<PAGE>

                                  OFFICE LEASE

                       PEREGRINE SYSTEMS CORPORATE CENTER

                            KR-CARMEL PARTNERS, LLC,

                      a Delaware limited liability company

                                  as Landlord,

                                       and

                             PEREGRINE SYSTEMS, INC.

                             a Delaware corporation

                                    as Tenant

                                   BUILDING 1




                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>


                 PEREGRINE SYSTEMS CORPORATE CENTER OFFICE LEASE

                       SUMMARY OF BASIC LEASE INFORMATION

         The undersigned hereby agree to the following terms of this Summary of
Basic Lease Information (the "SUMMARY"). This Summary is hereby incorporated
into and made a part of the attached Office Lease (the "OFFICE LEASE") which
pertains to the "Project," as that term is defined in the Office Lease, to be
known as "PEREGRINE SYSTEMS CORPORATE CENTER" (subject to Section 29.20 of the
Office Lease). This Summary and the Office Lease are collectively referred to
herein as the "LEASE". Each reference in the Office Lease to any term of this
Summary shall have the meaning set forth in this Summary for such term. In the
event of a conflict between the terms of this Summary and the Office Lease, the
terms of the Office Lease shall prevail. Any capitalized terms used herein and
not otherwise defined herein shall have the meanings set forth in the Office
Lease.

<TABLE>
<CAPTION>
<S><C>
          TERMS OF LEASE

(REFERENCES ARE TO THE OFFICE LEASE)
                                                                 DESCRIPTION

1.  Date:                               June 9, 1999.

2.  Landlord:                           KR-CARMEL PARTNERS, LLC, a Delaware limited liability company.

3.  Tenant:                             PEREGRINE SYSTEMS, INC., a Delaware corporation.

4.  Premises (Article 1).               The Premises is defined as the entire  building to be  constructed
                                        by Landlord,  consisting of  approximately  52,375 rentable square
                                        feet as  generally  depicted  on EXHIBIT  "A" to the Office  Lease
                                        ("BUILDING").  The  parties  hereby  stipulate  that the  Building
                                        will contain a usable square footage of 45,390 usable square feet.

5.  Lease Term (Article 2).             The Lease Term for Tenant's lease of the Building shall be eleven
                                        (11) years commencing on the Lease Commencement Date. The Lease
                                        Commencement Date is estimated to be October 1, 1999.

6.  Initial Base Rent (Article 3):      The initial Base Rent payable with respect to the Building shall
                                        be calculated as follows:
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
   Estimated Building           Monthly            Monthly Rental Rate Per
Rentable Square Footage      Installment of               Rentable
                               Base Rent                Square Foot*
-------------------------------------------------------------------------
<S>                          <C>                   <C>
        52,375                $117,843.75                  $2.25
-------------------------------------------------------------------------
</TABLE>

*Plus electricity (as indicated in Section 6.2 of the Office Lease)

<TABLE>
<CAPTION>
<S><C>
7.       Additional Rent (Article 4).

         7.1      Base Year:            Calendar year 2000.


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         7.2      Tenant's Share:       See Article 4.

8.  Security Deposit:                   See Article 21.

9.  Parking Privileges (Article 28):    Four (4) parking  permits for every 1,000 usable square feet of the
                                        Premises until the parking  structure for the Project is completed,
                                        and then four and  one-half  (4 1/2)  parking  permits for every 1,000
                                        usable  square  feet of the  Premises  as such  square  footage  is
                                        specified  in Section 4 of the Summary.  Each permit shall  entitle
                                        Tenant to utilize one (1) parking space on an  unreserved  basis in
                                        the Project parking facilities.

10. Brokers (Section 29.18):            John Burnham & Company (representing Landlord and Tenant) and CB
                                        Richard Ellis, Inc. (representing Tenant only)

11. Address of Tenant                   12670 High Bluff Drive
    (Section 29.13):                    San Diego, CA 92130
                                        Attention: Richard T. Nelson, Esq.

                                        with a copy to:

                                        12670 High Bluff Drive
                                        San Diego, CA 92130
                                        Attention: Mr. Robert Urwiler
</TABLE>


                                       ii



                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

            PEREGRINE SYSTEMS CORPORATE CENTER OFFICE BUILDING LEASE
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE               SUBJECT MATTER                                                                           PAGE
<S>                                                                                                            <C>
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS........................................................ 1
                      1.1      Premises, Building, Project and Common Areas.................................... 1
                      1.2      Verification of Rentable and Usable Square Feet of Premises, Building, and
                               Project......................................................................... 3

ARTICLE 2 LEASE TERM........................................................................................... 3
                      2.1      Initial Term.................................................................... 3
                      2.2      Options to Extend............................................................... 4

ARTICLE 3 BASE RENT............................................................................................ 6
                      3.1      Initial Base Rent............................................................... 6
                      3.2      Adjustments to Base Rent........................................................ 6

ARTICLE 4 ADDITIONAL RENT...................................................................................... 7
                      4.1      General Terms................................................................... 7
                      4.2      Definitions of Key Terms Relating to Additional Rent............................ 7
                      4.3      Allocation of Direct Expenses.................................................. 13
                      4.4      Calculation and Payment of Additional Rent..................................... 14
                      4.5      Taxes and Other Charges for Which Tenant Is Directly Responsible............... 16

ARTICLE 5 USE OF PREMISES..................................................................................... 17
                      5.1      Permitted Use.................................................................. 17
                      5.2      Prohibited Uses................................................................ 17
                      5.3      CC&R's......................................................................... 17

ARTICLE 6 SERVICES AND UTILITIES.............................................................................. 18
                      6.1      Standard Tenant Services....................................................... 18
                      6.2      Utilities Costs; Overstandard Tenant Use....................................... 20
                      6.3      Interruption of Use............................................................ 20
                      6.4      Additional Services............................................................ 21
                      6.5      Utility Deregulation........................................................... 21
                      6.6      Emergency Generator............................................................ 22
                      6.7      Substitution of Vendors........................................................ 22
                      6.8      Abatement Event................................................................ 22

ARTICLE 7 REPAIRS............................................................................................. 23
                      7.1      Obligations.................................................................... 23
                      7.2      Tenant's Failure to Comply..................................................... 23
                      7.3      Landlord's Failure to Comply................................................... 24

ARTICLE 8 ADDITIONS AND ALTERATIONS........................................................................... 25
                      8.1      Landlord's Consent to Alterations.............................................. 25
                      8.2      Manner of Construction......................................................... 25
                      8.3      Payment for Improvements....................................................... 26
                      8.4      Construction Insurance......................................................... 26
                      8.5      Landlord's Property............................................................ 26

ARTICLE 9 COVENANT AGAINST LIENS.............................................................................. 26

ARTICLE 10 INSURANCE.......................................................................................... 27
                      10.1     Indemnification and Waiver..................................................... 27


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                      10.2     Tenant's Compliance with Landlord's Fire and Casualty Insurance................ 27
                      10.3     Tenant's Insurance............................................................. 27
                      10.4     Fire and Casualty Insurance of Landlord........................................ 28
                      10.5     Form of Policies............................................................... 28
                      10.6     Subrogation.................................................................... 29
                      10.7     Additional Insurance Obligations............................................... 29

ARTICLE 11 DAMAGE AND DESTRUCTION............................................................................. 29
                      11.1     Repair of Damage to Premises by Landlord....................................... 29
                      11.2     Landlord's Option to Repair.................................................... 30
                      11.3     Landlord's or Tenant's Option to Repair........................................ 30
                      11.4     Waiver of Statutory Provisions................................................. 30
                      11.5     Damage Near End of Term........................................................ 31

ARTICLE 12 NONWAIVER.......................................................................................... 31

ARTICLE 13 CONDEMNATION....................................................................................... 31
                      13.1     Permanent Taking............................................................... 31
                      13.2     Temporary Taking............................................................... 32

ARTICLE 14 ASSIGNMENT AND SUBLETTING.......................................................................... 32
                      14.1     Transfers...................................................................... 32
                      14.2     Landlord's Consent............................................................. 33
                      14.3     Transfer Premium............................................................... 34
                      14.4     Landlord's Option as to Subject Space.......................................... 35
                      14.5     Effect of Transfer............................................................. 35
                      14.6     Additional Transfers........................................................... 36
                      14.7     Affiliated and Permitted Transfers............................................. 36

ARTICLE 15 SURRENDER OF PREMISES; REMOVAL OF TRADE FIXTURES................................................... 37
                      15.1     Surrender of Premises.......................................................... 37
                      15.2     Removal of Tenant Property by Tenant........................................... 37
                      15.3     Removal of Tenant's Property by Landlord....................................... 37
                      15.4     Landlord's Actions on Premises................................................. 38

ARTICLE 16 HOLDING OVER....................................................................................... 38

ARTICLE 17 ESTOPPEL CERTIFICATES.............................................................................. 39

ARTICLE 18 SUBORDINATION...................................................................................... 39

ARTICLE 19 DEFAULTS; REMEDIES................................................................................. 40
                      19.1     Defaults....................................................................... 40
                      19.2     Remedies Upon Default.......................................................... 40
                      19.3     Sublessees of Tenant........................................................... 41
                      19.4     Form of Payment After Default.................................................. 41
                      19.5     Waiver of Default.............................................................. 41
                      19.6     Efforts to Relet............................................................... 42

ARTICLE 20 COVENANT OF QUIET ENJOYMENT........................................................................ 42

ARTICLE 21 SECURITY DEPOSIT................................................................................... 42
                      21.1     Letter of Credit............................................................... 42
                      21.2     Financial Standards............................................................ 43
                      21.3     Conditional Release of Security................................................ 43
                      21.4     Cash Equivalent................................................................ 43

ARTICLE 22 ROOF RIGHTS........................................................................................ 43


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<PAGE>

ARTICLE 23 SIGNAGE............................................................................................ 44
                      23.1     General........................................................................ 44
                      23.2     Tenant's Exterior Signage Rights............................................... 45
                      23.3     Tenant's Interior Signage Rights............................................... 46

ARTICLE 24 COMPLIANCE WITH LAW................................................................................ 46

ARTICLE 25 LATE PAYMENTS...................................................................................... 47

ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT............................................... 47
                      26.1     Landlord's Cure................................................................ 47
                      26.2     Tenant's Reimbursement......................................................... 47

ARTICLE 27 ENTRY BY LANDLORD.................................................................................. 47

ARTICLE 28 TENANT PARKING..................................................................................... 48

ARTICLE 29 MISCELLANEOUS PROVISIONS........................................................................... 49
                      29.1     Binding Effect................................................................. 49
                      29.2     Modification of Lease/Memorandum of Lease...................................... 49
                      29.3     Transfer of Landlord's Interest................................................ 50
                      29.4     Consents by the Parties........................................................ 50
                      29.5     Captions....................................................................... 50
                      29.6     Time of Essence................................................................ 50
                      29.7     Partial Invalidity............................................................. 50
                      29.8     No Warranty.................................................................... 50
                      29.9     Construction................................................................... 50
                      29.10    Entire Agreement............................................................... 51
                      29.11    Right to Lease................................................................. 51
                      29.12    Force Majeure.................................................................. 51
                      29.13    Notices........................................................................ 51
                      29.14    Joint and Several.............................................................. 52
                      29.15    Authority...................................................................... 52
                      29.16    Governing Law.................................................................. 52
                      29.17    Submission of Lease............................................................ 52
                      29.18    Brokers........................................................................ 52
                      29.19    Independent Covenants.......................................................... 52
                      29.20    Project or Building Name and Signage........................................... 52
                      29.21    Transportation Management...................................................... 53
                      29.22    No Discrimination.............................................................. 53
                      29.23    Hazardous Material............................................................. 53
                      29.24    Development of the Project..................................................... 53
                      29.25    Landlord Exculpation........................................................... 54
                      29.26    Waiver of Redemption by Tenant................................................. 54
                      29.27    Attorneys' Fees................................................................ 54
                      29.28    Communications and Computer Lines.............................................. 55
                      29.29    No Air Rights.................................................................. 55
                      29.30    Counterparts................................................................... 55
                      29.31    Confidentiality................................................................ 55
                      29.32    Disclosures and Mutual Release................................................. 55
</TABLE>

EXHIBIT "A"           SITE PLAN
EXHIBIT "B"           TENANT WORK LETTER
EXHIBIT "C"           NOTICE OF LEASE TERM DATES
EXHIBIT "D"           RULES AND REGULATIONS
EXHIBIT "E"           FORM OF TENANT'S ESTOPPEL CERTIFICATE
EXHIBIT "F"           CC&R'S


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
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<PAGE>

EXHIBIT "G"           HVAC AND ELECTRICAL STANDARDS
EXHIBIT "H-1"         JANITORIAL SPECIFICATIONS
EXHIBIT "H-2"         DAY PORTER SPECIFICATIONS
EXHIBIT "I"           SECURITY SYSTEMS AND PERSONNEL
EXHIBIT "J"           SIGNAGE CRITERIA


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

            PEREGRINE SYSTEMS CORPORATE CENTER OFFICE BUILDING LEASE

                             INDEX OF DEFINED TERMS

<TABLE>
<S>                                                                           <C>
Abatement Event..........................................................................22
Abatement Notice.........................................................................22
Accelerated Force Majeure Period.........................................................16
Acceptable Changes.......................................................................25
Actual Surrender Date....................................................................38
ADA......................................................................................46
Additional Rent...........................................................................7
Adjacent Building.........................................................................2
Adjacent Building Leases..................................................................2
Adjustment Year..........................................................................13
Aggregate Force Majeure Period...........................................................16
Alterations..............................................................................25
Alternative..............................................................................21
Applicable Laws..........................................................................25
Approved Working Drawings.........................................................EXHIBIT B
Architect.........................................................................EXHIBIT B
Association..............................................................................17
Base Rent.................................................................................6
Base Year.................................................................................7
Base, Shell and Core..............................................................EXHIBIT B
Base, Shell and Core Completion...................................................EXHIBIT B
BOMA......................................................................................3
Brokers..................................................................................52
Building..................................................................................i
Building 2................................................................................1
Building 2 Lease..........................................................................2
Building 3................................................................................1
Building 3 Lease..........................................................................2
Building 4................................................................................1
Building 4 Lease Option Agreement.........................................................2
Building 5................................................................................2
Building 5 Lease..........................................................................2
Building Common Areas.....................................................................2
Building Direct Expenses..................................................................7
Building Hours...........................................................................18
Building Operating Expenses...............................................................7
Building Systems and Equipment...........................................................20
Building Tax Expenses.....................................................................7
Building Top Signs.......................................................................45
Building Working Drawings.........................................................EXHIBIT B
CAD.......................................................................................3
CC&R's...................................................................................17
CD.......................................................................................43
Change Orders.....................................................................EXHIBIT B
Claims...................................................................................27
Code..........................................................................34. EXHIBIT B
Commencement Date.........................................................................4
Committee................................................................................18
Common Areas..............................................................................2
Communication Equipment..................................................................43
ComparableBuildings.......................................................................2
Construction Schedule.............................................................EXHIBIT B
Contractor........................................................................EXHIBIT B
Cost Pools...............................................................................14
Cost Proposal.....................................................................EXHIBIT B
Cost Proposal Delivery Date.......................................................EXHIBIT B
Delivery Period..........................................................................16
Direct Expenses...........................................................................7
Director Board...........................................................................46
Drawings..........................................................................EXHIBIT B
Effective Date....................................................................EXHIBIT B
Electric Service Provider................................................................21
Eligibility Period.......................................................................23
Engineers.........................................................................EXHIBIT B


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<PAGE>

Estimate.................................................................................14
Estimate Statement.......................................................................14
Estimated Excess.........................................................................14
Excess...................................................................................14
Excess Over-Allowance Amount......................................................EXHIBIT B
Excusable Delay...................................................................EXHIBIT B
Expense Year..............................................................................7
Extension Notice..........................................................................4
Extension Options.........................................................................4
Extension Reminder Notice.................................................................4
Extension Term Base Rent..................................................................4
Extension Term Commencement Date..........................................................4
Extension Term(s).........................................................................4
Fair Market Rental Value..................................................................5
Final Space Plan..................................................................EXHIBIT B
Financial Standards......................................................................43
Force Majeure............................................................................51
Force Majeure Effective Date.............................................................15
Force Majeure Extension Options..........................................................16
Force Majeure Termination Notice.........................................................15
Hazardous Material.......................................................................53
Holdover Notice..........................................................................38
Holdover Notice Date.....................................................................38
Holidays.................................................................................18
HVAC.....................................................................................18
Interest Rate............................................................................47
KRC......................................................................................34
Landlord..................................................................................1
Landlord Parties.........................................................................27
Landlord Supervision Fee..........................................................EXHIBIT B
Landlord Work.....................................................................EXHIBIT B
Landlord Work Change Orders.......................................................EXHIBIT B
LC.......................................................................................42
Lease.....................................................................................1
Lease Commencement Date...................................................................3
Lease Expiration Date.....................................................................3
Lease Term................................................................................3
Lease Year................................................................................3
Lines....................................................................................54
Major Project Milestones..........................................................EXHIBIT B
Notices..................................................................................51
Objectionable Name.......................................................................45
Office Lease..............................................................................i
Operating Expenses........................................................................7
Original Tenant...........................................................................4
Other Improvements.......................................................................54
Outside Date......................................................................EXHIBIT B
Outside Date Extension Notice.....................................................EXHIBIT B
Outside Date Termination Notice...................................................EXHIBIT B
Over-Allowance Amount.............................................................EXHIBIT B
Package Units............................................................................18
Partial Cost Proposal.............................................................EXHIBIT B
Pedestrian Passageway.............................................................EXHIBIT B
Peregrine Center..........................................................................1
Permits...........................................................................EXHIBIT B
Permitted Affiliate......................................................................36
Permitted Signage Entities...............................................................45
Permitted Transferee.....................................................................37
Pre-Judgment Offset Amount...............................................................24
Premises..................................................................................1
Premium Base Amount......................................................................34
Premium Guidance.........................................................................34
Progress Payment Request..........................................................EXHIBIT B
Project...................................................................................1
Project Architect.................................................................EXHIBIT B
Project Architect Agreement.......................................................EXHIBIT B
Project Common Areas......................................................................2
Proposition 13...........................................................................12
Qualifying Income........................................................................34


                                       viii



                                              PEREGRINE SYSTEMS CORPORATE CENTER
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<PAGE>

Qualifying Period.........................................................................5
Qualifying Transferee....................................................................44
Readjustment Year........................................................................13
Reassessment.............................................................................13
Recapture Notice.........................................................................35
REIT Requirements........................................................................34
Reno..............................................................................EXHIBIT B
Rent......................................................................................7
Requirements.............................................................................47
Review Period............................................................................15
Shell Completion Dates............................................................EXHIBIT B
Signage Criteria.........................................................................44
Single Appraiser Date.....................................................................5
Site Plan.................................................................................1
space comparable to the Building..........................................................5
Specifications....................................................................EXHIBIT B
Standard Improvement Package......................................................EXHIBIT B
Statement................................................................................14
Subject Space............................................................................32
Subleasing Costs.........................................................................34
Substantial Completion....................................................................3
Summary...................................................................................1
Tax Expenses.............................................................................12
Tenant....................................................................................1
Tenant Delays.....................................................................EXHIBIT B
Tenant Improvement Allowance......................................................EXHIBIT B
Tenant Improvement Allowance Items................................................EXHIBIT B
Tenant Improvements...............................................................EXHIBIT B
Tenant Work...............................................................................3
Tenant Work Letter........................................................................1
Tenant's Share...........................................................................13
Tenant's Signs...........................................................................45
Threshold Level..........................................................................31
Time Deadlines....................................................................EXHIBIT B
Title 24.................................................................................46
Transfer Notice..........................................................................32
Transfer Premium.........................................................................34
Transferee...............................................................................32
Transfers................................................................................32
Withdrawal Date...........................................................................4
Work..............................................................................EXHIBIT B
Working Drawings..................................................................EXHIBIT B
Y2K......................................................................................10
</TABLE>


                                       ix



                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                       PEREGRINE SYSTEMS CORPORATE CENTER
                                  OFFICE LEASE

     This Office Lease, which includes the preceding Summary of Basic Lease
Information (the "SUMMARY") attached hereto and incorporated herein by this
reference (the Office Lease and Summary are sometimes collectively referred to
herein as the "LEASE"), dated as of the date set forth in Section 1 of the
Summary is made by and between KR-CARMEL PARTNERS, LLC, a Delaware limited
liability company ("LANDLORD"), and PEREGRINE SYSTEMS, INC., a Delaware
corporation ("TENANT").

                                    ARTICLE 1

                  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

     1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.

          1.1.1 THE PREMISES. Upon and subject to the terms hereinafter set
forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the premises set forth in Section 4 of the Summary (the
"PREMISES"), consisting of the Building described therein and more particularly
depicted on the Site Plan attached hereto as Exhibit "A" (the "SITE PLAN"). The
parties hereto agree that the lease of the Premises is upon and subject to the
terms, covenants and conditions herein set forth, and Tenant covenants as a
material part of the consideration for this Lease to keep and perform each and
all of such terms, covenants and conditions by it to be kept and performed and
that this Lease is made upon the condition of such performance. The parties
hereto hereby acknowledge that the purpose of the Site Plan is to show the
location of the Building and the Adjacent Buildings only, and such Exhibit is
not meant to constitute an agreement, representation or warranty as to the
construction of the Premises, the precise area thereof or the specific location
of the Common Areas, as that term is defined in Section 1.1.3 below and the
elements thereof or of the accessways to the Premises or the "Project," as that
term is defined in Section 1.1.2 below. Landlord will not make material changes
to the Site Plan without the prior written approval of Tenant, which consent
shall not be unreasonably withheld or delayed. However, notwithstanding the
foregoing, Landlord may make changes to the Site Plan due to topography,
underground conditions, and governmental requirements in order to resolve issues
which arise during construction of the Project without the prior written
approval of Tenant, provided that (i) any such changes to the Site Plan due to
topography may be made to landscaping only (and not to other Site Plan items)
without the prior written approval of Tenant, and (ii) with respect to changes
that do not require the approval of Tenant pursuant to this sentence, Landlord
shall notify Tenant of any material changes made to the Site Plan. Except as
specifically set forth in this Lease and in the Tenant Work Letter attached
hereto as Exhibit "B" (the "TENANT WORK LETTER"), Landlord shall not be
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant also acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty regarding the
condition of the Premises, the Building, the Adjacent Buildings or the Project
or with respect to the suitability of any of the foregoing for the conduct of
Tenant's business, except as specifically set forth in this Lease and the Tenant
Work Letter.

          1.1.2 THE PROJECT. The Premises are located in the City and County
of San Diego, California, and are a part of the project to be known as
"PEREGRINE SYSTEMS CORPORATE CENTER" (subject to Section 29.20 below). The
term "PROJECT," as used in this Lease, shall mean (i) the Building, the
Adjacent Buildings and the "Common Areas", as that term is defined in Section
1.1.3 below, and (ii) the land (which is or will be improved with
landscaping, parking facilities and other improvements) upon which the
Buildings and the Common Areas are to be located. For purposes of this Lease,
the term "BUILDING 2" shall mean that building to be constructed by Landlord
at the location so designated on the Site Plan, "BUILDING 3" shall mean that
building to be constructed by Landlord at the location so designated on the
Site Plan, "BUILDING 4" shall mean that building to be constructed by
Landlord at the location so designated




                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

on the Site Plan, and "BUILDING 5" shall mean that building to be constructed
by Landlord at the location so designated on the Site Plan. Building 2,
Building 3, Building 4 and Building 5 may be collectively referred to herein
as the "ADJACENT BUILDINGS." Landlord and Tenant hereby acknowledge that,
concurrently with the execution and delivery of this Lease, Landlord and
Tenant are entering into separate leases for Building 2 (the "BUILDING 2
LEASE"), Building 3 (the "BUILDING 3 LEASE"), and Building 5 (the "BUILDING 5
LEASE") and a Lease Option Agreement for Building 4 (the "BUILDING 4 LEASE
OPTION AGREEMENT") whereby Tenant shall lease from Landlord all of Building
2, all of Building 3, and all of Building 5 and shall have an option to lease
all of Building 4. The Building 2 Lease, Building 3 Lease, Building 5 Lease
and Building 4 Lease Option Agreement may be collectively referred to herein
as the "ADJACENT BUILDING LEASES."

                  1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right
to use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project, whether or not those areas are open
to the general public (such areas are collectively referred to herein as the
"COMMON AREAS"). The Common Areas shall consist of the Project Common Areas and
the Building Common Areas. The term "PROJECT COMMON AREAS," as used in this
Lease, shall mean the portion of the Project designated as such in the Site
Plan. The Project Common Areas shall consist of all parking facilities,
entrances and exits, driveways, exterior walkways, first-class landscaped and
hardscaped areas which are generally consistent with the quality of landscaped
and hardscaped areas of Comparable Buildings in existence as of the date of this
Lease, open space areas and plazas on the real property comprising the Project.
The term "BUILDING COMMON AREAS," as used in this Lease, shall mean the portions
of the Common Areas located within any building in the Project not entirely
leased by Tenant, which Building Common Areas shall be reasonably designated as
such by Landlord. Notwithstanding the foregoing and subject to (i) Landlord's
approval, which approval (as indicated in Section 29.4 below) shall not be
unreasonably withheld or delayed, (ii) the CC&R's, and (iii) all terms of this
Lease regarding Hazardous Materials, Tenant may install or locate such items as
benches, patio tables, bike racks, above-ground generators, security cameras and
the like (collectively, "MISCELLANEOUS COMMON AREA ITEMS") at Tenant's sole cost
in the Common Areas or on the exterior of the Building, as applicable, provided
that Tenant removes such items upon the expiration or earlier termination of
this Lease and repairs any damage to the Common Areas or the exterior of the
Building (as applicable) resulting from such removal. If Tenant fails to remove
any Miscellaneous Common Area Item or to repair any damage resulting from such
removal upon the expiration or earlier termination of this Lease, Landlord may
do so and may charge Landlord's actual cost thereof to Tenant. The manner in
which the Common Areas are maintained and operated shall be in accordance with a
standard which is not less than that customarily followed in the operation and
maintenance of first class mid-rise office buildings located within the
University Towne Center (I.E., the area from two (2) blocks to the North of La
Jolla Village Drive to two (2) blocks to the South of La Jolla Village Drive
between the I-5 and I-805 freeways), Del Mar, Carmel Valley and Torrey Hills
geographical areas, provided that Landlord shall manage, maintain and operate
the same in a manner consistent with that of Comparable Buildings, and the use
thereof shall be subject to such rules and regulations as Landlord reasonably
may make from time to time. As used herein, "COMPARABLE BUILDINGS" shall mean
the first class mid-rise office buildings (now existing or subsequently
constructed) within the projects located within the University Towne Center, Del
Mar, Carmel Valley and Torrey Hills geographical areas and having substantially
similar characteristics to the Building pertaining to size, age, accessibility,
design, quality, amenities and tenancies. Landlord reserves the right to make
alterations or additions to, or to change the location of, elements of the
Project and the Common Areas, provided that if any such changes might affect
Tenant's use of the Premises (in other than an immaterial manner), Landlord
obtains Tenant's prior written approval of any such alterations, additions and
changes and such alterations, additions and changes do not unreasonably
interfere with Tenant's access to the Premises. Except when and where Tenant's
right of access is specifically excluded in this Lease, Tenant shall have the
right of access to the Building and the parking facilities twenty-four (24)
hours per day, seven (7) days per week during the Lease Term.


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     1.2 VERIFICATION OF RENTABLE SQUARE FEET OF PREMISES, BUILDING, AND
PROJECT. The number of rentable square feet in the Premises and the Building
shall be determined pursuant to the Standard Method for Measuring Floor Area in
Office Buildings, ANSI Z65.1 - 1996 ("BOMA"). The number of rentable square feet
of the Building shall be initially determined by Landlord from the "as-built"
drawings for the Building utilizing Landlord's computer assisted design ("CAD")
system. Tenant shall have the option, exercisable by written notice to Landlord
within thirty (30) days following Tenant's receipt of such initial determination
by Landlord, to cause the number of rentable square feet of the Building to be
verified by an architect, planner, designer or consultant specializing in
measuring square footage selected by Landlord and reasonably approved by Tenant
and such verification shall be made in accordance with the provisions of this
Article 1. In addition, the number of rentable square feet of any other
buildings within the Project not leased by Tenant are subject to verification by
an architect, planner, designer or consultant specializing in measuring square
footage selected by Landlord and such verification shall be made in accordance
with the provisions of this Article 1. The cost of any such verification of
square footage figures as specified in this Section 1.2 above shall be borne
fifty percent (50%) by Landlord and fifty percent (50%) by Tenant. In the event
that such architect, planner, designer or consultant determines that the amounts
thereof are different from those set forth in this Lease, all amounts,
percentages and figures appearing or referred to in this Lease based upon such
incorrect amount (including, without limitation, the amount of the Rent and
Tenant's Share as those terms are defined in this Lease) shall be modified in
accordance with such determination. Absent manifest error, such determination
shall be final and conclusive. As such determination is made, it will be
confirmed in writing by Landlord and Tenant, and Landlord and Tenant shall
execute an amendment to this Lease confirming the changed amounts of Rent,
Tenant's Share and the Tenant Improvement Allowance.

                                    ARTICLE 2

                                   LEASE TERM

     2.1 INITIAL TERM. The terms, covenants and conditions and provisions of
this Lease shall be effective as of the date of this Lease. The term of this
Lease (the "LEASE TERM") shall be as set forth in Section 5 of the Summary and
shall commence ("LEASE COMMENCEMENT DATE") on the earlier of (i) the date
Tenant's work stations are installed and cabled or (ii) eight (8) business days
after "Substantial Completion" by Landlord of the Tenant Improvements for the
Building, provided Landlord has given to Tenant at least sixty (60) days' prior
written notice of the date Landlord estimates for Substantial Completion for the
Building (if such date is more than thirty (30) days different from the
estimated date specified in the Summary). The Lease Commencement Date shall not
under any circumstances occur earlier than the day which is thirty (30) days
earlier than the Estimated Lease Commencement Date set forth in Section 5 of the
Summary unless Tenant elects to commence business operations within such
Building as of an earlier date. The Lease Term shall terminate (the "LEASE
EXPIRATION DATE") on the last day of the month in which the eleventh (11th)
anniversary of the Lease Commencement Date occurs, unless this Lease is sooner
terminated or extended as hereinafter provided. For purposes of this Lease, the
term "LEASE YEAR" shall mean each consecutive twelve (12) month period during
the Lease Term; provided, however, that the first Lease Year shall commence on
the Lease Commencement Date and the last Lease Year shall end on the Lease
Expiration Date. For purposes of this Lease, "SUBSTANTIAL COMPLETION" shall
occur upon the completion of construction of the Tenant Improvements in the
Building pursuant to the plans and drawings which are prepared pursuant to the
terms of the Tenant Work Letter. The completion of the construction with respect
to any such Tenant Improvements shall not be deemed to have occurred unless and
until (i) Landlord has delivered the portion of the Premises covered by such
Tenant Improvements to Tenant in broom-clean condition subject only to punch
list items and any tenant fixtures, workstations or equipment to be installed by
Tenant in the Premises pursuant to the terms of the Tenant Work Letter (the
"TENANT WORK") (i.e., the completion of punchlist items and Tenant Work shall
not affect Substantial Completion), (ii) a temporary certificate of occupancy or
its equivalent permitting occupancy of such portion of the Premises improved
with such Tenant Improvements has been issued by the City of San Diego or other
applicable governmental agency, (iii) all essential building systems to be
installed by Landlord (including,


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but not limited to, electrical, plumbing, heat, air conditioning systems, and
their distribution into such portions of the Premises) are operational to the
extent reasonably necessary to service the portion of the Premises covered by
such Tenant Improvements, and (iv) Tenant has been provided with the parking to
which it is entitled under this Lease . If a temporary certificate of occupancy
or its equivalent is issued by the City of San Diego, Landlord shall use
commercially reasonable efforts to obtain a permanent certificate of occupancy
within three (3) months after the Lease Commencement Date (except to the extent
the receipt of such permanent certificate is delayed as a result of the Tenant
Work or any actions of Tenant, its agents, employees or contractors). At any
time during the Lease Term, Landlord may deliver to Tenant a notice in the form
as set forth in Exhibit "C" attached hereto, which notice (so long as it
contains accurate information) Tenant shall execute and return to Landlord
within ten (10) days of receipt thereof. If Tenant contends that such notice
contains inaccurate information, Tenant shall modify such notice as appropriate
and return such notice to Landlord within said ten (10) day period.

         2.2 OPTIONS TO EXTEND. Tenant shall have two (2) option(s) to extend
(the "EXTENSION OPTIONS") the Lease Term for consecutive five (5) year period(s)
(the foregoing option term(s) shall be referred to hereinafter sometimes as the
"EXTENSION TERM(S)"), by delivering a written notice of exercise to Landlord
("EXTENSION NOTICE") with respect to the applicable Extension Term, which
Extension Notice may not be delivered earlier than the date which is eighteen
(18) months prior to the end of the initial Lease Term or first Extension Term
(as applicable) and may not be delivered later than the date which is thirty
(30) days after the Reminder Notice. If Landlord has not received an applicable
Extension Notice by the date which is twelve (12) months prior to the end of the
initial Lease Term or first Extension Term (as applicable), Landlord may provide
written notice ("EXTENSION REMINDER NOTICE") to Tenant that the Extension Option
will expire if Tenant fails to deliver the Extension Notice to Landlord within
thirty (30) days after the date of such notice from Landlord. If Tenant fails to
deliver the Extension Notice within said thirty (30) day period, Tenant shall be
deemed to have waived its right to exercise such Extension Option. The parties
acknowledge that Tenant's Extension Option will not lapse until the date which
is thirty (30) days after Landlord's delivery of the Extension Reminder Notice
pursuant to this Section 2.2. The Extension Option shall apply to all space (and
not a portion of the space) then leased by Tenant in the Building. Tenant may
exercise the Extension Option(s) only if this Lease is in full force and effect
and there is no uncured Event of Default under this Lease, at the time of
exercise of such Extension Option and/or at the time of the commencement of the
Extension Term, but Landlord shall have the right to waive such conditions
herein. Tenant's exercise of the second (2nd) Extension Option shall be
conditioned upon Tenant's exercise of the first Extension Option. The rights of
Tenant contained in this Section 2.2 shall be personal to the original Tenant
named in the Summary ("ORIGINAL TENANT") and any Permitted Affiliate and may
only be exercised by the Original Tenant or such Permitted Affiliate if Tenant,
at the date of Tenant's Extension Notice, meets or exceeds the Financial
Standards set forth in Section 21.2 below. The Base Rent during each Extension
Term ("EXTENSION TERM BASE RENT") shall be an amount equal to ninety-five
percent (95%) of the then "Fair Market Rental Value" of the Building (as such
term is defined in Section 2.2(e) below), as stated on a monthly basis and
determined pursuant to this Section 2.2 as of the first (1st) day of the
applicable Extension Term ("EXTENSION TERM COMMENCEMENT DATE"); provided,
however, in no event shall the Base Rent payable during any Extension Term for
the Building be less than the Base Rent payable during the period immediately
preceding such Extension Term for the Building and provided further that, on the
first anniversary of the Extension Term Commencement Date, and on each
subsequent anniversary thereof during such Extension Term, the then payable
monthly Extension Term Base Rent shall be increased in accordance with market
rate increases, as mutually agreed to by Landlord and Tenant or, if Landlord and
Tenant cannot agree, as determined by the appraisal process described below.
Upon receipt by Landlord of Tenant's Extension Notice under this Section 2.2,
above, Landlord and Tenant shall meet in an effort to negotiate, in good faith,
the applicable Extension Term Base Rent which shall become effective as of the
respective Extension Term Commencement Date. If Landlord and Tenant have not
agreed upon the Extension Term Base Rent (including the annual market rate
increases) on or before the "Withdrawal Date" (as that term is defined below),
Tenant may elect to withdraw the Extension Notice thereby canceling Tenant's
exercise of the Extension Option. The term "WITHDRAWAL DATE" shall mean (i) if
Landlord delivers the Reminder Notice


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prior to Tenant's delivery of the Extension Notice, the date which is thirty
(30) days after the date of the Reminder Notice, or (ii) if Landlord has not yet
delivered a Reminder Notice at the time of Tenant's delivery of the Extension
Notice, the date which is the earlier of (1) the date which is eleven (11)
months prior to the end of the initial Lease Term or first Extension Term (as
applicable), or (2) the date which is sixty (60) days after the date of Tenant's
delivery of the Extension Notice. If Tenant fails to deliver written notice to
Landlord so withdrawing the Extension Notice on or before the Withdrawal Date
and if Landlord and Tenant have not agreed upon the Extension Term Base Rent
(including the annual market rate increases) within sixty (60) days after the
delivery of Tenant's Extension Notice, the Extension Term Base Rent shall be
determined as follows:

          (a) Landlord and Tenant shall attempt to agree in good faith upon a
single appraiser not later than the date ("SINGLE APPRAISER DATE") which is
forty-five (45) days after delivery of Tenant's Extension Notice. If Landlord
and Tenant are unable to agree upon a single appraiser within such time period,
then Landlord and Tenant shall each appoint one appraiser not later than five
(5) days after the deadline for selecting a single appraiser. Landlord and
Tenant shall each give written notice to the other as to the name of the
appraiser it has selected, within five (5) days after the deadline for selecting
a single appraiser. Within ten (10) days thereafter, the two (2) appointed
appraisers shall appoint a third appraiser. All appraisers shall be independent
from, and disinterested in, both Landlord and Tenant.

          (b) The only tasks which the appraiser(s) shall perform shall be
forming and reporting to Landlord and Tenant an opinion of the Fair Market
Rental Value (including annual market rate increases) of the Premises for use in
determining the Extension Term Base Rent.

          (c) If either Landlord or Tenant fails to appoint its appraiser within
the prescribed time period, the single appraiser appointed shall determine the
Fair Market Rental Value of the Building. If both parties fail to appoint
appraisers within the prescribed time periods, or if the two (2) appointed
appraisers cannot agree on a third appraiser then either party shall have the
right to apply to the presiding judge of the Superior Court of San Diego County
for the appointment of an appraiser meeting the qualifications hereof to
determine the Fair Market Rental Value of such Building.

          (d) Each party shall bear the cost of its own appraiser and the
parties shall share equally the cost of any single or third appraiser, if
applicable. All appraisers so designated herein shall have at least ten (10)
years' experience in the appraisal of commercial properties similar to the
Premises and Comparable Buildings and shall be members of professional
organizations such as MAI or its equivalent.

          (e) For the purpose of such appraisal and this subsection (e), the
term "FAIR MARKET RENTAL VALUE" shall mean the price that a ready and willing,
non-equity, non-sublease tenant would pay as annual rent as of the Extension
Term Commencement Date (taking into consideration the annual market rate
increases specified in Section 2.2(b) above) and a ready and willing landlord
would accept on a non-sublease, non-renewal basis, at arm's length, from
creditworthy tenants (provided Tenant is then in compliance with the Financial
Standards specified in Section 21.2) for a five (5) year term for unencumbered
"space comparable to the Building" in Comparable Buildings. Such "space
comparable to the Building" shall mean office space consisting of an entire
building, with tenant improvements of substantially similar quality and layout
as the Premises. Fair Market Rental Value shall include or take into
consideration any lease concessions offered by landlords in lease transactions
from and after the date which is twelve (12) months prior to the Single
Appraiser Date (the "QUALIFYING PERIOD") for space comparable to the Building
within such Comparable Buildings, including, without limitation, free rent,
tenant improvement allowances or any other payments or concessions; however,
Fair Market Rental Value shall also take into consideration (i) the market trend
(i.e., all other factors being equal, comparable transactions entered into
earlier in the Qualifying Period shall be accorded less weight than comparable
transactions entered into later in the Qualifying Period), and (ii) the value in
the market of the existing improvements in the Building, as compared to the
value in the market of the existing improvements in such space comparable to the
Building.


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Further, in calculating the Fair Market Rental Rate, no consideration shall be
given to the fact that Landlord is or is not required to pay a real estate
brokerage commission in connection with the Extension Term or the fact that
comparable deals do or do not involve the payment of real estate brokerage
commissions. If there are less than two (2) lease transactions for "space
comparable to the Building," as defined in this Section 2.2(e), entered into
during the Qualifying Period, then the term "space comparable to the Building"
shall be expanded as necessary to allow appraiser(s) to consider lease
transactions covering multiple floors in a building (but less than an entire
building) with the appraiser(s) making appropriate economic adjustments to
compensate for such lease transactions in which less than the entire building is
leased by the tenant.

          (f) If a single appraiser is chosen, then such appraiser shall
determine the Fair Market Rental Value of the Building. Otherwise, the Fair
Market Rental Value of the Building shall be the arithmetic average of the two
(2) appraisals which are closest in amount, and the third appraisal shall be
disregarded.

          (g) Landlord and Tenant shall instruct the appraiser(s), in writing,
to complete their written determination of the Fair Market Rental Value not
later than thirty (30) days after their selection. If the Fair Market Rental
Value has not been determined by such date, then the Fair Market Rental Value
shall be determined thereafter, and if it has not been determined by the
Extension Term Commencement Date, then Tenant shall continue to pay Landlord
monthly installments of Base Rent in the amount applicable to the Building
immediately prior to the Extension Term Commencement Date until the Fair Market
Rental Value is determined. When the Fair Market Rental Value of the Building is
determined, Landlord shall deliver notice thereof to Tenant, and Tenant shall
pay to Landlord, within ten (10) days after receipt of such notice, the
difference between the monthly installments of Base Rent actually paid by Tenant
to Landlord subsequent to the Extension Term Commencement Date and the new
monthly installments of Base Rent which are determined to have been actually
owing during such period in accordance with this Section 2.2, plus interest at
the Interest Rate from the date the applicable monthly installments were due
until such difference is actually paid.

                                    ARTICLE 3

                                    BASE RENT

     3.1 INITIAL BASE RENT. Tenant shall pay, without notice or demand, to
Landlord or Landlord's agent at the management office of the Project, or at such
other place as Landlord may from time to time designate in writing, in currency
or a check for currency which, at the time of payment, is legal tender for
private or public debts in the United States of America, base rent ("BASE RENT")
as set forth in Section 6 of the Summary, payable in equal monthly installments
as set forth in Section 6 of the Summary in advance on or before the first day
of each and every month during the Lease Term, without any offset or deduction
whatsoever except as otherwise expressly set forth in this Lease. Base Rent
shall commence on the Lease Commencement Date. The Base Rent for the first full
month of the Lease Term shall be paid at the time of Tenant's execution of this
Lease. If any Rent payment date (including the Lease Commencement Date) falls on
a day of the month other than the first day of such month or if any payment of
Rent is for a period which is shorter than one month, the Rent for any
fractional month shall accrue on a daily basis for the period from the date such
payment is due to the end of such calendar month or to the end of the Lease Term
at a rate per day which is equal to 1/365 of the Rent. All other payments or
adjustments required to be made under the terms of this Lease that require
proration on a time basis shall be prorated on the same basis.

     3.2 ADJUSTMENTS TO BASE RENT. The Base Rent rate payable (per rentable
square foot) with respect to the Building shall be increased on the second (2nd)
anniversary of the Lease Commencement Date and on each subsequent second (2nd)
anniversary thereof during the initial Lease Term to an amount equal to 106.5%
of the Base Rent rate payable (per rentable square foot) during the immediately
prior period, subject to further adjustment during any Extension Term in
accordance with Section 2.2 above.


