this Option may be deferred for
such period.  Equitable Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this
agreement, damages alone will be an inadequate remedy, and such breach will
cause the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this agreement.  Arbitration  General.Any controversy, dispute, or claim between
the parties to this letter agreement, including any claim arising out of, in
connection with, or in relation to the formation, interpretation, performance
or breach of this letter agreement, the exercise of the Option or the
disposition of the Option Shares, shall be settled exclusively by arbitration,
before a single arbitrator, in accordance with these provisions and the then
most applicable rules of the American Arbitration Association.  Judgment upon any award rendered by the
arbitrator may be entered by any state or federal court having jurisdiction thereof.  Such arbitration shall be administered by
the American Arbitration Association. 
Arbitration shall be the exclusive remedy for determining any such
dispute, regardless of its nature. 
Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court for provisional relief, including a temporary restraining
order or a preliminary injunction, on the ground that the award to which the
applicant may be entitled in arbitration may be rendered ineffectual without
provisional relief.  Unless mutually
agreed by the parties otherwise, any arbitration shall take place in the City
of San Diego, California.  Selection of Arbitrator.In the event
the parties are unable to agree upon an arbitrator, the parties shall select a
single arbitrator from a list of nine arbitrators drawn by the parties at
random from the Independent (or Gold Card) list of retired judges or, at
your option, from a list of nine persons (which shall be retired judges or
corporate or litigation attorneys experienced in stock options and buy-sell
agreements) provided by the office of the American Arbitration Association
having jurisdiction over San Diego, California.  If the parties are unable to agree upon an arbitrator from the
list so drawn, then  3 
   the parties shall each strike names
alternately from the list, with the first to strike being determined by
lot.  After each party has used four
strikes, the remaining name on the list shall be the arbitrator.  If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.  Applicability of Arbitration; Remedial Authority.This agreement
to resolve any disputes by binding arbitration shall extend to claims against
any parent, subsidiary or affiliate of each party, and, when acting within such
capacity, any officer, director, shareholder, employee or agent of each party,
or of any of the above, and shall apply as well to claims arising out of state
and federal statutes and local ordinances as well as to claims arising under
the common law.  In the event of a
dispute subject to this paragraph the parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator.  The remedial authority of the arbitrator
(which shall include the right to grant injunctive or other equitable relief)
shall be the same as, but no greater than, would be the remedial power of a
court having jurisdiction over the parties and their dispute.  The arbitrator shall, upon an appropriate
motion, dismiss any claim without an evidentiary hearing if the party bringing
the motion establishes that he or it would be entitled to summary judgment if
the matter had been pursued in court litigation.  In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these
procedures shall govern.  Fees and Costs.Any filing or
administrative fees shall be borne initially by the party requesting
arbitration.  The Company shall be
responsible for the costs and fees of the arbitration, unless you wish to
contribute (up to 50%) of the costs and fees of the arbitration.  Notwithstanding the foregoing, the
prevailing party in such arbitration, as determined by the arbitrator, and in
any enforcement or other court proceedings, shall be entitled, to the extent
permitted by law, to reimbursement from the other party for all of the
prevailing partys costs (including but not limited to the arbitrators
compensation), expenses, and attorneys fees.  Award Final and Binding.The arbitrator
shall render an award and written opinion, and the award shall be final and
binding upon the parties.  If any of
these arbitration provisions, or of this agreement, are determined to be
unlawful or otherwise unenforceable, in whole or in part, such determination
shall not affect the validity of the remainder of this agreement, and this
agreement shall be reformed to the extent necessary to carry out its provisions
to the greatest extent possible and to insure that the resolution of all
conflicts between the parties, including those arising out of statutory claims,
shall be resolved by neutral, binding arbitration.  If a court should find that the arbitration provisions of this
agreement are not absolutely binding, then the parties intend any arbitration
decision and award to be fully admissible in evidence in any subsequent action,
given great weight by any finder of fact, and treated as determinative to the
maximum extent permitted by law.  Miscellaneous Provisions  Successors and Assigns.Subject to the
limitations set forth in this letter agreement, the benefits and obligations of
this letter agreement will be binding on the executors, administrators, heirs,
legal representatives, successors, and assigns of the parties.  4 
   Governing Law.This letter agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware excluding
those laws that direct the application of the laws of another jurisdiction.  Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this letter agreement.  Notices.All notices and other communications under
this letter agreement shall be in writing. 
Unless and until you are notified in writing to the contrary, all
notices, communications, and documents directed to the Company and related to
the agreement, if not delivered by hand or by telecopier, shall be mailed,
addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator 3611
Valley Center Drive San
Diego, CA 92130  Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this letter
agreement, if not delivered by hand or by telecopier, shall be mailed to your
last known address as shown on the Companys books.  Notices and communications shall be mailed by first class mail,
postage prepaid.  All mailings and
deliveries related to this letter agreement shall be deemed received when
actually received, if by hand delivery or telecopier, and three business days
after mailing, if by mail.  The
Administrator may, by notice to you in the form set forth above, specify that
future notices and communications may be sent electronically in a manner
acceptable to the Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this letter agreement,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before
submitting this letter agreement to the Company.  This is not an employment contract.This letter
agreement is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and
look forward to your continued contribution.  Sincerely,/s/ John MutchJohn MutchCEO  5 
   I accept this
option and agree to the terms of this offer letter agreement and the Plan.  , 200Optionee signature
  
  Date  6 
   Stock
Option Grant Letter  Option Shares:
  
  Grant Date:Price per Share:
  
  Vesting Base Date:Fully-Vested Date:Option Control No:
  
  Expiration Date:Sale Restriction End Date:
  Dear:  I am pleased to confirm that
the Company has granted you an option to purchase shares of our common stock
under the 2003 Equity Incentive Plan of Peregrine Systems, Inc.  (the Plan).  To acknowledge receipt of your stock option, please sign the
enclosed copy of this Option Grant Letter and return it to the Finance
Department {in the envelope provided}.  General terms  Your
Option is intended to benefit from the preferred tax regime applicable to
qualified stock options under French law. 
The basic terms of your Option Grant are identified in the information
block at the top of this Option Grant Letter, but other important terms and
conditions are described in this Option Grant Letter and in the Plan.  For the purposes of this Option Grant
Letter, Plan includes the terms of the French sub-plan adopted by the Company
in order to allow the grant of options to French employees (the French
Sub-Plan) We encourage you to carefully review the Plan, a copy of which is
available on the intranet at
http://falconnet.peregrine.com/stock_plan_admin/index.cfm?objectID=E752A718-60E3-4892-A72AF8449EA248D2.  Capitalized words in this
Option Grant Letter, which are not defined in this Option Grant Letter, are
defined in the Plan.  This Option Grant
Letter constitutes the document evidencing the grant of an Award called for in
the Plan.  If the terms of this Option
Grant Letter differ from the rules of the French Sub-Plan the rules of the
French Sub-Plan shall prevail.  A French
translation of this Option Grant Letter shall be made available to you for
information purposes only.  In the event
of any conflict between the terms of this Option Grant Letter and the French
translation of the Option Grant Letter, the English language version shall
prevail.  Purchase and payment  Subject to the Plan, your
option vests (becomes exercisable) to the extent of 25% of the Option Shares
one year after the Vesting Base Date (or, if no Vesting Base Date is specified,
the Grant Date), the so-called first Initial Exercise Date, and then in
cumulative  
   monthly increments of 2.0833% of the Option
Shares (Initial Exercise Date, calculated to the closest whole Share on each
monthly anniversary of the Vesting Base Date), so that all Shares will become
purchasable on the Fully-Vested Date shown above, subject to your continuing
status as an Employee on each vesting date.  Notwithstanding anything to
the contrary in this Option Grant Letter, if you have a Company-initiated
Termination without Cause within 12 months after the occurrence of a Change in
Control, one half of the portion of this Option which would otherwise be unvested
as of the date of your Termination under the provisions set forth above shall
become vested as of the date of your Termination.  Furthermore, notwithstanding anything to the contrary in this
Option Grant Letter, upon the occurrence of a Change in Control, the Companys
Board of Directors may, in its discretion, take any or all of the steps set
forth in Section 10.4 of the US Plan and Section 12(c) of the French Sub Plan,
provided that the vesting of this Option shall be no less favourable to you
than the vesting set forth in the preceding sentence.  Notwithstanding anything to the contrary in this Option Grant
Letter, in the event of a Fundamental Transaction, the Companys Board of
Directors may, in its discretion, take any or all of the steps set forth in
Section 10.3 of the US Plan and Section 12(c) of the French Sub Plan.(1)  If you decide to purchase
Shares under this Option, you will be required to submit a completed exercise
notice on a form approved by the Company, together with payment for the Option
Shares, and in accordance the procedure for exercise provided for in Section 10
(a) of the French Sub-Plan.  You may pay
for the Option Shares (plus any associated withholding taxes and broker fees)
using cash, a check, a wire transfer or any other form of payment listed in
Section 9 (d) of the French Sub-Plan and permitted by the Administrator at the