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                                    ARTICLE 4

                                 ADDITIONAL RENT

     4.1 GENERAL TERMS. In addition to paying the Base Rent specified in Article
3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Building
Direct Expenses," as those terms are defined in Sections 4.2.9 and 4.2.2 of this
Lease, respectively, which are in excess of the amount of Building Direct
Expenses applicable to the "Base Year" for such Building, as that term is
defined in Section 4.2.1, below; provided, however, if the Lease Commencement
Date occurs after January 1 of the Base Year, the amount of Building Direct
Expenses applicable to the Base Year shall be increased in order to reflect
Building Direct Expenses for an entire twelve (12) month period. Further, in no
event shall any decrease in Building Direct Expenses for such Building for any
"Expense Year" for the Building as that term is defined in Section 4.2.6 below,
below Building Direct Expenses for the Base Year entitle Tenant to any decrease
in Base Rent for the Building or any credit against sums due under this Lease.
It is the intent of Landlord and Tenant hereunder that Building Direct Expenses
be calculated for the Building separately based on the Building Direct Expenses
allocated to such Building. Such payments by Tenant, together with any and all
other amounts payable by Tenant to Landlord pursuant to the terms of this Lease,
are collectively referred to in this Lease as the "ADDITIONAL RENT", and the
Base Rent and the Additional Rent are collectively referred to in this Lease as
"RENT." All amounts due under this Article 4 as Additional Rent shall be payable
for the same periods and in the same manner as the Base Rent. Without limitation
on other obligations of Tenant which survive the expiration of the Lease Term,
the obligations of Tenant to pay the Additional Rent provided for in this
Article 4, and the obligation of Landlord to refund to Tenant any overpayment of
Building Direct Expenses pursuant to Section 4.2 below, shall survive the
expiration of the Lease Term.

     4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:

          4.2.1 "BASE YEAR" shall mean the period set forth in Section 7.1 of
the Summary.

          4.2.2 "BUILDING DIRECT EXPENSES" shall mean "Building Operating
Expenses" and "Building Tax Expenses," as those terms are defined in Sections
4.2.3 and 4.2.4 below, respectively.

          4.2.3 "BUILDING OPERATING EXPENSES" shall mean the portion of
"Operating Expenses," as that term is defined in Section 4.2.7 below, allocated
to the tenants of the Building pursuant to the terms of Section 4.3.1 below.

          4.2.4 "BUILDING TAX EXPENSES" shall mean that portion of "Tax
Expenses," as that term is defined in Section 4.2.8 below, allocated to the
tenants of the Building pursuant to the terms of Section 4.3.1 below.

          4.2.5 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."

          4.2.6 "EXPENSE YEAR" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.

          4.2.7 "OPERATING EXPENSES" shall mean all expenses, costs and amounts
which Landlord pays or accrues during any Expense Year because of or in
connection with the ownership, management, maintenance, security, repair,
replacement, restoration or operation of the Project, or any portion thereof.
Without limiting the generality of the foregoing, Operating Expenses shall
specifically include any and all of the following: (i) the cost of supplying all
utilities to the Project (except that electricity supplied to the Premises shall
be separately paid for by Tenant pursuant to Section 6.2.2 below), the cost of
operating, repairing, maintaining, and renovating the utility, telephone,
mechanical, sanitary, storm drainage, and elevator systems, and the cost of
maintenance and service contracts in connection therewith; (ii) the cost of
licenses, certificates, permits and inspections (other than those obtained in
connection with the initial


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construction of the Building and the Tenant Improvements) and the cost of
contesting any governmental enactments which may affect Operating Expenses, and
the costs incurred in connection with a governmentally mandated transportation
system management program or similar program; (iii) the cost of all insurance
carried by Landlord in connection with the Project as reasonably determined by
Landlord; (iv) the cost of landscaping, relamping, and supplies, tools,
equipment and materials used in the operation, repair and maintenance of the
Project, or any portion thereof; (v) the cost of parking area (including any
parking structures) repair, restoration, and maintenance; (vi) reasonable fees
and other costs, including reasonable management, consulting, legal and
accounting fees, of all contractors and consultants in connection with the
management, operation, maintenance and repair of the Project; (vii) payments
under any equipment rental agreements and the fair rental value of any on-site
or off-site management office space for the Project (as described in Section
6.1.4 below) not to exceed 2,000 rentable square feet (which fair rental value
for the purpose of determining the Direct Expenses for the Base Year and any
subsequent Expense Years shall be the same rate per rentable square foot as the
monthly rental rate per rentable square foot paid by Tenant to Landlord from
time to time for the Building under this Lease); (viii) wages, salaries and
other compensation and benefits, including taxes levied thereon, of all
non-executive persons reasonably engaged in the operation, maintenance and
security of the Project; (ix) costs under any instrument pertaining to the
reasonable sharing of costs by the Project (including, without limitation, any
assessments and association dues under the CC&R's); (x) operation, repair,
maintenance and replacement of all systems and equipment and components thereof
of the Project including, but not limited to HVAC systems, electrical, plumbing
and life-safety systems, elevators, any Project locker rooms and workout
facilities (except that the cost of electricity used to operate the HVAC system
shall be paid by Tenant directly pursuant to Section 6.2.2 below); (xi) the cost
of janitorial, alarm, security and other services, replacement of wall and floor
coverings, ceiling tiles and fixtures in common areas, maintenance and
replacement of curbs, roadways, driveways, and walkways, repair to roofs and
re-roofing; (xii) amortization (including interest on the unamortized cost) over
the useful life as Landlord shall reasonably determine, of the cost of acquiring
or the rental expense of personal property used in the maintenance, operation
and repair of the Project, or any portion thereof; (xiii) the cost of capital
improvements or other costs incurred in connection with the Project (A) which
are intended, in good faith, to effect economies in the operation or maintenance
of the Project, or any portion thereof, and only to the extent such anticipated
economies exceed the cost of such item, (B) that are required to comply with
present or anticipated conservation programs, (C) required by laws, ordinances
or regulations enacted after the date permits for the construction of the
Building were obtained, and (D) includable in Operating Expenses pursuant to
consistently applied and sound accounting and management principles (including,
but not limited to, the repair, resurfacing and replacement of parking lots and
Project roadways and driveways); provided, however, that any capital expenditure
shall be amortized (including interest on the amortized cost at Landlord's
actual cost of funds) over its useful life as Landlord shall reasonably
determine; and (xiv) costs, fees, charges or assessments imposed by, or
resulting from any mandate imposed on Landlord by, any federal, state or local
government for fire and police protection, trash removal, community services, or
other services which do not constitute "Tax Expenses" as that term is defined in
Section 4.2.8 below. Notwithstanding the foregoing, for purposes of this Lease,
Operating Expenses shall not, however, include:

          (a) costs incurred in connection with the original construction of the
     Building and costs of repairing, replacing or otherwise correcting latent
     defects, the cost of any "tap fees" or one-time lump sum sewer or water
     connection fees for the Building payable in connection with the original
     construction of the Building, costs incurred (less costs of recovery) for
     any item to the extent covered by a manufacturer's, materialman's, vendor's
     or contractor's warranty and paid by such manufacturer, materialman, vendor
     or contractor (provided, however, the costs incurred for any normal repair
     or maintenance item (not attributable to the correction of start-up
     problems, repairs or replacements) to the extent covered by a
     manufacturer's, materialman's, vendor's or contractor's warranty in the
     Base Year (and not in a subsequent Expense Year) and paid by such
     manufacturer, materialman, vendor or contractor during the Base Year shall
     be included in Operating


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     Expenses); non-cash items such as deductions for depreciation and
     amortization of the Building and the Building Systems and Equipment;

          (b) costs, including marketing costs, legal fees, space planners'
     fees, and brokerage fees incurred in connection with the original
     construction or development of the Project or the original or future
     leasing of the Project, and costs, including permit, license and inspection
     costs and allowances and other concessions, incurred with respect to the
     installation of tenant improvements made for new tenants in the Project or
     incurred in renovating or otherwise improving, decorating, painting or
     redecorating vacant leasable space for tenants or other occupants (or
     prospective tenants or occupants) of the Project;

          (c) except as set forth in items (xii), (xiii), and (xiv) above,
     depreciation, interest and principal payments on mortgages and other debt
     costs, if any, penalties and interest, costs of capital repairs and
     alterations, and costs of capital improvements and equipment;

          (d) costs for which Landlord is reimbursed by any tenant or occupant
     of the Project or by insurance by its carrier or any tenant's carrier (or
     if Landlord fails to carry the insurance required to be carried by Landlord
     pursuant to Section 10.4 below, costs which would have been covered by
     insurance had Landlord obtained the coverage required to be carried under
     this Lease) or by the Association under the CC&R's or by anyone else, and
     electric power costs for which any tenant directly contracts with the local
     public service company;

          (e) any bad debt loss, rent loss, or reserves for bad debts or rent
     loss;

          (f) costs associated with the operation of the business of the
     partnership or entity which constitutes Landlord, as the same are
     distinguished from the costs of operation of the Project (which shall
     specifically include, but not be limited to, accounting costs associated
     with the operation of the Project). Costs associated with the operation of
     the business of the partnership or entity which constitutes Landlord
     including costs of partnership accounting and legal matters, costs of
     defending any lawsuits with any mortgagee (except as the actions of the
     Tenant may be in issue), costs of selling, syndicating, financing,
     mortgaging or hypothecating any of Landlord's interest in the Project, and
     costs incurred in connection with any disputes between Landlord and its
     employees, between Landlord and Project management, or between Landlord and
     other tenants or occupants, and Landlord's general corporate overhead and
     general and administrative expenses;

          (g) the wages and benefits of any employee who does not devote
     substantially all of his or her employed time to the Project unless such
     wages and benefits are prorated to reflect time spent on operating and
     managing the Project vis-a-vis time spent on matters unrelated to operating
     and managing the Project; provided, that in no event shall Operating
     Expenses for purposes of this Lease include wages and/or benefits
     attributable to personnel above the level of regional Project manager or
     Project engineer;

          (h) amount paid as ground rental for the Project by Landlord;

          (i) any compensation paid to clerks, attendants or other persons in
     commercial concessions operated by Landlord, provided that any compensation
     paid to any concierge at the Project and any compensation paid regarding
     parking operations shall be includable as an Operating Expense;

          (j) rentals and other related expenses incurred in leasing air
     conditioning systems, elevators or other equipment which if purchased the
     cost of which would be excluded from Operating Expenses as a capital cost,
     except equipment not affixed to the Project which is used in providing
     janitorial or similar services and, further excepting from this exclusion
     such equipment rented or leased to remedy or ameliorate an


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     emergency condition in the Project, or during periods when the systems or
     equipment is being repaired;

          (k) all items and services for which Tenant or any other tenant in the
     Project reimburses Landlord or which Landlord provides selectively to one
     or more tenants (other than Tenant) without reimbursement;

          (l) costs, other than those incurred in ordinary maintenance and
     repair, for sculpture, paintings, fountains or other objects of art;

          (m) any costs expressly excluded from Operating Expenses elsewhere in
     this Lease;

          (n) costs incurred to comply with laws or otherwise relating to the
     removal or abatement of hazardous material in the soil and costs incurred
     to comply with laws or otherwise relating to the removal or abatement of
     hazardous material in the Building or any Common Area improvements except
     where such removal or abatement in the Building or Common Area improvements
     is required to be performed during the Lease Term by laws not in effect as
     of the Lease Commencement Date (in which case an amount not exceeding
     twenty-five cents (.25(cent)) per rentable square foot of the Building for
     the cost of such removal or abatement may be included in Operating Expenses
     and any remaining costs shall be capitalized and amortized over a useful
     life determined in accordance with generally accepted accounting principles
     (but in no event less than ten (10) years) but only fifty percent (50%) of
     such amortized amount may be included in Operating Expenses in each
     calendar year during such amortization term);

          (o) costs arising from Landlord's charitable or political
     contributions;

          (p) expenses directly resulting from the active or gross negligence of
     Landlord, its agents, servants or employees;

          (q) rental for any space in the Building set aside for conference
     facilities, storage facilities or exercise facilities;

          (r) the amounts of any payments by Landlord or to its affiliates for
     goods or services in the Project in excess of a competitive (but not
     necessarily the lowest) rate;

          (s) costs (not including Tax Expenses), incurred in connection with
     the sale, financing, refinancing, mortgaging, selling or change of
     ownership of the Building, including brokerage commissions, consultant's,
     attorneys' and accountant's fees, closing costs, title insurance premiums,
     transfer taxes and interest charges;

          (t) costs incurred by Landlord to correct any Year 2000 ("Y2K")
     problems incurred as a direct result of any Y2K problems (provided that
     this exclusion shall not apply to Y2K problems of utility providers to
     Landlord);

          (u) costs attributable to increases in expenses during the Lease Term
     for management fees unless the total management fees for such Expense Year
     (including any such increases therein) are not in excess of a competitive
     (but not necessarily the lowest) rate for Comparable Buildings; and

          (v) assessments, charges, and dues under the CC&R's which would result
     in a duplicative charge to Tenant or a charge which is otherwise precluded
     under this Section 4.2.7 or other provisions of this Lease including
     without limitation (1) any expense, cost or charge which would be
     duplicative of a charge for which Tenant already is responsible under this
     Lease; (2) any expense for property management which would be duplicative
     of a charge for which Tenant already is responsible under this Lease; (3)
     special assessments levied under the CC&R's which would be precluded by
     subsection 4.2.7(c) above; and (4) any expense precluded by Section 5.3
     below.


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     With respect to Landlord's regional Project manager, such individual's
wages and benefits may be included in Operating Expenses; provided, however,
that (1) the amount so included in Operating Expenses for the Project shall not
increase by more than Two Thousand Dollars ($2,000.00) in the first Expense Year
after the Base Year and (2) the maximum amount includable in Operating Expenses
in each Expense Year thereafter shall be one hundred five percent (105%) of the
maximum amount includable in Operating Expenses for the immediately preceding
Expense Year, except that in no event shall such amount included in Operating
Expenses in any such subsequent Expense Year be more than one hundred ten
percent (110%) of the average amount so included in the immediately preceding
two (2) Expense Years. By way of example only, and not as a limitation upon the
foregoing, if the amount of such wages and benefits included in Operating
Expenses for the Project in the Base Year is Forty Thousand Dollars
($40,000.00), such wages and benefits are Forty-Two Thousand Dollars
($42,000.00) in the first (1st), second (2nd) and third (3rd) Expense Years
after the Base Year, but in the fourth (4th) Expense Year after the Base Year
such wages and benefits are increased to Forty-Eight Thousand Dollars
($48,000.00), the maximum amount includable in Operating Expenses for the fourth
(4th) Expense Year after Base Year shall be Forty-Six Thousand Two Hundred
Dollars ($46,200.00) (i.e., 110% of $42,000.00) and the maximum amount
includable in the Operating Expenses for the fifth (5th) Expense Year after Base
Year shall be Forty-Eight Thousand Five Hundred Ten Dollars ($48,510.00) (i.e.,
110% of the average of $42,000.00 and $46,200.00).

     There shall be deducted from Operating Expenses the following items in the
year in which they are applicable: (i) insurance and condemnation proceeds to
the extent that such proceeds relate to costs and expenses previously included
in Operating Expenses, (ii) all other funds recovered from any tenant of the
Building, contractors, or other parties as payment for expenses which were
previously included in Operating Expenses, other than tenants' contributions for
their proportionate share of Operating Expenses, and (iii) all funds available
through the CC&R's which were previously included in Operating Expenses.
Operating Expenses shall reflect reductions for cash discounts and trade
discounts taken by Landlord.

     If Landlord does not carry a form of insurance coverage (e.g., earthquake
insurance) for the Building during any part of the Base Year but subsequently
obtains such insurance for the Building during the Lease Term, then from and
after the date upon which Landlord obtains such insurance coverage and
continuing throughout the period during which Landlord maintains such insurance,
Operating Expenses for the Base Year shall be deemed to be increased by the
amount of the premium Landlord reasonably estimates it would have incurred had
Landlord maintained such insurance for the same period of time during the Base
Year as such insurance was maintained by Landlord during such subsequent
calendar year. Conversely, if Landlord carries a form of insurance coverage
(e.g., earthquake insurance) for the Building during any part of the Base Year
but subsequently no longer carries such form of insurance coverage, then from
and after the date upon which Landlord no longer carries such insurance coverage
and continuing throughout the period during which Landlord no longer maintains
such insurance coverage, Operating Expenses for the Base Year shall be deemed to
be decreased by the amount of premium Landlord incurred for such insurance for
the same period of time during the Base Year as such insurance was no longer
maintained by Landlord during such subsequent calendar year.

     If Landlord is not furnishing any particular work or service (the cost of
which, if performed by Landlord, would be included in Operating Expenses) to a
tenant who has undertaken to perform such work or service in lieu of the
performance thereof by Landlord, then Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such work or service to such tenant. If the Building is
not at least ninety-five percent (95%) occupied during all or a portion of the
Base Year or any Expense Year, Landlord shall make an appropriate adjustment to
the components of Operating Expenses for such year to determine the amount of
Operating Expenses that would have been paid had such Building been ninety-five
percent (95%) occupied; and the amount reasonably so determined shall be deemed
to have been the amount of Operating Expenses for such year. Operating Expenses
for the Base Year shall not include market-wide labor-rate increases due to
extraordinary circumstances, including, but not limited to, boycotts and
strikes, or utility rate


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

increases due to extraordinary circumstances including, but not limited to,
conservation surcharges, boycotts, embargoes or other shortages (unless such
labor rate or utility rate increases remain in effect after the Base Year, in
which event the Operating Expenses for the Base Year shall be adjusted when the
labor rate increases or utility rate increases adjust following the cessation of
the extraordinary circumstances causing such increases in the first place), or
amortized costs relating to capital improvements.

          4.2.8 TAXES.

              4.2.8.1 "TAX EXPENSES" shall mean all federal, state, county,
or local governmental or municipal taxes, fees, charges or other impositions
of every kind and nature, whether general, special, ordinary or
extraordinary, (including, without limitation, real estate taxes, general and
special assessments, transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property
taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing and operation of the Project, or any portion
thereof. Tax Expenses for the Base Year of the Lease Term for the Building
(and the underlying land for the tax parcel) shall be calculated as if the
value of such Building, the Base, Shell and Core of such Building and the
Tenant Improvements thereto and related improvements to the Common Area as
reasonably allocated to such Building were fully assessed. With respect to
Tenant Improvements in each Building, such Tax Expenses shall be calculated
to include the actual "soft" and "hard" costs of such improvements. If Tenant
fails to utilize the entire Tenant Improvement Allowance for any particular
Building for Tenant Improvements, thereupon Tax Expenses shall be adjusted to
the actual amount so utilized.

              4.2.8.2 Tax Expenses shall include, without limitation: (i) any
tax on the rent, right to rent or other income from the Project, or any
portion thereof, or as against the business of leasing the Project, or any
portion thereof; (ii) any assessment, tax, fee, levy or charge in addition
to, or in substitution, partially or totally, of any assessment, tax, fee,
levy or charge previously included within the definition of real property
tax, it being acknowledged by Tenant and Landlord that Proposition 13 was
adopted by the voters of the State of California in the June 1978 election
("PROPOSITION 13") and that assessments, taxes, fees, levies and charges may
be imposed by governmental agencies for such services as fire protection,
street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners or
occupants, and, in further recognition of the decrease in the level and
quality of governmental services and amenities as a result of Proposition 13,
Tax Expenses shall also include any governmental or private assessments or
the Project's contribution towards a governmental or private cost-sharing
agreement for the purpose of augmenting or improving the quality of services
and amenities normally provided by governmental agencies; (iii) any
assessment, tax, fee, levy, or charge allocable to or measured by the area of
the Premises or the Rent payable hereunder, including, without limitation,
any business or gross income tax or excise tax or business license tax with
respect to the receipt of or measured by the amount of such rent, or upon or
with respect to the possession, leasing, operating, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises, or any
portion thereof; and (iv) any assessment, tax, fee, levy or charge, upon this
transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises.

              4.2.8.3 Any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year
such expenses are paid. Tax refunds shall be credited against Tax Expenses
and refunded to Tenant regardless of when received, based on the Expense Year
to which the refund is applicable, provided that in no event shall the amount
to be refunded to Tenant for any such Expense Year exceed the total amount
paid by Tenant as Additional Rent under this Article 4 for such Expense Year.
If Tax Expenses for any period

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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

during the Lease Term or any extension thereof are increased after payment
thereof for any reason, including, without limitation, error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord upon
demand Tenant's Share of any such increased Tax Expenses included by Landlord as
Building Tax Expenses pursuant to the terms of this Lease. Notwithstanding
anything to the contrary contained in this Section 4.2.8 (except as set forth in
Section 4.2.8.1, above), there shall be excluded from Tax Expenses (i) all
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the Project),
(ii) any items included as Operating Expenses, and (iii) any items paid by
Tenant under Section 4.5 of this Lease.

              4.2.8.4 If in any Expense Year subsequent to the Base Year (the
"ADJUSTMENT YEAR"), the amount of Tax Expenses decreases below the amount of Tax
Expenses for the Base Year as a result of a Proposition 8 reduction, then for
purposes of all subsequent Expense Years, including the Expense Year in which
such decrease in Tax Expenses occurs, the Building Direct Expenses for the Base
Year shall be decreased by an amount equal to such decrease in assessed value or
direct assessments, as applicable, in the Adjustment Year. Conversely, if the
Tax Expenses thereafter are decreased by a lesser amount during any comparison
year subsequent to the Adjustment Year (the "READJUSTMENT YEAR") as a result of
Landlord's failure to secure a Proposition 8 reduction which is greater than or
equal to the Proposition 8 reduction secured during the Adjustment Year, then
for purposes of all subsequent comparison years, including the comparison year
in which such lesser decrease in Tax Expenses occurs, the Building Direct
Expenses for the Base Year shall only be decreased by an amount equal to the
decrease in assessed value or direct assessments, as applicable, during such
Readjustment Year which resulted from Landlord's failure to secure a Proposition
8 reduction greater than or equal to the Proposition 8 reduction secured during
the Adjustment Year; provided that any costs and expenses incurred by Landlord
in securing any Proposition 8 reduction shall not be included in Building Direct
Expenses for purposes of this Lease. Landlord and Tenant acknowledge that this
Section 4.2.8.4 is not intended to in any way affect (A) the inclusion in Tax
Expenses of the statutory two percent (2%) annual increase in Tax Expenses (as
such statutory increase may be modified by subsequent legislation), or (B) the
inclusion or exclusion of Tax Expenses pursuant to the terms of Proposition 13,
which shall be governed pursuant to the terms of Sections 4.2.8.1 through
4.2.8.3, above and Section 4.4.4 below. Notwithstanding the foregoing, in the
event that the Project is reassessed (the "REASSESSMENT") for real estate tax
purposes by the appropriate governmental authority pursuant to the terms of
Proposition 13, and such Reassessment results in a decrease in Tax Expenses, the
component of Tax Expenses for the Base Year which is attributable to the
assessed value of the Project under Proposition 13 prior to the Reassessment
(without taking into account any Proposition 8 reductions) shall be reduced for
the purposes of comparison to all subsequent Expense Years (commencing with the
Expense Year for which the Reassessment is first attributable) to an amount
equal to the real estate taxes based upon such Reassessment.

          4.2.9 "TENANT'S SHARE" with respect to Building Direct Expenses, shall
equal the percentage which the total rentable square footage of the space leased
by Tenant in such Building bears to the total rentable square footage of the
Building. In the event either the rentable square feet of the Premises and/or
the total rentable square feet of the Building is remeasured pursuant to Section
1.2 above, Tenant's Share shall be appropriately adjusted, and, as to the
Expense Year in which such change occurs, Tenant's Share for such Expense Year
shall be determined on the basis of the number of days during such Expense Year
that each such Tenant's Share was in effect.

     4.3 ALLOCATION OF DIRECT EXPENSES.

          4.3.1 METHOD OF ALLOCATION. The parties acknowledge that the Building
will be a part of a multi-building project and that the costs and expenses
incurred in connection with the Project (I.E. the Direct Expenses) should be
shared among the tenants of the Building and the tenants of the Adjacent
Buildings in the Project. Such allocation shall be made in accordance


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                                                             [Peregrine Systems]
<PAGE>

with the CC&R's; provided, however, that to the extent such allocation is not
addressed in the CC&R's, Landlord shall, in Landlord's reasonable judgment,
determine which Direct Expenses are properly allocable to an individual building
(because the expense applies to only such building) and which Direct Expenses
shall be allocable to tenants of more than one (1) building (in which case
Building Direct Expenses shall include those expenses so allocated to the
Building based upon the relative square footages of the affected buildings).

          4.3.2 COST POOLS. Notwithstanding anything to the contrary contained
herein, Landlord shall have the right, from time to time, to equitably allocate
some or all of the Direct Expenses for the Project among different portions or
occupants of the Project (the "COST POOLS"), in Landlord's reasonable judgment.
Such Cost Pools may include, but shall not be limited to, the office space
tenants of a building of the Project or of the Project, and the retail space
tenants of a building of the Project or of the Project. The Direct Expenses
within each such Cost Pool shall be allocated and charged to the tenants within
such Cost Pool in an equitable manner.

     4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. If for any Expense Year
ending or commencing within the Lease Term, Tenant's Share of Building Direct
Expenses for such Expense Year exceeds Tenant's Share of Building Direct
Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the
manner set forth in Section 4.4.1, below, and as Additional Rent, an amount
equal to the excess (the "EXCESS").

          4.4.1 STATEMENT OF ESTIMATED BUILDING DIRECT EXPENSES. By May 1 of
each year, Landlord shall give Tenant a yearly expense estimate statement (the
"ESTIMATE STATEMENT") which shall set forth Landlord's reasonable estimate (the
"ESTIMATE") of what the total amount of Building Direct Expenses for the
then-current Expense Year shall be and the estimated excess (the "ESTIMATED
EXCESS") as calculated by comparing the Building Direct Expenses for such
Expense Year, which shall be based upon the Estimate, to the amount of Building
Direct Expenses for the Base Year. The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Estimated Excess under this Article 4, nor
shall Landlord be prohibited from revising any Estimate Statement or Estimated
Excess theretofore delivered to the extent necessary but Landlord shall not do
so more than twice during any Expense Year. Thereafter, Tenant shall pay, with
its next installment of Base Rent due, a fraction of the Estimated Excess for
the then-current Expense Year (reduced by any amounts paid pursuant to the next
to last sentence of this Section 4.4.1). Such fraction shall have as its
numerator the number of months which have elapsed in such current Expense Year,
including the month of such payment, and twelve (12) as its denominator. Until a
new Estimate Statement is furnished (which Landlord shall have the right to
deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base
Rent installments, an amount equal to one-twelfth (1/12th) of the total
Estimated Excess set forth in the previous Estimate Statement delivered by
Landlord to Tenant. Landlord shall maintain books and records with respect to
Building Direct Expenses in accordance with generally accepted and sound
accounting and management practices, consistently applied.

          4.4.2 STATEMENT OF ACTUAL BUILDING DIRECT EXPENSES AND PAYMENT BY
TENANT. In addition, Landlord shall give to Tenant following the end of each
Expense Year, a statement (the "STATEMENT") which shall state the Building
Direct Expenses incurred or accrued for such preceding Expense Year for the
Building, and which shall indicate the amount of the Excess. Upon receipt of the
Statement for each Expense Year commencing or ending during the Lease Term, if
an Excess is present, Tenant shall pay, with its next installment of Base Rent
due, the full amount of the Excess for such Expense Year, less the amounts, if
any, paid during such Expense Year as Estimated Excess, and if Tenant paid more
as Estimated Excess than the actual Excess, Tenant shall receive a credit in the
amount of Tenant's overpayment against Rent next due under this Lease. In
addition, Landlord shall, within ten (10) days after written request from
Tenant, distribute (or if Landlord does not control the Association, request the
Association to distribute) to Tenant a copy of (1) the budget, notice and
summary prepared pursuant to Section 3.3 of the CC&R's and (2) the accounting
prepared pursuant to Section 3.6(c) of the CC&R's. The failure of Landlord to
timely furnish the Statement, or any other information required under this
Section 4.4.2, for any Expense Year shall not prejudice Landlord or Tenant from
enforcing


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

its rights under this Article 4. Even though the Lease Term has expired and
Tenant has vacated the Premises, when the final determination is made of
Tenant's Share of Building Direct Expenses for the Expense Year in which this
Lease terminates, if an Excess if present, Tenant shall pay to Landlord such
amount within thirty (30) days, and if Tenant paid more as Estimated Excess than
the actual Excess, Landlord shall, within thirty (30) days, deliver a check
payable to Tenant in the amount of the overpayment. The provisions of this
Section 4.4.2 shall survive the expiration or earlier termination of the Lease
Term.

          4.4.3 TENANT'S AUDIT RIGHT. Within six (6) months after receipt of a
Statement by Tenant ("REVIEW PERIOD"), if Tenant disputes the amount set forth
in the Statement, Tenant's employees or an independent certified public
accountant (which accountant is a member of a nationally or regionally
recognized accounting firm), designated by Tenant, may, after reasonable notice
to Landlord and at reasonable times, inspect Landlord's records at Landlord's
offices, provided that Tenant is not then in default in the payment of Base Rent
or Building Direct Expenses after expiration of all applicable cure periods and
provided further that Tenant and such accountant or representative shall, and
each of them shall use their commercially reasonable efforts to cause their
respective agents and employees to, maintain all information contained in
Landlord's records in strict confidence. Landlord shall cooperate with Tenant in
obtaining all necessary or appropriate information from the Association.
Notwithstanding the foregoing, Tenant shall only have the right to review
Landlord's records one (1) time during any twelve (12) month period. Tenant's
failure to dispute the amounts set forth in any Statement by written notice to
Landlord within thirty (30) days after the Review Period shall be deemed to be
Tenant's approval of such Statement and Tenant, thereafter, waives the right or
ability to dispute the amounts set forth in such Statement. If after such
inspection, but within thirty (30) days after the Review Period, Tenant notifies
Landlord in writing that Tenant still disputes such amounts, a certification as
to the proper amount shall be made by an independent certified public accountant
selected by Landlord and reasonably approved by Tenant who is a member of a
nationally or regionally recognized accounting firm. Landlord shall cooperate in
good faith with Tenant and the accountant to show Tenant and the accountant the
information upon which the certification is to be based. If such certification
by the accountant proves that the Building Direct Expenses set forth in the
Statement were (i) overstated by less than two percent (2%), then the cost of
the accountant and the cost of such certification shall be paid for by Tenant,
(ii) overstated by two percent (2%) or more but less than three percent (3%),
then the cost of the accountant and the cost of certification shall be split
evenly between Landlord and Tenant, or (iii) overstated by three percent (3%) or
more, then the cost of the accountant and the cost of such certification shall
be paid for by Landlord. Promptly following the parties receipt of such
certification, the parties shall make such appropriate payments or
reimbursements, as the case may be, to each other, as are determined to be owing
pursuant to such certification.

          4.4.4 TENANT'S PAYMENT OF CERTAIN TAX EXPENSES. Notwithstanding
anything to the contrary contained in this Lease in the event that at any time
during the first seven (7) years of the Lease Term, any sale, refinancing, or
change in ownership of such Building is consummated, and as a result thereof,
and to the extent that in connection therewith, a Reassessment occurs pursuant
to the terms of Proposition 13, then the terms of this Section 4.4.4 shall apply
to such Reassessment for the Building.

              4.4.4.1 THE TAX INCREASE. For purposes of this Article 4, the
term "Tax Increase" shall mean that portion of the Tax Expenses, as
calculated immediately following the Reassessment, which is attributable
solely to the Reassessment. Accordingly, the term Tax Increase shall not
include any portion of the Tax Expenses, as calculated immediately following
the Reassessment, which is attributable to (i) the initial assessment of the
value of the land associated with the Building, the Base, Shell and Core of
such Building, improvements in the Project or any "soft" costs, permit costs,
site improvement costs or entrepreneurial profit added by the assessor due to
construction of the Project, (ii) assessments which were pending immediately
prior to the Reassessment which assessments were conducted during, and
included in, such Reassessment, or which assessments were otherwise rendered
unnecessary following the Reassessment, or (iii) the annual inflationary
increase of real estate taxes permitted to be assessed annually under
Proposition 13.

                                      -15-


                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

              4.4.4.2 TAX INCREASE PROTECTION. During the first seven (7)
years of the initial Lease Term, Tenant shall not be obligated to pay any
portion of the Tax Increase. Notwithstanding the foregoing, Landlord shall be
permitted to pass through to Tenant any Tax Increase resulting from a change
in ownership of the Project arising out of the sale, financing or merger of
all or substantially all of the assets or stock of and/or partnership
interests and/or limited liability company interests owned by Kilroy Realty
Corporation and/or its affiliates.

              4.4.4.3 LANDLORD'S RIGHT TO PURCHASE THE PROPOSITION 13
PROTECTION AMOUNT ATTRIBUTABLE TO A PARTICULAR REASSESSMENT. The amount of
Tax Expenses which Tenant is not obligated to pay or will not be obligated to
pay during the Lease Term in connection with a particular Reassessment
pursuant to the terms of this Section 4.4.4, shall be sometimes referred to
hereinafter as "Proposition 13 Protection Amount." If the occurrence of a
Reassessment is reasonably foreseeable by Landlord and the Proposition 13
Protection Amount attributable to such Reassessment can be reasonably
quantified or estimated for each Lease Year commencing with the Lease Year in
which the Reassessment will occur, the terms of this Section 4.4.4.3. shall
apply to each such Reassessment. Upon notice to Tenant, Landlord shall have
the right to purchase the Proposition 13 Protection Amount relating to the
applicable Reassessment (the "Applicable Reassessment"), at any time during
the Lease Term, by paying to Tenant an amount equal to the "Proposition 13
Purchase Price," as that term is defined below, provided that the right of
any successor of Landlord to exercise its right of repurchase hereunder shall
not apply to any Reassessment which results from the event pursuant to which
such successor of Landlord became the landlord under this Lease. As used
herein, "Proposition 13 Purchase Price" shall mean the present value of the
Proposition 13 Protection Amount remaining during the Lease Term, as of the
date of payment of the Proposition 13 Purchase Price by Landlord. Such
present value shall be calculated (i) by using the portion of the Proposition
13 Protection Amount attributable to each remaining Lease Year (assuming for
purposes of this computation that the amount of such Proposition 13
Protection Amount benefited Tenant on an equal monthly basis at the end of
each month during each Lease Year), as the amount to be discounted, and (ii)
by using an eight percent (8%) discount rate, compounded annually, for each
monthly amount to be discounted. Upon such payment of the Proposition 13
Purchase Price, the provisions of Section 4.4.4.2 of this Lease shall not
apply to any Tax Increase attributable to the Applicable Reassessment. Since
Landlord is estimating the Proposition 13 Purchase Price because a
Reassessment has not yet occurred, then when such Reassessment occurs, if
Landlord has underestimated the Proposition 13 Purchase Price, then upon
notice by Landlord to Tenant, Tenant's Rent next due shall be credited with
the amount of such under-estimation, and if Landlord overestimates the
Proposition 13 Purchase Price, then upon notice by Landlord to Tenant, Rent
next due shall be increased by the amount of the overestimation. The amount
of any such underestimate or overestimate shall be calculated by taking the
difference between the Proposition 13 Purchase Price for the Applicable
Reassessment actually paid to Tenant and the Proposition 13 Purchase Price
for the Applicable Reassessment as it should have been computed had all
relevant facts concerning the Applicable Reassessment been known at the time
such Purchase Price was originally computed, and adding interest thereto at a
rate per annum equal to ten percent (10%), compounded annually, from the date
such Purchase Price was paid to Tenant through the date that the amount of
the underestimate or overestimate is to be credited or debited (as the case
may be) against Rent next due hereunder.

     4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.

          4.5.1 Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment, furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.

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          4.5.2 If the tenant improvements in the Premises, whether installed
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the Tenant Improvement Allowance actually
used to build-out the Premises then the Tax Expenses levied against Landlord or
the property by reason of such excess assessed valuation shall be deemed to be
taxes levied against personal property of Tenant and shall be governed by the
provisions of Section 4.5.1, above.

          4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay
prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or
value added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facilities; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.

                                    ARTICLE 5

                                 USE OF PREMISES

     5.1 PERMITTED USE. Tenant shall use the Premises for office, software
development, training, research and development, storage, distribution and other
lawful uses permitted under the CC&R's (as defined below) and the Project's
permitted zoning and for no other purpose or purposes whatsoever without
Landlord's consent, which may be withheld in Landlord's sole discretion.

     5.2 PROHIBITED USES. Tenant further covenants and agrees that Tenant shall
not use, or suffer or permit any person or persons to use, the Premises or any
part thereof for any use or purpose contrary to the provisions of the Rules and
Regulations set forth in Exhibit "D," attached hereto, or in violation of the
laws of the United States of America, the State of California, or the
ordinances, regulations or requirements of the local municipal or county
governing body or other lawful authorities having jurisdiction over the Project.
Tenant shall not do or permit anything to be done in or about the Premises which
will obstruct or interfere with the rights of other tenants or occupants of the
Buildings or Project, or injure them or use or allow the Premises to be used for
any unlawful purpose, nor shall Tenant cause or maintain any nuisance in, on or
about the Premises. Tenant shall not use or knowingly allow another person or
entity to use any part of the Premises for the storage, use, treatment,
manufacture or sale of "Hazardous Material," (as that term is defined in Section
29.23 of this Lease); provided, however, Tenant may use commercially reasonable
amounts of any Hazardous Material as is normal and customary for general office
use so long as Tenant complies, at Tenant's sole cost and expense, with all
Applicable Laws relating thereto.

     5.3 CC&R's. Tenant acknowledges that Landlord intends to record an
Agreement Between Land Owners Including Covenants, Conditions and Restrictions
and Grants of Easements for Carmel Center and Including Termination of Both
Former Declaration and Prior Grants of Easements (the "CC&R'S") over the
Project. Tenant hereby approves the draft of CC&R's attached hereto as Exhibit
"F" and made a part hereof and hereby subordinates this Lease to the CC&R's and
any amendments or modifications thereto; provided, however, that any
modifications to the draft of the CC&R's attached as Exhibit "F" which may have
a material effect on Tenant's use or enjoyment of, or access to, the Premises or
Project shall be subject to Tenant's prior approval, which approval shall not be
unreasonably withheld or delayed. Tenant shall, within fifteen (15) days after
request by Landlord, execute such further instruments or assurances as Landlord
may reasonably deem necessary to evidence or confirm the subordination of this
Lease to the CC&R's. As of the date of execution of this Lease, Landlord
contemplates that it will be the declarant under the CC&R's and a California
nonprofit mutual benefit corporation has been, or will be, established (the
"ASSOCIATION") and charged with certain duties under the CC&R's. Certain
individuals who are directors, officers or employees of Landlord, the members of
Landlord, or affiliates thereof, are, or will be, members of the board of
directors of


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the Association. The board shall have the right to appoint members and
alternatives members of the Architectural and Development Review Committee (the
"COMMITTEE") contemplated by the CC&R's. As an owner of property subject to the
CC&R's, Landlord is a member of the Association for each parcel within the
Project which is subject to assessments under the CC&R's. With respect to
Landlord's respective capacities as declarant, member of the board, and a member
of the Committee under the CC&R's, Landlord covenants not to do any of the
following without Tenant's consent (which shall not be unreasonably withheld)
(i) take any action which in Landlord's reasonable opinion will jeopardize or be
detrimental to Tenant's rights under this Lease and Tenant's use and enjoyment
of its leasehold estate, (ii) take any action which has the effect of materially
increasing assessments or costs incurred by Landlord under the CC&R's, which
will result in an unreasonable increase in Direct Expenses in Expense Years
after the Base Year, (iii) vote in favor of or approve any new improvements,
operation or use on any of the properties covered by the CC&R's without first
consulting with Tenant, and (iv) knowingly allow any use of the parking
facilities within the Project (as defined in this Lease) that is not allowed
pursuant to the reciprocal parking rights described in the CC&R's. Landlord
shall provide (or if Landlord does not control the Association, Landlord will
request the Association to provide) to Tenant the draft budget prepared from
time to time in connection with the CC&R's for Tenant's review and comment, and
Landlord will reasonably consider Tenant's comments in preparing the budget.
Further, Landlord represents and warrants that the signage contemplated by this
Lease is in compliance with the CC&R's and the Sign Plan defined therein.

                                    ARTICLE 6

                             SERVICES AND UTILITIES

     6.1 STANDARD TENANT SERVICES. Landlord shall provide the following services
on all days (unless otherwise stated below) during the Lease Term.

          6.1.1 Subject to all governmental rules, regulations and guidelines
applicable thereto, Landlord shall provide heating, ventilation and air
conditioning ("HVAC") , pursuant to the HVAC service levels set forth in Exhibit
"G" attached hereto, from Monday through Friday, during the period from 6:00
A.M. to 7:00 P.M. and on Saturday during the period from 8:00 A.M. to 12:00 P.M.
(the "BUILDING HOURS"), except for the dates of observation of New Year's Day,
Presidents Day, Independence Day, Labor Day, Memorial Day, Thanksgiving Day, and
Christmas Day and other nationally recognized holidays that are not nationally
recognized as of the date of this Lease (collectively, the "HOLIDAYS").
Notwithstanding the foregoing, Landlord shall change the Building Hours as
requested by Tenant from time to time (but not more than two (2) times per
calendar year) so long as (i) the total Building Hours for the weekly period
(i.e., Monday through Sunday) do not exceed sixty-nine (69) hours, (ii) Tenant
leases the entire Building, (iii) any such Building Hours so designated by
Tenant for any day must be consecutive hours, and (iv) Tenant shall be
responsible for any additional reasonable costs incurred by Landlord as a result
of such change in hours requested by Tenant (which costs shall be payable as
Additional Rent within thirty (30) days after Tenant's receipt of invoice
therefor). Tenant shall be entitled to install, as an initial Tenant Improvement
or as an Alteration, dedicated heating, ventilation and air conditioning units
("PACKAGE UNITS") within or serving the Premises at Tenant's sole cost and
expense (but not window units). The plans and specifications for any Package
Units shall, as indicated in Article 8 below and the Tenant Work Letter (as
applicable), be subject to Landlord's reasonable approval and the electricity
required to power such Package Units shall be included within the allotment set
forth in Section 6.1.2 below and such electricity and any other utilities used
by such Package Units shall be payable by Tenant in accordance with Section 6.2
below. Tenant shall be solely responsible for maintenance and repair of the
Package Units and such units shall be considered to be a fixture within the
Premises and shall remain upon the Premises upon the expiration or earlier
termination of Lease Term unless Landlord requires Tenant to remove such items
upon expiration or earlier termination of this Lease pursuant to the provisions
of Section 8.5 below. Notwithstanding the foregoing, Tenant may remove any
"Libert" or similar type HVAC units from the Premises at any time prior to
expiration or earlier termination of the Lease Term provided that Tenant removes
all associated


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                                                             [Peregrine Systems]
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wiring and cabling, repairs any damage resulting from such removal and restores
the Premises to the condition prior to the placement of such unit(s), reasonable
wear and tear excepted.

          6.1.2 Landlord shall provide adequate electrical wiring, facilities
and power sufficient to provide Tenant with four (4) watts per rentable square
foot of connected electrical load for Tenant's equipment and sufficient to
provide an additional one point five (1.5) watts per rentable square foot of
connected electrical load for Tenant's lighting fixtures. Any such electrical
usage shall be subject to applicable laws and regulations. Tenant shall bear the
cost of replacement of any non-Building standard lamps, starters and ballasts
for lighting fixtures within the Premises; replacement of any such Building
standard items (as shown on the Specifications) shall be included in Operating
Expenses.