time you wish to exercise.  Shares
available under this Option must be purchased, if at all, no later than the Expiration
Date.  Acceleration of Vesting  Notwithstanding anything to
the contrary in this Option Grant Letter, in the event of a Change in Control
or Fundamental Transaction, the Companys Board of Directors may, in its
discretion, take any or all of the steps set forth in Sections 10.3 or 10.4 of
the US Plan and Section 12(c) of the French Sub Plan(2).  Your Termination  In the event of your
Termination for any reason other than death, disability or retirement (as
defined in section 10 (c), (d) and (e) of the French Sub-Plan), this Option
shall cease to be exercisable three months following your Termination
date.  In the event of your Termination
on account of disability, this Option shall cease to be exercisable six months
following your Termination date in accordance with section 10 (c) of the French
Sub-Plan.  In the event of your
Termination on account of death, this Option shall cease to be exercisable six
months following the date of your death in accordance with section 10 (d) of
the French Sub-Plan.  In the event of
your Termination on account of retirement, this Option  
 (1) You should however note
that in these circumstances you may not benefit from the preferred tax
treatment in France.  (2) You should however note
that in these circumstances you may not benefit from the preferred tax treatment
in France.  2 
   shall cease to be
exercisable before the beginning of the 3-months period preceding the date of
your Termination date for Options vested before this date in accordance with
section 10 (e) of the French Sub-Plan. 
In no event, however, may this Option be exercisable past the Expiration
Date or for the Option Shares that were not yet vested as of your Termination
date, except as otherwise provided in Section 10(d) and (e) of the French
Sub-Plan.  Limitations on Transfer  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during your lifetime only by you.  No shares subject to this Option may be
exercised, sold or transferred in any manner whatsoever except through the
Authorised Broker, as defined in Section 2(b) of the French Sub-Plan.  Subject to all of the other terms and
conditions of this Option Grant Letter, following your death, this Option may, to
the extent it is vested and exercisable by you in accordance with its terms on
the date of death, be exercised by your heirs or legal representatives in the
event of your death.  Restrictions on Exercise  No Shares will be issued
pursuant to the exercise of this Option unless and until there shall have been
full compliance with all applicable requirements of the United States of
America Securities Act of 1933, as amended (whether by registration or
satisfaction of exemption conditions), all applicable laws, and all applicable
listing requirements of any national securities exchange or other market system
on which the Shares are then listed.  As
a condition to the exercise of this Option, the Company may require you to make
any representation and warranty to the Company as may be necessary or
appropriate, in the judgment of the Administrator, to comply with any
applicable law.  You understand and
acknowledge that, because the Company has recently emerged from a bankruptcy
reorganization, the Company has not filed all reports under Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, that would enable it to be
eligible to file a Registration Statement on Form S-8 relating to this
Option.  Accordingly, you understand and
acknowledge that a considerable period of time may pass before the Company is
eligible to use Form S-8 with respect to this Option, and that the
exercisability of this Option may be deferred for such period.  Restrictions on Sale  Except in the event of
Optionees disability, death, or retirement, as set forth in Sections 10(c),
(d) and (e) of the French Sub-Plan, the Shares subject to this Option shall not
be transferred, assigned, hypothecated or sold in any manner otherwise than by
will or by the laws of descent or distribution before the Sale Restriction End
Date, as defined above.  In
this respect, the Option Shares acquired upon exercise of the Options cannot be
sold:  (i)for the 25% of Option Shares that vest one
year after the Vesting Base Date, before the expiry of three years from the
first Initial Exercise Date;  3 
   (ii)for each cumulative monthly increment of
2.0833% of the Option Shares that vest as set out in the Option Grant Letter,
before the expiry of three years from the relevant Initial Exercise Date, less
the number of whole months between the first Initial Exercise Date (relating to
the 25% of Option Shares) and the relevant Initial Exercise Date, whenever that
shall be.(3)  Equitable Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this grant
letter, damages alone will be an inadequate remedy, and such breach will cause
the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this grant letter.  Miscellaneous Provisions  Successors.Subject to the limitations set forth in this
Option Grant Letter, the benefits and obligations of this Option Grant Letter
will be binding on the executors, administrators, heirs, legal representatives
and successors of the parties.  Governing Law.This Option Grant Letter shall be governed
by, and construed in accordance with, the laws of the State of Delaware
excluding those laws that direct the application of the laws of another
jurisdiction.  Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this Option Grant Letter in particular and the Plan in
general.  Notices.All notices and other communications under
this Option Grant Letter shall be in writing. 