          6.1.3 Landlord shall provide city water from the regular Building
outlets for drinking, lavatory and toilet purposes.

          6.1.4 Landlord shall manage the Project and employ qualified property
management personnel and maintenance personnel to operate and manage the Project
in accordance with a standard which is not less than customarily observed in the
operation and management of Comparable Buildings. Such management personnel and
maintenance personnel shall, at a minimum, include the following: upon
completion of Building 5, on-site management shall include a full-time property
manager, an assistant property manager and an allocation of time for a regional
property manager; engineering staff will include one (1) senior full-time
engineer as of the Lease Commencement Date and an additional journeyman level
engineer to be hired upon the Lease Commencement Date for the initial Floor
Group for Building 3 and stationed at the Project; and one (1) full-time day
porter will be stationed at the Project upon the Lease Commencement Date whose
duties shall be as specified in Exhibit "H-2." The management office for the
Project shall be located in the Del Mar Heights area until such time as Building
5 has been completed, at which time the management office for the Project shall
be located within the Project for the remainder of the Lease Term. Landlord
shall at all times comply with the service levels and performance standards
specifically described in Exhibit "G" and Exhibit "H-1" and Exhibit "H-2",
attached hereto, which may be modified by Landlord from time to time so long as
an equivalent or better level of service is provided and such modification is
reasonable and customary for Comparable Buildings; provided, however, that if
any such modification is made by Landlord and results in an increase in
Operating Expenses, then from and after the date upon which such modification is
effective and continuing throughout the period during which such modification is
effective, Operating Expenses for the Base Year shall be increased by the amount
Landlord reasonably determines it would have incurred had the modification been
in effect throughout the Base Year.

          6.1.5 Landlord shall provide janitorial services five (5) days per
week except the date of observation of the Holidays, in and about the Building
in accordance with the standards described in Exhibit "H-1" attached hereto and
window washing services in accordance with a standard which is not less than
that customarily observed in other Comparable Buildings. Notwithstanding the
foregoing, Tenant may elect upon reasonable prior notice to Landlord to require
Landlord to change the provider of such janitorial services in the Building in
accordance with, and subject to, Section 6.7 below.

          6.1.6 Landlord shall provide nonexclusive, non-attended automatic
passenger elevator service during the Building Hours; Landlord shall have one
elevator available at all other times, including Holidays.

          6.1.7 Landlord, at its sole cost but includable as an Operating
Expense, shall provide a security system for the Project, including equipment,
on-site personnel, procedures and systems as provided in Exhibit "I" attached
hereto and made a part hereof. Security procedures shall be implemented to
regulate access to the Project during certain hours provided that, subject to
such restrictions and subject to the other provisions of this Lease, Tenant
shall have access to the Premises seven (7) days a week, twenty-four (24) hours
per day. Subject to Landlord's reasonable approval of Tenant's plans and
specifications and Tenant's compliance with the terms


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                                                             [Peregrine Systems]
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and conditions of Article 8, Tenant shall be entitled to install its own
security systems for the Premises, which shall be located within the Premises
and shall not interfere with the Project systems.

     Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems (collectively, "BUILDING SYSTEMS AND EQUIPMENT") .

     6.2 UTILITIES COSTS; OVERSTANDARD TENANT USE.

          6.2.1 If Tenant uses heat-generating machines, machines other than
normal office machines, or equipment or lighting other than Building standard
lights in the Building, which adversely and materially affects the temperature
otherwise maintained by the air conditioning system or materially increase the
water normally furnished for such Building by Landlord pursuant to the terms of
Section 6.1 of this Lease, Landlord shall have the right to install
supplementary air conditioning units or other facilities in such Building,
including supplementary or additional metering devices, and the cost thereof,
including the cost of installation, operation and maintenance shall be paid by
Tenant to Landlord within thirty (30) days after billing by Landlord.

          6.2.2 The Tenant Improvements to be constructed for the Building shall
include an electrical meter section and switchgear to measure electricity
supplied to the Premises (including, without limitation, electricity required in
order to provide HVAC to the Premises). Tenant shall contract directly with an
electricity service provider for electrical service to the Premises (including,
without limitation, electricity required in order to provide HVAC to the
Premises) and Tenant shall timely pay all charges for such service from such
provider and Landlord shall have no obligation with respect to the provision of
such service. The actual cost of electricity provided to the Premises
(including, without limitation, electricity required in order to provide HVAC to
the Premises) shall, notwithstanding anything to the contrary contained in this
Lease, not be included in Operating Expenses (including, without limitation,
Operating Expenses for the Base Year) for the Building (except for electricity
relating to the Common Areas, which shall be included in Operating Expenses
(including, without limitation, Operating Expenses for the Base Year) and paid
by Tenant as part of Building Direct Expenses).

          6.2.3 If Tenant desires to use HVAC during hours other than those for
which Landlord is obligated to supply such HVAC pursuant to the terms of Section
6.1 of this Lease (i.e., in excess of sixty-nine (69) hours in any week), Tenant
shall not be required to give Landlord prior notice of Tenant's desired use but
rather Tenant may control its after-hours HVAC use from within the Premises.
Landlord shall supply such after-hours HVAC to Tenant subject to Tenant's
payment to Landlord of an amount reasonably determined by Landlord to be
attributable to increased wear and tear on existing Building Systems and
Equipment caused by such after-hours use, any engineer's over-time and a nominal
amount attributable to overhead and accounting costs. Amounts payable by Tenant
to Landlord for such use of additional utilities shall be deemed Additional Rent
hereunder and shall be paid within thirty (30) days after Tenant's receipt of
invoice therefor.

     6.3 INTERRUPTION OF USE. Tenant agrees that Landlord shall not be liable
for damages, by abatement of Rent (except for abatement as specifically provided
in Section 6.8 below), or otherwise, for failure to furnish or delay in
furnishing any service (including telephone, electrical and telecommunication
services), or for any diminution in the quality or quantity thereof, when such
failure or delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
the Project after diligent and reasonable efforts to do so, by any accident or
casualty whatsoever, by act or default of Tenant or other parties, or by any
other cause beyond Landlord's reasonable control; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Premises or relieve Tenant from paying Rent
(except for abatement as specifically provided in Section 6.8


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                                                             [Peregrine Systems]
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below), or performing any of its obligations under this Lease. Furthermore,
Landlord shall not be liable under any circumstances for a loss of, or injury
to, property or for injury to, or interference with, Tenant's business,
including, without limitation, loss of profits, however occurring, through or in
connection with or incidental to a failure to furnish any of the services or
utilities as set forth in this Article 6, except in any circumstances where the
failure to furnish any such services or utilities arises out of or is a result
of, Landlord's sole or gross negligence or intentional misconduct (in which case
Landlord shall be responsible to the extent such item is not covered by
insurance required to be carried by Tenant under this Lease or actually carried
by Tenant). Landlord shall be entitled to cooperate in a reasonable manner with
the mandatory requirements of national, state or local governmental agencies or
utilities suppliers in reducing the consumption of energy or other resources
(including temporary stoppages in the supply of any utilities), and Landlord
shall not be in default hereunder or be liable for any damages directly or
indirectly resulting from, nor shall the Rent herein reserved be abated (except
as expressly provided in Section 6.8 below) by reason of such cooperation by
Landlord.

     6.4 ADDITIONAL SERVICES. Landlord shall also provide any additional
services which may be reasonably requested by Tenant, including, without
limitation, locksmithing, lamp replacement, additional janitorial service, and
additional repairs and maintenance, provided that Tenant shall pay to Landlord
within fifteen (15) days after receipt of written notice from Landlord, the sum
of all costs to Landlord of such additional services plus a reasonable
administration fee. Charges for any service for which Tenant is required to pay
from time to time hereunder shall be deemed Additional Rent hereunder and shall
be billed on a monthly basis. Tenant shall not be required to use Landlord for
such any additional services; provided, however, that Landlord shall have the
right to reasonably approve any other provider of such services should Tenant
elect not to use Landlord for the providing of such services. However, nothing
in this Section 6.4 shall be construed as requiring Landlord to provide any such
service which would, in Landlord's reasonable judgment, result in the receipt by
Landlord of amounts that would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Internal Revenue Code of 1986, as
amended, or any successor section thereto.

     6.5 UTILITY DEREGULATION.

          6.5.1 SELECTION OF SERVICE PROVIDER. Landlord has advised Tenant that
presently San Diego Gas and Electric ("ELECTRIC SERVICE PROVIDER") is the
utility company selected by Landlord to provide electricity service for the
Project. Notwithstanding the foregoing, if permitted by Applicable Law, upon
mutual agreement of Tenant and Landlord, the contract for service to the Common
Areas will be let to a different company or companies providing electricity
service (each such company shall hereinafter be referred to as an "ALTERNATE
SERVICE PROVIDER"). Any and all rebates or discounts enjoyed or realized as a
result of the selection of an Alternate Service Provider or the continued use of
the Electric Service Provider shall be reflected in the payments to be made by
Tenant pursuant to Article 4 above. However, if, after the Base Year, the
parties agree to utilize an Alternate Service Provider, then from and after the
date upon which the Alternate Service Provider is retained and continuing
throughout the period during which the Alternate Service Provider is retained,
Operating Expenses for the Base Year shall be reduced by the amount Landlord
reasonably estimates it would have saved had the Alternate Service Provider been
retained throughout the Base Year (for service to the Common Areas) based upon
the rates of the Alternate Service Provider prevailing throughout the Base Year.
Landlord and Tenant acknowledge that, with respect to electricity service to be
provided to the Premises, Tenant shall be entitled to retain any provider
(including, without limitation, an Alternate Service Provider) and that Tenant
will be contracting directly with such provider as indicated in Section 6.2.2
above.

          6.5.2 TENANT SHALL GIVE LANDLORD ACCESS. Tenant shall cooperate with
Landlord, the Electric Service Provider, and any Alternate Service Provider at
all times and, as reasonably necessary, shall allow Landlord, Electric Service
Provider, and any Alternate Service Provider reasonable access to the Building's
electric lines, feeders, risers, wiring and any other machinery within the
Premises, provided Landlord shall take all reasonable measures to minimize any
interference or disruption to Tenant's use of the Premises. In addition,
Landlord

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                                                             [Peregrine Systems]
<PAGE>

shall cooperate with Tenant and Tenant's provider of electrical service to the
Premises at all times and as reasonably necessary to allow access to the
facilities of the Building necessary for the provision of such service.

     6.6 EMERGENCY GENERATOR. Subject to Tenant's compliance with all Applicable
Laws and Landlord's prior approval of all plans and specifications, which
approval shall not be unreasonably withheld, Landlord shall permit Tenant to
install, at Tenant's sole cost and expense, an above-ground emergency generator
(as a Miscellaneous Common Area Item) for Tenant's use in the Building. Such
emergency generator shall be used by Tenant only during (i) testing and regular
maintenance, and (ii) any period of electrical power outage in the Building.
Tenant shall be entitled to operate the emergency generator for testing and
regular maintenance only upon notice to Landlord and at times reasonably
approved by Landlord. Landlord's consent to Tenant's plans for the emergency
generator may be conditioned on Tenant complying with such reasonable
requirements imposed by Landlord, based on the advice of Landlord's engineers,
so that the systems and equipment of the Building are not adversely affected.
Any repairs and maintenance of such generator shall be the sole responsibility
of Tenant. Upon the expiration or earlier termination of the Lease, Tenant
shall, at Tenant's sole cost and expense, remove the emergency generator and all
associated cabling and wiring and repair all damage resulting from such removal.
Landlord makes no representation or warranty with respect to the emergency
generator or its suitability for use by Tenant and Article 10 of the Lease shall
apply with respect to Tenant's use, maintenance, repair and operation of the
emergency generator.

     6.7 SUBSTITUTION OF VENDORS. Upon request from Tenant, Landlord shall
review with Tenant the performance and cost of vendors and contract service
providers for the Project and except for the property manager and the property
management staff and engineers, Tenant shall have the right to require Landlord
to substitute other vendors or contract service providers reasonably designated
by Tenant provided that (i) Tenant then leases on a direct basis (i.e., not
including any space leased by Tenant pursuant to a sublease) at least fifty
percent (50%) of the space then constructed for lease at the Project, (ii) such
substitution does not result in any increase in Operating Expenses during the
Base Year, (iii) such substitution does not result in any invalidation or
reduction in coverage of any warranties for the Project (unless Tenant agrees to
be responsible for the costs which would have otherwise been covered by such
warranties), and (iv) Landlord reasonably approves such substitute vendor or
contract service provider. If a vendor or contract service provider is
substituted pursuant to this Section 6.7 above and if the annual cost of such
substitute vendor or contract service provider is less than the amount included
in Operating Expenses during the Base Year for the same service, effective upon
the date of such substitution, Operating Expenses for the Base Year shall be
reduced by the amount of such difference.

     6.8 ABATEMENT EVENT. An "ABATEMENT EVENT" shall be defined as an event that
prevents Tenant from using the Premises or any portion thereof, as a result of
any failure to provide services or access to the Premises, where (i) Tenant does
not actually use the Premises or such portion thereof, and (ii) such event is
not caused by the negligence or willful misconduct of Tenant, its agents,
employees or contractors. In addition, an "Abatement Event" shall not be deemed
to have occurred where such failure is caused by (a) an Alternate Service
Provider for the Premises where such failure would generally not have occurred
had Tenant utilized the Electric Service Provider (or its successor), or (b) an
Alternate Service Provider for service to the Common Areas where Landlord
reasonably conditioned its approval of the use of such Alternate Service
Provider pursuant to Section 6.5.1 upon Tenant assuming the risk that any
failures to provide services or access to the Premises caused by such Alternate
Service Provider would not be deemed to constitute an "Abatement Event" pursuant
to this Section 6.8. Tenant shall give Landlord notice ("ABATEMENT NOTICE") of
any such Abatement Event, and if such Abatement Event continues beyond the
"Eligibility Period" (as that term is defined below), then the Base Rent and
Tenant's Share of Direct Expenses shall be abated entirely or reduced, as the
case may be, after expiration of the Eligibility Period for such time that
Tenant continues to be so prevented from using, and does not use, the Premises
or a portion thereof, in the proportion that the rentable area of the portion of
the Premises that Tenant is prevented from using, and does not use, bears to the
total rentable area of the Premises leased by Tenant; provided, however, in the


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                                                             [Peregrine Systems]
<PAGE>

event that Tenant is prevented from using, and does not use, a portion of the
Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Base Rent and Tenant's Share of Direct
Expenses for the entire Premises shall be abated entirely for such time as
Tenant continues to be so prevented from using, and does not use, the Premises
for Tenant's business purposes. If, however, Tenant reoccupies any portion of
the Premises during such period, the Base Rent and Tenant's Share of Direct
Expenses allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises. The term "ELIGIBILITY PERIOD" shall
mean a period of five (5) consecutive business days after Landlord's receipt of
any Abatement Notice(s). If the Abatement Event is caused by the negligence or
willful misconduct of Tenant, or by the circumstances described in the second
(2nd) sentence of this Section 6.8 with respect to an Alternate Service
Provider, the Abatement described in this Section 6.8 shall not apply; however,
Tenant may seek recovery from its business interruption insurance. Except as
provided in Article 11 and Article 13, such right to abate Base Rent and
Tenant's Share of Direct Expenses shall be Tenant's sole and exclusive remedy at
law or in equity for an Abatement Event.

                                    ARTICLE 7

                                     REPAIRS

     7.1 OBLIGATIONS. Landlord shall maintain and repair any and all defects in
the Base, Shell and Core of the Building, including, without limitation, the
foundations, floor/ceiling slabs, structural portions of the roof (including the
roof membrane), curtain wall, exterior glass, columns, beams, shafts, stairs,
stairwells, and elevator cabs, and shall also maintain and repair the basic
mechanical, electrical, life safety, plumbing, sprinkler systems and heating,
ventilating and air conditioning systems of the Building (i.e., all of such
systems except for distribution within the Premises, in which case (i) Landlord
shall be responsible for repair of construction defects, (ii) with respect to
design defects, that party that retained the consultant to design such
distribution shall be responsible for repair of the defect and additional costs
incurred as a result of such defect (to the extent not covered by warranty or
insurance), and (iii) Tenant shall be responsible for all other repairs and
maintenance), the exterior portions of the Building and the Common Areas of the
Project. In addition, Landlord shall make repairs necessitated by the acts or
omissions of Landlord or its respective agents, employees or contractors. Tenant
shall, at Tenant's own expense, keep the Premises and specifically all tenant
improvements, fixtures and furnishings therein, in good order, repair and
condition at all times during the Lease Term, and in this regard, Tenant shall
at Tenant's own expense within a reasonable period of time but under the
supervision and subject to the prior approval of Landlord with respect to any
repairs for which a building permit is required, adequately repair all such
damage thereto. Except with respect to the express maintenance and repair
obligations of Tenant under this Lease, Landlord shall maintain and repair the
Building and the Project (including the Common Areas) and replace or repair all
damaged, broken, or worn fixtures and appurtenances, the cost of which shall be
included in Operating Expenses (subject to the provisions of Article 4 above).
Landlord may enter the Premises at all reasonable times upon reasonable prior
notice to Tenant (except that no notice will be required in case of emergency)
to make such repairs, alterations, improvements or additions to the Buildings or
to the Project or to any equipment located in the Project as Landlord is
obligated under this Lease or Landlord shall deem reasonably necessary or as
Landlord may be required to do by governmental or quasi-governmental authority
or court order or decree.

     7.2 TENANT'S FAILURE TO COMPLY. If Tenant fails to make any repairs
required of Tenant under this Lease, after written notice to Tenant and the
expiration of a reasonable cure period, Landlord may (but need not) enter the
Premises pursuant to Section 7.1 above to make such repairs and replacements,
and Tenant shall pay Landlord the cost thereof, including a percentage (not to
exceed five percent (5%)) of the cost thereof to compensate Landlord for all


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

overhead, general conditions, fees and other costs or expenses arising from
Landlord's involvement with such repairs and replacements within fifteen (15)
days of being billed for same. Except as expressly provided in Section 7.3
below, Tenant hereby waives and releases its right to make repairs at Landlord's
expense under Sections 1941 and 1942 of the California Civil Code or under any
similar law, statute, or ordinance now or hereafter in effect.

     7.3 LANDLORD'S FAILURE TO COMPLY. If Tenant provides notice to Landlord of
an event or circumstance which requires the action of Landlord with respect to
the provision of repairs as set forth in Section 7.1 of this Lease, and Landlord
fails to provide such action as required by the terms of this Lease within
thirty (30) days after the date of such notice from Tenant (or if such repair is
reasonably expected to require longer than thirty (30) days to complete, if
Landlord shall fail to commence such repair within said thirty (30) day period
or to diligently prosecute such repair to completion), then Tenant may proceed
to take the required action upon delivery of an additional ten (10) business
days notice and cure period to Landlord specifying that Tenant is taking such
required action, and if such action was required under the terms of this Lease
to be taken by Landlord, then Tenant shall be entitled to prompt reimbursement
by Landlord of Tenant's reasonable costs and expenses in taking such action
including a percentage (not to exceed five percent (5%) of the cost thereof to
compensate Tenant for all overhead, general conditions, fees and other costs or
expenses arising from Tenant's involvement with such repairs and replacement) in
which case the reimbursed amount shall be included in Operating Expenses to the
extent the action, if taken by Landlord, would have been includable in Operating
Expenses pursuant to Section 4.2.7 above. In the event Tenant takes such action,
and such work will affect the Building Systems and Equipment, structural
integrity of the Building or exterior appearance of the Building, Tenant shall
use only those contractors used by Landlord in the Project for such work unless
such contractors are unwilling or unable to perform such work or their pricing
is unreasonable, in which event Tenant may utilize the services of any other
qualified contractor which normally and regularly performs similar work in
comparable first-class, institutional quality, office buildings in the San
Diego, California area whose pricing is reasonable. If Tenant is entitled to
reimbursement by Landlord of Tenant's reasonable costs and expenses in taking
any action pursuant to this Section 7.3, Tenant shall so notify Landlord in
writing (the "REIMBURSEMENT NOTICE"), which Reimbursement Notice shall specify
in detail such costs and expenses. Within thirty (30) days after Landlord's
receipt of a Reimbursement Notice, Landlord shall pay to Tenant any undisputed
portion of such costs and expenses and shall notify Tenant in writing of those
costs and expenses specified by Tenant in the Reimbursement Notice which
Landlord disputes (the "DISPUTED AMOUNTS") and the reasons for such dispute. Any
amounts which are not so identified by Landlord as Disputed Amounts within said
thirty (30) day period shall be considered to be undisputed. To the extent
Landlord fails to reimburse Tenant for the costs and expenses specified in the
Reimbursement Notice within thirty (30) days after demand therefor, Tenant shall
be entitled to offset the sum of (i) the amount of any undisputed portion of
such costs and expenses and (ii) one-half of the amount of any Disputed Amount
(which total sum may be referred to as the "PRE-JUDGMENT OFFSET AMOUNT") against
Base Rent payable by Tenant under this Lease together with interest at the
Interest Rate specified in Article 25 of this Lease from the date of expiration
of said thirty (30) day period until the date of offset (up to a maximum offset
each month of twenty percent (20%) of the Base Rent payable for the Building)
until the full Pre-Judgment Offset Amount (plus such interest) has been so
offset. If Tenant obtains a final judgment against Landlord for the remaining
portion of the Disputed Amount and if Landlord fails to pay such judgment within
thirty (30) days after the date such judgment is rendered, Tenant shall be
entitled to offset such judgment against Base Rent payable by Tenant under this
Lease together with interest at the Interest Rate specified in Article 25 of
this Lease from the date Landlord failed to timely reimburse Tenant for such
costs and expenses until the date of offset (up to a maximum offset each month
of twenty percent (20%) of the Base Rent payable for the Building) until the
full amount of such judgment (plus such interest) has been so offset. If
Landlord obtains a final judgment against Tenant for the Disputed Amount, Tenant
shall pay to Landlord such judgment (as it relates to the Disputed Amount plus
interest Tenant has previously offset with respect to the Disputed Amount)
within thirty (30) days after the date such judgment is rendered.


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                    ARTICLE 8

                            ADDITIONS AND ALTERATIONS

     8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make any
improvements, alterations, additions or changes to the Premises (collectively,
the "ALTERATIONS") without first procuring the prior written consent of Landlord
to such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent (as
indicated in Section 29.4 below) shall not be unreasonably withheld by Landlord.
However, Tenant may make (i) cosmetic changes to the finish work in the
Premises, not requiring any structural or other substantial modifications to the
Premises (e.g., voice/data cabling), without Landlord's prior consent, (ii)
cosmetic changes to the interior of any Tenant space within the Building (e.g.,
changes to the carpet, wallcovering and paint) and (iii) nonstructural changes
to the interior of any Tenant space within the Building (such cosmetic and
nonstructural changes to be referred to hereafter collectively as the
"ACCEPTABLE CHANGES") upon at least ten (10) days prior notice to Landlord but
without Landlord's prior consent provided (a) with respect to the changes
described in Subsection 8.1(iii) above only, such changes do not cost in excess
of Two Dollars ($2.00) per usable square foot of the Premises for any one (1)
job, (b) such Acceptable Changes do not affect the exterior appearance of the
Building or Common Areas, the structural aspects of the Building, or any
Building System or Equipment, and (c) Tenant shall perform such Acceptable
Changes in a good and workmanlike manner and in conformance with any and all
applicable federal, state, county or municipal laws, rules or regulations
(collectively, "APPLICABLE LAWS"). At any time Tenant proposes to make
Alterations which require the consent of Landlord pursuant to this Section 8.1,
Tenant's notice regarding the proposed Alterations shall be provided together
with plans and specifications for the Alterations, and Landlord shall approve or
disapprove of the same within fifteen (15) days after Landlord's receipt
thereof. The construction of the initial improvements to the Premises shall be
governed by the terms of the Tenant Work Letter and not the terms of this
Article 8, and therefore, as used herein, the term "Alterations" does not refer
to any tenant improvements installed pursuant to the Tenant Work Letter.

     8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord may reasonably require, including, but
not limited to, the requirement that Tenant shall, at Tenant's expense, remove
such Alterations upon the expiration or any early termination of the Lease Term,
provided Landlord imposed such removal requirement as a condition to consenting
to such Alterations when they are installed, and/or the requirement that Tenant
utilize for such purposes only contractors, subcontractors, materials, mechanics
and materialmen approved by Landlord (which approval (as indicated in Section
29.4 below) shall not be unreasonably withheld or delayed). In any event, Tenant
shall utilize subcontractors of Landlord's selection to perform any and all work
that may affect the Building Systems and Equipment, structural aspects of the
Building, the Base Shell or Core or exterior appearance of the Building or
Common Areas provided that (i) if such subcontractors are unwilling or unable to
perform such work, Tenant may utilize the services of any other qualified
subcontractor which normally and regularly performs similar work in comparable
first-class, institutional quality, office buildings in the San Diego,
California area, and (ii) Landlord shall cause such subcontractor selected by
Landlord to charge Tenant for such work in an amount equal to the cost that a
comparable, first-class, reputable and reliable subcontractor would have charged
Tenant if selected pursuant to competitive bidding procedures (and if such
subcontractor refuses to meet such pricing requirements, Landlord shall have the
option to either pay the excess charges of such subcontractor or to permit
Tenant to utilize any other qualified subcontractor which meets the requirements
of subsection 8.2(i) above). Tenant shall construct such Alterations and perform
such repairs in conformance with any and all Applicable Laws and pursuant to a
valid building permit, issued by the City of San Diego, all in conformance with
Landlord's construction rules and regulations. All work with respect to any
Alterations must be done in a good and workmanlike manner and diligently
prosecuted to completion to the end that the Premises shall at all times be a
complete unit except during the period of work. In performing the work of any
such Alterations, Tenant shall have the work performed in such manner so as not
to obstruct

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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

access to the Project or any portion thereof by any other tenant of the Project,
and so as not to obstruct the business of other tenants in the Project. In
addition to Tenant's obligations under Article 9 of this Lease, upon completion
of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded
in the office of the Recorder of the County of San Diego in accordance with
California Civil Code Section 3093 or any successor statute, and Tenant shall
deliver to the Project management office a reproducible copy of the "as built"
drawings of the Alterations.

     8.3 PAYMENT FOR IMPROVEMENTS. The Cost of all Alterations shall be paid for
by Tenant. In the event Tenant orders any Alterations or repair work directly
from Landlord, the charges for such work shall be deemed Additional Rent under
this Lease, payable within fifteen (15) days of billing therefor, either
periodically during construction in reasonable progress payments or upon the
substantial completion of such work, at Landlord's option. Upon completion of
such work, Tenant shall deliver to Landlord evidence of payment, contractors'
affidavits and full and final waivers of all liens for labor, services or
materials. If Tenant orders any work directly from Landlord, Tenant shall pay to
Landlord a percentage of the cost of such work not to exceed three percent (3%)
of such cost to compensate Landlord for all overhead, general conditions, fees
and other costs and expenses arising from Landlord's involvement with such work.
If Tenant does not order such work directly from Landlord, Tenant shall pay to
Landlord a fee equal to one percent (1%) of the cost of such work and shall
reimburse Landlord for Landlord's reasonable out-of-pocket costs and expenses
actually incurred in connection with review of such work; provided, however,
that this sentence shall not apply to Acceptable Changes.

     8.4 CONSTRUCTION INSURANCE. In the event that Tenant makes any Alterations
(other than work described in Subsections 8.1(i) and (ii) above), Tenant agrees
to carry "Builder's All Risk" insurance in a reasonable amount covering the
construction of such Alterations, and such other insurance as Landlord may
reasonably require, it being understood and agreed that all of such Alterations
shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon
completion thereof. In addition, if Tenant fails to meet the Financial Standards
(described in Section 21.2 below) and the cost of the Alteration exceeds One
Hundred Thousand Dollars ($100,000.00), Landlord may, in its reasonable
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a
co-obligee.

     8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures and/or
equipment which may be installed or placed in or about the Premises, and all
signs installed in, on or about the Premises, from time to time, shall be at the
sole cost of Tenant and shall be and become the property of Landlord, except
that Tenant may remove any fixtures, equipment and/or other personal property
owned by Tenant (including, without limitation, items purchased by Tenant
pursuant to Section 2.2.10 of the Tenant Work Letter), provided Tenant repairs
any damage to the Premises and Building caused by such removal. Furthermore,
Landlord may require Tenant, at Tenant's expense, to remove any Alterations (or
any Tenant Improvements which do not conform to the Specifications) and to
repair any damage to the Premises and Building caused by such removal provided
Landlord gave to Tenant written notice (prior to the installation of any such
Alterations or Tenant Improvement) that Landlord would require such removal at
the end of the Lease Term or following any earlier termination of this Lease. If
Tenant fails to complete such removal and/or to repair any damage caused by the
removal of such Alterations or Tenant Improvements, Landlord may do so and may
charge the actual cost thereof to Tenant.

                                    ARTICLE 9

                             COVENANT AGAINST LIENS

     Landlord shall have the right at all times to post and keep posted on the
Premises any notice which it deems necessary for protection from mechanics'
liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics
or materialmen or others to be placed against


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                                                             [Peregrine Systems]
<PAGE>

the Project, the Building or the Premises, or any portion thereof, with respect
to work or services claimed to have been performed for or materials claimed to
have been furnished to Tenant or the Premises, and, in case of any such lien
attaching or notice of any lien, Tenant covenants and agrees to cause it to be
promptly released and removed of record. Notwithstanding anything to the
contrary set forth in this Lease, in the event that such lien is not released
and removed by bond or otherwise on or before the date occurring thirty (30)
days after notice of such lien is delivered by Landlord to Tenant (which thirty
(30) day period shall be subject to reduction as provided in the next sentence
below), Landlord, at its sole option, may immediately take all action necessary
to release and remove such lien, without any duty to investigate the validity
thereof, and all sums, costs and expenses, including reasonable attorneys' fees
and costs, incurred by Landlord in connection with such lien shall be deemed
Additional Rent under this Lease and shall immediately be due and payable by
Tenant. However, if Landlord's notice of such lien to Tenant indicates that
Landlord is in escrow to sell or finance the Building or has an executed letter
of intent to sell or a commitment letter to finance the Building (or a
substantially similar document), Landlord may indicate in such notice that such
thirty (30) day period shall be reduced to a period designated by Landlord which
is not less than ten (10) business days.

                                   ARTICLE 10

                                    INSURANCE

     10.1 INDEMNIFICATION AND WAIVER. To the extent not prohibited by law,
Landlord, its members, partners, subpartners and affiliates and their respective
officers, agents, servants, employees, and independent contractors
(collectively, "LANDLORD PARTIES") shall not be liable for, any damage either to
person or property or resulting from the loss of use thereof, which damage is
sustained by Tenant. Tenant shall indemnify, defend, protect, and hold harmless
Landlord Parties from any and all loss, cost, damage, expense and liability,
including without limitation court costs and reasonable attorneys' fees
(collectively, "CLAIMS") incurred in connection with or arising from any cause
in, on or about the Premises during the Lease Term, provided that the terms of
the foregoing indemnity by Tenant shall not apply to the gross negligence or
willful misconduct of Landlord or its agents, contractors, servants, employees
or licensees in connection with Landlord's activities in the Project and
Landlord shall indemnify, defend, protect and hold Tenant, its officers,
directors, agents, servants and employees harmless from any such Claims (except
for damage to the Tenant Improvements and Tenant's personal property, fixtures,
furniture and equipment in the Premises, to the extent Tenant is required to
obtain the requisite insurance coverage pursuant to this Lease). The provisions
of this Section 10.1 shall survive the expiration or sooner termination of this
Lease with respect to any claims or liability occurring prior to such expiration
or termination.

     10.2 TENANT'S COMPLIANCE WITH LANDLORD'S FIRE AND CASUALTY INSURANCE.
Tenant shall, at Tenant's expense, comply with all insurance company
requirements pertaining to the use of the Premises. If Tenant's conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

     10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages in
the following amounts.

          10.3.1 Commercial/Comprehensive General Liability Insurance covering
the insured against claims of bodily injury, personal injury and property damage
arising out of Tenant's operations, assumed liabilities or use of the Premises,
including a Broad Form Commercial/Comprehensive General Liability endorsement
covering the insuring provisions of this Lease and the performance by Tenant of
the indemnity agreements set forth in Section 10.1 of this Lease, for limits of
liability not less than:


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

        Bodily Injury and
        Property Damage Liability          $3,000,000 each occurrence
                                           $3,000,000 annual aggregate, or any
                                           combination of primary insurance and
                                           excess liability

        Personal Injury Liability          $3,000,000 each occurrence
                                           $3,000,000 annual aggregate, or any
                                           combination of primary insurance and
                                           excess liability

          10.3.2 Property Insurance covering (i) all office furniture, trade
fixtures, office equipment, merchandise and all other items of Tenant's property
on the Premises installed by, for, or at the expense of Tenant, (ii) the Tenant
Improvements, and (iii) all other improvements, alterations and additions to the
Premises. Such insurance shall be written on an "all risks" of physical loss or
damage basis, for the full replacement cost value new without deduction for
depreciation of the covered items and in amounts that meet any co-insurance
clauses of the policies of insurance and shall include sprinkler leakage
coverage and earthquake sprinkler leakage coverage.

          10.3.3 Worker's Compensation and Employer's Liability Insurance, with
a waiver of subrogation endorsement, with minimum limits of $1,000,000 per
employee and $1,000,000 per occurrence.

          10.3.4 Business Interruption, loss of income and extra expense
insurance in such amounts as will reimburse Tenant for actual direct or indirect
loss of earnings for up to one (1) year attributable to the risks outlined in
Section 10.3.2 above; however, Tenant shall be entitled to self-insure the
coverage described in this Section 10.3.4 only, in which case such
self-insurance shall be deemed to contain all of the terms and conditions
applicable to the coverage described in this Section 10.3.4 including, without
limitation, a deemed waiver of subrogation and, consequently, Landlord shall be
treated, for all purposes, as if Tenant had actually purchased such insurance
from a third party.

     10.4 FIRE AND CASUALTY INSURANCE OF LANDLORD. Landlord shall maintain
during the Lease Term and as an Operating Expense, a policy or policies of
insurance insuring the Building and Landlord's remaining interest in the Tenant
Improvements and Alterations against loss or damage due to fire and other
casualties covered within the classification of fire and extended coverage,
vandalism coverage and malicious mischief, sprinkler leakage, water damage and
special extended coverage. Such coverage shall be in the amount of full
replacement cost for the Building (including coverages for enforcement of
Applicable Laws requiring the upgrading, demolition, reconstruction or
replacement of any portion of the Building as the result of a covered loss) and
other improvements and may include, at the option of Landlord, the risks of
earthquakes and/or flood damage and additional hazards, a rental loss
endorsement for a period of one (1) year and one or more loss payee endorsements
in favor of the holders of any mortgages or deeds of trust encumbering the
interest of Landlord in the Building or any ground or underlying lessors of the
Building.

     10.5 FORM OF POLICIES. The minimum limits of policies of insurance required
of Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. All insurance shall be issued on an occurrence basis and shall be
(i) be issued by an insurance company having a rating of not less than A-X in
BEST'S INSURANCE GUIDE or which is otherwise acceptable to Landlord and licensed
to do business in the State of California; and (ii) provide that said insurance
shall not be canceled or coverage changed unless thirty (30) days' prior written
notice shall have been given to Landlord and any mortgagee or ground or
underlying lessor of Landlord. In addition, the insurance described in Section
10.3.1 above shall (a) name Landlord, and any other party reasonably specified
by Landlord, as an additional insured; (b) specifically cover the liability
assumed by Tenant under this Lease including, but not limited to, Tenant's
obligations under Section 10.1 of this Lease; (c) be primary insurance as to all
claims thereunder and provide that any insurance obtained by Landlord is excess
and is non-contributing with any


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

insurance requirement of Tenant; and (d) contain a cross-liability endorsement
or severability of interest clause acceptable to Landlord. Tenant shall deliver
said policy or policies or certificates thereof to Landlord before the Lease
Commencement Date (or Tenant's entry into the Building pursuant to the Tenant
Work Letter, if earlier) and at least thirty (30) days before the expiration
dates thereof. In the event Tenant shall fail to procure such insurance, or to
deliver such certificate, Landlord may, at its option, procure such policies for
the account of Tenant, and the costs of it shall be paid to Landlord as
Additional Rent within fifteen (15) days after delivery to Tenant of bills
therefor. Tenant may satisfy the insurance coverage described in this Article 10
through one or more blanket policies so long as such policies otherwise meet the
requirements specified above.

     10.6 SUBROGATION. Landlord and Tenant agree to have their respective
insurance companies issuing property damage and loss of insurance and extra
expense insurance waive any rights of subrogation that such companies may have
against Landlord or Tenant, as the case may be, so long as the insurance carried
by Landlord and Tenant, respectively, is not invalidated thereby. As long as
such waivers of subrogation are contained in their respective insurance policies
(or are deemed to be contained in any self-insurance maintained by Tenant
pursuant to the provisions of Section 10.3.4 above), Landlord and Tenant hereby
waive any right that either may have against the other on account of any loss or
damage to the extent such loss or damage is insurable under such policies of
insurance.

     10.7 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10, and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord. Notwithstanding the foregoing, Landlord's
request shall only be considered reasonable if such increased amounts and any
such other coverages are standard amounts and coverages for Comparable
Buildings, and Landlord shall not increase amounts and require additional
coverages during the first five (5) years of the Lease Term and thereafter not
more often than one time in any five (5) year period.

                                   ARTICLE 11

                             DAMAGE AND DESTRUCTION

     11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly notify
Landlord of any damage to the Building or other portion of the Project resulting
from fire or any other casualty. If such Building or any Common Areas serving or
providing access to such Building shall be damaged by fire or other casualty,
Landlord shall promptly and diligently, subject to reasonable delays for
insurance adjustment or other matters beyond Landlord's reasonable control, and
subject to all other terms of this Article 11, restore the Base, Shell, and Core
of such Building and such Common Areas. Such restoration shall be to
substantially the same condition of the Base, Shell, and Core of the Premises
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord and reasonably approved by Tenant, provided that access to
the Building shall not be materially impaired. Upon the occurrence of any damage
to such Building, Tenant shall assign to Landlord (or to any party designated by
Landlord) all insurance proceeds payable to Tenant under Tenant's physical
damage and property damage insurance required under Section 10.3 of this Lease
(excluding, however, proceeds payable with respect to any damage to Tenant's
furniture, equipment and other personal property on the Premises), and Landlord
shall repair any injury or damage to the Tenant Improvements installed in the
Premises and shall return such Tenant Improvements and Alterations to their
original condition; provided that if the cost of such repair by Landlord exceeds
the amount of insurance proceeds received by Landlord from Tenant's insurance
carrier, as assigned by Tenant, plus the amount of insurance proceeds received
by Landlord from Landlord's insurance carrier to the extent allocable to damage
of such Tenant Improvements and Alterations, the cost of such repairs shall be
paid by Tenant to Landlord in reasonable progress payments as Landlord repairs
the damage (provided


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

that if any mortgage holder or deed of trust beneficiary so requires, Tenant
shall deposit such cost of repairs with such mortgage holder or deed of trust
beneficiary prior to the commencement of repair by Landlord of such injury or
damage, in which case Tenant shall be entitled to interest on such funds to the
extent permitted by such lender). In connection with such repairs and
replacements, Tenant shall, prior to the commencement of construction, submit to
Landlord, for Landlord's review and approval, all plans, specifications and
working drawings relating thereto, and Landlord shall select the contractors
(subject to Tenant's approval thereof, not to be unreasonable withheld or
delayed (as indicated in Section 29.4 below)) to perform such improvement work.
Landlord shall not be liable for any inconvenience or annoyance to Tenant or its
visitors, or injury to Tenant's business resulting in any way from such damage
or the repair thereof; provided however, that if such fire or other casualty
shall have damaged the Building or Common Areas necessary to Tenant's occupancy,
Landlord shall allow Tenant a proportionate abatement of Base Rent during the
time and to the extent the Building is unfit for occupancy for the purposes
permitted under this Lease, and not occupied by Tenant as a result thereof for
the conduct of Tenant's business; provided, however, that if such damage is the
result of the negligence or willful misconduct of Tenant or Tenant's employees,
contractors, licensees or invitees, such abatement of Base Rent shall apply only
to the extent Landlord is reimbursed from the proceeds of rental interruption
insurance purchased by Landlord as a part of Operating Expenses.

     11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of Section 11.1
of this Lease, Landlord may elect not to rebuild and/or restore the Building;
and instead terminate this Lease by notifying Tenant in writing of such
termination within ninety (90) days after the date Landlord learns of the
necessity for repairs as the result of damage, such notice to include a
termination date giving Tenant ninety (90) days to vacate the Building, but
Landlord may so elect only if (i) the Building shall be damaged by fire or other
casualty or cause, and the damage is not fully covered, except for deductible
amounts, by insurance policies required to be carried by Landlord under this
Lease and (ii) Tenant is not willing to fund the amount of the shortfall in
excess of deductible amounts.

     11.3 LANDLORD'S OR TENANT'S OPTION TO REPAIR. Notwithstanding the terms of
Section 11.1 of this Lease, either Landlord or Tenant may elect to terminate
this Lease by notifying the other in writing of such termination with ninety
(90) days after the date Landlord learns of the necessity for repairs as a
result of such damage, such notice to include a termination date giving Tenant
ninety (90) days to vacate the Building, but Landlord or Tenant, whichever is
the case, may so elect only if the Building shall be damaged by fire or other
casualty or cause and one or more of the following conditions is present: (i)
the repair or restoration is reasonably estimated to cost more than sixty
percent (60%) of the replacement cost of such Building, or (ii) repairs cannot
reasonably be substantially completed within three hundred sixty (360) days
after the date Landlord learns of the necessity for repairs as the result of
damage (when such repairs are made without the payment of overtime or other
premiums). Notwithstanding the foregoing, if this Lease is terminated by
Landlord and Landlord thereafter elects to commence the rebuilding of the
Building prior to the sooner to occur of the third (3rd) anniversary of the
termination date or the expiration of this Lease, Tenant shall have the right to
reinstate this Lease by written notice to Landlord within forty-five (45) days
after Tenant's receipt of notice from Landlord that Landlord so elects to
rebuild. Tenant's failure to so notify Landlord within said forty-five (45) day
period shall be deemed to constitute Tenant's waiver of the right to so
reinstate this Lease. Tenant hereby specifically acknowledges that its right to
reinstatement contained in this Section 11.3 shall not be applicable to any
assignee or transferee of Landlord to whom the Premises is transferred after
this Lease is terminated pursuant to this Section 11.3 as a result of a
foreclosure, trustee's sale or bona-fide deed in lieu of foreclosure.

     11.4 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, California Civil Code
Sections 1932(2) and 1933(4), with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute


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or regulation, now or hereafter in effect, shall have no application to this
Lease or any damage or destruction to all or any part of the Premises, the
Buildings or the Project.

         11.5 DAMAGE NEAR END OF TERM. In the event that the Building is
destroyed or damaged during the last twelve (12) months of the Lease Term or any
Extension Term and the repair or restoration is reasonably estimated to cost
more than the "Threshold Level" (as that term is defined below), then
notwithstanding anything contained in this Article 11, Landlord shall have the
option to terminate this Lease by giving written termination notice to Tenant of
the exercise of such option within thirty (30) days after Landlord learns of the
necessity for repairs as the result of such damage or destruction, and, to the
extent such damage or destruction was not caused as a result of the negligence
or willful misconduct of Tenant or any of Tenant's employees, agents,
contractors, licensees or invitees and the repair of same is reasonably expected
by Landlord to require more than three (3) months to complete, Tenant shall have
the option to terminate this Lease by giving written termination notice to
Landlord of the exercise of such option within thirty (30) days after Landlord
learns of the necessity for repairs as the result of such damage or destruction.
The term "THRESHOLD LEVEL" shall mean twenty percent (20%) of the replacement
cost of the Building where the damage occurs during the period from the first
day of the ninth (9th) month prior to the scheduled date of expiration of the
Lease Term or any Extension Term to the last day of the twelfth (12th) month
prior to the scheduled date of expiration of the Lease Term or any Extension
Term, fifteen percent (15%) of the replacement cost of the Building where the
damage occurs during the period from the first day of the fifth (5th) month
prior to the scheduled date of expiration of the Lease Term or any Extension
Term until the last day of the eighth (8th) month prior to the scheduled date of
expiration of the Lease Term or any Extension Term, and ten percent (10%) of the
replacement cost of the Building where the damage occurs during the last four
(4) months of the Lease Term or any Extension Term. If either Landlord or Tenant
exercises such option to terminate this Lease as provided above (i) this Lease
shall cease and terminate as of the earlier of (1) the date ninety (90) days
after the date of such notice, or (2) the expiration date of this Lease, (ii)
Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to
such date of termination, and (iii) both parties hereto shall thereafter be
freed and discharged of all further obligations hereunder, except as provided
for in provisions of this Lease which by their terms survive the expiration or
earlier termination of the Lease Term. Notwithstanding the foregoing, if Tenant
exercises an upcoming option to extend the term of this Lease, neither Landlord
nor Tenant shall not have any right to terminate this Lease under this Section
11.5.