Unless and until you are notified in writing to the contrary, all
notices, communications, and documents directed to the Company and related to
the Option Grant Letter, if not delivered by hand or by telecopier, shall be
mailed, addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator  
 (3)Working example  Assuming a date of grant of
the Option : 01.01. Year 2004  25% of the Option shall vest on 01.01.  Year 2005.  The restriction on sale of this portion of the Option lapses 3
years as from the Initial Exercise Date i.e. 
01.01.Year 2008.  Then, a further 1/36 of the Option shall vest on
01.02.Year 2005.  The restriction on
sale applicable to this portion of the Option lapses 3 years less the number of
months between the first Initial Exercise Date (0l.0l.Year 2005) and the
relevant Initial Exercise Date (01.02.Year 2005) i.e., 35 months (36 months
less one month), as from the relevant Initial Exercise Date of this portion of
Option (01.02.Year 2005) so that the Sale Restriction End Date is 01.01.Year
2008.  In
practice, the
restriction on sale always expires 4 years
after the date of grant.  4 
   3611
Valley Center Drive San
Diego, CA 92130  Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this Option Grant
Letter, if not delivered by hand or by telecopier, shall be mailed to your last
known address as shown on the Companys books. 
Notices and communications shall be mailed by first class mail, postage
prepaid.  All mailings and deliveries
related to this Option Grant Letter shall be deemed received when actually
received, if by hand delivery or telecopier, and three business days after
mailing, if by mail.  The Administrator
may, by notice to you in the form set forth above, specify that future notices
and communications may be sent electronically in a manner acceptable to the
Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this Option Grant Letter,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before
submitting this Option Grant Letter to the Company.  This is not an employment contract.This Option
Grant Letter is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and
look forward to your continued contribution.  Sincerely,/s/ John MutchJohn MutchCEO  I
acknowledge receipt of this Option Grant Letter and declare that I fully
understand all the terms and conditions of the Plan and this Option Grant
Letter.  [I understand that, in order to perform its
requirements under this Plan, my Employer and/or Peregrine Systems, Inc. or any
agent apppointed by Peregrine Systems Inc., may process personal data and/or
sensitive personal data about me.  Such
data include but are not limited to the information provided on the Payroll
Deduction Authorisation form and any changes thereto, other appropriate
personal and financial data about me, and information about the amount in my
Plan account and my purchases under the Plan from time to time.  I hereby give my explicit consent to my
Employer and/or Peregrine Systems Inc., or any agent appointed by Peregrine
Inc.  to process any such personal data
and/or sensitive personal data for the exclusive purpose of administrating the
Plan, excluding other transfers of data unrelated to the Plans aim.  I understand that in some of the countries
outside the European Union, regulations on the protection of personal data may
be weaker than those existing in the European Union, or non-existent.  I also hereby give my explicit consent to my  5 
   Employer and/or Peregrine Systems, Inc to
transfer any such personal data and/or sensitive personal data outside the
country in which I work or am employed and outside the European Union.  The legal persons for whom my personal data
are intended are my Employer and any independent agent or contractor appointed
by my Employer or Peregrine Systems, Inc.  I have been informed of my right of access
and correction to my personal data.  I
understand that completion of this form is required for my enrolment in the
Plan].  , 200Optionee signature
  
  Date  6 
   Stock
Option Grant Letter  Option Shares:
  
  Grant Date:Price per Share:
  
  Vesting Base Date:Fully Vested Date:Option Control No:
  
  Expiration Date:Sale Restriction End Date:
  Dear:  I am pleased to confirm that
the Company has granted you an option to purchase shares of our common stock
under the 2003 Equity Incentive Plan of Peregrine Systems, Inc.  (the Plan).  To acknowledge receipt of your stock option, please sign the
enclosed copy of this Option Grant Letter and return it to the Finance
Department {in the envelope provided}.  General terms  Your Option is intended to
benefit from the preferred tax regime applicable to qualified stock options
under French law.  The basic terms of
your Option Grant are identified in the information block at the top of this
Option Grant Letter, but other important terms and conditions are described in
this Option Grant Letter and in the Plan. 