                                   ARTICLE 12

                                    NONWAIVER

     No waiver of any provision of this Lease shall be implied by any failure of
either party to enforce any remedy on account of the violation of such
provision, even if such violation shall continue or be repeated subsequently.
Any waiver by either party of any provision of this Lease may only be in
writing. Additionally, no express waiver shall affect any provision other than
the one specified in such waiver and then only for the time and in the manner
specifically stated. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the Lease Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of said Rent shall not waive or affect said notice, suit or
judgment.

                                   ARTICLE 13

                                  CONDEMNATION

     13.1 PERMANENT TAKING. If more than twenty-five percent (25%) of the
rentable square feet of the Building shall be taken by power of eminent domain
or condemned by any competent


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authority for any public or quasi-public use or purpose, or if Landlord shall
grant a deed or other instrument in lieu of such taking by eminent domain or
condemnation, Landlord shall have the option to terminate this Lease upon ninety
(90) days' notice, provided such notice is given no later than one hundred
twenty (120) days after the date of such taking, condemnation, reconfiguration,
vacation, deed or other instrument. If more than twenty-five percent (25%) of
the rentable square feet of the Building is taken, Tenant shall have the option
to terminate this Lease upon ninety (90) days' notice, provided such notice is
given no later than one hundred twenty (120) days after the date of such taking.
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant's personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the terms of this Lease, and for moving expenses, so long as such
claims do not diminish the award available to Landlord, its ground lessor with
respect to such Building or Project or its mortgagee, and such claim is payable
separately to Tenant. All Rent shall be apportioned as of the date of such
termination, or the date of such taking, whichever shall first occur. If any
part of the Premises shall be taken, and this Lease is not terminated pursuant
to this Section 13.1, the Rent shall be abated proportionately based on the
percentage of the rentable square feet of the Building which is taken. Tenant
hereby waives any and all rights it might otherwise have pursuant to California
Code of Civil Procedure Section 1265.130.

     13.2 TEMPORARY TAKING. Notwithstanding anything to the contrary contained
in this Article 13, in the event of a temporary taking of all or any portion of
the Premises for a period of one (1) year or less, then this Lease shall not
terminate but the Base Rent shall be abated for the period of such taking for
the number of rentable square feet of the Premises so taken. Landlord shall be
entitled to receive the entire award made in connection with any such temporary
taking.

                                   ARTICLE 14

                            ASSIGNMENT AND SUBLETTING

     14.1 TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, except as otherwise expressly provided herein, assign, mortgage,
pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise
transfer, this Lease or any interest hereunder, permit any assignment, or other
transfer of this Lease or any interest hereunder by operation of law, sublet the
Premises or any part thereof, or permit the use of the Premises by any persons
other than Tenant and its employees (all of the foregoing are hereinafter
sometimes referred to collectively as "TRANSFERS" and any person to whom any
Transfer is made or sought to be made is hereinafter sometimes referred to as a
"TRANSFEREE"). Where Landlord's consent to a proposed Transfer is required under
this Article 14, if Tenant desires Landlord's consent to any Transfer, Tenant
shall notify Landlord in writing, which notice (the "TRANSFER NOTICE") shall
include (i) the proposed effective date of the Transfer, which shall not be less
than fifteen (15) business days nor more than one hundred eighty (180) days
after the date of delivery of the Transfer Notice, (ii) a description of the
portion of the Premises to be transferred (the "SUBJECT SPACE"), (iii) all of
the material terms of the proposed Transfer and the consideration therefor
(including calculation of the "Transfer Premium," as that term is defined in
Section 14.3 below, in connection with such Transfer), the name and address of
the proposed Transferee, and a copy of all existing executed and/or proposed
documentation pertaining to the proposed Transfer, including all existing
operative documents to be executed to evidence such Transfer or the agreements
incidental or related to such Transfer, and (iv) current financial statements of
the proposed Transferee certified by an officer, partner or owner thereof, and
any other information reasonably required by Landlord to determine the financial
responsibility, character, and reputation of the proposed Transferee, nature of
such Transferee's business and proposed use of the Subject Space, and such other
information as Landlord may reasonably require. Landlord shall approve or
disapprove of the proposed Transfer within fifteen (15) business days after
Landlord's receipt of the applicable Transfer Notice including all items
required pursuant to the immediately preceding sentence. Where Landlord's
consent to a proposed Transfer is required under this Article 14, any Transfer
made without Landlord's prior written consent shall, at Landlord's option, be
null, void and of no effect, and shall, at Landlord's option, constitute a
default by Tenant under Section 19.1.2 of this

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                                                             [Peregrine Systems]
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Lease. Where Landlord's consent to a proposed Transfer is required under this
Article 14, whether or not Landlord consents to such proposed Transfer, for each
proposed Transfer Tenant shall pay to Landlord a review and processing fee in an
amount equal to $500.00 and any reasonable legal fees incurred by Landlord
(which legal fees shall not exceed $1,000 per proposed Transfer during the
initial Lease Term), upon request by Landlord.

     14.2 LANDLORD'S CONSENT. Where Landlord's consent to a proposed Transfer is
required under this Article 14, Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:

          14.2.1 The Transferee is of a character or reputation or engaged in a
business which Landlord reasonably determines is not consistent with the quality
of the Project as a first-class, institutional quality office project;

          14.2.2 The Transferee is either a governmental agency or
instrumentality thereof which Landlord reasonably determines is not consistent
with the quality of the Project as a first-class, institutional quality office
project;

          14.2.3 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;

          14.2.4 The Transfer will result in more than a reasonable and safe
number of occupants per floor within the Subject Space;

          14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities involved under the
Transfer on the date consent is requested (provided, however, that this Section
14.2.5 shall only apply if the Transfer is for a full floor or more of the
Building); or

          14.2.6 The proposed Transfer would cause a violation of another lease
for space in the Project, or would give an occupant of the Project a right to
cancel its lease or bring an action against Landlord, provided that (i) the
foregoing provisions of this Section 14.2.6 shall only apply (a) to restrictions
in other leases in the Project to the extent Tenant has received written notice
of such restrictions prior to the proposed Transfer, and (b) if (at the time
Tenant gives Landlord any Transfer Notice) Tenant is leasing less than eighty
percent (80%) of the rentable square feet of the Project; and (ii) this Section
14.2.6 shall not apply to any proposed food service use by the proposed
Transferee (i.e., Landlord may not grant an exclusive within the Project for a
food service use that would restrict Tenant's ability to enter into a Transfer).

          If Landlord consents to any Transfer pursuant to the terms of this
Section 14.2 (and does not exercise any recapture rights Landlord may have under
Section 14.4 of this Lease), Tenant may within six (6) months after Landlord's
consent, but not later than the expiration of said six-month period, enter into
such Transfer of the Premises or portion thereof, upon substantially the same
terms and conditions as are set forth in the Transfer Notice furnished by Tenant
to Landlord pursuant to Section 14.1 of this Lease, provided that if there are
any material changes in the terms and conditions from those specified in the
Transfer Notice (i) such that Landlord would initially have been entitled to
refuse its consent to such Transfer under this Section 14.2, or (ii) which would
cause the proposed Transfer to be more favorable to Tenant than the terms set
forth in Tenant's original Transfer Notice, Tenant shall again submit the
Transfer to Landlord for its approval and other action under this Article 14
(including Landlord's right of recapture, if any, under Section 14.4 of this
Lease). Notwithstanding any contrary provisions of this Lease, if Tenant claims
that Landlord has unreasonably withheld or delayed its consent to a proposed
Transfer or otherwise has breached its obligations under this Article, Tenant's
only remedies shall be to seek a declaratory judgment and/or injunctive relief
and/or monetary damages, and Tenant waives the right to terminate this Lease as
to all or any portion of the Premises.


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     14.3 TRANSFER PREMIUM.

          14.3.1 DEFINITION OF TRANSFER PREMIUM. If Landlord consents to a
Transfer, as a condition thereto which the parties hereby agree is reasonable,
Tenant shall, except as otherwise provided in this Article 14, pay to Landlord
fifty percent (50%) of any "Transfer Premium," as that term is defined in this
Section 14.3, received by Tenant from such Transferee (the amount which may be
so payable to Landlord may be referred to herein as the "PREMIUM BASE AMOUNT").
"TRANSFER PREMIUM" shall mean all rent, additional rent or other consideration
payable by such Transferee in excess of the Rent and Additional Rent payable by
Tenant under this Lease on a per rentable square foot basis if less than all of
the Premises is transferred, after deducting the reasonable expenses incurred by
Landlord or Tenant for (i) any changes, alterations and improvements to the
Premises in connection with the Transfer, (ii) any brokerage commissions,
reasonable attorneys' and architectural fees and reasonable advertising costs
incurred in connection with the Transfer, (iii) any Rent and Additional Rent
paid by Tenant for the portion of the Premises transferred while such space is
being actively marketed for sublease or assignment to the extent Tenant is not
occupying such space, and (iv) any other out-of-pocket costs reasonably incurred
by Tenant in connection with such Transfer (collectively, the "SUBLEASING
COSTS"). "Transfer Premium" shall also include, but not be limited to, key money
and bonus money paid by Transferee to Tenant in connection with such Transfer,
and any payment in excess of fair market value for services rendered by Tenant
to Transferee or for assets, fixtures, inventory, equipment, or furniture
transferred by Tenant to Transferee in connection with such Transfer.

          14.3.2 PAYMENT OF TRANSFER PREMIUMS. The determination of the amount
of the Transfer Premium shall be made on an annual basis in accordance with the
terms of this Section 14.3.2, but an estimate of the amount of the Transfer
Premium shall be made each month and one-twelfth (1/12th) of such estimated
amount shall be paid to Landlord promptly, but in no event later than the next
date for payment of Base Rent hereunder, subject to an annual reconciliation on
each anniversary date of the Transfer. If the payments to Landlord under this
Section 14.3.2 during the twelve (12) months preceding each annual
reconciliation exceed the amount of Transfer Premium determined on an annual
basis and actually received by Tenant, then Landlord shall promptly refund the
excess to Tenant. If Tenant has underpaid the Transfer Premium, as determined by
such annual reconciliation, Tenant shall pay the amount of such deficiency to
Landlord promptly, but in no event later than the next date for payment of Basic
Rent hereunder. For purposes of calculating the Transfer Premium on an annual
basis, Tenant's Subleasing Costs shall be amortized on a straight-line basis
over the term of the Transfer.

          14.3.3 LIMITATION ON AMOUNT AND TIMING. Notwithstanding the foregoing
provisions of this Section 14, Tenant shall have no obligation to pay, and shall
not pay, any percentage of the foregoing Transfer Premium under this or any
other section of this Lease in any calendar year, to the extent Tenant is
advised by Landlord that such payment would exceed the sum of: (A) the maximum
amount (if any) that can be paid to Landlord without causing Kilroy Realty
Corporation, a Maryland corporation ("KRC") to fail to meet the requirements of
sections 856(c)(2) and (3) of the Internal Revenue Code of 1986, as amended (the
"CODE") for such year determined as if (i) the payment of such amount did not
constitute income described in sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of
the Code ("QUALIFYING INCOME"), (ii) the payment of such amount resulted in all
other amounts received by Landlord from Tenant pursuant to this Lease during
such year failing to constitute Qualifying Income, and (iii) KRC had $1,000,000
of income from unknown sources during such year which was not Qualifying Income
(in addition to any known or anticipated income of KRC which was not Qualifying
Income), in each case as determined by KRC's independent accountants, and (B)
the Premium Base Amount less the amounts paid under clause (A) in the event KRC
receives and provides Tenant with a copy of a reasoned opinion from outside
counsel or a ruling from the Internal Revenue Service (the "PREMIUM GUIDANCE")
indicating that Landlord's receipt of the Premium Base Amount would constitute
Qualifying Income and would not cause other amounts paid by Tenant to Landlord
to fail to constitute Qualifying Income (the "REIT REQUIREMENTS"). In the event
that Landlord is not able to receive the full Premium Base Amount due to the
above limitation, Tenant shall not pay any amounts in excess of such limit
unless and until KRC receives (and delivers to Tenant)


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any one or combination of the following, once or more often: (i) a letter from
KRC's independent accountants indicating the maximum amount that can be paid by
Tenant to Landlord at that time without causing KRC to fail to meet the REIT
Requirements (calculated as described above) or (ii) the Premium Guidance; in
which event Tenant shall pay to Landlord the lesser of the unpaid Transfer
Premium or the maximum amount stated in the letter referred to in (i) above.
Tenant's obligation to pay any unpaid portion of the Transfer Premium shall
terminate on the December 31 following the date which is three (3) years after
the date such payment would (without regard to the limitations in this
subparagraph) have initially been due. Any amounts paid shall first be applied
to the Transfer Premium which is the oldest. Tenant shall cooperate with
Landlord and KRC and provide them with any information or documents that are
necessary or helpful to Landlord or KRC in obtaining any Premium Guidance or in
calculating the amount of any payment due hereunder.

     14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. In the event that, following
any proposed Transfer, Tenant and its Permitted Affiliates do not or will not
occupy at least fifty percent (50%) of the rentable square footage of the
Building or should Tenant's financial performance at the time of such proposed
Transfer have fallen below the minimum Financial Standards set forth in Section
21.2 below, Landlord shall have the option, by giving written notice ("RECAPTURE
NOTICE") to Tenant within fifteen (15) days after receipt of any Transfer
Notice, to recapture the Subject Space. Such recapture shall cancel and
terminate this Lease, with respect to the Subject Space as of the date stated in
the Transfer Notice as the effective date of the proposed Transfer until the
last day of the term of the Transfer as set forth in the Transfer Notice.
However, if Landlord delivers a Recapture Notice to Tenant, Tenant may, within
ten (10) days after Tenant's receipt of the Recapture Notice, deliver written
notice to Landlord indicating that Tenant is rescinding its request for consent
to the proposed Transfer, in which case such Transfer shall not be consummated
and this Lease shall remain in full force and effect as to the portion of the
Premises that was the subject of the Transfer. Tenant's failure to so notify
Landlord in writing within said ten (10) day period shall be deemed to
constitute Tenant's election to allow the Recapture Notice to be effective. In
the event of a recapture by Landlord, if this Lease shall be canceled with
respect to less than all of the rentable square feet within the Building, the
Rent reserved herein shall be prorated on the basis of the number of rentable
square feet retained by Tenant in proportion to the number of rentable square
feet contained in the Building, and this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same. If Landlord declines, or
fails to timely elect to recapture the Subject Space under this Section 14.4,
then, provided Landlord has consented to the proposed Transfer with respect to
any Transfer which such consent is required, Tenant shall be entitled to
transfer the Subject Space to the proposed Transferee, subject to the provisions
of this Article 14. If, as a result of Landlord's exercise of its recapture
rights, the Building is converted to a multi-tenant building, Landlord and
Tenant will amend this Lease in order to reflect appropriate modifications
necessary for a multi-tenant building.

     14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the terms
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish upon Landlord's request a complete statement, certified by
an independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant from liability under this
Lease. Landlord or its authorized representatives shall have the right at all
reasonable times (but no more than one (1) timer per calendar year) to audit the
books, records and papers of Tenant relating to any Transfer, and shall have the
right to make copies thereof. If the Transfer Premium respecting any Transfer
shall be found understated, Tenant shall, within thirty (30) days after demand,
pay the deficiency and, in addition, if understated by more than (a) two percent
(2%), Tenant shall pay Landlord's cost of such audit within thirty (30) days
after demand, and (b) ten percent (10%), Landlord shall be entitled to interest
on the understated amount at the rate of ten percent (10%) per annum from

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                                                             [Peregrine Systems]
<PAGE>

the date upon which the understated amount would have been paid if the Transfer
Premium had been accurately determined in the first place to the date Tenant
pays to Landlord in full such understated amounts; Landlord's rights pursuant to
the immediately preceding sentence shall constitute Landlord's sole remedy for
any understatement of the Transfer Premium (in the absence of fraud by Tenant).

     14.6 ADDITIONAL TRANSFERS. For purposes of this Lease, the term "Transfer"
shall also include (i) if Tenant is a partnership or limited liability company,
the withdrawal or change, voluntary, involuntary or by operation of law, of
fifty percent (50%) or more of the partners or members, or transfer of fifty
percent (50%) or more of partnership or membership interests, within a twelve
(12)-month period, or the dissolution of the partnership or company without
immediate reconstitution thereof, and (ii) except as otherwise provided in
Section 14.7 below, if Tenant is a closely held corporation (I.E., whose stock
is not publicly held and not traded through an exchange or over the counter),
(A) the dissolution, merger, consolidation or other reorganization of Tenant or,
(B) the sale or other transfer of more than an aggregate of fifty percent (50%)
of the voting shares of Tenant (other than to immediate family members by reason
of gift or death) within a twelve (12)-month period, or (C) the sale, mortgage,
hypothecation or pledge of more than an aggregate of fifty percent (50%) of the
value of the unencumbered assets of Tenant within a twelve (12)-month period.

     14.7 AFFILIATED AND PERMITTED TRANSFERS.

          14.7.1 PERMITTED AFFILIATES. Notwithstanding anything contained in
this Lease to the contrary, an assignment, subletting or permitting the use of
all or any portion of the Premises to or by a Permitted Affiliate (as defined
below) of Tenant shall not be deemed a Transfer under this Article 14 and thus
shall not be subject to (i) any requirement of obtaining Landlord's consent
thereto under this Article 14, (ii) Landlord's right to receive fifty percent
(50%) of any Transfer Premium in connection therewith under Section 14.3 or
(iii) Landlord's right to recapture the Premises under Section 14.4, provided
that (a) Tenant notifies Landlord of such assignment or sublease and the
identity of the Permitted Affiliate prior to the effective date thereof and
promptly after request from Landlord supplies Landlord with any documents or
information reasonably requested by Landlord regarding such assignment or
sublease and/or such Permitted Affiliate; and (b) such assignment or sublease is
not a subterfuge by Tenant to avoid its obligations under this Lease or the
restrictions on Transfers pursuant to this Article 14. As used in this Section
14.7, "PERMITTED AFFILIATE" shall mean (1) any person, corporation or other
entity which is controlled by, controls, or in common control with Tenant, or
(2) any entity which merges with Tenant or acquires substantially all of
Tenant's stock or assets, and in either case of (1) or (2) above, such person,
corporation or other entity has a net worth as of the effective date of the
assignment or sublease at least equal to the net worth of Tenant as of the date
of execution of this Lease. "Control," as used in this Section 14.7, shall mean
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
the ownership of voting securities, by contract or otherwise.

          14.7.2 PERMITTED TRANSFERS. Notwithstanding anything contained in this
Lease to the contrary, any subletting of less than fifty percent (50%) of the
rentable square footage, in the aggregate, of the Building by Tenant for a term
less than the remaining initial Lease Term (or, if during any Extension Term,
for a term less than the remaining Extension Term), shall not require Landlord's
consent and shall not be subject to Landlord's recapture right under Section
14.4 (unless Tenant's financial performance at the time of such proposed
Transfer has fallen below the minimum Financial Standards set forth in Section
21.2 below), but shall be subject to (a) the condition that the sublease does
not provide for the subtenant to receive parking in a ratio per rentable square
foot in excess of that to which Tenant is entitled under this Lease, and (b)
Landlord's receipt of the amounts described in Section 14.3. In the event of any
such sublease, Tenant shall notify Landlord at least thirty (30) days prior to
the effective date of such sublease, of such proposed sublease and the identity
of the proposed subtenant and supply Landlord with any documents or information
reasonably requested by Landlord in connection


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therewith. Any subtenant under any sublease occurring under this Section 14.7.2
may be referred to herein as a "PERMITTED TRANSFEREE."

                                   ARTICLE 15

                             SURRENDER OF PREMISES;
                            REMOVAL OF TRADE FIXTURES

     15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in a writing signed by Landlord. The delivery of keys
to any portion of the Premises to Landlord or any agent or employee of Landlord
shall not constitute a surrender of the Premises or any portion thereof or
effect a termination or partial termination of this Lease, whether or not the
keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises.

     15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear and
repairs which are specifically made the responsibility of Landlord hereunder
excepted. Upon such expiration or termination, Tenant shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, and such items of furniture, equipment, Alterations and Tenant
Improvements which do not conform to the Specifications (provided Landlord
conditioned its approval of their installation under Section 8.5 above upon
Tenant's removal of such Alterations or non-standard Tenant Improvements (as
applicable) upon the expiration or earlier termination of this Lease),
free-standing cabinet work, and other articles of personal property owned by
Tenant or installed or placed by Tenant at its expense in the Premises, and such
similar articles of any other persons claiming under Tenant, as Landlord may, in
its sole discretion, require to be removed, and Tenant shall repair at its own
expense all damage to the Building resulting from such removal. Tenant also
shall comply with the provisions of Section 8.5 of this Lease. Notwithstanding
the foregoing, with respect to Tenant's cabling, Landlord shall have the option,
exercisable by written notice to Tenant on or before the day which is thirty
(30) days prior to the expiration or earlier termination of this Lease, to
require Tenant to remove any or all of its cabling from the Premises and to
repair any damage to the Premises resulting from such removal; provided,
however, that if Landlord so requires Tenant to remove such cabling and if,
within six (6) months after the date of expiration or earlier termination of
this Lease, leasehold improvements within the Premises are demolished in a
manner such that the amount expended to remove such cabling as a part of such
demolition would have been less than the amount previously incurred by Tenant to
remove such cabling, Landlord shall promptly rebate to Tenant the difference
between the amount expended by Tenant to remove such cabling and the amount
which would have been incurred by Landlord to remove such cabling as a part of
the demolition process described herein.

     15.3 REMOVAL OF TENANT'S PROPERTY BY LANDLORD. Whenever Landlord shall
re-enter the Building as provided in this Lease, any personal property of Tenant
not removed by Tenant upon the expiration of the Lease Term, or within five (5)
days after a termination by reason of Tenant's default as provided in this
Lease, shall be deemed abandoned by Tenant and may be disposed of by Landlord in
accordance with California Civil Code Sections 1980 through 1991 and California
Code of Civil Procedure Section 1174, or in accordance with any laws or judicial
decisions which may supplement or supplant those provisions from time to time.


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     15.4 LANDLORD'S ACTIONS ON PREMISES. Excepting any claims for damages or
other liability arising out of Landlord's or its agents' or its representatives'
gross negligence or willful misconduct, Tenant hereby waives, and releases
Landlord from, all claims for damages or other liability in connection with
Landlord's or its agents' or representatives' reentering and taking possession
of the Premises or removing, retaining, storing or selling the property of
Tenant as herein provided, and Tenant hereby indemnifies and holds Landlord
harmless from any such damages or other liability, and no such re-entry shall be
considered or construed to be a forcible entry.

                                   ARTICLE 16

                                  HOLDING OVER

     If Tenant provides Landlord with written notice ("HOLDOVER NOTICE") at
least thirty (30) days prior to expiration of the Lease Term (or any applicable
Extension Term) that Tenant will be holding over in the Premises, Tenant shall
have the right (and, subject to the grace periods described below, the
obligation) to hold over after the expiration of the Lease Term until the date
("HOLDOVER NOTICE DATE") specified in such Holdover Notice (but not in excess of
one hundred twenty (120) days after the expiration of the Lease Term or
applicable Extension Term). Any holdover tenancy (including without limitation,
any holdover tenancy pursuant to a Holdover Notice) shall be subject to every
applicable term, covenant and agreement contained herein, except that the Base
Rent payable by Tenant for the Premises (irrespective of the amount of space
Tenant continues to occupy in the Building) shall be escalated to equal one
hundred ten percent (110%) of the then current Base Rent and Direct Expenses
payments for the entire Premises for the first ninety (90) days of such holdover
occupancy and one hundred twenty-five percent (125%) of such amount during the
next succeeding ninety (90) days and from and after such one hundred eighty
(180) day period, Rent shall equal one hundred fifty percent (150%) of such
amount thereafter; provided, however, subject to the next sentence of this
Article 16, such holdover Rent and Additional Rent shall be prorated on a per
diem basis through and including the date ("ACTUAL SURRENDER DATE") Tenant
actually vacates and surrenders the Premises to Landlord in the condition
required under this Lease. If Tenant properly delivers the Holdover Notice and
the Actual Surrender Date (a) is earlier than the Holdover Notice Date by
forty-five (45) days or less, Tenant's obligation to pay such holdover Rent and
Additional Rent shall terminate on a per diem basis as of the Actual Surrender
Date, however if the Actual Surrender Date is earlier than forty-five (45) days
prior to the Holdover Notice Date, Tenant's holdover Rent and Additional Rent
shall cease as of the date which is forty-five (45) days prior to the Holdover
Notice Date, or (b) is later than the Holdover Notice Date, Tenant's obligation
to pay holdover Rent and Additional Rent shall cease as of the Actual Surrender
Date, provided that Tenant shall have no right to holdover beyond the earlier to
occur of fifteen (15) days after the Holdover Notice Date or the expiration of
the one hundred twenty (120) period specified in the first sentence of this
Article 16 above. By way of example only, and not as a limitation upon the
foregoing, if the Holdover Notice indicates that the Holdover Notice Date is
ninety (90) days after the expiration of the Lease Term or applicable Extension
Term, Tenant shall be permitted to holdover until the date which is one hundred
five (105) days after the expiration of the Lease Term or applicable Extension
Term and Tenant's obligation to pay holdover Rent and Additional Rent shall be
prorated on a per diem basis until the later of the forty-fifth (45th) day after
the expiration of the Lease Term or applicable Extension Term or the Actual
Surrender Date. Nothing contained in this Article 16 shall be construed as
consent by Landlord to any holding over by Tenant (except as expressly provided
in this Article 16 above), and Landlord expressly reserves the right to require
Tenant to surrender possession of the Premises to Landlord as provided in this
Lease upon the expiration of the Lease Term (or the period specified in clause
16(b) above, as applicable). The provisions of this Article 16 shall not be
deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law. If Tenant fails to surrender the Premises
within the period specified in this Article 16 above, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys' fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
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(including such tenant's lost profits) and any lost profits to Landlord
resulting therefrom, provided Landlord promptly notified Tenant in writing of
any lease or signed letter of intent for all or any portion of the Premises.

                                   ARTICLE 17

                              ESTOPPEL CERTIFICATES

     Within fifteen (15) days following a request in writing by either party to
the other, but in no event more frequently than three (3) times in any twelve
(12) month period, the recipient party shall execute and deliver to the
requesting party an estoppel certificate, which shall be substantially in the
form of EXHIBIT "E", attached hereto (or such other form as may be reasonably
required by any prospective mortgagee or purchaser of the Building or other
portion of the Project, or any portion thereof), indicating therein any
exceptions thereto that may exist at that time, and shall also contain any other
information reasonably requested by Landlord or Landlord's mortgagee or
prospective mortgagee. Tenant shall execute and deliver whatever other
instruments may be reasonably required for such purposes. Failure of either
party to timely execute and deliver such estoppel certificate or other
instruments shall constitute an acceptance of the Premises (if addressed to
Tenant) and an acknowledgment by such party that the statements included in the
estoppel certificate in good faith are true and correct, without exception.

                                   ARTICLE 18

                                  SUBORDINATION

     This Lease shall be subject and subordinate to all present and future
ground or underlying leases of the Building or Project and to the lien of any
first mortgage or trust deed, now or hereafter in force against the Building or
Project, if any, and to all renewals, extensions, modifications, consolidations
and replacements thereof, and to all advances made or hereafter to be made upon
the security of such mortgages or trust deeds, unless the holders of such
mortgages or trust deeds, or the lessors under such ground lease or underlying
leases, require in writing that this Lease be superior thereto. Landlord agrees
to provide Tenant, within sixty (60) days after written request by Tenant, with
commercially reasonable nondisturbance agreements(s) in favor of Tenant from any
ground lessors, mortgage holders or deed of trust beneficiaries under any ground
lease, mortgage or deed of trust affecting the Project or any portion thereof
leased by Tenant (whether now existing or coming into existence at any time
after the date of execution of this Lease but prior to the expiration of the
Lease Term) and in consideration of, and as a condition precedent to, Tenant's
agreement to be bound by the terms of this Article 18. Tenant covenants and
agrees in the event any proceedings are brought for the foreclosure of any such
mortgage or deed in lieu thereof, to attorn, without any deductions or set-offs
whatsoever, to the purchaser or any successors thereto upon any such foreclosure
sale or deed in lieu thereof if so requested to do so by such purchaser, and to
recognize such purchaser as the lessor under this Lease. Tenant shall, within
fifteen (15) days of request by Landlord, execute such further instruments or
assurances as Landlord or any mortgage holder or deed of trust beneficiary may
reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases or other typical provisions contained in Subordination,
Non-Disturbance and Attornment Agreements. Tenant waives the provisions of any
current or future statute, rule or law which may give or purport to give Tenant
any right or election to terminate or otherwise adversely affect this Lease and
the obligations of Tenant hereunder in the event of any foreclosure proceeding
or sale.


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                                   ARTICLE 19

                               DEFAULTS; REMEDIES

     19.1 DEFAULTS. The occurrence of any of the following shall constitute a
default of this Lease by Tenant:

          19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due, where such
failure continues for five (5) days after written notice thereof from Landlord
to Tenant; or

          19.1.2 Any failure by Tenant to observe or perform any other
provision, covenant or condition of this Lease to be observed or performed by
Tenant where such failure continues for thirty (30) days after written notice
thereof from Landlord to Tenant; provided, however, if the nature of such a
default is such that the same cannot be reasonably be cured within a thirty (30)
day period, Tenant shall not be deemed to be in default if it diligently
commences such cure within such period and thereafter diligently proceeds to
rectify and cure said default as soon as is reasonably possible under the
circumstances; or

          19.1.3 To the extent permitted by law, a general assignment by Tenant
or any guarantor of the Lease for the benefit of creditors, or the filing by or
against Tenant or any guarantor of any proceeding under an insolvency or
bankruptcy law, unless in the case of a proceeding filed against Tenant or any
guarantor the same is dismissed within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant's assets located upon
the Premises or of Tenant's interest in this Lease, unless such seizure is
discharged within thirty (30) days; or

          19.1.4 The hypothecation or assignment of this Lease or subletting of
the Premises in violation of Article 14 hereof; or

          19.1.5 Any default by Tenant (after expiration of any applicable cure
period) under any of the Adjacent Building Leases; provided, however, that any
such default by Tenant under any of the Adjacent Building Leases shall be
treated as a default by Tenant under this Lease only if (i) Landlord and all of
the other landlords under the Adjacent Building Leases all elect to declare a
default, and (ii) all lenders of this Building and the applicable Adjacent
Building consent. However, the restrictions upon Landlord in declaring a default
by Tenant pursuant this Section 19.1.5 are not intended to, and shall not,
restrict Landlord from declaring a default of this Lease by Tenant under the
circumstances described in Sections 19.1.1 through and including 19.1.4 above.

     19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity, the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever.

          19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:

               (i) The worth at the time of award of any unpaid rent which has
     been earned at the time of such termination; plus


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               (ii) The worth at the time of award of the amount by which the
     unpaid rent which would have been earned after termination until the time
     of award exceeds the amount of such rental loss that Tenant proves could
     have been reasonably avoided; plus

               (iii) The worth at the time of award of the amount by which the
     unpaid rent for the balance of the Lease Term after the time of award
     exceeds the amount of such rental loss that Tenant proves could have been
     reasonably avoided; plus

               (iv) Any other amount necessary to compensate Landlord for all
     the detriment proximately caused by Tenant's failure to perform its
     obligations under this Lease or which in the ordinary course of things
     would be likely to result therefrom, specifically including but not limited
     to, brokerage commissions and advertising expenses incurred, and an
     amortized portion (over the balance of the Lease Term compared to the term
     of any new lease) of any expenses of remodeling the Premises or any portion
     thereof for a new tenant, whether for the same or a different use, and any
     special concessions made to obtain a new tenant; and

               (v) At Landlord's election, such other amounts in addition to or
     in lieu of the foregoing as may be permitted from time to time by
     applicable law.

          The term "rent" as used in this Section 19.2 shall be deemed to be and
to mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Sections
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Section 19.2.1(iii) above, the "worth at the time of award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).

          19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all Rent as it becomes due.

     19.3 SUBLESSEES OF TENANT. Whether or not Landlord elects to terminate this
Lease on account of any default by Tenant as set forth in this Article 19,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.

     19.4 FORM OF PAYMENT AFTER DEFAULT. Following the occurrence of more than
two (2) monetary events of default by Tenant in any twelve (12) month period
during the Lease Term, Landlord shall have the right to require that any or all
subsequent amounts paid by Tenant to Landlord hereunder, whether in the cure of
the default in question or otherwise, be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.

     19.5 WAIVER OF DEFAULT. No waiver by Landlord or Tenant of any violation or
breach of any of the terms, provisions and covenants herein contained shall be
deemed or construed to constitute a waiver of any other or later violation or
breach of the same or any other of the terms, provisions, and covenants herein
contained. Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon an event of default shall not be deemed or construed


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to constitute a waiver of such default. The acceptance of any Rent hereunder by
Landlord following the occurrence of any default, whether or not known to
Landlord, shall not be deemed a waiver of any such default, except only a
default in the payment of the Rent so accepted.

     19.6 EFFORTS TO RELET. For the purposes of this Article 19, Tenant's right
to possession shall not be deemed to have been terminated by efforts of Landlord
to relet the Premises, by its acts of maintenance or preservation with respect
to the Premises, or by appointment of a receiver to protect Landlord's interests
hereunder. The foregoing enumeration is not exhaustive, but merely illustrative
of acts which may be performed by Landlord without terminating Tenant's right to
possession.

                                   ARTICLE 20

                           COVENANT OF QUIET ENJOYMENT

     Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by any persons lawfully claiming by or through Landlord.
The foregoing covenant is in lieu of any other covenant express or implied.

                                   ARTICLE 21

                                SECURITY DEPOSIT

     21.1 LETTER OF CREDIT. In addition to its primary obligations under this
Lease, Tenant shall, commencing March 31, 2000, and continuing throughout the
Lease Term (including any Extension Terms), at any time that Tenant fails to
meet or equal the "Financial Standards" set forth below, provide security
against a default by Tenant under this Lease in the form of an unconditional,
irrevocable, standby letter of credit ("LC"), naming Landlord as the payee
thereunder, with terms as described in more detail below. The LC shall be in an
amount equal to six (6) months' then current Base Rent and shall be increased by
the amount of and upon any increase in monthly Base Rent payable under this
Lease. The LC shall be issued by a money center bank (a bank which accepts
deposits, maintains accounts, has a local San Diego office which will negotiate
a letter of credit, and whose deposits are insured by the FDIC) reasonably
acceptable to Landlord, and shall be in a form and content reasonably acceptable
to Landlord and in the form required hereunder. The LC shall be drawable by
Landlord upon presentation of a sight draft or demand to the LC issuer. Landlord
may present such a sight draft or demand if (i) the LC has not been renewed and
replaced by Tenant at least thirty (30) days prior to the expiration date of the
then effective LC, or (ii) Tenant commits a default under this Lease; provided,
however, proceeds of the drawn LC shall be applied to Rent, damages or charges
to which Landlord is entitled under the Lease as a result of Tenant's default.
If Landlord makes a draw upon the LC pursuant to this Section 21.1 and Tenant
fails to replenish the LC (or, if applicable, the CD described in Section 21.4
below) within ten (10) days thereafter to an amount equal to six (6) months'
then current Base Rent, then Tenant shall be in default under this Lease. The LC
is not intended to represent liquidated damages for Tenant's default, but only a
mechanism for paying the Rent, damages or charges to which Landlord may be
entitled. If allowed by the issuing bank, Landlord shall be entitled to grant a
security interest in, or make a collateral assignment of, Landlord's rights
under the LC in connection with mortgage indebtedness incurred by Landlord to a
bona fide third-party institutional lender in an arm's-length transaction. The
LC shall indicate that it is transferable in it entirety by Landlord as
beneficiary and that upon receiving written notice of the transfer and upon
presentation to the issuer of the LC the issuer will reissue the LC naming such
transferee as beneficiary. Tenant shall pay all expenses, points, and/or fees
incurred in obtaining the LC.


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     21.2 FINANCIAL STANDARDS. Such LC shall be required in the event Tenant, at
the end of any calendar quarter (commencing with the calendar quarter ending
March 31, 2000), fails to meet all of the following financial requirements
("FINANCIAL STANDARDS"): (i) Tenant shall have annual gross revenues of not less
than $150,000,000, (ii) Tenant shall have cash on hand of not less than
$15,000,000 and (iii) Tenant's equity-to-debt (which for purposes of this test
shall exclude deferred revenue) ratio shall not be less than 1:1.

     21.3 CONDITIONAL RELEASE OF SECURITY. Any LC previously delivered by Tenant
shall be returned to Tenant at such time as Tenant has not been in default
(after expiration of any applicable notice and cure period) under this Lease and
has met or exceeded all of the Financial Standards, for four (4) consecutive
quarters. Notwithstanding the foregoing, in the event the LC has been returned
to Tenant, but Tenant thereafter fails, at the end of any quarter, to meet all
of the Financial Standards then, in such event, Landlord shall be entitled to
require that the LC be reestablished on the terms and provisions set forth in
this Article 21.

     21.4 CASH EQUIVALENT. At Tenant's option, but subject to the terms and
conditions hereof and the condition that Landlord determine that Landlord's
ability to draw upon such security in the event of Tenant's bankruptcy is not
impaired, Tenant may , in lieu of the delivery of an LC, pledge a Certificate of
Deposit ("CD") which shall be administered, as practicable, in accordance with
the procedures set forth in this Article 21 with respect to the LC; provided,
however, in the event of such CD any interest accruing on the CD shall be for
the benefit of Tenant. The pledge of any such CD shall be on terms and
conditions approved by Landlord, and the CD shall be issued by a financial
institution reasonably acceptable to Landlord.

                                   ARTICLE 22

                                   ROOF RIGHTS

     Subject to all governmental laws, rules and regulations and compliance with
the CC&R's, Tenant and Tenant's contractors (which shall first be approved by
Landlord but which approval shall not be unreasonably withheld or delayed (as
specified in Section 29.4 below)) shall have the nonexclusive right and access,
without further payment of Rent to Landlord, to install, repair, replace,
remove, operate and maintain satellite dishes and/or microwave dishes, and other
radio transmitting and receiving antennae, together with all necessary cable,
wiring, conduits and related equipment (collectively, "COMMUNICATION
EQUIPMENT"), for the purpose of receiving and sending telephone and other
communication signals, at a location on the roof of the Building as reasonably
requested by Tenant and reasonably approved by Landlord in writing. Tenant's
installation and operation of the Communication Equipment shall be governed by
the following terms and conditions:

          (i) Tenant's right to install, replace, repair, remove, operate and
maintain the Communication Equipment shall be subject to all governmental laws,
rules and regulations and Landlord makes no representations that such laws,
rules and regulations permit such installation and operation. Any such
installation shall be under the supervision of Landlord, by a contractor
approved by Landlord and shall be installed in a lien-free manner in accordance
with the provisions of this Lease.

          (ii) The exact size, quality, materials and aesthetics of, and any
required screening for, the Communication Equipment shall be subject to
Landlord's prior written consent which shall not be unreasonably withheld or
delayed. In addition, the installation, protection for roof membrane,
specifications for roof penetration and flashing shall be subject to Landlord's
prior written consent, which shall not be unreasonably withheld or delayed.

          (iii) All costs of installation, operation and maintenance of the
Communication Equipment and any necessary related equipment (including, without
limitation, costs of obtaining any necessary permits and of connections to the
Building's electrical system) shall be borne by Tenant. All such Communication
Equipment shall be screened to commercially reasonable standards and to prevent
visual impairment. Tenant shall be responsible for the replacement, repair and
maintenance, at Tenant's sole cost and expense, of those areas on the roof of
the


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Building surrounding Tenant's Communication Equipment to the extent any such
replacement, repair or maintenance is required by virtue of Tenant's
installation, operation or maintenance of Tenant's Communication Equipment,
notwithstanding anything to the contrary contained in this Lease.

          (iv) Tenant shall endeavor to use the Communication Equipment so as
not to cause any interference (i) with any other communications from or to the
Project or (ii) to other existing tenants or occupants in the Project who may
use the communication facilities located at the Project and/or related
facilities.

          (v) Landlord shall not have any obligations with respect to the
Communication Equipment. Landlord makes no representation that the Communication
Equipment will be able to receive or transmit communication signals without
interference or disturbance and Tenant agrees that Landlord shall not be liable
to Tenant therefor.

          (vi) Tenant's rights with respect to such Communication Equipment
shall be personal to the Original Tenant executing this Lease and may not be
assigned or transferred to, or utilized by, any other person or entity with the
exception of any Permitted Transferee under Article 14 which occupies a minimum
of 10,000 rentable square feet of the Building or (ii) any Permitted Affiliate
(collectively, "QUALIFYING TRANSFEREE"); provided, however, such Qualifying
Transferee's rights with respect to Communication Equipment shall be subject to
all the terms and conditions of this Article 22. Other than Qualifying
Transferees, Tenant shall not be permitted to allow any third party to use any
portion of the roof for Communication Equipment or otherwise without Landlord's
consent, which shall not be unreasonably withheld.

          (vii) Tenant shall (i) be solely responsible for any damage caused as
a result of the Communication Equipment, (ii) promptly pay any tax, license or
permit fees charged pursuant to any laws or regulations in connection with the
installation, maintenance or use of the Communication Equipment and comply with
all precautions and safeguards recommended by all governmental authorities, and
(iii) pay for all necessary repairs, replacements to or maintenance of the
Communication Equipment and all roof repairs required by the installation and
maintenance of the Communication Equipment.

          (viii) The Communication Equipment shall remain the sole property of
Tenant. Tenant shall remove the Communication Equipment and related equipment at
Tenant's sole expense upon the expiration or sooner termination of this Lease or
upon the imposition of any governmental law or regulation which may require
removal, and shall repair the Building upon such removal to the extent required
by such work of removal. If Tenant fails to remove the Communication Equipment
and repair the Building within thirty (30) days after the expiration or earlier
termination of this Lease with respect to such Building, Landlord may do so at
Tenant's expense.

Landlord reserves the right to use a portion of the roof space on the Building
or lease roof space on the Building to other parties; provided, however, any
party to which Landlord leases such roof space shall be subject to similar
restrictions as set forth in this Article 22.

                                   ARTICLE 23

                                     SIGNAGE

     23.1 GENERAL. Other than as contemplated by Section 23.2 below, Tenant
shall have no right to install or maintain any Tenant identification signs (or
any other signs, banners or other such displays) in any location on the Building
or in the Project which may be visible from the exterior of the Building, except
as may be approved by Landlord in writing prior to installation (which approval
shall not be unreasonably withheld, and are consistent and compatible with (a)
the restrictions contained in this Article 23, (b) all governmental regulations
and requirements, (c) the Project's signage criteria, a copy of which is
attached hereto as EXHIBIT "J" ("SIGNAGE CRITERIA"), and (d) the CC&R's.


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     23.2 TENANT'S EXTERIOR SIGNAGE RIGHTS.

          23.2.1 Tenant shall have the right, at Tenant's sole cost and expense
(but chargeable against the Tenant Improvement Allowance described in the Tenant
Work Letter), to install during the Lease Term (i) an identity sign on the
exterior of the Building (the "BUILDING TOP SIGNS") and (ii) certain eyebrow,
directional and monument signage in accordance with the Signage Criteria. As
used herein, "TENANT'S SIGNS" shall mean all Building Signs and any eyebrow,
directional, monument or other signage rights granted to Tenant pursuant to this
Article 23 or EXHIBIT "J". Tenant's Signs shall identify the name of Tenant and
shall not refer to the name of the Project except that monument signage may
refer to the name of the Project.

          23.2.2 Tenant's right to Tenant's Signs which are visible from the
exterior of the Building shall be personal to the Original Tenant, any Permitted
Affiliate and any other assignee of Tenant's entire interest in this Lease
(collectively, "PERMITTED SIGNAGE ENTITIES") and may not be transferred to any
other person or entity, except that, subject to the occupancy requirements of
Section 23.2.4 below, Tenant may assign Tenant's rights to any of Tenant's Signs
to any other Transferee occupying at least a full floor in the Building where
Landlord reasonably determines that the name of the Transferee is not an
"Objectionable Name," as that term is defined below. The term "OBJECTIONABLE
NAME" shall mean any name that (i) relates to an entity that is of a character
or reputation, or is associated with a political orientation or faction, that is
inconsistent with the quality of the Project as a first-class, institutional
quality office project, or which a landlord of a first-class, institutional
quality office project would reasonably find to be offensive, taking into
consideration the level and visibility of the applicable Tenant's Signs, or (ii)
conflicts with any exclusive use covenants in other leases of space in the
Project.

          23.2.3 Tenant's signage rights shall include exclusive illuminated and
nonilluminated signage for the Building so long as Tenant occupies at least
fifty percent (50%) of the rentable square footage thereof, and Tenant shall
have the right to have its professional name and logo prominently displayed on
any monument signage for the Building so long as Tenant occupies at least fifty
percent (50%) of the rentable square footage thereof.

          23.2.4 If Tenant's (or any other Permitted Signage Entity's) occupancy
of the Building falls below fifty percent (50%) of the rentable square footage
thereof, upon notice to Tenant, Tenant's right to Building Top Signs for such
Building shall terminate and Tenant shall remove such signs in accordance with
Section 23.2.8 below.

          23.2.5 Any utility costs for illuminated signs shall be charged to
Tenant pursuant to Article 6.

          23.2.6 Notwithstanding the foregoing, Landlord hereby reserves and
retains the right to identify Landlord (or its successor) as owner and/or
manager of the Project on monument signage and at the entry to the Building. Any
specifications for such signage not shown on EXHIBIT "J" shall be subject to
Tenant's approval, which approval shall not be unreasonably withheld or delayed.
Tenant's name on the monument signage shall be prominent and at the top of such
signage. The monument signage shall be limited to tenants of the Project except
as described in this Section 23.2.6.

          23.2.7 Tenant's Building Top Sign may (but shall not be required to)
face SR56 and shall be located on the skin of the Building in the location shown
on the Signage Criteria. The specifications, plans and elevations for Tenant's
Signs (including the graphics, materials, color, design, lettering, height,
lighting, size and quality) shall be subject to Landlord's approval, which shall
not be unreasonably withheld or delayed and shall be consistent with the Signage
Criteria for the Project. Tenant's Signs shall be installed under the
supervision of Landlord by a contractor reasonably approved by Landlord and
shall be installed in a lien-free manner in accordance with the provisions of
this Lease. Tenant's signs shall be maintained, at the sole cost and expense of
Tenant, pursuant to a maintenance program approved by Landlord.

          23.2.8 Tenant shall, at Tenant's sole cost and expense (subject to
Landlord's supervision, but without charge to Tenant for such supervision),
cause Tenant's Signs

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to be removed and the Building and the Project to be restored to the condition
existing prior to the placement of such Tenant's Signs (reasonable wear and tear
excepted) at the expiration or earlier termination of this Lease (or such
earlier time as Tenant elects or is required to remove any such Tenant Signs).
If Tenant fails to remove Tenant's Signs and restore the Building and Project as
provided above within thirty (30) days following Landlord's demand therefor,
then Landlord may perform such work and all costs and expenses incurred by
Landlord in so performing such work shall be reimbursed by Tenant to Landlord
within fifteen (15) days following Landlord's delivery to Tenant of an invoice
therefor.

         23.3 TENANT'S INTERIOR SIGNAGE RIGHTS. Tenant shall have the right to
locate in the Building lobby a Building directory board ("DIRECTORY BOARD") the
size, location, design, materials, color and quality of which shall be subject
to Tenant's reasonable discretion, except that if, at any time, the Building is
not one hundred percent (100%) leased by Tenant, the size, location, design,
material, color and quality of the Directory Board shall be subject to
Landlord's reasonable approval. The cost of the Directory Board shall be
included in the Base, Shell and Core for the Building and the cost of Tenant's
listings shall be borne by Tenant. Tenant shall have exclusive use of any such
Directory Board so long as Tenant's lease covers one hundred percent (100%) of
the rentable square footage in the Building; provided, however, Landlord shall
have the right to identify Landlord (or its successor) as owner and/or manager
of the Project on any such Directory Board. In the event Tenant no longer leases
and occupies one hundred percent (100%) of the rentable square footage of the
Building, Tenant and its Permitted Transferees shall be entitled to its Building
pro rata share of the space on such Directory Board. Tenant shall also have the
right to install other signage identifying Tenant within the Building, which
interior signage shall be in compliance with the Signage Criteria.

                                   ARTICLE 24

                               COMPLIANCE WITH LAW

         Tenant shall not do anything or suffer anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated. At its sole cost and expense, Tenant shall
promptly comply with all such governmental measures, other than the making of
(i) structural changes to the Building or (ii) changes to the Building's life
safety system, or (iii) any capital improvements to the Project the requirement
of which is not related to Tenant's particular use of the Premises or
Alterations made by Tenant. Compliance with the items described in subsections
(i), (ii) and (iii) above shall be Landlord's responsibility and shall, subject
to the terms of Article 4 above, be included in Operating Expenses. Should any
standard or regulation now or hereafter be imposed on Landlord or Tenant by a
state, federal or local governmental body charged with the establishment,
regulation and enforcement of occupational, health or safety standards for
employers, employees, landlords or tenants, then Tenant agrees, at its sole cost
and expense, to comply promptly with such standards or regulations. The judgment
of any court of competent jurisdiction or the admission of Tenant in any
judicial action, regardless of whether Landlord is a party thereto, that Tenant
has violated any of said governmental measures, shall be conclusive of that fact
as between Landlord and Tenant. Notwithstanding the foregoing or anything to the
contrary contained in this Lease, Landlord hereby warrants to Tenant that the
Building shall be in compliance with the requirements of the Americans With
Disabilities Act ("ADA") and California Administrative Code Title 24 ("TITLE
24") in effect at the time Landlord obtains the certificate of occupancy (or its
equivalent) for the Base, Shell and Core; provided, however, that if the
requirements of ADA and/or Title 24 change after the date upon which Landlord
obtains the permit for the initial construction of the Building and Landlord is
not required by law to comply with such change, Landlord shall not be in
violation of this provision so long as Landlord not making such change does not
increase the cost of construction of the Tenant Improvements or delay the
construction of the Tenant Improvements. Landlord will be fully responsible for
making all alterations and repairs to the Building, at Landlord's cost (which
shall not be included in Operating Expenses) resulting from or necessitated by
the failure of Landlord or Landlord's contractors to comply with the foregoing
ADA and Title 24 warranty. The obtaining of a Certificate of Occupancy by either
Landlord or


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Tenant permitting Tenant occupy the Building shall be prima facia evidence that
Landlord has complied with the foregoing requirements of this Article 24
("REQUIREMENTS") as of the date of such Certificate of Occupancy, unless refuted
or reversed by any applicable governmental authorities. However, notwithstanding
anything to the contrary contained in this Article 24, Tenant, at Tenant's sole
cost and expense, shall promptly make all repairs, replacements, alterations or
improvements needed to comply with the Requirements to the extent that the
Requirements relate to or are triggered by (a) Tenant's particular use of the
Building for other than general office use, or (b) any Alterations made to the
Building by Tenant.

                                   ARTICLE 25

                                  LATE PAYMENTS

     If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to two
percent (2%) of the overdue amount. The late charge shall be deemed Additional
Rent and the right to require it shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting Landlord's remedies in any manner. In addition to the
late charge described above, any Rent or other amounts owing hereunder which are
not paid within five (5) days after the date they are due shall bear interest
from the date when due until paid at a rate per annum ("INTEREST RATE") equal to
the lesser of (i) two percent (2%) over the rate publicly announced by Wells
Fargo Bank as its prime or reference rate (or the largest state chartered bank
operating in California in the event that Wells Fargo Bank ceases to exist or to
announce a prime or reference rate) or (ii) the highest rate permitted by
applicable law.

                                   ARTICLE 26

                        LANDLORD'S RIGHT TO CURE DEFAULT;
                               PAYMENTS BY TENANT

     26.1 LANDLORD'S CURE. All covenants and agreements to be kept or performed
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent. If Tenant shall fail to perform
any of its obligations under this Lease, within a reasonable time after such
performance is required by the terms of this Lease, Landlord may, but shall not
be obligated to, after reasonable prior notice to Tenant (except in the case of
an emergency), make any such payment or perform any such act on Tenant's part
without waiving its rights based upon any default of Tenant and without
releasing Tenant from any obligations hereunder.

     26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days
after delivery by Landlord to Tenant of statements therefor: (i) sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with the remedying by Landlord of Tenant's defaults pursuant to the provisions
of Section 26.1; (ii) sums equal to all losses, costs, liabilities, damages and
expenses referred to in Article 10 of this Lease; and (iii) sums equal to all
expenditures reasonably made and obligations incurred by Landlord in collecting
or attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant's obligations
under this Section 26.2 shall survive the expiration or sooner termination of
the Lease Term.

                                   ARTICLE 27

                                ENTRY BY LANDLORD

     Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the


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Premises to prospective purchasers, mortgagees or tenants (but as to prospective
tenants, only during the last twelve (12) months of the initial Lease Term or of
any Extension Term), or to the ground or underlying lessors; (iii) post notices
of nonresponsibility; or (iv) alter, improve or repair the Premises or the
Building if necessary to comply with current building codes or other applicable
laws, or for structural alterations, repairs or improvements to the Building.
Tenant shall be offered an opportunity to accompany Landlord in connection with
any such entry and Landlord shall use reasonable efforts to comply with Tenant's
security procedures in connection with such entry (except that these
restrictions shall not apply in the case of an emergency where Tenant is not
available to accompany Landlord). Notwithstanding anything to the contrary
contained in this Article 27, Landlord may enter the Premises at any time to (A)
perform services required of Landlord; (B) take possession due to any breach of
this Lease in the manner provided herein; and (C) perform any covenants of
Tenant which Tenant fails to perform. Landlord may make any such entries without
the abatement of Rent so long as Tenant can continue to occupy and use any
affected portion of the Premises for the same business purposes as Tenant had
been using such affected portion prior to Landlord's entry, and Landlord may
take such reasonable steps as required to accomplish the stated purposes,
provided, however, that any such entry shall be accomplished as expeditiously as
reasonably possible and in a manner so as to not materially and adversely
interfere with Tenant's normal business functions. Tenant hereby waives any
claims for damages or for any injuries or inconvenience to or interference with
Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the
Premises, and any other loss occasioned thereby except any claims arising out of
Landlord's gross negligence or willful misconduct. For each of the above
purposes, Landlord shall at all times have a key with which to unlock all the
doors in the Premises, excluding Tenant's vaults, safes and special security
areas designated from time to time in advance by Tenant. In an emergency,
Landlord shall have the right to use any means that Landlord may deem proper to
open the doors in and to the Premises. Any entry into the Premises by Landlord
in the manner hereinbefore described shall not be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.

                                   ARTICLE 28

                                 TENANT PARKING

     Commencing on the Lease Commencement Date, Tenant shall have the right, at
no cost to Tenant during the initial Lease Term (with the parking charge, if
any, during Extension Terms to be determined as a component of Fair Market
Rental Value), to the use of the number of parking permits set forth in Section
9 of the Summary, which parking permits shall pertain to the Project parking
facilities. Such parking permits shall permit Tenant and its employees and
invitees to use, on a nonexclusive basis, together with other tenants and their
respective employees and invitees, any undesignated, unreserved spaces available
in such parking facility for the Building. Tenant shall abide by all rules and
regulations which are prescribed from time to time for the orderly operation and
use of the Project parking facility, provided that Landlord shall not prescribe
any rules and regulations which unreasonably and adversely affect Tenant's use
of the Project parking facility. Such rules and regulations shall provide that
Tenant shall pay Landlord's then current nominal charge for any replacement of
any Tenant parking pass card, if any, which is lost, stolen, damaged or
destroyed. Tenant understands and agrees that, pursuant to the CC&R's, other
owners of adjacent property to the Project have been or will be granted
reciprocal rights of access and parking over certain portions of the Project as
more particularly set forth in the CC&R's; provided, however, the use of the
parking structure will be limited to tenants of the Project. Landlord shall not,
without Tenant's prior written approval (which approval shall not be
unreasonably withheld), change the size, configuration, design, layout and all
other aspects of the Project parking facilities at any time, and if Tenant
approves any such changes, Tenant acknowledges and agrees that Landlord may,
without incurring any liability to Tenant and without any abatement of Rent
under this Lease, from time to time, temporarily restrict access to the Project
parking facility for purposes of permitting any such construction, alteration or
improvements so long as Landlord takes all reasonable measures to minimize any
disruption to Tenant's use or access of the Project parking facilities for the
duration of any such construction, alteration or improvements. Notwithstanding
the foregoing, Landlord may, without


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Tenant's prior written approval, make such changes to the Project parking
facilities to the extent such changes are mandated by any applicable
governmental law, rule or regulation or any changes to any governmental law,
rule or regulation. If Landlord is forced to relocate Tenant's parking off site
of the Project parking facility, any such relocation shall be temporary and
Landlord shall use commercially reasonable efforts to cause such relocation to
be within a reasonable walking or shuttle distance of the Project. Further,
Landlord shall not knowingly allow any non-tenants of the Project to use the
Project parking facilities in violation of the CC&R's without Tenant's prior
written approval. Landlord agrees that the average number of parking permits
granted by Landlord to any other tenants of the Project shall not exceed four
and one-half (4.5) parking permits per 1,000 usable square feet of space so
leased. Landlord may delegate its responsibilities hereunder to a parking
operator in which case such parking operator shall have all the rights of
control attributed hereby to the Landlord. Tenant's parking permits under this
Article 28 are provided to Tenant solely for use by Tenant's own personnel and
such privileges may not be transferred, assigned, subleased or otherwise
alienated by Tenant without Landlord's prior approval other than on a pro rata
basis to Permitted Affiliates and Permitted Transferees. Tenant's invitees and
guests may use parking spaces in such parking facility which are not allocated
or reserved for Tenant or other occupants or visitors of the Building or Project
on a first-come, first-serve basis. Notwithstanding the foregoing, approximately
ten percent (10%) of Tenant's parking permits for the Building shall be reserved
spaces for Tenant's visitors and employees of the Building, as will be shown on
a Project parking plan prepared by Landlord and acceptable to Tenant. Landlord
shall have the right to relocate such reserved spaces from time to time so long
as Landlord provides Tenant with reserved spaces within the same general
proximity of the Building. The parking permits allocated to Tenant are not for
long term (i.e., more than ninety-six (96) hours) storage of automobiles, and
are not for short or long term storage of boats, trailers, recreational
vehicles, motorcycles or other vehicles or equipment. Tenant shall have the
option to require Landlord to add, at Tenant's sole cost and expense (other than
the cost of card keys for tenant(s) of Building 4, unless Tenant exercises its
option to lease Building 4), a card key entry system to the parking structure
(as selected by Tenant and reasonably approved by Landlord) for the Project
and/or security cameras (including a security desk and console with monitors for
each security camera at the location specified in EXHIBIT "I") within the
parking structure for the Project; if Tenant exercises such option, Tenant shall
pay such cost to Landlord, as Additional Rent, within thirty (30) days after
Tenant's receipt of reasonably detailed invoice(s).

                                   ARTICLE 29

                            MISCELLANEOUS PROVISIONS

     29.1 BINDING EFFECT. Subject to all other provisions of this Lease, each of
the provisions of this Lease shall extend to and shall, as the case may require,
bind or inure to the benefit not only of Landlord and of Tenant, but also of
their respective successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

     29.2 MODIFICATION OF LEASE/MEMORANDUM OF LEASE. Should any current or
prospective mortgagee or ground lessor for the Building or Project require a
modification or modifications of this Lease, which modification or modifications
will not cause an increased cost or expense to Tenant or in any other way change
the rights and obligations of Tenant hereunder (as reasonably determined by
Tenant), then and in such event, Tenant agrees that this Lease may be so
modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days following a
request therefor. Landlord agrees to pay to Tenant, within thirty (30) days
after invoice, any reasonable attorneys' fees incurred by Tenant in connection
with any modification to this Lease executed by Tenant pursuant to the
immediately preceding sentence. Should Landlord or any such prospective
mortgagee or ground lessor, or should Tenant, request execution of a short form
Memorandum of Lease for recording, containing, among other customary provisions,
the names of the parties, a description of the Premises and the Lease Term, each
party agrees to execute and deliver such short form Memorandum of Lease to the
other within twenty (20) days following the request therefor.


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Either party may record any such Memorandum of Lease at such party's sole cost
and expense; however, if Tenant records a Memorandum of Lease, Tenant agrees to
execute, acknowledge and deliver to Landlord, within ten (10) days after
Landlord's request (which request may be made by Landlord at any time after the
date of expiration or earlier termination of this Lease), a quitclaim deed
prepared by Landlord and in commercially reasonable form acknowledging the
expiration or earlier termination of this Lease. The immediately preceding
sentence shall survive the expiration or earlier termination of this Lease.

     29.3 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord has
the right to transfer all or any portion of its interest in the Project and in
this Lease, and Tenant agrees that in the event of any such transfer, Landlord
shall automatically be released from all liability under this Lease for
obligations accruing after the date of transfer and Tenant agrees to look solely
to such transferee for the performance of Landlord's obligations to be performed
hereunder after the date of transfer. Tenant further acknowledges that Landlord
may assign its interest in this Lease to the holder of any mortgage or deed of
trust as additional security, but agrees that an assignment shall not release
Landlord from its obligations hereunder and Tenant shall continue to look to
Landlord for the performance of its obligations hereunder.

     29.4 CONSENTS BY THE PARTIES. The parties intend that whenever Landlord's
or Tenant's consent or approval is expressly or impliedly required by any
provision of this Lease, the consent or approval may not be unreasonably or
arbitrarily withheld, conditioned or delayed; and on the contrary, shall be
approved or disapproved by a party acting in a commercially reasonable manner.
Notwithstanding anything to the contrary contained in this Lease, except as
expressly provided in Section 14.2 above, an action for declaratory judgment or
specific performance shall be Tenant's or Landlord's sole right and remedy in
any dispute as to whether Tenant or Landlord has breached this Section 29.4
concerning a consent or approval.

     29.5 CAPTIONS. The captions of articles and sections are for convenience
only and shall not be deemed to limit, construe, affect or alter the meaning of
such articles and sections.

     29.6 TIME OF ESSENCE. Time is of the essence of this Lease and each of its
provisions.

     29.7 PARTIAL INVALIDITY. If any term, provision or condition contained in
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

     29.8 NO WARRANTY. In executing and delivering this Lease, Tenant has not
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.

     29.9 CONSTRUCTION. Should any provision of this Lease require
interpretation by a court of law, it is agreed that the court interpreting or
construing this Lease shall not apply a presumption that the terms shall be more
strictly construed against one party who by itself or through its agents
prepared this document.

     29.10 ENTIRE AGREEMENT. It is understood and acknowledged that there are no
oral agreements between the parties hereto affecting this Lease and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease and
any side letter or separate agreement executed by Landlord and Tenant in
connection with this Lease and dated of even date herewith, contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the

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Premises and shall be considered to be the only agreements between the parties
hereto and their representatives and agents. None of the terms, covenants,
conditions or provisions of this Lease can be modified, deleted or added to
except in writing signed by the parties hereto.

     29.11 RIGHT TO LEASE. Subject to Tenant's rights hereunder, Landlord
reserves the absolute right to effect such other tenancies in the Project as
Landlord in the exercise of its sole business judgment shall determine to best
promote the interests of the Building or Project, provided that Landlord shall
lease space in the Project only to tenants who are consistent with the quality
of the Project as a first-class, institutional quality office project. Tenant
does not rely on the fact, nor does Landlord represent, that any specific tenant
or type or number of tenants shall, during the Lease Term, occupy any space in
the Building or Project.

     29.12 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease (collectively, the "FORCE MAJEURE"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.

     29.13 NOTICES. All notices, demands, statements, designations, approvals or
other communications (collectively, "NOTICES") given or required to be given by
either party to the other hereunder shall be in writing, shall be sent by (i)
United States certified or registered mail, postage prepaid, return receipt
requested, (ii) nationally recognized and reputable overnight courier (e.g.,
Federal Express and Network Courier), or (iii) delivered personally. Notice
shall be sent (a) to Tenant at the appropriate address set forth in Section 11
of the Summary, or to such other place as Tenant may from time to time designate
in a Notice to Landlord; or (b) to Landlord at the following addresses, or to
such other firm or to such other place as Landlord may from time to time
designate in a Notice to Tenant:

           Kilroy Realty, L.P.
           2250 East Imperial Highway, Suite 1200
           El Segundo, California  92045
           Attention:  Legal Department
           Facsimile:  (310) 322-8790

           with a copy to:

           Kilroy Realty, L.P.
           4370 Executive Drive, Suite 400
           San Diego, California  92121
           Attention:  Asset Manager
           Facsimile:  (619) 547-4767

Any Notice will be deemed given on the date which is three (3) business days
after the date it is mailed as provided in this Section 29.13, the next business
day if sent by overnight courier, or upon the date personal delivery is made. If
Tenant is notified of the identity and address of the holder of any deed of
trust or ground or underlying lessor, Tenant shall give to such mortgagee or
ground or underlying lessor written notice of any default by Landlord under the
terms of this Lease by registered or certified mail, and such mortgagee or
ground or underlying lessor shall be given the same opportunity to cure such
default as is available to Landlord, prior to Tenant's exercising any remedy
available to Tenant.

     29.14 JOINT AND SEVERAL. If there is more than one Tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.


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     29.15 AUTHORITY. If Tenant is a corporation or partnership, each individual
executing this Lease on behalf of Tenant hereby represents and warrants that
Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Lease and that each person signing on behalf of Tenant is authorized to do
so. If only one (1) officer executes this Lease for Tenant, Tenant agrees to
provide to Landlord evidence reasonably satisfactory to Landlord confirming the
authority of the signing officer of Tenant to bind Tenant to this Lease.

     29.16 GOVERNING LAW. This Lease shall be construed and enforced in
accordance with the laws of the State of California. IN ANY ACTION OR PROCEEDING
ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF
ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, AND (II) SERVICE OF PROCESS
BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW. EACH PARTY HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION (FOR UNLAWFUL DETAINER OR OTHERWISE) BY LANDLORD TO
RECOVER POSSESSION OF THE PREMISES.

     29.17 SUBMISSION OF LEASE. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or an option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.

     29.18 BROKERS. Landlord and Tenant hereby warrant to each other that they
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 10 of the Summary (the "BROKERS"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, and costs and expenses (including
without limitation reasonable attorneys' fees) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of any
dealings with any real estate broker or agent, other than the Brokers (whose
commissions shall be paid by Landlord pursuant to a separate agreement),
occurring by, through, or under the indemnifying party.

     29.19 INDEPENDENT COVENANTS. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord except as expressly set forth in this Lease;
provided, however, that the foregoing shall in no way impair the right of Tenant
to commence a separate action against Landlord for any violation by Landlord of
the provisions hereof so long as notice is first given to Landlord.

     29.20 PROJECT OR BUILDING NAME AND SIGNAGE. Landlord and Tenant agree that
if Tenant leases on a direct basis (i.e., not including any space leased by
Tenant pursuant to a sublease) at least two-thirds (2/3) of any space then
constructed for lease at the Project, the name of the Project shall be
"Peregrine Systems Corporate Center." However, if at any time (after the Lease
Commencement Date for Building 1) Tenant fails to lease on a direct basis at
least two-thirds (2/3) of such space, Landlord shall have the right, at
Landlord's sole cost and expense, to change the name of the Project to "Carmel
Center", whether or not Tenant subsequently meets the leasing requirement
specified above. Except as provided in this Section 29.20 above, Landlord shall
not have the right at any time to change the name of the Project or Building
without first obtaining Tenant's written consent. Except for signs identifying
the Project or the owner or manager of the Project, Landlord shall not install,
affix and maintain any signs on the exterior or on the interior of the Building,
except as expressly contemplated by this Lease and/or may be required by law.


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                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     29.21 TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all present
or future mandatory programs imposed by statute or ordinance intended to manage
parking, transportation or traffic in and around the Project or Building, and in
connection therewith, Tenant shall take responsible action for the
transportation planning and management of all employees located at the Premises
by working directly with Landlord, any governmental transportation management
organization or any other transportation-related committees or entities. If any
of the foregoing are not imposed by statute or ordinance, Tenant may
participate, in its discretion, on a voluntary basis. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of
an in-house ridesharing program and an employee transportation coordinator; (iv)
working with employees and any Project, Buildings or area-wide ridesharing
program manager; (v) instituting employer-sponsored incentives (financial or
in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work
shifts for employees. Tenant shall be entitled to the benefit of any
governmental incentives (financial or in-kind) available or otherwise offered to
induce compliance with such programs to the extent such incentives are
applicable to Tenant's implementation of any such programs.

     29.22 NO DISCRIMINATION. Tenant covenants by and for itself, its heirs,
executors, administrators and assigns, and all persons claiming under or through
Tenant, and this Lease is made and accepted upon and subject to the following
conditions: that there shall be no discrimination against or segregation of any
person or group of persons, on account of race, color, creed, sex, religion,
marital status, ancestry or national origin in the leasing, subleasing,
transferring, use, or enjoyment of the Premises, nor shall Tenant itself, or any
person claiming under or through Tenant, establish or permit such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy, of tenants, lessees, sublessees, subtenants
or vendees in the Premises.

     29.23 HAZARDOUS MATERIAL. As used herein, the term "HAZARDOUS MATERIAL"
means any hazardous or toxic substance, material or waste which is or becomes
regulated by, or is dealt with in, any local governmental authority, the State
of California or the United States Government. Tenant acknowledges that Landlord
may incur costs (A) for complying with laws, codes, regulations or ordinances
relating to Hazardous Material, or (B) otherwise in connection with Hazardous
Material including, without limitation, the following: (i) Hazardous Material
present in soil or ground water; (ii) Hazardous Material that migrates, flows,
percolates, diffuses or in any way moves onto or under the Project; (iii)
Hazardous Material present on or under the Project as a result of any discharge,
dumping or spilling (whether accidental or otherwise) on the Project by other
tenants of the Project or their agents, employees, contractors or invitees, or
by others; and (iv) material which becomes Hazardous Material due to a change in
laws, codes, regulations or ordinances which relate to hazardous or toxic
material, substances or waste. Tenant agrees that the costs incurred by Landlord
with respect to, or in connection with, the Project for complying with laws,
codes, regulations or ordinances relating to the investigation, remediation or
removal of Hazardous Material shall not be an Operating Expense, except as
indicated in Section 4.2.7(n) above. However, if the cost of such compliance, as
between Landlord and Tenant, is the responsibility of Tenant under this Lease,
Tenant shall bear the cost of such compliance.

     29.24 DEVELOPMENT OF THE PROJECT.

          29.24.1 SUBDIVISION. Tenant acknowledges that the Project has been, or
is in the process of being, subdivided. Landlord reserves the right to further
subdivide all or a portion of the buildings and Common Areas in the Project.
Tenant agrees to execute and deliver, within ten (10) days after demand by
Landlord and in the form reasonably requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from a
subdivision and any all maps in connection therewith provided Tenant shall not
be required to incur any cost, undue burden or diminution of Tenant's rights
hereunder in connection therewith. Notwithstanding anything to the contrary set
forth in this Lease, the separate ownership of any buildings and/or Common Areas
of the Project by an entity other than Landlord shall not affect the calculation
of Direct Expenses or Tenant's payment of Tenant's Share of Direct Expenses.


                                      -53-




                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

          29.24.2 THE OTHER IMPROVEMENTS. If portions of the Project or property
adjacent to the Project (collectively, the "OTHER IMPROVEMENTS") are owned by an
entity other than Landlord, Landlord, at its option, may enter into an agreement
with the owner or owners of any of the Other Improvements to provide (i) for
reciprocal rights of access, use and/or enjoyment of the Project and the Other
Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and all or any
portion of the Other Improvements, (iii) for the allocation of a portion of the
Project Expenses to the Other Improvements and the allocation of a portion of
the operating expenses and taxes for the Other Improvements to the Project, (iv)
for the use or improvement of the Other Improvements and/or the Project in
connection with the improvement, construction, and/or excavation of the Other
Improvements and/or the Project, and (v) for any other matter which Landlord
deems necessary. Nothing contained herein shall be deemed or construed to limit
or otherwise affect Landlord's right to sell all or any portion of the Project
or any other of Landlord's rights described in this Lease.

          29.24.3 CONSTRUCTION OF PROJECT AND OTHER IMPROVEMENTS. Tenant
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Tenant
hereby waives any and all rent offsets or claims of constructive eviction which
may arise in connection with such construction, provided that Landlord shall
take all reasonable measures to minimize any interference or disruption to
Tenant's use of the Premises.

          29.25 LANDLORD EXCULPATION. It is expressly understood and agreed that
notwithstanding anything in this Lease to the contrary, and notwithstanding any
applicable law to the contrary, the liability of Landlord hereunder (including
any successor landlord hereunder) and any recourse by Tenant against Landlord
from and after Landlord's Substantial Completion of the Building and delivery of
the same to Tenant in accordance with Landlord's obligations under this Lease,
shall be limited solely and exclusively to the lesser of (a) the equity interest
of Landlord in the Buildings then leased by Tenant as of the date upon which any
claim(s) arises or accrues in favor of Tenant or (b) the equity interest
Landlord would have in such Buildings if such Buildings were encumbered by
third-party debt in an amount equal to eighty percent (80%) of the value of the
Buildings, except to the extent any such claims and liability are covered by
insurance carried by Landlord. None of Landlord's constituent members, owners,
partners or subpartners, shall have any liability for the obligations of
Landlord under this Lease, and Tenant, on behalf of itself and all persons
claiming by, through or under Tenant, hereby expressly waives and releases such
members, owners, partners and subpartners from any and all liability.

          29.26 WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives for Tenant
and for all those claiming under Tenant, all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant's right of occupancy of the Premises after any termination of this Lease.

          29.27 ATTORNEYS' FEES. If either party commences litigation against
the other for the specific performance of this Lease, for damages for the breach
hereof or otherwise for enforcement of any remedy hereunder, the prevailing
party shall be entitled to recover from the other party such costs and
reasonable attorneys' fees as may have been incurred, including any and all
costs incurred in enforcing, perfecting and executing such judgment.

          29.28 COMMUNICATIONS AND COMPUTER LINES. Tenant may install, maintain,
replace, remove or use any communications or computer wires and cables
(collectively, the "LINES") at underground locations in the Project in or
serving the Premises, provided that (i) Tenant shall use an experienced and
qualified contractor approved in writing by Landlord (which approval shall not
be unreasonably withheld or delayed), and comply with all of the other
provisions of Articles 7 and 8 of this Lease, (ii) an acceptable number of
conduits for additional Lines shall be maintained for existing and future
occupants of the Project, as determined in Landlord's reasonable opinion, (iii)
conduits for the Lines therefor (including riser cables unless originally
installed by Landlord) shall be appropriately insulated to prevent excessive
electromagnetic


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                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

fields or radiation, and shall be surrounded by a protective conduit reasonably
acceptable to Landlord, (iv) any new or existing Lines servicing the Premises
shall comply with all applicable governmental laws and regulations, and (v)
Tenant shall pay all costs in connection therewith (except that Tenant shall
have no obligation to remove any Lines between the Buildings upon the expiration
or earlier termination of this Lease). However, Landlord reserves the right to
require that Tenant remove any Lines located in or serving the Premises which
are installed in violation of these provisions, or which are at any time in
violation of any laws or represent a dangerous or potentially dangerous
condition.

     29.29 NO AIR RIGHTS. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.

     29.30 COUNTERPARTS. This Lease may be executed in counterparts with the
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.

     29.31 CONFIDENTIALITY. Landlord and Tenant acknowledge that the content of
this Lease and any related documents are confidential information. Landlord and
Tenant shall keep such confidential information strictly confidential and shall
not disclose such confidential information to any person or entity other than
(i) their financial, legal, and space planning consultants, (ii) as may be
required by any public reporting requirements, and (iii) as may be required by
any applicable governmental law, rule or regulation.

     29.32 DISCLOSURES AND MUTUAL RELEASE. Tenant acknowledges that Landlord has
advised Tenant (i) that an earthquake fault may be located under a portion of
the Project, and (ii) of the proximity of the Project to the Miramar military
air base's vectored departure corridors and the potential overflights and
associated noise generated by various military aircraft in the area. Landlord
and Tenant hereby mutually release, acquit and discharge each other from any and
all Claims which either party may have against the other party arising out of or
in connection with (a) any earthquake affecting all or any portion of the
Project (subject to Landlord's and Tenant's rights and obligations under Article
11 above), and (b) any such overflights and associated noise.


                                      -55-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

     IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.

         "LANDLORD":       KR-CARMEL PARTNERS, LLC,
                           a Delaware limited liability company

                           By:      Kilroy Realty, L.P.,
                                    a Delaware limited partnership
                                    Managing Member

                                    By:      Kilroy Realty Corporation,
                                             a Maryland corporation
                                             General Partner

                                             By: /s/ Steven L. Black
                                                 ----------------------------
                                             Name: Steven L. Black
                                                   --------------------------
                                                   Its: EVP & CEO
                                                        ---------------------

                                             By: /s/ Jeffrey C. Hawken
                                                 ----------------------------
                                             Name: Jeffrey C. Hawken
                                                   --------------------------
                                                   Its: EVP & COO
                                                        ---------------------

         "TENANT":         PEREGRINE SYSTEMS, INC., a Delaware corporation

                           By:  /s/ [ILLEGIBLE]
                                ------------------------------------------------
                                Sr. V.P., Finance & Administration
                                ------------------------------------------------
                                    [PRINT NAME AND OFFICE OF PERSON SIGNING]

                           By:
                                ------------------------------------------------

                                ------------------------------------------------
                                    [PRINT NAME AND OFFICE OF PERSON SIGNING]


                                      -56-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                    EXHIBIT A

                       PEREGRINE SYSTEMS CORPORATE CENTER

                                    SITE PLAN

                                     [MAP]


                                    EXHIBIT A
                                      -1-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                    EXHIBIT B

                       PEREGRINE SYSTEMS CORPORATE CENTER

                               TENANT WORK LETTER

     This Tenant Work Letter shall set forth the terms and conditions relating
to the construction of the Base, Shell and Core and tenant improvements for the
Building. This Tenant Work Letter is essentially organized chronologically and
addresses the issues of the construction of the Building, in sequence, as such
issues will arise during the actual construction of the Building. All
capitalized terms used but not defined herein shall have the meanings given such
terms in the Lease. All references in this Tenant Work Letter to articles or
sections of "this Lease" shall mean the relevant portion of Articles 1 through
29 of this Office Lease to which this Tenant Work Letter is attached as EXHIBIT
B and of which this Tenant Work Letter forms a part, and all references in this
Tenant Work Letter to sections of "this Tenant Work Letter" shall mean the
relevant portion of Sections 1 through 7 of this Tenant Work Letter.

                                    SECTION 1

                 LANDLORD'S CONSTRUCTION OF BASE, SHELL AND CORE

     The base, shell and core for the Building (collectively, the "BASE, SHELL
AND CORE") shall be constructed by Landlord, at its sole cost and expense
(except as expressly provided herein), in accordance with this Section 1.

     1.1 LANDLORD'S RESPONSIBILITIES. The Base, Shell and Core for the Building
shall consist of only those items reflected on those certain drawings prepared
by the Project Architect as summarized on Schedule 3 to this Tenant Work Letter,
as such drawings may be revised pursuant to this Tenant Work Letter for reasons
other than a Landlord Work Change Order. Such drawings as revised pursuant to
this Tenant Work Letter for reasons other than a Landlord Work Change Order may
be referred to herein as the "BUILDING WORKING DRAWINGS". Notwithstanding the
foregoing, the Base, Shell and Core for the Building shall (without limitation
to the items reflected in the Building Working Drawings) consist of (i) core
walls and elevator lobby areas drywalled and taped ready for Building-standard
surface treatments; (ii) balance of core: exposed structure, level concrete
floors (broom clean) suitable for the installation of general office
improvements and ready to receive floor covering, Building-standard finish for
painted door frames, and Building-standard hardware; (iii) primary electrical
system ready for Tenant's switchgear in main electrical room which will service
the floor of the Building on which the Premises are located sufficient to
provide Tenant with 4 watts per rentable square foot and sufficient capacity in
such distribution to provide an additional 1.5 watts per rentable square foot;
(iv) Building telephone room to have floor sleeves to allow utility company to
distribute service lines onto each floor (Tenant to locate phone system
equipment in the Premises and to provide voice/data cabling from equipment to
termination in telephone room); (v) men's and ladies' restroom facilities with
Building-standard finishes located on each floor; (vi) sprinkler risers capped
at the core walls; (vii) primary heating, ventilating and air conditioning
system, including main water distribution loop (however, any heat pumps and
ducting including main ducting loop, shall be a Tenant Improvement); (viii)
drinking fountain at core on ground floor; (ix) electrical and janitorial
closets; (x) code required exit stairways; (xi) mechanical shafts; (xii)
life-safety systems as required by applicable building codes on an unoccupied
basis and ground floor lobby improvements including the improvements described
in the Building Working Drawings; and (xiii) card access system for Building
entrances and elevators. Landlord shall use commercially reasonable efforts to
cause the Base, Shell and Core of the Building to be completed by the date
specified in Section 1.5.2(v) below (the "SHELL COMPLETION DATES") in order to
allow a sufficient period of time for the construction of the Tenant
Improvements prior to the Estimated Lease Commencement Date.

          1.1.1 BOOKS AND RECORDS. Landlord shall be responsible for performing
all accounting functions associated with the performance of the construction of
the improvements to the Common Areas and the Base, Shell and Core and Tenant
Improvements (collectively, the


                                   EXHIBIT B
                                       -1-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

"WORK") and shall prepare and maintain or cause to be prepared and maintained
detailed and accurate operating and financial records for the Work. Tenant shall
have the right to inspect such records at the offices of Landlord in Southern
California during normal business hours and to make copies thereof at its
expense. Landlord shall preserve, or cause its agents to preserve, copies of all
books and records relating to the Work for a period of three (3) years after the
completion of the Base, Shell and Core.

          1.1.2 GOVERNMENTAL APPROVALS. Landlord shall be responsible for
obtaining all necessary agreements with governmental agencies and utility
companies relating to access, traffic control, utility services and other
similar entitlements affecting the construction of the Work.

          1.1.3 BIDDING OF CONTRACTS. Landlord shall be responsible for the
bidding (or at Landlord's election the negotiation of fees) of the contract with
the general contractor and all subcontracts to be awarded in connection with the
initial Common Area improvements and the Base, Shell and Core (collectively, the
"LANDLORD WORK") in accordance with Section 1.4 below. Landlord shall be
responsible for negotiating the terms of the agreements with the contractor and
Project Architect with respect to the Landlord Work, both of which shall be
consistent with the terms and provisions of this Section 1. Except as expressly
provided in the Lease or this Tenant Work Letter, Landlord shall be solely
responsible for the payment of the costs of designing and constructing the
Landlord Work.

          1.1.4 PERMITS. In addition to Landlord's obligations under Section
1.1.2 above, Landlord shall be responsible for obtaining, or causing its
contractor to obtain, all building permits and other governmental approvals,
permits and land use entitlements required to complete the Landlord Work.
Landlord shall be responsible for compliance with all laws, rules, regulations
and policies of the City of San Diego, State of California and United States of
America governing completion of the Landlord Work, including without limitation,
the requirements of the ADA and Title 24 in effect as of the Lease Commencement
Date, and shall correct any such violations at no cost to Tenant; however, if
the requirements of any laws change after the date upon which Landlord obtains
the permit for construction of the Base, Shell and Core and Landlord is not
required by law to comply with such change with respect to the Landlord Work,
Landlord shall not be in violation of this Section 1.1.4 so long as Landlord by
electing not to make such change does not increase the cost of construction of
the Tenant Improvements or delay the construction of the Tenant Improvements.

          1.1.5 PROJECT ADMINISTRATION. Landlord shall be responsible for
supervising the progress of the Work and for reviewing and approving progress
payment applications before they are processed for payment.

          1.1.6 POST-COMPLETION MATTERS. Following the completion of the
Landlord Work, Landlord shall assemble and maintain at the property management
office for the Project copies of (i) all warranties, operating manuals,
specifications and similar items with respect to the Building, and (ii) as-built
architectural and engineering drawings (including the master background) and any
other plans for the Landlord Work. Following the completion of the Work, upon
the request of Tenant and at Landlord's expense, Landlord also shall assemble
and deliver to Tenant copies of reproducible as-built plans and specifications
for the Building (in an auto-cad format, if available).

          1.1.7 STATUS REPORTS. Landlord shall inform Tenant of any problems or
developments that may have an adverse impact on the completion of the Landlord
Work in a timely manner promptly after Landlord becomes aware of such problems
or developments.

          1.1.8 PERIODIC INSPECTIONS. Landlord shall conduct ongoing inspections
(at least weekly) of the Landlord Work for compliance with plans and
specifications and review of progress of construction, and shall conduct
periodic site meetings with the construction trades. Landlord shall keep Tenant
reasonably informed of such meetings and proposed meetings and provided that
Tenant's participation does not extend the Construction Schedule, Tenant shall
have the right to participate in such meetings if it so desires.


                                   EXHIBIT B
                                       -2-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

          1.1.9 PEDESTRIAN PASSAGEWAY. Landlord agrees to use commercially
reasonable efforts to obtain all necessary governmental permits and approvals to
construct a passageway between the Building and the parking structure for the
Project beneath the entry drive for the Project (the "PEDESTRIAN PASSAGEWAY").
If Landlord obtains all such governmental permits and approvals, subject to
Tenant's approval of costs to be incurred in connection with design and
construction of the Pedestrian Passageway, Landlord shall use reasonable efforts
to cause the Pedestrian Passageway to be completed concurrently with the
completion of such parking structure or as soon as reasonably possible
thereafter. The working drawings for the Pedestrian Passageway will be subject
to the approval of Tenant (which approval shall not be unreasonably withheld,
conditioned or delayed). Landlord shall be responsible for the first Two Hundred
Thousand Dollars ($200,000.00) of costs incurred in order to design and
construct the Pedestrian Passageway; however, should such costs exceed Two
Hundred Thousand Dollars ($200,000.00), such excess shall be paid by Tenant to
Landlord, as Additional Rent, in the same manner as payments of Over-Allowance
Amounts as described in Section 4.3.1 below.

     1.2 DESIGN OF THE LANDLORD WORK. Landlord has entered into an agreement
with Carrier Johnson for the design of the Landlord Work including preparation
of design, development and construction documents. Landlord has entered into or
may enter into other agreements with other consultants for design of other
aspects of the Landlord Work (if applicable). Carrier Johnson and such other
design consultants (if applicable) retained by Landlord shall be collectively
referred to as the "PROJECT ARCHITECT." Landlord's agreement(s) with the Project
Architect shall be collectively referred to herein as the "PROJECT ARCHITECT
AGREEMENT." The specific terms of the Project Architect Agreement shall be such
that it will enable Landlord to perform Landlord's obligations hereunder.