For the purposes of this Option Grant Letter, Plan includes the terms
of the French sub-plan adopted by the Company in order to allow the grant of
options to French employees (the French Sub-Plan) We encourage you to
carefully review the Plan, a copy of which is available on the intranet at
http://falconnet.peregrine.com/stock_plan_admin/index.cfm?objectID=E752A718-60E3-4892-A72AF8449EA248D2.  Capitalized words in this
Option Grant Letter, which are not defined in this Option Grant Letter, are
defined in the Plan.  This Option Grant
Letter constitutes the document evidencing the grant of an Award called for in
the Plan.  If the terms of this Option
Grant Letter differ from the rules of the French Sub-Plan the rules of the
French Sub-Plan shall prevail.  A French
translation of this Option Grant Letter shall be made available to you for
information purposes only.  In the event
of any conflict between the terms of this Option Grant Letter and the French
translation of the Option Grant Letter, the English language version shall
prevail.  Purchase and payment  Subject to the Plan, your
option vests (becomes exercisable) to the extent of 25% of the Option Shares
one year after the Vesting Base Date (or, if no Vesting Base Date is specified,
the Grant Date), the so-called first Initial Exercise Date, and then in
cumulative  
   monthly increments of 2.0833% of the Option
Shares (Initial Exercise Date, calculated to the closest whole Share on each monthly
anniversary of the Vesting Base Date), so that all Shares will become
purchasable on the Fully-Vested Date shown above, subject to your continuing
status as an Employee on each vesting date.  Notwithstanding
anything to the contrary in this Option Grant Letter, upon the occurrence of a
Change in Control, the Companys Board of Directors may, in its discretion,
take any or all of the steps set forth in Section 10.4 of the US Plan and
Section 12(c) of the French Sub Plan, provided that the vesting of this Option
shall be no less favourable to you than the vesting set forth in the preceding
sentence.  Notwithstanding anything to
the contrary in this Option Grant Letter, in the event of a Fundamental
Transaction, the Companys Board of Directors may, in its discretion, take any
or all of the steps set forth in Section 10.3 of the US Plan and Section 12(c)
of the French Sub Plan.(1)  If
you decide to purchase Shares under this Option, you will be required to submit
a completed exercise notice on a form approved by the Company, together with
payment for the Option Shares, and in accordance the procedure for exercise
provided for in Section 10 (a) of the French Sub-Plan.  You may pay for the Option Shares (plus any
associated withholding taxes and broker fees) using cash, a check, a wire
transfer or any other form of payment listed in Section 9 (d) of the French
Sub-Plan and permitted by the Administrator at the time you wish to
exercise.  Shares available under this
Option must be purchased, if at all, no later than the Expiration Date.  Acceleration of Vesting  Notwithstanding anything to
the contrary in this Option Grant Letter, in the event of a Change in Control
or Fundamental Transaction, the Companys Board of Directors may, in its
discretion, take any or all of the steps set forth in Sections 10.3 or 10.4 of
the US Plan and Section 12(c) of the French Sub Plan(2).  Your Termination  In
the event of your Termination for any reason other than death, disability or
retirement (as defined in section 10 (c), (d) and (e) of the French Sub-Plan),
this Option shall cease to be exercisable three months following your
Termination date.  In the event of your
Termination on account of disability, this Option shall cease to be exercisable
six months following your Termination date in accordance with section 10 (c) of
the French Sub-Plan.  In the event of
your Termination on account of death, this Option shall cease to be exercisable
six months following the date of your death in accordance with section 10 (d)
of the French Sub-Plan.  In the event of
your Termination on account of retirement, this Option shall cease to be
exercisable before the beginning of the 3-months period preceding the date of
your Termination date for Options vested before this date in accordance with
section 10 (e) of the French Sub-Plan. 