     The Project Architect has prepared and delivered to Tenant, and Tenant has
approved, the Building Working Drawings. Landlord has obtained approval of the
Building Working Drawings as approved by Tenant, from all appropriate
governmental agencies, including all departments of the City of San Diego having
jurisdiction to review the Building Working Drawings. Any revisions or changes
to the Building Working Drawings, if requested by Landlord (but not if required
by the City of San Diego or any other governmental agency), will be subject to
the approval of Tenant (which approval shall not be unreasonably withheld,
conditioned or delayed). Tenant shall approve or disapprove any such revisions
or changes by written notice to Landlord within five (5) days after Tenant's
receipt of such proposed revisions or changes; Tenant's failure to disapprove
any such revisions or changes by written notice to Landlord within said five (5)
day period (which written notice shall include detailed reasons for Tenant's
disapproval) shall be deemed to constitute Tenant's approval of such revisions
or changes.

     1.3 CHANGE ORDERS REQUESTED BY TENANT TO THE LANDLORD WORK. Tenant may
request that additions to or deletions from the Landlord Work be made ("LANDLORD
WORK CHANGE ORDERS"). If Tenant desires a Landlord Work Change Order to be made,
Tenant shall so notify Landlord in writing and, within ten (10) days after such
notification, Landlord shall deliver to Tenant (i) written notice that Landlord
has determined, in Landlord's reasonable discretion, to disapprove the proposed
Landlord Work Change Order, or (ii) if Landlord approves the proposed Landlord
Work Change Order, a written estimate of any extension to the Construction
Schedule and any additional costs resulting from such proposed Landlord Work
Change Order. Without limitation on other reasons for Landlord's disapproval,
Landlord may disapprove any such proposed Landlord Work Change Order if it will
cause (a) a material change to the exterior of the Building, (b) a material
change to any of the finish materials, including without limitation, to the
lobby, bathrooms or elevator cabs of the Building, or (c) any material adverse
effect (as reasonably determined by Landlord) on the quality or adequate
functionality of the Landlord Work. If Landlord approves the proposed Landlord
Work Change Order, Tenant shall, within five (5) days following receipt of such
notification from Landlord, then notify Landlord in writing whether or not
Tenant elects to proceed with the Landlord Work Change Order. If Tenant elects
to cause any Landlord Work Change Order to be made, the Shell Completion Date
and other Major Project Milestones shall be appropriately adjusted as a result
of any delays due to such Landlord Work Change Order. If Landlord does not
approve a proposed Landlord Work


                                   EXHIBIT B
                                       -3-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

Change Order, the Landlord Work Change Order shall not be implemented. Any
increased cost resulting from a Landlord Work Change Order shall be charged to
the Tenant Improvement Allowance and any delay resulting from a Landlord Work
Change Order shall, subject to Section 5 below, be deemed to constitute a Tenant
Delay and an Excusable Delay. Tenant acknowledges, however, that the contractor
for the Landlord Work shall not be instructed to stop work during the time taken
by Tenant in considering whether to proceed with any proposed Landlord Work
Change Orders and that the cost charged to the Tenant Improvement Allowance and
any potential Tenant Delay and Excusable Delay resulting from a Landlord Work
Change Order shall include any work necessary to reverse the work performed by
the contractor during the pendency of Tenant's decision whether to proceed with
a Landlord Work Change Order.

     1.4 CONTRACTING. Landlord has entered into an agreement with Reno for the
construction of the Base, Shell and Core for the Building.

     1.5 CONSTRUCTION SCHEDULE.

          1.5.1 COMPLETION. The construction of the Base, Shell and Core of the
Building shall be deemed to be completed (the "BASE, SHELL AND CORE COMPLETION")
when (i) the Project Architect determines that the Base, Shell and Core for such
Building has been completed in accordance with the Building Working Drawings
(subject to customary "punch list" items) by issuing a certificate of
substantial completion, and (ii) a certificate of occupancy or an approval to
occupy (or their equivalent) with respect to the Base, Shell and Core has been
issued by the City of San Diego. "Punch list" items, as referred to in this
Section 1.5.1, are items that will require correction but that will not
materially interfere with, or cause a delay to, the construction of the Tenant
Improvements. Landlord agrees to correct all such Base, Shell and Core punch
list items prior to the Lease Commencement Date.

          1.5.2 MAJOR PROJECT MILESTONES. Landlord agrees that it shall use
commercially reasonable efforts to complete its duties and tasks specified in
this Tenant Work Letter in accordance with the schedule attached to this Tenant
Work Letter as Schedule 1 and made a part hereof ("CONSTRUCTION SCHEDULE") and
to endeavor to accomplish all "Major Project Milestones" within the time set
forth in the Construction Schedule. As used herein, the term "MAJOR PROJECT
MILESTONES" means:

               (i)   Completion of Base, Shell and Core Working Drawings and
     submittal of same to City of San Diego for permits by:

                            Done

               (ii)  Obtaining all building and other permits for the
     construction of the Base, Shell and Core by:

                            Done

               (iii) Commencement of construction of the Base, Shell and Core
     by:

                            Done

               (iv)  Completion of vertical construction of the Base, Shell and
     Core by:

                            Done

               (v)   Base, Shell and Core Completion by the applicable Shell
     Completion Date:

                            September 30, 1999

     Landlord shall use its reasonable, good-faith efforts to meet all
milestones by the date set forth for the accomplishment of such milestones in
the Construction Schedule. If Landlord fails to accomplish any milestone by the
date set forth in the Construction Schedule (as may be


                                   EXHIBIT B
                                       -4-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

extended pursuant to the next sentence below), then Landlord shall authorize and
direct its employees, the Project Architect, the general contractor for the
Landlord Work and any relevant subcontractor to work at an accelerated pace
utilizing such "overtime" hours as may be necessary to bring the Landlord Work
back on schedule. The dates set forth in the Construction Schedule (including,
without limitation, any milestones and any Major Project Milestones) shall be
extended by any delay (collectively, "EXCUSABLE DELAY") attributable to Tenant's
failure to comply with its obligations under Section 1 of this Tenant Work
Letter, any Tenant Delay, any Landlord Work Change Order, and any Force Majeure.
However, any delay necessitated by changes in the Building Working Drawings
because the same do not comply with Code or other applicable laws shall not
constitute an Excusable Delay except to the extent the portion of the Building
Working Drawings which is found to not comply is attributable to Landlord Work
Change Orders made by Tenant.

                                    SECTION 2

                               TENANT IMPROVEMENTS

     2.1 TENANT IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a tenant
improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount of One
Million Six Hundred Seventy-Eight Thousand Seven Hundred Fifty-Eight Dollars
($1,678,758.00) for the costs relating to the design and construction of
Tenant's improvements (the "TENANT Improvements"). Tenant shall have the right
to defer the construction of Tenant Improvements for space in the Building which
Tenant elects not to initially build-out until no later than three (3) years
after the Lease Commencement Date; however, (i) if Tenant elects to commence
construction of Tenant Improvements for any space in the Building, such
construction may not thereafter be deferred, and (ii) any such deferral shall be
deemed a Tenant Delay so that the Lease Commencement Date shall not be delayed.
In no event shall Landlord be obligated to make disbursements pursuant to this
Tenant Work Letter in a total amount which exceeds the Tenant Improvement
Allowance (except as expressly contemplated by this Tenant Work Letter). Any
portion of the Tenant Improvement Allowance remaining after construction of the
Tenant Improvements for the Building may be used by Tenant for Tenant
Improvements for such Building before the first anniversary of the Lease
Commencement Date for such Building; provided, however, Tenant shall have the
right to transfer portions of the Tenant Improvement Allowance among the
Building and Buildings 2 and 5 for Tenant Improvements and space planning costs
only. Further, Tenant shall allocate and use a minimum Tenant Improvement
Allowance for "hard costs" (i.e., costs incurred under the general contract with
Contractor) of Tenant Improvements in an amount not less than One Million
Ninety-Six Thousand Nine Hundred Sixteen Dollars ($1,096,916.00). All Tenant
Improvements for which the Tenant Improvement Allowance has been made available
shall be deemed Landlord's property except as described under the terms of
Section 8.5 of this Lease.

     2.2 DISBURSEMENT OF THE TENANT IMPROVEMENT ALLOWANCE. Except as otherwise
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord (each of which disbursements shall be made pursuant to the
disbursement process described in Section 4.3.1 below) only for the following
items and costs (collectively, the "TENANT IMPROVEMENT ALLOWANCE ITEMS"):

          2.2.1 Payment of the fees of all design consultants, project managers,
the "Space Planner," "Architect" and the "Engineers," as those terms are defined
in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by,
and the cost of documents and materials supplied by, Landlord and Landlord's
consultants in connection with the preparation and review of the "Construction
Drawings," as that term is defined in Section 3.1 of this Tenant Work Letter;

          2.2.2 The payment of all governmental and utility service or
connection fees, including, but not limited to, plan check, permit and license
fees relating to construction of the Tenant Improvements; provided, however, the
Tenant Improvement Allowance Items shall not


                                   EXHIBIT B
                                       -5-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

include any costs for utilities or use of elevators during the construction of
the Tenant Improvements;

          2.2.3 The cost of construction of the Tenant Improvements within such
Building, including, without limitation, all labor, materials, testing and
inspection costs, hoisting and trash removal costs, and contractors' fees and
general conditions;

          2.2.4 The cost of any changes in the Base, Shell and Core work when
such changes are required by the Construction Drawings (including if such
changes are due to the fact that such work is prepared on an unoccupied basis),
such cost to include all direct architectural, engineering and/or other
consultant fees and expenses incurred in connection therewith;

          2.2.5 The cost of any changes to the Construction Drawings or Tenant
Improvements required by applicable governing codes ("CODE") unless such changes
are required to cause the Base, Shell and Core to comply with applicable
building Code (however, changes to the Base, Shell and Core required due to the
unique nature of the Tenant Improvements requested by Tenant shall be charged to
the Tenant Improvement Allowance);

          2.2.6 Sales and use taxes and Title 24 fees;

          2.2.7 The costs incurred (by Landlord or Tenant) in connection with
third party design services prior to Lease execution (which costs shall not
exceed Twenty Cents ($0.20) per rentable square foot of the Building);

          2.2.8 "Landlord's Supervision Fee", as that term is defined in Section
4.3.2 of this Tenant Work Letter;

          2.2.9 All other costs to be expended by Landlord and reasonably
approved by Tenant in connection with the construction of the Tenant
Improvements; and

          2.2.10 Costs incurred for Tenant's voice/data cabling, network racks
and hardware, furniture, telecom system, keys, locks, security costs, relocation
and interior and exterior signage (including Tenant's Signs); provided, however,
in no event shall the aggregate costs of the items forth in this Section 2.2.10
exceed Three Hundred Thirty-Three Thousand Eight Hundred Forty-Four Dollars
($333,844.00). Landlord and Tenant acknowledge that the Base Rent for the
Premises includes an amortization (with interest at twelve percent (12%) per
annum) of the amount payable by Landlord pursuant to this Section 2.2.10.

     2.3 STANDARD TENANT IMPROVEMENT PACKAGE. Landlord and Tenant have
established specifications (the "SPECIFICATIONS") for some of the Building
standard components which Tenant may elect to construct in the Building
(collectively, the "STANDARD IMPROVEMENT PACKAGE"). The Standard Improvement
Package is attached as Schedule 2 to this Tenant Work Letter. Landlord may only
make changes to the Specifications and the Standard Improvement Package from
time to time with Tenant's prior written approval thereof. Tenant may deviate
from the Specifications with Landlord's approval (as part of the approval of
Construction Drawings).

                                    SECTION 3

                              CONSTRUCTION DRAWINGS

     3.1 SELECTION OF ARCHITECT. Tenant shall retain Carrier Johnson as
architect (the "ARCHITECT") to prepare the architectural plans and drawings for
the Tenant Improvements in the Building in accordance with the Construction
Schedule. Tenant shall have the right to replace Architect with another
architect(s) from time to time at Tenant's discretion and subject to Landlord's
reasonable approval. Tenant shall also retain engineering consultants (the
"ENGINEERS") selected by Tenant and subject to Landlord's reasonable approval to
prepare all plans and engineering working drawings relating to the structural,
mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work of the
Tenant Improvements. The parties


                                   EXHIBIT B
                                       -6-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

acknowledge that Tenant's retention of the Engineers may be done in connection
with a design/build format. The plans and drawings to be prepared by Architect
and the Engineers hereunder shall be known collectively as the "CONSTRUCTION
DRAWINGS." All Construction Drawings shall comply with the drawing format and
specifications as reasonably determined by Landlord, and shall be subject to
Landlord's approval which shall not be unreasonably withheld or delayed. Tenant
shall be deemed to have approved any Construction Drawings submitted to Landlord
for Landlord's approval. Tenant and Architect shall verify, in the field, the
dimensions and conditions as shown in the relevant portions of Construction
Drawings for the Base, Shell and Core. Landlord shall cause the Contractor to
assist Tenant's Architect in identifying any coordination or other construction
issues relating to the Construction Drawings for the Base, Shell and Core.
Landlord's review of the Construction Drawings, as set forth in this Section 3,
shall not imply Landlord's review of the same for quality, design, Code
compliance or other like matters, but Landlord shall nevertheless inform Tenant
of any deficiencies discovered. Accordingly, notwithstanding any Construction
Drawings reviewed by Landlord or its consultants, and notwithstanding any advice
or assistance which may be rendered to Tenant by Landlord or Landlord's
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings unless any omissions or errors are a result of omissions
or errors in the Construction Drawings for the Base, Shell and Core, and
Tenant's waiver and indemnity set forth in Section 10.1 of the Lease shall
specifically apply to the Construction Drawings.

     3.2 FINAL SPACE PLAN. On or before the applicable date set forth in the
Construction Schedule, Tenant shall cause the Architect to prepare the final
space plan for Tenant Improvements in the Building (collectively, the "FINAL
SPACE PLAN"), which Final Space Plan shall include a layout and a designation of
all offices, rooms and other partitioning, their intended use, and equipment to
be contained therein, and shall deliver the Final Space Plan to Landlord for
Landlord's approval. Subject to the restrictions specified in Section 2.1 above,
Tenant may exclude from the Final Space Plan a layout for any space in the
Building which Tenant elects not to initially build out. Landlord shall notify
Tenant of its approval (which approval shall not be unreasonably withheld) or
disapproval (with reasons for disapproval specified) of the Final Space Plan for
the Premises within ten (10) business days after receipt thereof; any failure by
Landlord to notify Tenant of its approval or disapproval within such ten (10)
business day period shall be deemed to be Landlord's disapproval thereof. If
Landlord disapproves the Final Space Plan, Landlord and Tenant shall, within two
(2) business days thereafter, meet (or telephonically confer) in an attempt to
resolve such disapproval as soon as reasonably possible. If, in connection with
such meeting, Landlord and Tenant conceptually agree upon revisions to be made
to the Final Space Plan, then within ten (10) business days after such meeting,
Tenant shall cause the Final Space Plan to be revised in accordance with the
parties' conceptual agreement and shall resubmit the Final Space Plan for
Landlord's approval. This process shall continue until the Final Space Plan is
approved by Landlord. If Landlord and Tenant are, despite such meeting, unable
to resolve the items disapproved by Landlord in the Final Space Plan, the
parties shall mutually select an architect from Carrier Johnson to resolve such
disagreement (or if Carrier Johnson is unwilling to make a determination to
resolve such dispute or either party objects to Carrier Johnson playing such
role, then the parties shall mutually agree upon some other reasonably qualified
architect to resolve such issues). Any such resolution by such architect
(whether from Carrier Johnson or some other firm) shall be made within ten (10)
business days after the meeting between Landlord and Tenant.

     3.3 WORKING DRAWINGS. On or before the applicable date set forth in the
Construction Schedule, the Architect and the Engineers shall complete the
architectural and engineering drawings for the Premises, and the final
construction documents in a form which is complete to allow contractors and
subcontractors to bid on the work, to obtain all applicable permits, and to
subsequently construct the work (collectively, the "WORKING DRAWINGS"). Subject
to the restrictions specified in Section 2.1 above, Tenant may exclude from the
Working Drawings any space which Tenant elects not to initially build-out.
Landlord shall notify Tenant of its approval (which approval shall not be
unreasonably withheld) or disapproval (with reasons for such disapproval
specified) of the Working Drawings within ten (10) business days after receipt
thereof; any failure by Landlord to notify Tenant of its approval or disapproval
within such ten


                                   EXHIBIT B
                                       -7-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

(10) business day period shall be deemed to be Landlord's disapproval thereof.
However, Landlord may not disapprove any details of the Working Drawings which
have already been approved by Landlord in the Final Space Plan. If Landlord
disapproves the Working Drawings, Landlord and Tenant shall, within two (2)
business days thereafter, meet in an attempt to resolve such disapproval as soon
as reasonably possible. If, in connection with such meeting, Landlord and Tenant
conceptually agree upon revisions to be made to the Working Drawings, then
within ten (10) business days after such meeting, Tenant shall cause the Working
Drawings to be revised in accordance with the parties' conceptual agreement and
shall resubmit the Working Drawings for Landlord's approval. This process shall
continue until the Working Drawings are approved by Landlord. If Landlord and
Tenant are, despite such meeting, unable to resolve the items disapproved by
Landlord in the Working Drawings, the parties shall mutually select an architect
from Carrier Johnson to resolve such disagreement (or if Carrier Johnson is
unwilling to make a determination to resolve such dispute or either party
objects to Carrier Johnson playing such role, then the parties shall mutually
agree upon some other reasonably qualified architect to resolve such issues).
Any such resolution by such architect (whether from Carrier Johnson or some
other firm) shall be made within ten (10) business days after the meeting
between Landlord and Tenant.

     3.4 PERMITS. The Working Drawings shall be approved by Landlord (the
"APPROVED WORKING DRAWINGS") prior to the commencement of construction of the
Tenant Improvements. Landlord shall, in accordance with the Construction
Schedule, submit or cause the Approved Working Drawings to be submitted to the
appropriate municipal authorities for all applicable building permits necessary
to allow the Contractor selected pursuant to Section 4.1 below to commence and
fully complete the construction of the Tenant Improvements (the "PERMITS"), and
in connection therewith, Landlord and Tenant shall coordinate with Contractor to
allow Landlord and Tenant to take part in all phases of the permitting process.
Landlord shall require Contractor to supply Landlord and Tenant, as soon as
possible, with all plan check numbers and dates of submittal with respect to the
Building. No changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord and Tenant,
which shall not be unreasonably withheld or delayed, provided that Landlord may
withhold its consent, in its sole discretion, to any change in the Approved
Working Drawings if such change would delay the Substantial Completion of such
Tenant Improvements or the Building unless Tenant agrees in writing to be
responsible for any such delay as in a Tenant Delay and for the costs of any
delay resulting therefrom.

     3.5 TIME DEADLINES. Landlord and Tenant shall use good faith, reasonable
efforts and all due diligence to cooperate with each other and the Architect and
the Engineers to complete all phases of the Working Drawings and the permitting
process, and with Contractor for approval of the Cost Proposal (as defined
below), as is necessary to keep such Tenant Improvements on schedule. The
applicable dates for approval of items, plans and drawings as described in this
Tenant Work Letter are set forth and further elaborated upon in the Construction
Schedule (the "TIME DEADLINES"), attached hereto. Landlord and Tenant agree to
use good faith, reasonable efforts to comply with the Time Deadlines.

     3.6 DESIGN-BUILD. Landlord and Tenant acknowledge that Tenant may elect to
design and construct the Tenant Improvements using a fast-track design/build
format. If Tenant so elects, Tenant may forward to Landlord, for Landlord's
approval, Construction Drawings for portions of the Tenant Improvement project
rather than Construction Drawings for the entire Premises. Landlord agrees to
advise Tenant within ten (10) business days after Landlord's receipt of any such
drawings if the same are unsatisfactory or incomplete in any respect. Upon
Landlord's approval of any such drawings, the Contractor may be instructed to
submit the same to the applicable governmental authorities for receipt of
Permits. This process may be repeated by Tenant, as necessary, for all portions
of the Tenant Improvement project.


                                   EXHIBIT B
                                       -8-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                    SECTION 4

                     CONSTRUCTION OF THE TENANT IMPROVEMENTS

     4.1 CONTRACTOR. A general contractor retained by Landlord (the
"CONTRACTOR"), shall construct the Tenant Improvements. Reno Contracting, Inc.,
a California corporation ("RENO") shall act as Contractor for the Tenant
Improvements for the Building. Reno has agreed to a four percent (4%)
contracting fee and a three percent (3%) general conditions fee, both of which
fees shall be based upon the direct costs of the subcontractors.

          4.1.1 CONTRACT WITH CONTRACTOR. The contract with the Contractor shall
be consistent with this Tenant Work Letter and shall provide that Tenant shall
have the full benefit of all warranties provided by Contractor and that such
warranties shall be assignable to Tenant. Landlord shall provide Tenant with an
opportunity to review the construction contract with the Contractor to confirm
that such contract is not in conflict with this Tenant Work Letter. In addition,
upon request from Tenant, Landlord shall provide Tenant with a copy of all
Contractor's contracts with the major trade subcontractors in Landlord's
possession at the time of such request.

          4.1.2 GENERAL CONDITIONS FEE. The general conditions fee charged by
Contractor shall cover all of the following: project executive, general
superintendent, home office expenses, general overhead, office supplies,
accounting services, computer charges, telephone expenses, fax office/job site,
data processing, secretarial services, mail, express mail, insurance, city
licenses, project manager, estimator, project engineer, scheduling,
superintendent, daily clean up and final clean up, protection of work, petty
cash, safety enforcement and safety signage, small tools, first aid facilities,
general field coordination, project field office, tenant vendor coordination and
job trailer, but shall exclude reconstruction services, general labor, blue
printing and temporary structures. Except as provided herein, Landlord or
Contractor shall not receive any other fee or payment from Tenant in connection
with Contractor's services.

          4.1.3 CONTRACT OF WORK. Landlord shall cause its contract with
Contractor to include the provisions set forth in this Section 4.1.3. Contractor
shall take appropriate field measurements and verify field conditions before
commencing construction of Tenant Improvements. Contractor shall review, approve
and submit to the Architect shop drawings, product data, samples and submittals
required by the contract documents with promptness and in sequence as to cause
no delay in the Construction Schedule. During the course of construction,
Contractor shall take all reasonable precautions to maintain industry safety
standards and protect against damage, injury or loss to any persons or property.
Contractor shall supervise and direct the construction of the Tenant
Improvements using Contractor's best skills and attention and shall be fully
responsible for and have control over construction means, methods, techniques,
sequences and procedures for coordinating all portions of the work under the
contract.

     4.2 COST PROPOSAL. After the Approved Working Drawings are approved by
Landlord and Tenant, and the Contractor and subcontractors have been selected
pursuant to Section 4.1 above, Landlord shall provide Tenant with a cost
proposal in accordance with the Approved Working Drawings setting forth the
reconciled bids and copies of all sub-bids, which cost proposal shall include,
as nearly as possible, the cost of all Tenant Improvement Allowance Items to be
incurred in connection with the construction of the Tenant Improvements (the
"COST PROPOSAL"). The Cost Proposal shall reflect bids that will be priced by
Contractor on an individual item-by-item or trade-by-trade basis. Landlord and
Tenant shall work together in good faith in an attempt to agree upon a mutually
acceptable Cost Proposal as soon as reasonably possible. Notwithstanding the
foregoing, portions of the cost of the Tenant Improvements may be delivered to
Tenant as such portions of the Tenant Improvements are priced by Contractor (on
an individual item-by-item or trade-by-trade basis), even before the Approved
Working Drawings are completed (the "PARTIAL COST PROPOSAL") for purposes of
facilitating the early purchase of items and construction of the same. Tenant
shall approve and deliver the Cost Proposal to Landlord within seven (7)
business days of the receipt of the same, or, as to a Partial Cost Proposal
within five (5) business days of receipt of the same, and upon receipt of the
same


                                   EXHIBIT B
                                       -9-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

by Landlord, Landlord shall be released by Tenant to purchase the items set
forth in the Cost Proposal or Partial Cost Proposal, as the case may be, and to
commence the construction relating to such items. If Tenant disapproves the Cost
Proposal or Partial Cost Proposal, Tenant shall provide Landlord with a
reasonably sufficient explanation, and in such event, Landlord and Tenant shall
use good faith, diligent efforts to work with each other and Contractor to
address Tenant's reasons for disapproving the Cost Proposal or Partial Cost
Proposal, whichever is the case and a new Cost Proposal (or Partial Cost
Proposal, as applicable) shall be prepared and the process described in this
Section 4.2 shall be repeated. The date by which Tenant must approve and deliver
the Cost Proposal or the last Partial Cost Proposal to Landlord, as the case may
be, shall be known hereafter as the "COST PROPOSAL DELIVERY DATE". The total of
all Partial Cost Proposals, if any, shall be known as the Cost Proposal.

     4.3 CONSTRUCTION OF TENANT IMPROVEMENTS BY LANDLORD'S CONTRACTOR UNDER THE
SUPERVISION OF LANDLORD.

          4.3.1 OVER-ALLOWANCE AMOUNT. In connection with Tenant's approval of
the Cost Proposal, Tenant shall be responsible for the amount equal to the
difference between (i) the amount of the Cost Proposal and (ii) the amount of
the Tenant Improvement Allowance (as adjusted for any transfer to or from
Adjacent Buildings as provided in, and subject to, Section 2.1 of this Tenant
Work Letter above and less any portion thereof already disbursed by Landlord, or
in the process of being disbursed by Landlord, on or before the Cost Proposal
Delivery Date) (which difference is referred to herein as the "OVER-ALLOWANCE
AMOUNT"). All costs for Tenant Improvements shall be fully documented and may be
verified by Tenant. In the event that, after the Cost Proposal Delivery Date,
Tenant shall request any revisions, changes, or substitutions to the
Construction Drawings or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions or any other
additional costs (in excess of the Tenant Improvement Allowance) shall be
considered to be an addition to the Over-Allowance Amount (which shall result in
a recalculation of the amounts to be paid by Tenant pursuant to Sections
4.3.1.1. and 4.3.1.2 below).

              4.3.1.1 PAYMENT OF INITIAL PORTION OF OVER-ALLOWANCE AMOUNT.
Except as provided in Section 4.3.1.2 below, the procedure described in this
Section 4.3.1.1 shall apply to Tenant's payment of the Over-Allowance Amount.
Tenant shall pay ninety percent (90%) of the Over-Allowance Amount and
Landlord shall pay ninety percent (90%) of the Tenant Improvement Allowance,
in monthly progress payments corresponding to the progress of the Tenant
Improvement Work and Tenant and Landlord shall each retain ten percent (10%)
thereof to be paid as part of the final retention, in accordance with the
construction contract, upon completion of such work. During the course of
construction of the Tenant Improvements, Contractor shall deliver to Landlord
and Tenant not more than once for each calendar month a written request for
payment ("PROGRESS PAYMENT REQUEST") which shall be accompanied by (i)
Contractor's certification of the payment amount requested and the percentage
of completion of each item of work for which payment is sought and (ii)
copies of conditional lien releases (for upcoming payments) and unconditional
lien releases (for the previous month's payments) from all subcontractors and
vendors. Through this monthly process, Tenant shall pay to Landlord ninety
percent (90%) of the completed percentage of the Over-Allowance Amount, if
any, and Landlord shall pay to Contractor ninety percent (90%) of the Tenant
Improvement Allowance due pursuant to the Progress Payment Request, each
month within thirty (30) days after Tenant's and Landlord's receipt of the
above items and approval of the same (which approval shall not be
unreasonably withheld, conditioned or delayed and shall be granted or denied
(with detailed reasons for such denial) within five (5) days after Tenant's
receipt of a Progress Payment Request). Failure to grant or deny any such
approval within said five (5) day period shall be deemed to constitute
Tenant's approval thereof. The Over-Allowance Amount shall be proportionately
paid by Landlord prorata with the Tenant Improvement Allowance, and such
disbursement by Landlord of the Over- Allowance Amount shall be pursuant to
the same procedure as Landlord's disbursement of the Tenant Improvement
Allowance.

              4.3.1.2 PAYMENT OF ANY EXCESS PORTION OF OVER-ALLOWANCE AMOUNT.
To the extent that the Over-Allowance Amount is Four Hundred Seventy-Six
Thousand Nine


                                   EXHIBIT B
                                      -10-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

Hundred Twenty Dollars ($476,920.00) or more (such excess to be referred to as
the "EXCESS OVER-ALLOWANCE AMOUNT") and/or if as of the Cost Proposal Delivery
Date, Tenant fails to meet all of the Financial Standards, and if in either such
case, Landlord's lender (who is unaffiliated with Landlord) so requires, Tenant
shall pay the Excess Over-Allowance Amount (or if the Financial Standards are
not met, then all of the Over-Allowance Amount) in accordance with the procedure
specified in this Section 4.3.1.2 below. Tenant shall deposit fifty percent
(50%) of the Excess Over-Allowance Amount (or if the Financial Standards are not
met, then all of the Over-Allowance Amount) within ten (10) days after the Cost
Proposal Delivery Date and shall deposit the remaining fifty percent (50%) of
the Over-Allowance Amount within ten (10) days after notice from Landlord that
the Contractor has determined that the Tenant Improvement Work has been fifty
percent (50%) completed. Such deposits from Tenant shall be with Landlord (or
with the lender if so required by such lender) and maintained in a segregated
account at a financial institution reasonably selected by Landlord (if not with
the lender). To the extent permitted by the lender, any amounts so deposited by
Tenant shall earn interest which shall accrue to Tenant at the actual rate
earned from the date of such deposit until the date that such funds are
disbursed.

          4.3.2 LANDLORD'S RETENTION OF CONTRACTOR. Landlord shall independently
retain Contractor to construct the Tenant Improvements in accordance with the
Approved Working Drawings and the Cost Proposal and Tenant shall pay (as part of
the Tenant Improvement Allowance) a construction supervision fee (the "LANDLORD
SUPERVISION FEE") to Landlord in an amount equal to one percent (1%) of all
"hard" Tenant Improvement Allowance Items.

          4.3.3 CONTRACTOR'S WARRANTIES AND GUARANTIES. Landlord hereby assigns
to Tenant all warranties and guaranties by Contractor relating to the Tenant
Improvements, and Tenant hereby waives all claims against Landlord relating to,
or arising out of the construction of, the Tenant Improvements (except for any
portion of the Tenant Improvements which consist of components of the Building
Systems and Equipment for which Landlord maintains responsibility for repair
pursuant to Section 7.1 of the Lease). Such warranties and guaranties of
Contractor shall guarantee that the Tenant Improvements shall be free from any
defects in workmanship and materials for a period of not less than one (1) year
from the date of completion thereof, and Contractor shall be responsible for the
replacement or repair, without additional charge, of the Tenant Improvements
that shall become defective within one (1) year after Substantial Completion of
such Tenant Improvements. The correction of such work shall include, without
additional charge, all additional expenses and damages in connection with such
removal or replacement of all or any part of the Tenant Improvements.

          4.3.4 TENANT'S COVENANTS. Tenant hereby indemnifies Landlord for any
loss, claims, damages or delays arising from the actions of the Architect
retained by Tenant pursuant to Section 3.1 of this Tenant Work Letter on the
Premises or in the Building to design or construct the Tenant Improvements.
Tenant, immediately after the Substantial Completion of the Building, shall have
prepared and delivered to Landlord a copy of the "as built" plans and
specifications (including all working drawings) for the Tenant Improvements.

     4.4 CHANGE ORDERS. Subject to Landlord's reasonable approval, Tenant shall
have the right to order changes in the Tenant Improvements ("CHANGE ORDERS").
Landlord's contract with Contractor shall provide that, upon request and prior
to Tenant's submitting any binding Change Order, Contractor shall promptly
provide Tenant with a written itemized breakdown of labor and materials for the
estimated cost to implement, the estimated time delay and any other estimated
increased construction costs associated with the proposed Change Order. Costs
related to changes shall include, without limitation, any architectural or
design fees, and Contractor's fee (not to exceed the percentage rate for
Contractor's fee and general conditions fee as previously set forth herein) for
effecting the change. In addition, any Change Order shall be subject to
Landlord's approval, not to be unreasonably withheld, conditioned or delayed. If
ordered by Tenant and so approved by Landlord, Contractor shall implement such
Change Order and the cost of construction of the Tenant Improvements shall be
increased or decreased in accordance with the cost proposal previously approved
by Tenant for any such Change Order, subject to reconciliation for actual costs.


                                   EXHIBIT B
                                      -11-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                    SECTION 5

                     COMPLETION OF THE TENANT IMPROVEMENTS;
                             LEASE COMMENCEMENT DATE

     Except as provided in this Section 5, the Lease Commencement Date for the
Premises shall occur as set forth in Article 2 of this Lease. Any delay or
delays in the Substantial Completion of the Premises as set forth in Article 2
of this Lease, as a result of any of the following shall be considered "TENANT
DELAYS":

     5.1 Tenant's failure to comply with the Time Deadlines which are Tenant's
responsibility to meet in accordance with this Tenant Work Letter;

     5.2 Tenant's failure to timely approve any matter requiring Tenant's
approval;

     5.3 A breach by Tenant of the terms of this Tenant Work Letter or the
Lease;

     5.4 Changes in any of the Construction Drawings because the same do not
comply with Code or other applicable laws;

     5.5 Tenant's request for changes in the Working Drawings or the Approved
Working Drawings including any delay resulting from Tenant's request for
information from the Contractor, the time taken by Tenant in considering any
such information prior to agreeing to proceed (or not to proceed) with such
change and/or the actual Change Order;

     5.6 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, the Standard Improvement
Package, provided Landlord informed Tenant in writing that any such requirement
would not be available in accordance with the Construction Schedule and would
likely cause a delay in the anticipated date of Substantial Completion of the
Premises;

     5.7 Changes to the Base, Shell and Core work required by the Approved
Working Drawings; or

     5.8 Any other acts or omissions of Tenant, or its agents, or employees.

     Notwithstanding the foregoing, no delay under Sections 5.2, 5.3, 5.5, 5.6,
5.7 or 5.8 above shall be considered a Tenant Delay unless and until Tenant is
(i) provided prior written notice that it is about to suffer a Tenant Delay and
is afforded a one (1) business day opportunity to cure the same, and (ii)
offered the opportunity to incur premium costs (as an Over-Allowance Amount if
the Tenant Improvement Allowance has been exceeded) to prevent or minimize such
delay if it is possible to do so. Landlord shall not assess any day towards a
Tenant Delay for delays caused by Contractor, Landlord or any third parties or
due to Force Majeure. For purposes of determining whether a delay by Tenant or
Architect constitutes a Tenant Delay, reference shall be made to the critical
path schedule for the construction of Tenant Improvements set forth in the
Construction Schedule. Landlord and Contractor shall take commercially
reasonable actions, remedial or otherwise, to maintain the Construction Schedule
notwithstanding any Tenant Delay, provided that this requirement shall not
require Landlord or Contractor to incur any additional costs or expenses (e.g.,
contractor overtime or costs resulting from accelerated delivery) unless Tenant
agrees to pay for such additional costs or expenses.

     Notwithstanding anything to the contrary set forth in this Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of the Premises, the Lease Commencement Date for the Premises shall
be deemed to be the date the Lease Commencement Date would have occurred if no
Tenant Delays, as set forth above, had occurred; provided, however, if the
actual date of Substantial Completion of the Tenant Improvements occurs on or
before the estimated Lease Commencement Date specified in Section 5 of the
Summary, no Tenant Delays shall be deemed to have occurred.


                                   EXHIBIT B
                                      -12-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                    SECTION 6

                        ACCEPTANCE OF TENANT IMPROVEMENTS

     Tenant's taking possession of the Premises shall be an acceptance of the
Tenant Improvements except for (i) any "punch list" type items of which Tenant
has given Landlord written notice, (ii) any latent defects in the construction
of the Tenant Improvements, (iii) Landlord's obligation to correct construction
defects, (iv) any warranties made by Landlord and Contractor, and (v) any
noncompliance of the Premises with all laws and codes in effect as of the Lease
Commencement Date. Tenant shall provide Landlord with Tenant's written list of
"punch list" items within ten (10) business days after the Lease Commencement
Date. Landlord shall cause Contractor to correct within thirty (30) days of
Landlord's receipt of notice thereof any construction deficiencies or other
"punch list" items of which Tenant notifies Landlord and Contractor; except that
for minor items (such as minor items on backorder) that cannot reasonably be
corrected in thirty (30) days, Landlord shall cause correction to occur as soon
as reasonably practicable. Any such corrective work shall be performed so as to
reasonably minimize any interference or disruption to Tenant and its activities
on the Premises.

                                    SECTION 7

                                  MISCELLANEOUS

     7.1 TENANT'S ENTRY INTO THE PREMISES PRIOR TO SUBSTANTIAL COMPLETION.
Provided that Tenant and its agents do not interfere with Contractor's work in
the Project and the Building, Contractor shall allow Tenant (and its vendors,
consultants, contractors, and agents) access to the Building during the forty
five (45) day period prior to the estimated Substantial Completion date of the
Tenant Improvements (but if such access is to be prior to the issuance of the
Temporary Certificate of Occupancy for the Building, then such access shall be
only as allowed by the City of San Diego) for the purpose of Tenant installing
equipment, furniture or fixtures (including Tenant's data and telephone
equipment) in the Premises. Tenant's access shall include reasonable use
(subject to scheduling) of any exterior loading and staging areas and the use of
stairs, elevators and hoists, roofs and conduits. Tenant's entry into the
Premises prior to Substantial Completion pursuant to this Section 7.1 shall be
at no cost or charge from Landlord to Tenant including, without limitation, any
charge for utilities. Prior to Tenant's entry into the Premises as permitted by
the terms of this Section 7.1, Tenant shall submit a schedule to Landlord and
Contractor, for their approval, which schedule shall detail the timing and
purpose of Tenant's entry. Tenant shall hold Landlord, the Contractor and
subcontractors harmless from and indemnify, protect and defend Landlord against
any loss or damage to the Project or Premises and against injury to any persons
caused by Tenant's actions pursuant to this Section 7.1.

     7.2 TENANT'S REPRESENTATIVE. Tenant has designated Robert Urwiler as its
sole representative with respect to the matters relating to cost and schedule
set forth in this Tenant Work Letter, who, until further notice to Landlord,
shall have full authority and responsibility to act on behalf of Tenant in such
matters as required in this Tenant Work Letter. Tenant has designated Michele
Voth as its local representative with respect to daily decisions required under
this Tenant Work Letter that do not relate to cost or schedule, who, until
further notice to Landlord, shall have full authority and responsibility to act
on behalf of Tenant in such matters as required in this Tenant Work Letter.

     7.3 LANDLORD'S REPRESENTATIVE. Landlord has designated Randy Jackson as its
sole representative with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

     7.4 TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Landlord or Tenant is required to approve
or deliver an item, time is of the essence.


                                   EXHIBIT B
                                      -13-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

     7.5 TENANT'S LEASE DEFAULT. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in
Section 19.1 of this Lease has occurred at any time on or before the
Substantial Completion of the Tenant Improvements, then (i) in addition to
all other rights and remedies granted to Landlord pursuant to the Lease,
Landlord may cause Contractor to cease the construction of the Premises (in
which case, Tenant shall be responsible for any delay in the Substantial
Completion of the Premises caused by such work stoppage as set forth in
Section 5.3 of this Tenant Work Letter), and (ii) all other obligations of
Landlord under the terms of this Tenant Work Letter shall be forgiven until
such time as such default is cured pursuant to the terms of the Lease.

                                    SECTION 8

                            TENANT REMEDIES FOR DELAY

     8.1 LIQUIDATED DAMAGES FOR DELAY IN SUBSTANTIAL COMPLETION. In the event
the Substantial Completion of the Tenant Improvements has not occurred (or been
deemed to have occurred) by September 30, 1999 (as such date may be adjusted for
Excusable Delays), Landlord shall credit Tenant with two (2) days of free Base
Rent for each day and every day that Substantial Completion occurs after
September 30, 1999 (as such date may be adjusted for Excusable Delays) through
and including October 7, 1999 (as such date may be adjusted for Excusable
Delays) and, thereafter, with one (1) day of free Base Rent for each and every
day that Substantial Completion occurs after October 7, 1999 (as may be adjusted
for Excusable Delays).

     LANDLORD AND TENANT AGREE THAT TENANT'S ACTUAL DAMAGES IN THE EVENT OF A
     DELAY IN THE SUBSTANTIAL COMPLETION DATE BEYOND THE ESTIMATED LEASE
     COMMENCEMENT DATE (AS MAY BE ADJUSTED), WOULD BE EXTREMELY DIFFICULT OR
     IMPRACTICABLE TO DETERMINE AND THAT THE AMOUNTS DESIGNATED ABOVE AS
     LIQUIDATED DAMAGES PAYABLE BY LANDLORD TO TENANT IN SUCH EVENTS ARE EACH
     REASONABLE AMOUNTS TO BE SET AS DAMAGES FOR SUCH EVENTS UNDER THE
     CIRCUMSTANCES EXISTING AT THE TIME THIS LEASE HAS BEEN ENTERED INTO. IN
     CONSIDERATION OF THE PAYMENT OF LIQUIDATED DAMAGES, EXCEPT AS EXPRESSLY
     PROVIDED IN SECTION 8.2 BELOW, TENANT SHALL BE DEEMED TO HAVE WAIVED ALL
     OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN EQUITY DUE TO SUCH DELAY
     INCLUDING ANY RIGHTS TO SPECIFIC PERFORMANCE TENANT MAY OTHERWISE HAVE.

               Tenant: /s/ [Illegible]        Landlord: /s/ [Illegible]
                      ---------------------            ---------------------

     8.2 TERMINATION RIGHTS.

          8.2.1 DEFINITION OF OUTSIDE DATE. The term "OUTSIDE DATE" shall mean
the date which is five (5) months after the date for any Major Project Milestone
specified in the Construction Schedule, as such five (5) month period may be
extended by any Excusable Delay (subject to Section 8.2.4 below).

          8.2.2 OUTSIDE DATE TERMINATION. In the event that any Major Project
Milestone has not occurred by the Outside Date for such Major Project Milestone,
then the sole remedy of Tenant (in addition to the remedy specified in Section
8.1 above) shall be the right to deliver a notice to Landlord (the "OUTSIDE DATE
TERMINATION NOTICE") electing to terminate this Lease effective upon receipt of
the Outside Date Termination Notice by Landlord (the "EFFECTIVE DATE"). However,
until the Lease Commencement Date for Building 2 occurs, Tenant may elect to
terminate the leases of any or all of the Adjacent Buildings effective as of the
Effective Date by giving to Landlord notice thereof in the Outside Date
Termination Notice. Landlord and


                                   EXHIBIT B
                                      -14-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

Tenant acknowledge that Tenant's right to terminate any of the Adjacent Building
Leases pursuant to this Section 8.2 shall cease as of the Lease Commencement
Date for Building 2. The Outside Date Termination Notice must be delivered by
Tenant to Landlord, if at all, not earlier than the applicable Outside Date and
not later than ten (10) business days after the applicable Outside Date. If
Tenant timely delivers the Outside Date Termination Notice to Landlord, then
Landlord shall have the right to suspend the Effective Date for a period ending
thirty (30) days after the original Effective Date. In order to suspend the
Effective Date, Landlord must deliver to Tenant, within ten (10) business days
after Landlord's receipt of the Outside Date Termination Notice, a written
statement from the general contractor certifying that it is such contractor's
best, good faith judgment that the applicable Major Project Milestone will occur
within thirty (30) days after the original Effective Date. If the applicable
Major Project Milestone occurs within said thirty (30) day suspension period,
then the Outside Date Termination Notice shall be of no further force or effect;
if, however, the applicable Major Project Milestone does not occur within said
thirty (30) day suspension period, then this Lease (and the other leases so
specified in the Outside Date Termination Notice) shall terminate as of the date
of expiration of such thirty (30) day period.

          8.2.3 PROSPECTIVE EXTENSION OF OUTSIDE DATE. If, prior to any
applicable Outside Date, Landlord determines that any particular Major Project
Milestone will not occur by the applicable Outside Date, Landlord shall have the
right to deliver a written notice ("OUTSIDE DATE EXTENSION NOTICE") to Tenant
stating Landlord's opinion as to the date by which the Major Project Milestone
will occur and Tenant shall be required, within ten (10) business days after
receipt of such Outside Date Extension Notice, to either deliver the Outside
Date Termination Notice (in which case this Lease (and the other Adjacent
Building Leases so specified in the Outside Date Termination Notice subject to
the restrictions specified in Section 8.2.2 above) shall terminate) or to agree
to extend the applicable Outside Date (and any subsequent Outside Dates for the
Building) to that date which is set by Landlord in the Outside Date Extension
Notice. Failure of Tenant to so respond in writing within said five (5) business
day period shall be deemed to constitute Tenant's agreement to extend the
applicable Outside Date (and any subsequent Outside Dates for the Building) to
that date which is set by Landlord in the Outside Date Extension Notice. If such
Outside Date is so extended, Landlord's right to request Tenant to elect to
either terminate or further extend such Outside Date shall remain and shall
continue to remain, with each of the notice and response periods set forth
above, until the applicable Major Project Milestone occurs or until this Lease
is terminated.

          8.2.4 LIMITATION ON FORCE MAJEURE EXTENSIONS. Notwithstanding anything
to the contrary contained in this Section 8.2 above, the date for any Major
Project Milestone specified in the Construction Schedule may only be extended
for Force Majeure (whether or not such Major Project Milestone is also extended
pursuant to Section 8.2.1 for reasons other than Force Majeure) for up to a
maximum of one (1) year. If Force Majeure extends any Major Project Milestone
for one (1) year, without limitation on Tenant's rights under Section 8.2.2
above, Tenant shall have the right to deliver a notice to Landlord (the "FORCE
MAJEURE TERMINATION NOTICE") electing to terminate this Lease effective upon
receipt of the Force Majeure Termination Notice by Landlord (the "FORCE MAJEURE
EFFECTIVE DATE"). However, until the Lease Commencement Date for Building 2
occurs, Tenant may elect to terminate the leases of any or all of the Adjacent
Buildings effective as of the Force Majeure Effective Date by giving to Landlord
notice thereof in the Force Majeure Termination Notice. Landlord and Tenant
acknowledge that Tenant's right to terminate any Adjacent Building Leases
pursuant to this Section 8.2.4 shall cease as of the Lease Commencement Date for
Building 2. The Force Majeure Termination Notice must be delivered by Tenant to
Landlord, if at all, within thirty (30) calendar days after the date upon which
Tenant's right to deliver the Force Majeure Termination Notice to Landlord is
triggered. However, if Force Majeure extends for greater than one (1) year,
thereby triggering Tenant's right to deliver the Force Majeure Termination
Notice to Landlord, and if Tenant elects not to deliver such Force Majeure
Termination Notice to Landlord, and if Force Majeure continues for an additional
year, then Tenant shall have an additional right to deliver the Force Majeure
Termination Notice to Landlord within thirty (30) days after the expiration of
such two (2) year period based upon the date for any Major Project Milestone
being extended by Force Majeure for two (2) years. However, if Tenant does not
elect to deliver the


                                   EXHIBIT B
                                      -15-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

Force Majeure Termination Notice to Landlord based upon the two (2) year
extension for Force Majeure, Tenant shall not thereafter have the right to
deliver the Force Majeure Termination Notice to Landlord whether or not Force
Majeure continues beyond such two (2) year period.

          8.2.5 ACCELERATION OF TERMINATION RIGHT FOR LACK OF REASONABLE
ASSURANCES. If one (1) or more Force Majeure events extends the date for any
Major Project Milestone (whether or not such Major Project Milestone is also
extended pursuant to Section 8.2.1 for reasons other than Force Majeure) for a
period in excess of the "Accelerated Force Majeure Period" (as that term is
defined below) and if Landlord does not deliver to Tenant within fifteen (15)
days thereafter a statement providing reasonable assurances to Tenant that the
Force Majeure delay will last for a total period of less than one (1) year,
Tenant shall be entitled to deliver the Force Majeure Termination Notice to
Landlord within ten (10) days after the expiration of such fifteen (15) day
period (rather than waiting until the expiration of the one (1) year period
specified in Section 8.2.4 above). The one (1) year period described in this
Section 8.2.5 above may be referred to as the "AGGREGATE FORCE MAJEURE PERIOD"
and the fifteen (15) day period described in this Section 8.2.5 above may be
referred to as the "DELIVERY PERIOD." The term "ACCELERATED FORCE MAJEURE
PERIOD" shall mean a total of one hundred eighty (180) days of delay for events
of Force Majeure which may affect office construction projects in San Diego
County generally (e.g., labor strikes, material shortages and permit
moratoriums) or a period of one hundred twenty (120) total days of Force Majeure
delay for Force Majeure events which are particular to the Project and do not
apply to office construction in general. Notwithstanding the foregoing, Landlord
shall have five (5) separate options to extend the Accelerated Force Majeure
Period and the Aggregate Force Majeure Period for thirty (30) days each ("FORCE
MAJEURE EXTENSION OPTIONS"). In order to exercise a Force Majeure Extension
Option, Landlord must so notify Tenant in writing within the Delivery Period (as
to the first (1st) Force Majeure Extension Option) or prior to the expiration of
the previous thirty (30) day period for extension of the Accelerated Force
Majeure Period (with respect to each of the four (4) subsequent Force Majeure
Extension Options). In addition, in order to properly exercise any such Force
Majeure Extension Option, Landlord must pay to Tenant Forty-Five Thousand
Dollars ($45,000.00) within thirty (30) days after Landlord's notice to Tenant
of the exercise of such option, for each option so exercised. If Landlord
properly exercises any such Force Majeure Extension Option, the Accelerated
Force Majeure Period and the Aggregate Force Majeure Period shall each be
extended for thirty (30) days for each such option so exercised.

                                    SECTION 9

                             CONTINUITY OF LANDLORD

     Landlord acknowledges and agrees that Tenant has entered into this Lease in
reliance upon Landlord's reputation and ability to do all things necessary for
the proper construction and lien free completion of all Project improvements.
Accordingly, Landlord agrees not to sell its interest in any uncompleted
building in the Project (or otherwise assign its interest and duties hereunder
as to any uncompleted building in the Project) until after the Lease
Commencement Date has occurred for the initial Floor Group in Building 3 (or if
the Lease for Building 3 is terminated, until the termination date for such
Lease) except for (i) transfers between or among entities affiliated with Kilroy
Realty Corporation (i.e., entities controlled, controlled by or under common
control with Kilroy Realty Corporation); (ii) a merger or sale of all or
substantially all of the assets, stock, partnership interests and/or limited
liability company interests of, or owned by, Kilroy Realty Corporation and/or
its affiliates; (iii) a sale, contribution or distribution to a partnership,
corporation, joint venture, limited liability company or other ownership
structure, where Kilroy Realty Corporation or its affiliate(s) retains
responsibility for managing the development of the Project; or (iv) any transfer
resulting from foreclosure, trustee's sale or deed in lieu of foreclosure. Upon
the Lease Commencement Date for the initial Floor Group in Building 3, the
restrictions specified in this Section 9 shall terminate..


                                   EXHIBIT B
                                      -16-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>

                                   SCHEDULE 1

                              CONSTRUCTION SCHEDULE


                          MILESTONE DATES - BUILDING 1


                           BASE, SHELL AND CORE
<TABLE>
<CAPTION>
         Event                                                             Date
         -----                                                             ----
<S>      <C>                                                               <C>
 1       Completion of Schematic Design                                    Done
 2       Completion of Base, Shell and Core Working Drawings               Done
*3       Submittal to City of San Diego for Permits                        Done
*4       Obtaining all Building and other Permits for Construction of
         Base, Shell and Core                                              Done
*5       Commencement of Construction                                      Done
 6       Completion of Slab-on-Grade                                       Done
*7       Completion of Vertical Construction                               Done
 8       Completion of Roof Framing                                        Done
*9       Completion of Construction of Base, Shell and
          Core/Certificate of Occupancy/Shell Completion Date              September 30, 1999
</TABLE>
Notes: Items marked with an "*" are Major Project Milestones

                           TENANT IMPROVEMENTS
<TABLE>
<S>      <C>                                                               <C>
1.       Delivery by Tenant of Final Space Plan for Landlord Approval      May 7, 1999

2.       Delivery by Tenant of Working Drawings for Landlord Approval      June 7, 1999
</TABLE>


                                   SCHEDULE 1
                                       -1-

                                            PEREGRINE SYSTEMS CORPORATE CENTER
                                                           [Peregrine Systems]
<PAGE>
                                  SCHEDULE 2

                         STANDARD IMPROVEMENT PACKAGE


TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



1.0    PARTITIONS
--------------------------------------------------------------------------------

1.1    1 HOUR PARTITION: (One-Hour Rated Assembly)

       a.   Provide metal studs at walls & sub-ceiling (where indicated as a
            'tunnel' assembly); size, gauge and spacing per details
            illustrated on drawings.
       b.   5/8" Type "X" gypsum board, one layer each side, attached to
            studs with screws as required by code and as recommended by the
            Gypsum Association.
       c.   Continuous fire tape at all joints to maintain fire rated
            assembly.
       d.   All physical penetrations through fire rated assembly shall be
            sealed with UL Listed and approved sealant compounds.
       e.   All mechanical duct penetrations through one-hour assemblies shall
            be fitted with 20-minute rated combination smoke/fire dampers. Such
            assemblies shall be tied to the central fire alarm system as
            required by code.
       f.   Diagonal bracing shall be installed per details illustrated on
            drawings.
       g.   Install metal casing beads at all exposed corners and edges, as
            applicable.
       h.   All joints and surfaces shall be taped and sanded smooth to
            receive primer and paint or wallcovering (Note: no texture on
            painted walls; all painted surfaces shall be 'smooth').

1.2    2 HOUR PARTITION: (Two-Hour Rated Assembly)


       a.   Provide metal studs at walls & sub-ceiling (where indicated as a
            'tunnel' assembly); size, gauge and spacing per details
            illustrated on drawings.
       b.   5/8" Type "X" gypsum board, two layers each side, attached to
            studs with screws as required by code and as recommended by the
            Gypsum Association. Second layer of gypsum board shall be
            installed at right angles over the first layer with joints
            staggered.
       c.   Continuous fire tape at all joints to maintain fire rated
            assembly.
       d.   All physical penetrations through fire rated assembly shall be
            sealed with UL Listed and approved sealant compounds.
       e.   All mechanical duct penetrations through one-hour assemblies shall
            be fitted with 90-minute rated combination smoke/fire dampers. Such
            assemblies shall be tied to the central fire alarm system as
            required by code.
       f.   Diagonal bracing shall be installed per details illustrated on
            drawings.
       g.   Install metal casing beads at all exposed corners and edges, as
            applicable.
       h.   All joints and surfaces shall be taped and sanded smooth to
            receive primer and paint or wallcovering (Note: no texture on
            painted walls; all painted surfaces shall be 'smooth').



                                  SCHEDULE 2
                                      -1-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



1.3    STANDARD INTERIOR OFFICE PARTITION:

       a.   Provide 2-1/2"-25 gage metal studs at 16" O.C. at walls (or as
            otherwise noted) per details illustrated on drawings.
       b.   5/8" standard gypsum board, one layer each side, attached to
            studs with screws as required by code and as recommended by the
            Gypsum Association.
       c.   Partition height shall extend to underside of suspended
            acoustical ceiling grid (+10'-0" AFF, nominal); or shall extend 6"
            above ceiling grid plane. Refer to wall types and referenced
            details illustrated on drawings.
       d.   Partitions terminating at curtainwall and/or storefront framing
            systems shall receive a continuous neoprene sound gasket between
            the mullion and the metal wall trim cap.
       e.   Diagonal bracing shall be installed per details illustrated on
            the drawings.
       f.   Install metal casing beads at all exposed corners and edges, as
            applicable.
       g.   All joints and surfaces shall be taped and sanded smooth to
            receive primer and paint or wallcovering (Note: no texture on
            painted walls; all painted surfaces shall be 'smooth').


1.4    STANDARD INTERIOR OFFICE ACOUSTICAL PARTITION:

       a.   Provide 2-1/2"-25 gage metal studs at 16" O.C. at walls (or as
            otherwise noted) per details illustrated on drawings.
       b.   5/8" standard gypsum board, one layer each side, attached to
            studs with screws as required by code and as recommended by the
            Gypsum Association.
       c.   Partition height shall extend from floor slab to underside of
            metal or roof deck above (+13'-6" AFF, nominal). Refer to wall
            types and referenced details illustrated on drawings.
       d.   Partitions terminating at curtainwall and/or storefront framing
            systems shall receive a continuous neoprene sound gasket between
            the mullion and the metal wall trim cap.
       e.   Provide continuous bead of acoustical sealant between bottom edge
            of gypsum board panels and floor slab. Cut gypsum board panels at
            top of wall to fit undulations of metal deck structures and seal
            all gaps with drywall taping compound.
       f.   Install R-8 unfaced fiberglass sound batts in cavity between
            studs, full height of partition.


                                  SCHEDULE 2
                                      -2-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



2.0    COLUMN COVERS, CORE WALLS, PERIMETER SOFFITS
--------------------------------------------------------------------------------

       a.   Provide either 1-1/2" or 2-1/2"-25 gage metal studs at 16" O.C.
            (or as otherwise noted or configured) per details illustrated on
            drawings.
       b.   Furnish and install 5/8" standard gypsumboard, one layer around
            interior and perimeter columns, attached to studs with screws as
            required by code and as recommended by the Gypsum Association.
       c.   Provide and install R-8 unfaced sound batt insulation at all
            furred columns where plumbing lines occur, typical.
       d.   All joints and surfaces shall be taped and sanded smooth to
            receive primer and paint or wallcovering (Note: no texture on
            painted walls; all painted surfaces shall be 'smooth').


3.0    DOORS, FRAMES, HARDWARE
--------------------------------------------------------------------------------

3.1    ONE-HOUR CORRIDOR DOOR ASSEMBLY:

       a.   Doors shall be WEYERHAEUSER Architectural Doors, Solid Core Wood
            Veneer Door with matching edges, 20 minute rated, 3'-0" x 8'-10" x
            1-3/4" (U.N.O.). Doors shall conform to A.W.I. standards and carry
            a lifetime guarantee. Doors shall be pre-finished with Weyerhaeuser
            Plain Sliced Cherry with Standard Finish 28-95 "Toast". All
            applicable listing labels shall be provided and securely fastened
            to doors.

       b.   Aluminum door frames shall be WESTERN INTEGRATED MANUFACTURING,
            throat size as varies with partition type and thickness, minimum 20
            minute rated with applicable listing labels provided and securely
            fastened to frame. Color: Black Anodized.

       c.   Hardware:

            i.      Single

            4 each  Butts
            1 each  Lockset
            1 each  Closer
            1 each  Stop
            1 each  Smokeseal



                                  SCHEDULE 2
                                      -3-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)

            ii.     Pair

            8 each  Butts
            2 each  Closer
            1 each  Lockset
            1 each  Dummy
            1 each  Flushbolt
            1 each  Coordinator
            1 each  Astragal
            2 each  Stop
            2 each  Smokeseal
            1 each  Dustproof
                    Strike
            2 each  Electro Magnetic
                    Hold Open

3.2    INTERIOR DOOR ASSEMBLY:

       a.   Doors shall be WEYERHAEUSER Architectural Doors, Solid Core Wood
            Veneer Door with matching edges, 3'-0" x 8'-10" x 1-3/4"
            (U.N.O.). Doors shall conform to A.W.I. standards and carry a
            lifetime guarantee. Doors shall be pre-finished with Weyerhaeuser
            Plain Sliced Cherry with Standard Finish 28-95 "Toast". All
            applicable listing labels shall be provided and securely fastened
            to doors.

       b.   Aluminum door frames shall be WESTERN INTEGRATED MANUFACTURING,
            throat size as varies with partition type and thickness. Color:
            Black Anodized.

       c.   Hardware.

            i.      Single

            4 each  Butts
            1 each  Latchset
            1 each  Stop

            ii.     Single Locking

                    a. All the above. In place of latchset, provide lockset.

            iii.    Single with Closer

                    a. All the above, plus closer.



                                  SCHEDULE 2
                                      -4-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



            iv.     Pair

            8 each  Butts
            2 each  Closer
            1 each  Latchset
            1 each  Dummy
            1 each  Flushbolt
            1 each  Coordinator
            1 each  Astragal
            2 each  Stop
            1 each  Dustproof
                    Strike


4.0    SUSPENDED GRID CEILINGS
--------------------------------------------------------------------------------

4.1    GENERAL INSTALLATION REQUIREMENTS:

       a.   Install ceiling under the supervision of an experienced
            superintendent. Consult with and coordinate installation with other
            trades. Install ceiling using laser level within a tolerance of
            1/8" in 12 feet in any direction.

       b.   Pattern: Unless otherwise indicated or specified, install
            ceilings in a regular pattern without border, joint lines parallel
            to walls. Install acoustical units symmetrically about centerlines
            of each room or space (unless specifically noted otherwise on
            drawings), avoiding narrow units at walls.

       c.   Framing for Lighting and Mechanical Fixtures: Obtain necessary
            data from other trades and provide additional hanger wire and
            framing in suspended grids as required to support lighting and
            mechanical fixtures.

       d.   Lateral Bracing: Lateral bracing for suspended ceiling must be
            provided (UBC Table 23-j). Where ceiling loads are less than 5PSF
            and not supporting interior partitions, ceiling bracing shall be
            provided by four (4) No. 12 gauge wires secured to the main runner
            within 2 inches from the cross runner intersection and splayed 90
            degrees from each other at an angle not exceeding 45 degrees from
            the plane of the ceiling. These horizontal restraint points shall
            be placed 12 feet o.c. in both directions with the first point
            within 4 feet from each wall. Attachment of the restraint wires to
            the structure above shall be adequate for the load imposed.


                                  SCHEDULE 2
                                      -5-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



       e.   Hanger Wires: Space wires at maximum 48" centers along main tees
            and connect to structure above. Provide: 2 safety wires per
            mechanical diffuser, 2 per light fixture and 4 at main runner
            within 3" of fixture.

       f.   Ceiling Offsets: Provide trim pieces and/or accessories where
            illustrated on drawings or as necessary to properly finish or
            transition offsets or ceiling breaks.

       g.   Seismic Bracing: Provide splayed bracing wires as shown and
            required by the Uniform Building Code. Provide compression struts
            at 12'-0" o.c., both directions fastened to the main runner and a
            structural member above. Repair, Cleaning and Completion: Remove
            and replace all discolored, broken or damaged materials. Completed
            ceilings shall present a smooth level surface free of edge or corner
            offsets, cupping, scratches, gouges or other defects. Clean exposed
            surfaces and remove foreign matter.


4.2    2 x 2 ACOUSTICAL CEILING:

       a.   Suspension Grid: ARMSTRONG, "Suprafine" XL 9/16" Exposed Tee.
       b.   Ceiling Tile: ARMSTRONG, "Hi-LR Ultima" RH90 2 x 2 #1792 beveled
            tegular lay in.
       c.   Ceiling heights vary and are as noted on plans.


4.3    DRYWALL CEILING:

       a.   Carrying channel at 24" on center.
       b.   1-1/2" cold-rolled carrying channel at 48" on center with hanger
            wire spaced a maximum of 48" on center along carrying channel.
       c.   5/8" gypsum wallboard.
       d.   Seismic bracing as required per the Uniform Building Code and as
            noted on drawings.
       e.   All joints and surfaces shall be taped and sanded smooth to
            receive primer and paint. (Note: no texture; all painted surfaces
            shall be 'smooth').
       f.   Locate all mechanical and electrical equipment requiring access
            in 2' x 2' lay-in ceiling to avoid access doors in gypsum board
            ceilings, where possible.


                                  SCHEDULE 2
                                      -6-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



5.0    FINISHES
--------------------------------------------------------------------------------

       NOTE: PROVIDE CUTTINGS, BRUSH-OUTS, SAMPLES, ETC. OF ACTUAL DYE LOTS,
       OR PRODUCTION RUNS FOR ARCHITECT'S AND INTERIOR DESIGNER'S APPROVAL.

5.1    PAINT:

       a.   Provide paint color as specified on finish plans - one (1) coat
            primer base, two (2) coats flat water base latex acrylic.

5.2    CARPET:

       a.   Standard multicolored loop tenant improvement carpet shall be:
            Face weight: 32 oz.;
            Guage: 1/10 inch;
            Backing: Action Bac. Direct glue installation.

       b.   Standard cut pile tenant improvement carpet shall be:
            Face weight: 32 oz.;
            Guage: 1/10 inch;
            Backing:  Action Bac. Direct glue installation.

5.3    VINYL COMPOSITION TILE:

       a.   Vinyl composition tile (VCT) shall be: ARMSTRONG, "Imperial
            Texture". Colors as selected from standard range.

5.4    RESILIENT SHEET FLOORING:

       a.   Resilient sheet flooring shall be: ARMSTRONG, "Standard
            Excelon". Colors as selected from standard range.

5.5    RUBBER BASE:

       a.   Rubber base shall be: ROPPE, 4" topset; straight base at carpeted
            areas and coved at all hard surface areas. Colors as selected from
            standard range.


                                  SCHEDULE 2
                                      -7-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]


<PAGE>

TENANT IMPROVEMENT STANDARD SPECIFICATIONS                  KILROY CARMEL CENTER
--------------------------------------------------------------------------------
CARRIER JOHNSON PROJECT NO. 4246.00                          MAY 4, 1999 (DRAFT)



6.0    MILLWORK

11.0   GENERAL:

       a.   See millwork plans, details and notes for configuration and
            fabrication specifications.
       b.   Millwork shops drawings shall be WIC approved.
       c.   All fabrications shall conform to WIC standards for "Premium
            Grade" U.N.O. and be certified as such.
       d.   Submit shop drawings, samples, finishes for Architect's and
            Interior Designer's approval prior to fabrication and
            installation.



                                  SCHEDULE 2
                                      -8-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION

SECTION 15300 - FIRE PROTECTION SYSTEMS


A.     GENERAL

       All work shall be in strict conformance with but not limited to:

            Uniform Plumbing Code
            Uniform Building Code
            Uniform Fire Code
            Local Fire Department Regulations
            National Fire Protection Association
            All other Authorities Having Jurisdiction


B.     SCOPE OF WORK

       1.   Work Included:

            a.   This contract shall include all work necessary for a
                 complete automatic fire sprinkler system for the tenant
                 improvement of the shell building.
            b.   The shell building includes necessary standpipes, tamper
                 switches, flow and alarm switches and alarm bell.



B.     SYSTEM REQUIREMENTS

       1.   The entire tenant improvement of the building shall be provided
            with a hydraulically calculated automatic fire sprinkler system for
            each occupancy classification.

       2.   Minimum densities for areas of coverage shall be determined by
            the City of San Diego Fire Department. Hydraulically calculate water
            protection systems. Form sheets, summary sheets, detailed work
            sheets and graphs shall be in strict accordance with the required
            and advisory provisions of NFPA 13; 7-3.

       3.   Tenant spaces shall be sized for Ordinary Hazard Group 1.

       4.   The system shall be designed for earthquakes and shall include
            all materials necessary to provide the system complete and ready
            for use. Design and install the system to give full consideration
            to blind spaces, piping, electrical equipment, ductwork and other
            construction and equipment in accordance with detailed drawings to
            be submitted for approval.

       5.   Devices and equipment for fire protection service shall be UL
            listed and FM approved for the specific purpose for which the item
            is used in sprinkler systems.

PRELIMINARY DRAFT                                DIVISION 15 - FIRE PROTECTION
May 4, 1999                                                     PAGE 15300 - 1

                                  SCHEDULE 2
                                      -9-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION



C.     MATERIALS

       1.   Buried pipe and fittings: N/A

       2.   Above ground pipe and fittings:

            a.   2-inch and smaller: ASTM A53 or ASTM A135 Schedule 40 black
                 steel pipe with ANSI B16.3 Class 150 malleable iron threaded
                 fittings, Dynaflow or equal.

            b.   2 1/2-inch and larger: ASTM A135 Schedule 40 black steel
                 pipe with ANSI B16.3 Class 150 malleable iron threaded
                 fittings, Dynaflow pipe, or rolled groove pipe with mechanical
                 joint grooved coupling fittings; or ASTM A135 Schedule 10
                 welded steel pipe with rolled groove ends and mechanical
                 joint grooved coupling fittings. Cut grooving of pipe will not
                 be permitted.

            c.   Flanged fittings: ANSI B16.1 Class 125 cast iron.

            d.   Flanges: ANSI B16.1 Class 125 cast iron.

       3.   Gate Valves:

            a.   4-inch and larger: UL listed and labeled, FM approved, 175 psi
                 OS&Y type, iron body, bronze mounted.
            b.   3-inch and smaller: UL listed and labeled, FM approved, 175
                 psi OS&Y type, bronze body gate with solid wedge.

       4.   Check Valves: UL listed and labeled, FM approved, 175 psi iron
            body, bronze mounted, horizontal swing check valve with bolted
            bonnet and flanged end connections. Check valves shall be designed
            for replacement of internal parts without removal of valve body
            from piping with the exception that water check valves may be used
            with freestanding Fire Department Connections.

       5.   Butterfly Valves: UL listed and labeled. FM approved, 175 psi
            bronze body, threaded ends, stainless steel disc and stem, two
            inch maximum pipe size with integral tamper switch, and geared
            slow-close mechanism.

       6.   Drain Valve: UL listed and labeled, FM approved, 175 psi bronze
            body gate valve, OS&Y type, solid wedge bronze disc; or class 150,
            400 lb. WWP, conventional port, bronze, two-piece construction ball
            valve.

       7.   Sprinkler Heads:

            a.   Spacing and number of heads shall comply with recommendations
                 of NFPA 13 for type of occupancy involved.

            b.   Sprinkler Heads: UL listed and labeled and FM approved for
                 installation in the hazard classification as indicated and by
                 the agencies listed above; 165 degree F rated fusible link,
                 1/2 inch orifice, standard response.

PRELIMINARY DRAFT                                DIVISION 15 - FIRE PROTECTION
May 4, 1999                                                     PAGE 15300 - 2

                                  SCHEDULE 2
                                     -10-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION

                 .1   Finished ceiling Areas: Recessed, chrome-plated brass
                      pendant heads, matching chrome plated adjustable metal
                      escutcheon.
                 .2   Exposed Piping: Upright or pendant type; natural brass
                      finish.


D.     EQUIPMENT

       1.   N/A



                                END OF SECTION

PRELIMINARY DRAFT                                DIVISION 15 - FIRE PROTECTION
May 4, 1999                                                     PAGE 15300 - 3

                                  SCHEDULE 2
                                     -11-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION


SECTION 15400 - PLUMBING SYSTEMS DESCRIPTIONS

A.     GENERAL

       All work shall be in strict conformance with but not limited to:

            Uniform Plumbing Code
            Uniform Building Code
            Uniform Fire Code
            Local Fire Department Regulations
            National Fire Protection Association
            All other Authorities Having Jurisdiction

B.     SCOPE OF WORK

       1.   Work Included:

            a.   This contract shall cover all plumbing systems for the tenant
                 improvement design. Utilities shall be connected to and
                 extended from points-of-connection from the original building
                 shell.

            b.   Piped utilities required by the installation of HVAC
                 equipment/systems for the tenant improvements to the building.

       2.   Work Excluded:

            a.   Plumbing sanitary and vent mains, potable water mains,
                 condensate drains for building shell rooftop units, roof and
                 storm water mains, shell toilet rooms and janitors closets.

B.     SYSTEM REQUIREMENTS

       1.   Principal systems to be included in the tenant design:

            a.   Convenience sinks required by tenant for lunch/coffee rooms.
                 With local instahot water heater.

            b.   Potable cold water for drinking fountain system throughout the
                 building.

            c.   All drain piping from any HVAC equipment installed as part
                 of the tenant improvement that would generate condensate.

            d.   An hydraulically calculated automatic fire sprinkler system,
                 extended from the building shell to be installed in the tenant
                 improvement ceilings.

       2.   Materials:

            a.   Soil, Waste and Vent Above Ground: Service-weight, no-hub
                 cast-iron pipe and fittings.

PRELIMINARY DRAFT                                           DIVISION 15-PLUMBING
May 4, 1999                                                       PAGE 15400 - 1

                                    SCHEDULE 2
                                       -12-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION

            b.   Soil, Waste and Vent Below Ground and to 5'-0" Outside of
                 Building: Service-weight, cast-iron hub & spigot pipe and
                 fittings.

            c.   Water and Condensate Drain Piping Above Ground: Type "M"
                 hard-drawn copper type, ASTM B88, and wrought copper fittings,
                 ANSI B1 6.22. All hot water supply piping shall be insulated
                 with 1 inch thick fiberglass insulation for sizes up to 2-1/2
                 inch size, 1-1/2 inch thick above 2-inch size piping.
                 Condensate drain piping above ceilings shall be insulated.

            d.   Water Piping Below Ground 4-inches and Smaller: Type "K"
                 hard-drawn copper tubing, ASTM B88, and wrought copper fittings
                 ANSI B 16.22, silver brazed joints.

            e.   Natural Gas Piping: Buried piping shall be Polyethylene
                 (P.E.) per ASTM D2513. Above grade shall be Schedule 40 black
                 steel pipe per ASTM D2513.

            f.   Indirect Drains: Type "M" copper fittings, ANSI B16.22,
                 solder joint type. Insulate with Manville Micro-Lok 650AP.

       3.   Equipment:
            a.   N/A



       4.   Plumbing Fixtures:

            a.   Sinks as required and described in architectural floor
                 plans. If no description is provided, install 20 gage
                 stainless steel sink with standard single lever faucet.

            b.   Electric Water Cooler: Barrier-free, wall hung water cooler
                 with push bar control and equipped for handicap usage.

       5.   Drains:

            a. N/A


                                END OF SECTION



PRELIMINARY DRAFT                                           DIVISION 15-PLUMBING
May 4, 1999                                                       PAGE 15400 - 2

                                    SCHEDULE 2
                                       -13-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION

SECTION 15800 - HEATING, VENTILATING AND AIR CONDITIONING SYSTEMS DESCRIPTIONS

A.     CODES AND REGULATIONS

       All work shall be in strict conformance with, but not limited to:

            Uniform Mechanical Code - UMC 1997
            Uniform Building Code - UBC 1997
            CEC Title 24 Energy Standards
            Fire Department Regulation
            City of San Diego Requirements
            All other Authorities Having Jurisdiction

B.     SCOPE OF WORK

       1.   Tenant Improvement (TI) Work:

            a.   All main air moving equipment including all air handling
                 units, exhaust fans, hot water boilers and pumps, variable air
                 volume with hot water reheat terminals for the building core
                 and all associated vertical ductwork and heating hot water
                 piping, and DDC control backbone will be installed as part of
                 the shell work. Five rooftop VAV units, one per floor are
                 provided with cooling only, and are based on a nominal 350
                 sf/ton.

            b.   Tenant shall provide all extensions of duct, piping,
                 electronic VAV boxes, DDC thermostats, control power and
                 wiring, smoke/fire dampers, diffusers and grilles for all
                 tenant improvements. Any specialty tenant requirement, such as
                 Kitchen exhaust will be designed and installed during the TI
                 work.

            c.   Any controls associated with the operation of the VAV boxes,
                 reheat coils and equipment added as TI work including
                 sub-control panels and thermostats required for the
                 environmental controls will be done as part of the TI work.

C.     ENVIRONMENTAL DESIGN CONDITIONS

       The following criteria will be used for sizing the heating and
       cooling plants:

       1.   Outdoor Ambient Design Conditions:

                 Summer (mean 0.5%):             83DEG F dB 69DEG F wB
                                                 13DEG F dB outdoor daily range
                 Winter (0.2%):                  42DEG F dB

                 Note: 88DEG F dB, 70DEG F wB is the 0.1% mean temperature: we
                 assume the less conservative 0.5% temperature is acceptable
                 for this project.

       2.   Indoor Conditions for Air Conditioned Area:


PRELIMINARY DRAFT                                         DIVISION 15-MECHANICAL
May 4, 1999                                                       PAGE 15800 - 1

                                    SCHEDULE 2
                                       -14-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION

                 All floors                    70DEG F dB +/- 2DEG F dB (winter)
                                               72F dB +/- 2F dB (Summer)
                                               60% RH (no low end humidity
                                               control)




                 Electrical, Telecommunication   No Temperature Control -
                 Rooms:                          Ventilation only - if Tenant
                                                 Equipment mounted within a
                                                 room requires a controlled
                                                 environment, it shall be
                                                 provided as part of the TI





D.     VENTILATION AIR REQUIREMENTS

       Outdoor air for ventilation will be based on the American Society of
       Heating Ventilation and Air Conditioning Engineers (ASHRAE) Standard
       62-1989, Ventilation for Acceptable Indoor Air Quality.

E.     ENERGY USE AND CONSERVATION

       The Energy Efficiency Standard, Title 24, will be used as the basis of
       the design.

F.     HEATING HOT WATER SYSTEM

       1.   The heating for the building will be by hot water, generated on
            site by a rooftop boiler plant. The boilers, pumps and controls
            will be installed as part of the building shell, along with valved
            riser system to each floor.

       2.   Tenant improvement shall extend the heating hot water system to
            heating coils at each VAV terminal with automatic flow control
            valves, two way solenoids and a three way valve at four of the most
            remote VAV boxes on each floor.

       3.   Heating hot water piping shall be type M copper with wrought
            fittings, insulated.

G.     MISCELLANEOUS VENTILATION/EXHAUST SYSTEMS

       The following exhaust system will be installed within the scope of the
       shell building design, it is assumed that ambient outside air (1) and
       building air (2) (3) shall provide makeup air to the exhausted area:

                 (1)   Elevator Machinery Room on roof.

                 (2)   Electrical/telecom Rooms

                 (3)   Janitors closets.


PRELIMINARY DRAFT                                         DIVISION 15-MECHANICAL
May 4, 1999                                                       PAGE 15800 - 2

                                    SCHEDULE 2
                                       -15-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

KILROY CARMEL CENTER                                    BUILDING STANDARD TENANT
SAN DIEGO, CA                                          IMPROVEMENT SPECIFICATION



H.     TI CONTROLS

       1.   An electronic direct digital control (DDC) system shall
            incorporate stand alone, remote control units at each of the new
            air handling units. Electronic digital control will be provided at
            the zone level.

       2.   The controls will automatically operate the HVAC system and provide
            the necessary change-over commands for the occupied and non-occupied
            temperature and ventilation schedules. The system shall provide the
            necessary monitoring, alarm, and by-pass for efficient energy
            management.

I.     Specification Sections

       The following specification sections will be provided:

       1.   Division 15

            a.   Section 15010   Mechanical General Requirements

            b.   Section 15060   Hangers and Supports

            c.   Section 15090   Mechanical Identification

            d.   Section 15240   Vibration and Seismic Isolation

            e.   Section 15250   Mechanical Insulation

            f.   Section 15500   HVAC Pumps, Piping, Valves, and Accessories

            g.   Section 15850   Ductwork and Accessories

            h.   Section 15900   HVAC Controls

            i.   Section 15990   Testing, Adjusting and Balancing

                                                  END OF SECTION



PRELIMINARY DRAFT                                         DIVISION 15-MECHANICAL
May 4, 1999                                                       PAGE 15300 - 3

                                    SCHEDULE 2
                                       -16-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

Section 16050                                      BASIC ELECTRICAL REQUIREMENTS

PART 1        GENERAL REQUIREMENTS

1.1           RELATED DOCUMENTS

1.1.1         The general conditions and Division 1 are part of this section
              and the contract for this work and apply to this section as fully
              as if repeated herein. This section, 16050, applies to all
              Division 16 categories.

1.1.2         Reference to other sections: The applicable requirements from
              other Division 16 sections shall form a part of the electrical
              work and each section shall be referenced to the other sections.

1.2           EXPLANATION OF DRAWINGS

1.2.1         These construction documents are intended to be diagrammatic
              and reflect the scope, quality, and character of the work to be
              performed; all miscellaneous materials and work, though not
              specifically mentioned, shall be furnished and installed by the
              Contractor.

1.2.2         The Contractor shall confirm sizes, dimensions, weights and
              locations of all equipment prior to installation. Dimensioned
              architectural drawings shall take precedence over diagrammatic
              layouts shown on these contract documents.

1.2.3         The specifications and the drawings are an integral document and
              shall be considered complementary to each other. In the case of a
              conflict between the specifications and the drawings, the more
              constricting condition shall be enforced.

1.2.4         The Contractor shall be responsible for reporting any
              discrepancies, errors, or omissions noted prior to bid.

1.2.5         It is the intent of the drawings to indicate schematic routing
              and placement of devices, fixtures, equipment and conduit. Exact
              locations shall be dimensioned on these documents or in other
              trade documents (architectural, mechanical, etc.). Offsets,
              elbows, or extensions shall be furnished and installed by the
              Contractor as necessary to avoid structure, piping, clearances
              and to provide a complete and workmanlike installation.

1.3           QUALITY ASSURANCE

1.3.1         All work, material or equipment shall comply with the codes,
              ordinances and regulations of the local government having
              jurisdiction, including the regulations of serving utilities and
              any participating government agencies having jurisdiction.

1.3.2         All electrical work shall comply with the latest edition under
              enforcement of the following codes and standards or other
              regulations which may apply:

              .1   American Disabilities Act
              .2   American National Standards Institute
              .3   American Society for Testing and Materials
              .4   Institute of Cable Engineers Association

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-1

                                    SCHEDULE 2
                                       -17-
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                                                             [Peregrine Systems]

<PAGE>


              .5   Institute of Electrical and Electronic Engineers
              .6   Local Code Enforcement Agency Requirements
              .7   National Electrical Code
              .8   National Electrical Contractor's Association
              .9   National Electrical Manufacturer's Association
              .10  National Electrical Testing Association
              .11  National Fire Protection Association
              .12  Underwriters' Laboratories, Inc.
              .13  Uniform Building Code

              No requirement of these drawings and specifications shall be
              construed to void any of the provisions of the above standards.
              Any conflicts or changes required to the contract documents in
              order to obtain compliance with applicable codes shall be brought
              to the immediate attention of the Owner's Representative by the
              Contractor.

1.3.3         All items shall be listed by Underwriter's Laboratories and
              shall bear the U.L. label.

1.3.4         Equipment shown to scale is approximate only and based upon a
              general class of equipment specified. The Contractor shall verify
              all dimensions and clearances prior to commencement of work.

1.3.5         The Contractor shall verify all points of connection with the
              manufacturer's requirements, instructions, or recommendations
              prior to installation. The actual dimensions, weights, clearance
              requirements and installation requirements shall be verified and
              coordinated by the Contractor.

1.4           SUBMITTALS

1.4.1         Shop drawings for materials, equipment, devices, fixtures, and
              systems shall be submitted by the Contractor for review within 30
              days after award of the contract. In addition to the requirements
              for submittals stated herein, the Contractor shall be responsible
              for compliance with the requirements of Division 1.

1.4.2         The Contractor shall bear the responsibility for any materials
              installed which were not submitted for review or not installed in
              compliance with the review comments and the contract documents.

1.4.3         Verbal authorization of submittal documents or changes to the
              requirements of the contract documents shall not be acceptable.
              All submittal material must be documented in a written format.

1.4.4         All submittal packages must be submitted at one time and in
              accordance with the specification section appropriate for the
              material. All packages must be identical and clearly labeled
              indicating the specification section, project name, submittal
              date, Contractor's name, Engineer's name, preparer's name and
              submission version (first submission, resubmittal #1, etc.).

1.4.5         Product catalog cutsheets and descriptive literature shall be
              cross-referenced to the specification section by paragraph.

1.4.6         All submittal packages shall be permanently bound in brochure
              or booklet format. A minimum quantity of six submittal booklets
              shall be provided by the Contractor; additional copies may be
              required if so noted.

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-2

                                    SCHEDULE 2
                                       -18-
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                                                             [Peregrine Systems]

<PAGE>

1.4.7         Materials which bear a certification or approval of a testing
              agency, performance criteria, society, agency, or other
              organization shall be submitted with all labels identified.

1.4.8         The submittal shall be complete and with catalog data and
              information properly marked to show, among other things,
              materials, capacity and performance data to meet the specified
              requirements.

1.4.9         Incomplete submittals will be rejected at the discretion of the
              reviewing Engineer.

1.4.10        Review of the submittal is only for general conformance with
              the contract documents. The Contractor is responsible for
              confirmation and coordination of dimensions, quantities, sizes,
              fabrication, installation methods, and for coordination of work
              of other trades with electrical work.

1.4.11        Detailed working drawings shall be prepared and submitted showing
              items which are to be fabricated including transformer mounting
              racks, unistrut mounting frames, equipment room layouts, pull
              boxes, splice boxes, gutters, etc.

1.4.12        Minimum scale for submitted drawings shall be 1/8". Details shall
              be drawn to 1/4" scale. All drawings shall be 8.5"x11" or larger.

1.4.13        Submittal brochures shall be complete and descriptive of the
              type, make, manufacturer, application, quantity, performance,
              capacity, ratings, options, dimensions, clearances, weights,
              nameplate data, special installation requirements, mounting
              method, NEMA type, NEMA class, environmental restrictions, layout
              requirements or other information as may be necessary for review
              of the material.

1.4.14        Submittal brochures for switchgear shall include, as a minimum,
              the following: singleline diagrams; fault current ratings of
              buses and devices; device identification, ratings, layout and
              characteristics; dimensions; circuit identification;
              identification label type and method of affixing; mounting;
              conduit entry point and quantities; NEMA enclosure type; and
              additional data as required for a complete review.

1.4.15        Submittal brochures for lighting systems shall include, as a
              minimum, the following: manufacturer; detailed drawing or
              photograph; dimensions; lamp data; ballast data; certified
              photometric data from a third-party testing agency; U.L. label
              listing; fixture number or identification from the drawings;
              finish color and material; mounting equipment; socket type and
              rating; environmental ratings (damp location, watertight,
              explosionproof, etc.); voltage; input wattage; and additional
              information as necessary for a complete review.

1.4.16        The Contractor shall be responsible for all aspects of
              substitutions of material including any additional cost or delay
              incurred as a result of the substitution. The Contractor shall
              coordinate all substitutions with other trades, verify code
              compliance, verify clearances, photometric performance,
              appearance, suitability, constructability, and availability of the
              material prior to submitting the substitution for review. The
              Contractor shall bear the responsibility of any increased costs
              to other trades with are directly related to the substitution.

1.5           MATERIAL HANDLING

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-3

                                    SCHEDULE 2
                                       -19-
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                                                             [Peregrine Systems]

<PAGE>

1.5.1    The Contractor shall deliver all equipment and material to the site
         in the manufacturer's original packaging without seals broken.

1.5.2    The Contractor shall handle, store, and protect all equipment and
         materials in accordance with the manufacturer's recommendations.

1.5.3    The Contractor shall immediately replace damaged or defective
         equipment or materials with identical new equipment or material at
         no cost, inconvenience, or delay to the Owner.

1.6      EXISTING CONDITIONS

1.6.1    The Contractor shall verify all existing conditions prior to bid and
         include all costs in bid.

1.6.2    The Contractor shall match the finish and appearance of all existing
         conditions where constructing new work adjacent to existing surfaces
         or equipment.

1.6.3    Coordinate with the Owner's Representative for all ongoing projects
         or the work of other trades which may affect the Contractor's work.
         Verify Owner schedule requirements for special or standard events
         which may impact the Contractor's work.

1.6.4    Coordinate work to be performed in occupied areas and comply with
         the Owner's requirements such that the Owner's work is not disrupted
         by the Contractor. Verify the need for work to be performed during
         premium hours, evenings, weekends, or holidays prior to bid and
         include all costs in bid. Bring to the Owner's attention the need
         for all disruptive work prior to commencement of work.