In no event, however, may this Option be exercisable past the Expiration
Date or for the Option Shares that were not yet vested as of your Termination
date, except as otherwise provided in Section 10(d) and (e) of the French
Sub-Plan.  
 (1) You should however note
that in these circumstances you may not benefit from the preferred tax
treatment in France.  (2) You should however note
that in these circumstances you may not benefit from the preferred tax
treatment in France.  2 
   Limitations on Transfer  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during your lifetime only by you.  No shares subject to this Option may be
exercised, sold or transferred in any manner whatsoever except through the
Authorised Broker, as defined in Section 2(b) of the French Sub-Plan.  Subject to all of the other terms and
conditions of this Option Grant Letter, following your death, this Option may,
to the extent it is vested and exercisable by you in accordance with its terms
on the date of death, be exercised by your heirs or legal representatives in
the event of your death.  Restrictions on Exercise  No Shares will be issued
pursuant to the exercise of this Option unless and until there shall have been
full compliance with all applicable requirements of the United States of
America Securities Act of 1933, as amended (whether by registration or satisfaction
of exemption conditions), all applicable laws, and all applicable listing
requirements of any national securities exchange or other market system on
which the Shares are then listed.  As a
condition to the exercise of this Option, the Company may require you to make
any representation and warranty to the Company as may be necessary or
appropriate, in the judgment of the Administrator, to comply with any
applicable law.  You understand and
acknowledge that, because the Company has recently emerged from a bankruptcy
reorganization, the Company has not filed all reports under Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, that would enable it to be
eligible to file a Registration Statement on Form S-8 relating to this Option.  Accordingly, you understand and acknowledge
that a considerable period of time may pass before the Company is eligible to
use Form S-8 with respect to this Option, and that the exercisability of this
Option may be deferred for such period.  Restrictions on Sale  Except in the event of
Optionees disability, death, or retirement, as set forth in Sections 10(c),
(d) and (e) of the French Sub-Plan, the Shares subject to this Option shall not
be transferred, assigned, hypothecated or sold in any manner otherwise than by
will or by the laws of descent or distribution before the Sale Restriction End
Date, as defined above.  In this respect, the Option
Shares acquired upon exercise of the Options cannot be sold:  (i)for the 25% of Option Shares that vest one
year after the Vesting Base Date, before the expiry of three years from the
first Initial Exercise Date;  (ii)for each cumulative monthly increment of
2.0833% of the Option Shares that vest as set out in the Option Grant Letter,
before the expiry of three years from the relevant Initial Exercise Date, less
the number of whole months between the first Initial Exercise  3 
   Date (relating to the 25% of Option Shares)
and the relevant Initial Exercise Date, whenever that shall be.(3)  Equitable Relief  You acknowledge that, in the
event of a threatened or actual breach of any of the provisions of this grant
letter, damages alone will be an inadequate remedy, and such breach will cause
the Company great, immediate and irreparable injury and damage.  Accordingly, you agree that the Company
shall be entitled to injunctive and other equitable relief, and that such
relief shall be in addition to, and not in lieu of, any remedies it may have at
law or under this grant letter.  Miscellaneous Provisions  Successors.Subject to the limitations set forth in this
Option Grant Letter, the benefits and obligations of this Option Grant Letter
will be binding on the executors, administrators, heirs, legal representatives
and successors of the parties.  Governing Law.This Option Grant Letter shall be governed
by, and construed in accordance with, the laws of the State of Delaware
excluding those laws that direct the application of the laws of another
jurisdiction.  Costs.You will repay the Company for all costs and
damages, including incidental and consequential damages and attorneys fees,
resulting from any transfer of the Option Shares which is not in compliance
with the provisions of this Option Grant Letter in particular and the Plan in
general.  Notices.All notices and other communications under
this Option Grant Letter shall be in writing. 
Unless and until you are notified in writing to the contrary, all
notices, communications, and documents directed to the Company and related to
the Option Grant Letter, if not delivered by hand or by telecopier, shall be
mailed, addressed to:  Peregrine
Systems, Inc. Attention:
Stock Option Plan Administrator 3611
Valley Center Drive San
Diego, CA 92130  
 (3)Working example  Assuming a date of grant of
the Option : 01.01.  Year 2004  25% of the Option shall vest
on 01.01.  Year 2005.  The restriction on sale of this portion of
the Option lapses 3 years as from the Initial Exercise Date i.e.  01.01.Year 2008.  Then, a further 1/36 of the Option
shall vest on 01.02.Year 2005.  The
restriction on sale applicable to this portion of the Option lapses 3 years
less the number of months between the first Initial Exercise Date (0l.0l.Year
2005) and the relevant Initial Exercise Date (01.02.Year 2005) i.e., 35 months
(36 months less one month), as from the relevant Initial Exercise Date of this
portion of Option (01.02.  Year 2005) so
that the Sale Restriction End Date is 01.01. 
Year 2008.  In
practice, the
restriction on sale always expires 4 years
after the date of grant.  4 
   Communications.Unless and
until you notify the Company in writing to the contrary, all notices,
communications, and documents intended for you and related to this Option Grant
Letter, if not delivered by hand or by telecopier, shall be mailed to your last
known address as shown on the Companys books. 
Notices and communications shall be mailed by first class mail, postage
prepaid.  All mailings and deliveries
related to this Option Grant Letter shall be deemed received when actually
received, if by hand delivery or telecopier, and three business days after
mailing, if by mail.  The Administrator
may, by notice to you in the form set forth above, specify that future notices
and communications may be sent electronically in a manner acceptable to the
Administrator.  Taxes.You acknowledge that the Company has made no
warranties or representations to you with respect to the income tax
consequences of the transactions contemplated by this Option Grant Letter,
including the grant or exercise of the Option or the sale of the Option Shares,
and you are not relying on the Company or its representatives for an assessment
of such tax consequences.  You have had
adequate opportunity to consult with your personal tax advisor before
submitting this Option Grant Letter to the Company.  This is not an employment contract.This Option
Grant Letter is not to be interpreted as a guarantee or contract of continuing
employment.  We value your efforts and
look forward to your continued contribution.  Sincerely,/s/ John MutchJohn MutchCEO  I
acknowledge receipt of this Option Grant Letter and declare that I fully
understand all the terms and conditions of the Plan and this Option Grant Letter.  [I understand that, in order to perform its
requirements under this Plan, my Employer and/or Peregrine Systems, Inc. or any
agent apppointed by Peregrine Systems Inc., may process personal data and/or
sensitive personal data about me.  Such
data include but are not limited to the information provided on the Payroll
Deduction Authorisation form and any changes thereto, other appropriate
personal and financial data about me, and information about the amount in my
Plan account and my purchases under the Plan from time to time.  I hereby give my explicit consent to my
Employer and/or Peregrine Systems Inc., or any agent appointed by Peregrine
Inc.  to process any such personal data
and/or sensitive personal data for the exclusive purpose of administrating the
Plan, excluding other transfers of data unrelated to the Plans aim.  I understand that in some of the countries
outside the European Union, regulations on the protection of personal data may
be weaker than those existing in the European Union, or non-existent.  I also hereby give my explicit consent to my
Employer and/or Peregrine Systems, Inc to transfer any such personal data
and/or sensitive personal data outside the country in which I work or am
employed and outside the European  5 
   Union. 
The legal persons for whom my personal data are intended are my Employer
and any independent agent or contractor appointed by my Employer or Peregrine
Systems, Inc.  I have been informed of my right of access
and correction to my personal data.  I
understand that completion of this form is required for my enrolment in the
Plan].  , 200Optionee signature
  
  Date  6