1.7      UTILITY COMPANY REQUIREMENTS

1.7.1    The contractor shall contact the serving utility company for all
         utility system requirements prior to commencement of work. Utility
         work shall include electric power, telephone, data, fiber optic
         cable, cable television or other utilities as may require connections
         as a part of this contract. Coordinate and comply with all serving
         utility company requirements.

1.7.2    The utility information depicted on the contract documents is for
         bidding purposes only and shall not be used for construction
         purposes. All construction shall be performed according to
         engineered documents from the serving utility company. The
         Contractor shall obtain and coordinate with utility company
         requirements as a part of this contract and furnish and install all
         work as a part of this contract.

1.7.3    Verify all connection points, routing, and requirements with the
         serving utility company prior to commencement of work and coordinate
         final requirements with other trades.

1.7.4    The Contractor shall be responsible for all costs associated with
         his failure to contact or coordinate with utility company
         requirements.

1.8      CONSTRUCTION UTILITY REQUIREMENTS

1.8.1    Power, telephone or other temporary construction utility services
         required by the Contractor shall be the responsibility of the
         Contractor.

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-4

                                    SCHEDULE 2
                                       -20-
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                                                             [Peregrine Systems]

<PAGE>

1.8.2    Arrangements for construction utility services shall be made by the
         Contractor in coordination with the Owner's Representative and the
         serving utility company.

1.9      CONTINUITY OF SERVICE

1.9.1    The Contractor shall coordinate all shutdowns with the Owner's
         Representative. Electrical shutdowns shall be kept to the minimum
         number necessary to complete the work.

1.9.2    The Contractor shall coordinate all work done on overtime or premium
         time with Owner's Representative prior to commencement of work.

1.9.3    All work performed in or through occupied spaces, or other work
         disruptive to existing occupants shall be considered as performed
         during premium time or as overtime for the purposes of the
         bid; include all costs in bid.

1.9.4    The Contractor shall notify Owner's Representative of all shutdowns
         or disruptive work minimum of 72 hours prior to commencement of
         work. The Contractor shall obtain approval from the Owner's
         Representative prior to commencement of work.

1.9.5    The Contractor shall provide all necessary temporary power, including
         temporary power generation, to accommodate shutdowns and minimize
         disruption of work.

1.9.6    The Owner reserves the right to provide emergency repairs or
         temporary power to maintain service continuity at the Contractor's
         cost in the event Contractor fails to provide adequate service
         continuity.

1.10     RECORD DOCUMENTS

1.10.1   The Contractor shall prepare as-built documents depicting all
         revisions to branch circuits, conduit routing, equipment, or
         materials. Drawings shall be legible, reproducible, and properly
         identified such they may be used as a reference for maintenance or
         construction.

1.10.2   The Contractor shall provide a minimum of three copies of the
         operation and maintenance manuals to the Owner's Representative at
         the completion of the project. Each copy shall be bound in a
         three-ring binder and labeled indicating: the project name; system
         name; Contractor's name, telephone number, and contact person; and
         Owner's name. The Contractor shall provide the following information
         within each manual:

         .1   List of the Subcontractors performing work on the system
              including contact names and telephone numbers.

         .2   Routine and emergency service contacts and telephone numbers
              for each system.

         .3   Description of system operation.

         .4   Single line diagrams and control wiring diagrams.

         .5   Detailed product literature with technical information.

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-5

                                    SCHEDULE 2
                                       -21-
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                                                             [Peregrine Systems]

<PAGE>

         .6   Sequence of starting, shutdown and operation.

         .7   Installation instructions and safety requirements.

         .8   Maintenance schedule, testing instructions and performance
              parameters.

         .9   Parts list including recommended spare parts.

1.11     GUARANTEE

         All electrical work, materials and equipment provided under this
         contract shall be guaranteed for a period of one year from the date
         of acceptance of the work by the Owner. Any failures, problems, or
         deficiencies experienced during this period due to defective
         materials or faulty workmanship shall be immediately corrected by
         the Contractor without cost to the Owner. The Contractor shall be
         responsible for all damages to the Owner's facility due to
         deficiencies in the electrical system. Equipment guarantees in
         excess of one year shall not be superseded by this guarantee.

PART 2   PRODUCTS

2.1      MATERIALS

2.1.1    All materials shall be new, of prime quality, listed as suitable for
         the application, and bear factory-applied U.L. labels.

2.1.2    Materials shall be currently in production and shall be supported by
         spare parts, repair service, maintenance, and factory technical
         support.

2.1.3    Materials of one assembly (switchboards, substations, motor control
         centers, etc.) shall be of one manufacturer unless specifically stated
         otherwise in the contract documents.

PART 3   EXECUTION

3.1      INSTALLATION REQUIREMENTS

3.1.1    All work shall conform to National Electrical Contractors
         Association standards of installation and the requirements of the
         manufacturer, Division 1, Division 16, and the Owner's Representative.

3.1.2    The Contractor shall field-verify all dimensions and coordinate
         dimensions with equipment sizes and locations.

3.1.3    The Contractor shall coordinate and install all penetrations, openings,
         slots, chases, or sleeves as necessary for the routing and installation
         of raceways, conductors, or equipment. The Contractor shall provide
         approved fire sealant to maintain fire ratings at all penetrations.

3.1.4    The Contractor shall coordinate the placement and sequence of
         installation of all mounting bolts, conduits, sleeves, etc. which are
         to be set in poured-in-place concrete slabs per the structural
         drawings.

3.1.5    The Contractor shall install access panels in walls or ceilings in
         coordination with the Architect for all junction boxes or electrical
         equipment which requires access.

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-6

                                    SCHEDULE 2
                                       -22-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

3.1.6    All equipment shall be installed plumb, parallel, or orthogonal to
         structure and in a neat orderly fashion. All material shall be
         accessible for maintenance, inspection, servicing or replacement.

3.1.7    Verify final locations for devices during the rough-in phase with
         dimensioned architectural drawings, fabrication drawings, or other
         space planning requirements included in the contract documents.

3.1.8    The Contractor shall coordinate and arrange for the proper sequence
         of construction including scheduling of long-lead items, shutdowns,
         work of other trades, and Owner-scheduled events.

3.1.9    The Contractor shall provide adequate and qualified supervision for
         the work performed: no work shall be performed without the
         supervision of a representative of the Contractor.

3.1.10   The Contractor shall coordinate and cooperate with all other trades
         for a successful completion of the project.

3.2      SEISMIC BRACING

         The Contractor shall seismically brace all equipment in accordance
         with Title 24 requirements for Seismic Zone 4 and provide
         certification of seismic compliance upon request.

3.3      CUTTING AND PATCHING

3.3.1    The Contractor shall provide cutting and patching as required to
         install the electrical system in this contract.

3.3.2    Coordinate the schedule of all cutting such that the work may be
         performed in an expeditious manner with minimum inconvenience to
         the Owner.

3.3.3    Remove or cut structures or materials as necessary for demolition
         prior to the installation of new electrical work.

3.3.4    The Contractor shall protect all surfaces, structure, furnishings,
         and finishes not directly affected by cutting or patching.

3.3.5    Provide dust and moisture barriers as required during cutting and
         prior to patching openings.

3.3.6    All penetrations through roofs shall be performed per architectural
         requirements.

3.3.7    Patching shall be performed with materials which exactly match the
         adjacent surfaces in color, texture, character, and appearance.

3.3.8    All patches must maintain the fire ratings of the original surface
         and shall be sealed with a U.L. listed and Fire Marshal approved
         sealant.

3.4      COMMISSIONING

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-7

                                    SCHEDULE 2
                                       -23-
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                                                             [Peregrine Systems]

<PAGE>

3.4.1    The Contractor shall initiate start up of all electrical equipment
         including operation of all devices, switches, generators, transfer
         switches, overcurrent protection, disconnect switches, etc. to verify
         normal operation of all moving parts and electrical performance.

3.4.2    The Contractor shall test, adjust, aim, align, label, clean and
         complete all systems prior to acceptance by the Owner's
         Representative.

3.4.3    The Contractor shall demonstrate that all systems operate within the
         manufacturer's recommended performance characteristics, the
         electrical construction documents, system requirements, and Owner
         requirements.

3.4.4    The Contractor shall test each system per the manufacturer's
         requirements and shall perform the following system tests:

         .1   Inspect cables for physical damage and proper connection.

         .2   Torque test cable connection and tighten in accordance with
              industry standards.

         .3   Infrared scan all connections under loaded conditions.

         .4   Insulation resistance test of each cable.

         .5   Inspect ground system connections.

         .6   Voltage drop tests on the main grounding electrode of system.

         .7   Determine the ground resistance between the main grounding
              system and all major electrical equipment frames, system neutral
              points.

         .8   Check rated voltage and phase balance at all equipment, motors
              and selected devices at full load conditions. Measure no load
              voltage conditions at each location.

         .9   Furnish all material, equipment, instruments and labor as
              required to complete testing.

3.5      TRAINING

3.5.1    Furnish at least one copy operating instructions from the
         manufacturer for all electrical equipment to the Owner's
         Representative. Instructions shall be clean, legible, and properly
         bound.

3.5.2    The Contractor shall provide training for the Owner's staff as
         directed by the Owner's Representative for a minimum of one
         man-day (eight hours).

3.5.3    Provide classroom training by a qualified instructor for the
         operation, installation, and maintenance of designated equipment or
         systems including, but not limited to, generation systems, transfer
         switches, uninterruptible power supplies, energy management
         systems, lighting control systems, power distributions systems, and
         other systems which may require instruction.

3.6      CLEANING

Section 16050                                      Basic Electrical Requirements
Master Specs                                                             16050-8

                                    SCHEDULE 2
                                       -24-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

         Contractor shall clean all equipment, panelboard interiors, conduit
         interiors, fixtures, devices, etc. of all extraneous paint, drywall
         mud, overspray, dust, dirt, debris, trash, grease or markings. All
         cleaning shall be performed by the Contractor in accordance with the
         appropriate manufacturer's recommendations.

                                  END OF SECTION





Section 16050                                     Basic Electrical Requirements
Master Specs                                                            16050-9

                                    SCHEDULE 2
                                       -25-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16110                                                           RACEWAYS



PART 1   GENERAL PROVISIONS

1.1      RELATED DOCUMENTS

1.1.1    The general conditions, Division 1, and Basic Electrical Requirements
         (Section 16050) are part of this section and the contract for this
         work and apply to this section as fully as if repeated herein.

1.2      QUALITY ASSURANCE AND STANDARDS

1.2.1    All work, material or equipment shall comply with the
         codes, ordinances and regulations of the local government having
         jurisdiction, including the regulations of serving utilities and any
         participating government agencies having jurisdiction.

1.2.2    All electrical work shall comply with the latest edition under
         enforcement of the following codes and standards or other
         regulations which may apply:

         .1   American Disabilities Act
         .2   American National Standards Institute
         .3   American Society for Testing and Materials
         .4   Institute of Cable Engineers Association
         .5   Institute of Electrical and Electronic Engineers
         .6   Local Code Enforcement Agency Requirements
         .7   National Electrical Code
         .8   National Electrical Contractor's Association
         .9   National Electrical Manufacturer's Association
         .10  National Electrical Testing Association
         .11  National Fire Protection Association
         .12  Underwriter's Laboratories, Inc.
         .13  Uniform Building Code

         No requirement of these drawings and specifications shall be
         construed to void any of the provisions of the above standards. Any
         conflicts or changes required to the contract documents in order to
         obtain compliance with applicable codes shall be brought to the
         immediate attention of the Owner's Representative by the contractor.

1.2.3    All items shall be listed by Underwriter's Laboratories and shall
         bear the U.L. label.

1.2.4    Equipment shown to scale is approximate only and based upon a
         general class of equipment specified. The Contractor shall verify
         all dimensions and clearances prior to commencement of work.

1.2.5    The Contractor shall verify all points of connection with the
         manufacturer's requirements, instructions, or recommendations prior to
         installation. The actual dimensions, weights, clearance requirements
         and installation requirements shall be verified and coordinated by
         the contractor.


Section 16110                                                          Raceways
Master Specs                                                            16110-1

                                    SCHEDULE 2
                                       -26-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

1.3      SUBMITTALS

1.3.1    Submit shop drawings per Section 16050 for review including the
         following:

         .1   Raceway materials
         .2   Fitting materials
         .3   Installation materials and methods

PART 2   PRODUCTS

2.1      Rigid Galvanized Steel (RGS) Conduit

2.1.1    Continuous hot-dipped galvanized manufactured per UL and ANSI
         requirement.

2.1.2    Rigid aluminum conduit is not acceptable.

2.1.3    Fittings for use with steel conduit, rigid or flexible, shall be
         manufactured per UL requirements and shall be cast metal with
         gasketed closures.

2.1.4    Fittings for RGS conduit shall be malleable iron or forged steel
         with cadmium or zinc coating.

2.1.5    Union couplings for joining rigid conduit at intermediate runs shall
         be of the same material as the conduit. Couplings shall be threaded
         concrete-tight to permit completing conduit runs when neither
         conduit can be turned and to permit breaking the conduit run at the
         union.

2.1.6    Set screw connectors or threadless type are not acceptable.

2.1.7    Minimum raceway size shall not be less than 3/4".

2.2      Electrical Metallic Tubing (EMT)

2.2.1    Conduit shall be cold rolled zinc coated steel and manufactured per
         UL and ANSI requirements.

2.2.2    Fittings for EMT shall be watertight steel or malleable gripping ring
         compression type.

2.2.3    Pressure cast material for nuts of compression ring type fittings
         and set screw connections are not acceptable.

2.2.4    Minimum raceway size shall be 1/2".

2.3      Flexible Metallic Conduit

2.3.1    Flexible conduit shall bear the UL label and be zinc coated steel.

2.3.2    Fittings for flexible metallic conduit shall be steel or malleable
         iron. Fittings shall clamp to conduit securely.

2.3.3    Screw in type, sheet metal or set screw type fittings are not
         acceptable.


Section 16110                                                          Raceways
Master Specs                                                            16110-2

                                    SCHEDULE 2
                                       -27-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

2.3.4    Minimum raceway size shall not be less than 3/4".

2.4      Liquid Tight Flexible Conduit

2.4.1    Conduit shall be manufactured in accordance with UL and ANSI
         requirements. Conduit shall be approved for grounding and compatible
         with approved fittings. Flexible steel conduit shall be hot dipped
         galvanized with extruded PVC covering manufactured per UL
         requirements.

2.4.2    Fittings shall be liquid tight type with body and gland nut of steel
         or malleable iron with provisions for grounding flexible conduit to
         fittings.

2.4.3    Minimum raceway size shall be 3/4".

2.5      Polyvinyl Chloride (PVC) Conduit

2.5.1    PVC shall be constructed of a virgin homopolymer PVC compound and be
         manufactured according to NEMA and UL specifications. PVC conduit shall
         be Schedule 40 or 80.

2.5.2    Minimum raceway size shall be 3/4".

PART 3   EXECUTION

3.1      Rigid Galvanized Steel (RGS) Conduit

3.1.1    RGS shall be used where exposed to weather or where subject to
         physical damage in exposed areas below 8'0" above finished floor.

3.1.2    RGS shall be used in NEC classified hazardous locations with seal
         connections per NEC requirements.

3.2      Electrical Metallic Tubbing (EMT)

3.2.1    EMT shall be run indoors concealed in drywall type
         construction, above suspended ceilings, and exposed indoors not less
         than 8'0" above finished floor in unfinished areas.

3.2.2    EMT shall not be installed underground or embedded in concrete.

3.3      Flexible Metallic Conduit

3.3.1    Flexible conduit shall be used for indoor lighting connections in
         suspended ceiling areas and shall not exceed 6'0" in length.

3.3.2    Flexible conduit shall be used for final connection to control
         equipment and not to exceed 2'0" in length.

3.3.3    The conduit grounding system shall be continuous as recommended by
         the manufacturer and UL approved.

3.4      Liquid Tight Flexible Conduit

Section 16110                                                          Raceways
Master Specs                                                            16110-3

                                    SCHEDULE 2
                                       -28-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

3.4.1    Flexible conduit shall be used for final connection to
         machines, motors, transformers and equipment that requires vibration
         isolation.

3.4.2    Flexible conduit shall be used for final connection to equipment in
         wet or damp locations or where exposed to grease, water, dust, or dirt.

3.4.3    The conduit grounding system shall be continuous as recommended by
         the manufacturer and UL requirements.

3.5      Polyvinyl Chloride (PVC) Conduit

3.5.1    All sweeps, bends, and risers shall be concrete encased Schedule 80.

3.5.2    All underground high voltage conduit, telephone conduit, service
         entrance conduit and feeders 100A and over shall have 3" of red
         mixed concrete cover.

3.5.3    All PVC conduit feeders shall contain a copper green grounding
         conductor sized per NEC requirements and continuity shall be
         maintained throughout conduit runs and pullboxes.

3.6      All conduit installation methods shall comply with the latest
         enforced edition of the National ELectrical Code and the authority
         having jurisdiction.

3.7      All conduit installations shall comply with the manufacturer's
         installation requirements.

3.8      All spare conduit shall be provided with a pullwire.

                                  END OF SECTION



Section 16110                                                          Raceways
Master Specs                                                            16110-4

                                    SCHEDULE 2
                                       -29-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

Section 16120
                                                                WIRE AND CABLE

PART 1   GENERAL PROVISIONS

1.1      RELATED DOCUMENTS

1.1.1    The general conditions, Division 1, and Electrical General
         Requirements (Section 16050) are part of this section and the
         contract for this work and apply to this section as fully as if
         repeated herein.

1.2      QUALITY ASSURANCE AND STANDARDS

1.2.1    All work, material or equipment shall comply with the
         codes, ordinances and regulations of the local government having
         jurisdiction, including the regulations of serving utilities and any
         participating government agencies having jurisdiction.

1.2.2    All electrical work shall comply with the latest edition under
         enforcement of the following codes and standards or other
         regulations which may apply:

         .1   American Disabilities Act
         .2   American National Standards Institute
         .3   American Society for Testing and Materials
         .4   Institute of Cable Engineers Association
         .5   Institute of Electrical and Electronic Engineers
         .6   Local Code Enforcement Agency Requirements
         .7   National Electrical Code
         .8   National Electrical Contractor's Association
         .9   National Electrical Manufacturer's Association
         .10  National Electrical Testing Association
         .11  National Fire Protection Association
         .12  Underwriter's Laboratories, Inc.
         .13  Uniform Building Code

         No requirement of these drawings and specifications shall be
         construed to void any of the provisions of the above standards. Any
         conflicts or changes required to the contract documents in order to
         obtain compliance with applicable codes shall be brought to the
         immediate attention of the Owner's Representative by the contractor.

1.2.3    All items shall be listed by Underwriter's Laboratories and shall
         bear the UL label.

1.2.4    Equipment shown to scale is approximate only and based upon a
         general class of equipment specified. The Contractor shall verify
         all dimensions and clearances prior to commencement of work.

1.2.5    The Contractor shall verify all points of connection with the
         manufacturer's requirements, instructions, or recommendations prior to
         installation. The actual dimensions, weights, clearance requirements
         and installation requirements shall be verified and coordinated by
         the contractor.

1.3      SUBMITTALS

1.3.1    Submit shop drawings per Section 16050 for review including the
         following:

Section 16120                                                    Wire and Cable
Master Specs                                                            16120-1

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                                       -30-
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                                                             (Peregrine Systems)
<PAGE>

         .1   Conductor materials
         .2   Connector and fitting materials
         .3   Installation materials and methods

PART 2   PRODUCTS

2.1      Conductors shall be copper; conductors size #10AWG and smaller shall
         be solid, conductors size #8AWG and larger shall be stranded.
         Conductors shall be minimum size #12AWG for power and lighting
         circuits; control circuits shall use a minimum conductor size of
         #14AWG.

2.2      Insulation shall be type THW or THHN/THWN for all branch circuits up
         to and including size #2AWG. Insulation for conductors over size
         #2AWG shall be XHHN.

2.3      Jackets shall be nylon of PVC material.

2.4      All cables shall be UL listed for the application.

2.5      All conductors shall be installed in conduit in the field, unless
         specifically noted otherwise in these documents. Type AC and type NM
         cable is not acceptable; type MC cable may be used where
         specifically noted for purposes of flexibility, maintenance, or ease
         of installation but shall not be used without permission.

2.6      Multi-conductor flexible cords shall be types SO, SJO, STO, or SJTO.

2.7      Connectors shall be UL listed and suitable for the conductor
         material being connected and rated appropriately. Connectors shall
         be solderless metal pressure type for conductors #10AWG and smaller.
         Connectors shall be compression type for conductors #8AWG and larger.

PART 3   EXECUTION

3.1      All wiring methods shall comply with the latest enforced edition of
         the National Electrical Code and the authority having jurisdiction.

3.2      Conductors shall be installed in clean raceways using nylon
         cord, polypropylene cord, hemp rope, or other material which will not
         damage the conductors or conduit. Do not use metal fish tape. Use
         lubricant when necessary for pulling.

3.3      Conductors shall be pulled into conduit simultaneously so as to not
         damage conductors during pulling.

3.4      Conductors installed at outlets and switches shall have a minimum of
         6" pigtail left in the box for future connections. All conductors
         not connected to devices shall be terminated with splice caps or
         tape.

3.5      Conductors shall be terminated such that no copper material is
         exposed. Conductors shall be trained and labeled at terminations in
         a neat and workmanlike manner.

3.6      All terminations shall comply with the manufacturer's installation
         and torquing requirements.

3.7      Splices on conductors #10AWG and smaller shall be made with splice
         caps twisted

Section 16120                                                    Wire and Cable
Master Specs                                                            16120-2


                                    SCHEDULE 2
                                       -31-
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                                                             (Peregrine Systems)
<PAGE>

         onto the conductors. Tape all splices.

3.8      Splices on conductors #8AWG and larger shall be made with pressure
         connectors and terminal lugs. Where exposed to water, damp air, or
         moisture splices shall be watertight.

3.9      Splices shall be not be made in feeders; splices to branch circuits
         shall not be made within panelboards or similar enclosures.

3.10     When combining homeruns, the Contractor shall derate all conductors
         per code requirements including reducing the capacity, using high
         temperature insulation where necessary. Conduit sizes shall be
         adjusted by the Contractor as suitable for the conductor revisions.

3.11     The Contractor shall provide a code-sized insulated ground
         conductor, in addition to the feeder conductors indicated on the
         drawings, where non-metallic conduit is used.

3.12     Conductors shall be color-coded as follows:

         208Y/120V             Phase                   480Y/277V

           Black                 A                       Brown
           Red                   B                       Orange
           Blue                  C                       Yellow
           White                 Neutral                 Gray
           Green                 Ground                  Green

3.13     Where tape or labels are used for color-coding, apply material at each
         end of the conductor, splices, boxes, and all terminations.

                                    END OF SECTION

Section 16120                                                    Wire and Cable
Master Specs                                                            16120-3


                                    SCHEDULE 2
                                       -32-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16130                                                          BOXES

PART 1   GENERAL PROVISIONS

1.1      RELATED DOCUMENTS

1.1.1    The general conditions, Division 1, and Electrical General
         Requirements (Section 16050) are part of this section and the
         contract for this work and apply to this section as fully as if
         repeated herein.

1.2      QUALITY ASSURANCE AND STANDARDS

1.2.1    All work, material or equipment shall comply with the
         codes, ordinances and regulations of the local government having
         jurisdiction, including the regulations of serving utilities and any
         participating government agencies having jurisdiction.

1.2.2    All electrical work shall comply with the latest edition under
         enforcement of the following codes and standards or other
         regulations which may apply:

         .1   American Disabilities Act
         .2   American National Standards Institute
         .3   American Society for Testing and Materials
         .4   Institute of Cable Engineers Association
         .5   Institute of Electrical and Electronic Engineers
         .6   Local Code Enforcement Agency Requirements
         .7   National Electrical Code
         .8   National Electrical Contractor's Association
         .9   National Electrical Manufacturer's Association
         .10  National Electrical Testing Association
         .11  National Fire Protection Association
         .12  Underwriter's Laboratories, Inc.
         .13  Uniform Building Code

         No requirement of these drawings and specifications shall be
         construed to void any of the provisions of the above standards. Any
         conflicts or changes required to the contract documents in order to
         obtain compliance with applicable codes shall be brought to the
         immediate attention of the Owner's Representative by the contractor.

1.2.3.   All items shall be listed by Underwriter's Laboratories and shall
         bear the U.L. label.

1.2.4    Equipment shown to scale is approximate only and based upon a
         general class of equipment specified. The Contractor shall verify
         all dimensions and clearances prior to commencement of work.

1.2.5    The Contractor shall verify all points of connection with the
         manufacturer's requirements, instructions, or recommendations prior to
         installation. The actual dimensions, weights, clearance requirements
         and installation requirements shall be verified and coordinated by
         the contractor.


Section 16130                                                             Boxes
Master Specs                                                            16130-1


                                    SCHEDULE 2
                                       -33-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

1.3        SUBMITTALS

1.3.1      Submit shop drawings per Section 16050 for review including the
           following:

           .1   Box materials
           .2   Accessory materials

PART 2     PRODUCTS

2.1        Boxes shall be flat rolled steel sized as required by code and as
           suitable for the application. Boxes shall have mounting holes and
           knock-outs in sides and back. Grounding shall be accommodated by
           means of threaded holes.

2.2        Provide accessories, extension rings, gaskets, supports, trim
           rings, hangers, straps, and other material as necessary for a
           complete code complying installation.

2.3        Boxes installed outdoors shall be weathertight, dusttight, and
           corrosion resistant. Provide gaskets and conduit hubs.

2.4        Provide Type FS boxes for surface mounted applications.

2.5        Provide additional support for boxes as necessary when mounting
           fixtures or devices from boxes.

2.6        Provide ganged boxes for multiple switches and devices; provide
           barriers for boxes served by separate voltages.

2.7        Acceptable manufacturers shall be Appleton, Crouse Hinds, Steel
           City, or Raco.

PART 3     EXECUTION

3.1        All box installation method shall comply with the latest enforced
           edition of the National Electrical Code and the authority having
           jurisdiction.

3.2        Install all boxes plumb, square, and securely fastened to
           structure.

3.3        Boxes shall be placed such that they are readily accessible.

3.4        Cover or plug all unused openings in boxes where knockout blanks
           have been removed.

3.5        Install boxes such that they are flush with the finished surface
           of the wall or surface within which they are mounted.

3.6        Install all boxes at mounting heights per architectural,
           electrical code, and ADA requirements.

3.7        Boxes shall not be mounted back to back in walls.

3.8        Boxes in sealed environments shall be sealed with an approved
           sealant suitable for the application.

3.9        Boxes penetrating fire rated walls or surfaces shall be sealed
           with a Fire Marshall approved fire sealant to maintain the fire
           rating of the wall or surface.

Section 16130                                                          Boxes
Master Specs                                                         16130-2

                                    SCHEDULE 2
                                       -34-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

3.10       Boxes located above inaccessible ceilings shall be made accessible
           by means of access doors or hatches in the ceiling.

3.11       Install all boxes per manufacturer's recommendations and
           requirements.

3.12       Provide for ground continuity at all boxes.

                                END OF SECTION

Section 16130                                                          Boxes
Master Specs                                                         16130-3

                                    SCHEDULE 2
                                       -35-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16140                                   WIRING DEVICES AND CONNECTORS

PART 1     GENERAL PROVISIONS

1.1        RELATED DOCUMENTS

1.1.1      The general conditions, Division 1, and Electrical General
           Requirements (Section 16050) are part of this section and
           the contract for this work and apply to this section as fully
           as if repeated herein.

1.2        QUALITY ASSURANCE AND STANDARDS

1.2.1      All work, material or equipment shall comply with the codes,
           ordinances and regulations of the local government having
           jurisdiction, including the regulations of serving utilities
           and any participating government agencies having jurisdiction.

1.2.2      All electrical work shall comply with the latest edition under
           enforcement of the following codes and standards or other
           regulations which may apply:

           .1    American Disabilities Act
           .2    American National Standards Institute
           .3    American Society for Testing and Materials
           .4    Institute of Cable Engineers Association
           .5    Institute of Electrical and Electronic Engineers
           .6    Local Code Enforcement Agency Requirements
           .7    National Electrical Code
           .8    National Electrical Contractor's Association
           .9    National Electrical Manufacturer's Association
           .10   National Electrical Testing Association
           .11   National Fire Protection Association
           .12   Underwriter's Laboratories, Inc.
           .13   Uniform Building Code

           No requirement of these drawings and specifications shall be
           construed to void any of the provisions of the above standards.
           Any conflicts or changes required to the contract documents in
           order to obtain compliance with applicable codes shall be brought
           to the immediate attention of the Owner's Representative by the
           contractor.

1.2.3      All items shall be listed by Underwriter's Laboratories and shall
           bear the UL label.

1.2.4      Equipment shown to scale is approximate only and based upon a
           general class of equipment specified. The Contractor shall verify
           all dimensions and clearances prior to commencement of work.

1.2.5      The Contractor shall verify all points of connection with the
           manufacturer's requirements, instructions, or recommendations
           prior to installation. The actual dimensions, weights, clearance
           requirements and installation requirements shall be verified and
           coordinated by the contractor.


Section 16140                                  Wiring Devices and Connectors
Master Specs                                                         16140-1

                                    SCHEDULE 2
                                       -36-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

1.3        SUBMITTALS

1.3.1      Submit shop drawings per Section 16050 for review including the
           following:

           .1   Receptacles
           .2   Switches
           .3   Wiring devices
           .4   Accessories

PART 2     PRODUCTS

2.1        RECEPTACLES

2.1.1      Wiring devices shall be UL listed and suitable for the application.

2.1.2      Devices shall be color coded per the system to which they are
           connected: normal power shall be white; emergency power shall
           be red; dedicated outlets shall be grey; unless otherwise noted
           on the construction documents.

2.1.3      Receptacles shall be heavy duty with the screw type, side wired,
           120V, 20A, duplex type, unless noted otherwise on the contraction
           documents. Verify NEMA configuration with construction documents.

2.1.4      Weathertight receptacles shall be gasketed in cast metal boxes
           with cast metal coverplates with spring-loaded hinged covers over
           each opening.

2.1.5      Ground fault interrupting receptacles shall be duplex type and
           capable of detecting a leaking current of 5mA.

2.2        TOGGLE SWITCHES

2.2.1      Toggle wall switches shall be quiet AC type, rated 120/277V, 20A
           and UL listed for the application.

2.2.2      Switches shall be single pole, double throw with white finish
           unless noted otherwise.

2.3        COVERPLATES

2.3.1      Single, combination coverplates shall be used at all ganged device
           locations.

2.3.2      Provide white plastic coverplates with white screws in all office
           areas. Provide stainless steel coverplates with matching screws in
           laboratory, process, manufacturing, and clean room areas or as
           noted on the construction documents.

2.3.3      Provide labeled plates as noted on the construction documents.

2.3.4      Provide labeled plates at all receptacles with circuit and panel
           designation. Labeling method shall utilize clear adhesive printed
           labels with black bold letters.

2.4        ACCEPTABLE MANUFACTURERS

2.4.1      Acceptable manufacturers shall be Arrow Hart, Hubbell, Leviton, or
           Pass and Seymour.

Section 16140                                  Wiring Devices and Connectors
Master Specs                                                         16140-2

                                    SCHEDULE 2
                                       -37-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

PART 3     EXECUTION

3.1        Installation method of wiring devices shall comply with the latest
           enforced edition of the National Electrical Code and the authority
           having jurisdiction.

3.2        Install all devices in accordance with the manufacturer's
           recommendations and requirements.

3.3        Coordinate device mounting height, location and type with
           architectural and interior drawings. Coordinate with other
           trades to identify conflicts with device locations and notify
           the Engineer of any conflicts.

3.4        Install devices only in clean boxes.

3.5        Install all trim rings and coverplates in coordination with other
           trades and their installation schedules.

3.6        Tighten and inspect all connections prior to covering devices and
           reconnect or repair wiring as necessary.

3.7        Test all devices for voltage level, continuity, ground fault, and
           short circuits.

3.8        Install all devices plumb and square to structure and adjacent
           surfaces.

3.9        Connect and inspect all ground bonds prior to covering device.

3.10       Demonstrate the proper operation of all ground fault interrupting
           devices.

                              END OF SECTION

Section 16140                                  Wiring Devices and Connectors
Master Specs                                                         16140-3

                                    SCHEDULE 2
                                       -38-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

Section 16170                                   CIRCUIT AND MOTOR DISCONNECTS

PART 1     GENERAL PROVISIONS

1.1        RELATED DOCUMENTS

1.1.1      The general conditions, Division 1, and Electrical General
           Requirements (Section 16050) are part of this section and the
           contract for this work and apply to this section as fully as if
           repeated herein.

1.2        QUALITY ASSURANCE AND STANDARDS

1.2.1      All work, material or equipment shall comply with the codes,
           ordinances and regulations of the local government having
           jurisdiction, including the regulations of serving utilities and
           any participating government agencies having jurisdiction.

1.2.2      All electrical work shall comply with the latest edition under
           enforcement of the following codes and standards or other
           regulations which may apply:

           .1   American Disabilities Act
           .2   American National Standards Institute
           .3   American Society for Testing and Materials
           .4   Institute of Cable Engineers Association
           .5   Institute of Electrical and Electronic Engineers
           .6   Local Code Enforcement Agency Requirements
           .7   National Electrical Code
           .8   National Electrical Contractor's Association
           .9   National Electrical Manufacturer's Association
           .10  National Electrical Testing Association
           .11  National Fire Protection Association
           .12  Underwriter's Laboratories, Inc.
           .13  Uniform Building Code

           No requirement of these drawings and specifications shall be
           construed to void any of the provisions of the above standards.
           Any conflicts or changes required to the contract documents in
           order to obtain compliance with applicable codes shall be brought
           to the immediate attention of the Owner's Representative by the
           contractor.

1.2.3      All items shall be listed by Underwriter's Laboratories and shall
           bear the UL label.

1.2.4      Equipment shown to scale is approximate only and based upon a
           general class of equipment specified. The Contractor shall verify
           all dimensions and clearances prior to commencement of work.

1.2.5      The Contractor shall verify all points of connection with the
           manufacturer's requirements, instructions, or recommendations prior
           to installation. The actual dimensions, weights, clearance
           requirements and installation requirements shall be verified and
           coordinated by the contractor.

Section 16170                                   Circuit and Motor Disconnects
Master Specs                                                          16170-1

                                    SCHEDULE 2
                                       -39-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

1.3        SUBMITTALS

1.3.1      Submit shop drawings per Section 16050 for review including the
           following:

           .1   Voltage and current ratings
           .2   NEMA enclosure type
           .3   Horsepower rand fault current rating
           .4   Dimensions
           .5   Fuse type and class

PART 2     PRODUCTS

2.1        Disconnects shall NEMA 1, indoor type, or rated for the location
           in which they are installed as noted on the construction documents.

2.2        Disconnects shall be UL listed and suitable for the application.

2.3        Exterior disconnects shall be raintight, dusttight, have raintight
           hubs, and be rated NEMA 3R.

2.4        Disconnects shall be heavy duty type, rated 600V with current
           capacity as noted on the construction documents. Verify NEMA
           configuration with construction documents.

2.5        Disconnects shall have hinged, lockable, dead-front doors wit
           permanently marked ON/OFF indicators. Enclosures shall be baked
           enamel factory painted steel with conduit knockouts.

2.6        Disconnects shall be operated by a handle accessible from the
           exterior of the enclosure. Handles shall have provision to be
           padlocked in the OFF position.

2.7        All current carrying parts shall be high conductivity copper
           designed to carry rated load without damage from heat and plated
           to resist corrosion.

2.8        Switch mechanism shall be a quick-make, quick-break type such that
           the operation of the contact is restrained by the handle during the
           closing or opening operation.

2.9        Switches shall have a minimum fault current rating of 200,000A RMS.
           All switches shall be fused unless specifically noted otherwise.

2.10       The disconnect door cover shall have an interlocking mechanism to
           prevent opening the cover when the switch is in the ON position.

2.11       Fuses serving motor loads shall be Class L and Class RK1, 250V and
           600V, time delay, dual element unless noted otherwise on the
           construction documents.

2.12       Fuses serving non-motor loads shall be Class L and Class RK1, 250V
           and 600V, fast acting, dual element unless noted otherwise on the
           construction documents.

2.13       Provide built-in fuse pullers.

2.14       Acceptable manufacturers shall be General Electric, Cutler-Hammer,
           Siemens, Square D. and Westinghouse. Fuses shall be Gould-Shawmut
           or Bussman.

Section 16170                                   Circuit and Motor Disconnects
Master Specs                                                          16170-2

                                    SCHEDULE 2
                                       -40-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

PART 3     EXECUTION

3.1        Installation method of disconnects shall comply with the latest
           enforced edition of the National Electrical Code and the authority
           having jurisdiction.

3.2        Install all disconnects in accordance with the manufacturer's
           recommendations and requirements.

3.3        Coordinate disconnect mounting height, location and type with
           architectural and interior drawings. Coordinate with other trades
           to identify conflicts with device locations and notify the
           Engineer of any conflicts. Mount switches 42" above finished
           floor unless noted otherwise.

3.4        Provide suitable galvanized metal strut framework where no wall or
           structure is available for the mounting of vibrating equipment.

3.5        Provide flexible conduit connections for disconnects mounted to
           strut framework, motors, or vibrating equipment.

3.6        Tighten and inspect all connections and reconnect or repair wiring
           as necessary.

3.7        Test all disconnects for voltage level, continuity, ground fault,
           and short circuits. Check switch mechanism operation under no load
           conditions prior to operating under load.

3.8        Install all disconnects plumb and square to structure and adjacent
           surfaces.

3.9        Provide and install all fuses sized per the equipment
           manufacturer's recommendation.

                                     END OF SECTION

Section 16170                                   Circuit and Motor Disconnects
Master Specs                                                          16170-3

                                    SCHEDULE 2
                                       -41-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16420                                                    SWITCHBOARDS

PART 1     GENERAL PROVISIONS

1.1        RELATED DOCUMENTS

1.1.1      The general conditions, Division 1, and Electrical General
           Requirements (Section 16050) are part of this section and the
           contract for this work and apply to this section as fully as if
           repeated herein.

1.2        QUALITY ASSURANCE AND STANDARDS

1.2.1      All work, material or equipment shall comply with the codes,
           ordinances and regulations of the local government having
           jurisdiction, including the regulations of serving utilities
           and any participating government agencies having jurisdiction.

1.2.2      All electrical work shall comply with the latest edition under
           enforcement of the following codes and standards or other
           regulations which may apply:

           .1   American Disabilities Act
           .2   American National Standards Institute
           .3   American Society for Testing and Materials
           .4   Institute of Cable Engineers Association
           .5   Institute of Electrical and Electronic Engineers
           .6   Local Code Enforcement Agency Requirements
           .7   National Electrical Code
           .8   National Electrical Contractor's Association
           .9   National Electrical Manufacturer's Association
           .10  National Electrical Testing Association
           .11  National Fire Protection Association
           .12  Underwriter's Laboratories, Inc.
           .13  Uniform Building Code

           No requirement of these drawings and specifications shall be
           construed to void any of the provisions of the above standards.
           Any conflicts or changes required to the contract documents in
           order to obtain compliance with applicable codes shall be brought
           to the immediate attention of the Owner's Representative by the
           Contractor.

1.2.3      All items shall be listed by Underwriter's Laboratories and shall
           bear the U.L. label.

1.2.4      Equipment shown to scale is approximate only and based upon a
           general class of equipment specified. The Contractor shall verify
           all dimensions and clearance prior to commencement of work.

1.2.5      The Contractor shall verify all points of connection with the
           manufacturer's requirements, instructions, or recommendations prior
           to installation. The actual dimensions, weights, clearance
           requirements and installation requirements shall be verified and
           coordinated by the contractor.

Section 16420                                                    Switchboards
Master Specs                                                          16420-1

                                    SCHEDULE 2
                                       -42-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

1.3        SUBMITTALS

1.3.1      Submit shop drawings per Section 16050 for review including the
           following:

           .1   Switchboards
           .2   Overcurrent protection
           .3   Instrumentation
           .4   Dimensions, weights, ratings, and layouts
           .5   Device settings and trip ratings

PART 2     PRODUCTS

2.1        Switchboards shall be factory assembled, dead-front, metal
           enclosed, self-supporting floor standing sections as noted in the
           construction documents.

2.2        Vertical sections shall contain overcurrent protective devices
           including circuit breakers and fuses and shall be nominally
           90" in height.

2.3        Switchboard finish shall be baked enamel factory paint of
           manufacturer's standard color.

2.4        Provide front accessibility for wireways on each side of
           overcurrent protective devices for entire height of section.
           Provide welded steel framework with screw covers removable from
           the front; covers may be hinged.

2.5        All bussing shall be silver-coated copper with ratings as
           indicated in the construction documents.

2.6        Switchboard, bussing, and devices shall be rated for the minimum
           available fault current as indicated on the construction documents.

2.7        Switchboards shall be equipped with lifting eyes.

2.8        Switchboards shall be suitable for the environment in which they
           are located and shall be NEMA 1, indoor, unless noted otherwise on
           the construction documents.

2.9        Main circuit breakers shall be provided and shall be solid state
           trip with ratings as noted. Distribution circuit breakers shall be
           molded case type. All circuit breakers shall be bolt-on type.

2.10       Cross bussing shall be fully rated for the length of the
           switchboard.

2.11       Instrumentation shall be provided where noted. Utility company
           metering shall be provided in accordance with the serving utility
           company requirements.

2.12       The switchgear manufacturer shall submit a coordination and short
           circuit study for the entire system provided including long time,
           short time, instantaneous, and ground fault.

2.13       Provide permanently adhered bakelite labels indicating the
           identification of each device on the switchboard adjacent to the
           device and visible on the enclosure exterior.

2.14       Provide a ground bus in each switchboard section with connecting
           ground bonds between sections.

Section 16420                                                    Switchboards
Master Specs                                                          16420-2

                                    SCHEDULE 2
                                       -43-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

2.15     Acceptable manufacturers shall be General Electric, Siemens, Square
         D. Cutler Hammer.

PART 3   EXECUTION

3.1      Installation method of switchboards shall comply with the latest
         enforced edition of the National Electrical Code and the authority
         having jurisdiction.

3.2      Install all switchboards in accordance with the manufacturer's
         recommendations and requirements.

3.3      Coordinate switchboard location and size with architectural and
         interior drawings. Coordinate with other trades to identify conflicts
         with switchboard locations and notify the Engineer of any conflicts.

3.4      Coordinate switchboard size with concrete housekeeping pads.

3.5      Check all connections, phase rotation, ground resistance and
         insulation resistance levels.

3.6      Ground fault protective devices shall be testing by an approved
         third party testing agency and a written report submitted with the
         operation manual for review.

3.7      Test all switchboards and overcurrent protection devices for voltage
         level, continuity, ground fault, and short circuits.

3.8      Install all switchboards plumb and square to structure and adjacent
         surfaces.

3.9      Connect and inspect all ground bonds prior to energizing switchboard.

3.10     Demonstrate the proper operation of all ground fault protective
         devices.

3.11     Clean all switchboard interiors and exteriors prior to handing over
         to Owner. Touch up scratched paint and finishes as necessary.

3.12     Adjust and set all devices for proper operation. Set ground fault
         protective device as per the written report recommendations.

                             END OF SECTION




Section 16420                                                      Switchboards
Master Specs                                                            16420-3

                                    SCHEDULE 2
                                       -44-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16460                                                      TRANSFORMERS

PART 1   GENERAL PROVISIONS

1.1      RELATED DOCUMENTS

1.1.1    The general conditions, Division 1, and Electrical General
         Requirements (Section 16050) are part of this section and contract for
         this work and apply to this section as fully as if repeated herein.

1.2      QUALITY ASSURANCE AND STANDARDS

1.2.1    All work, material or equipment shall comply with the codes,
         ordinances and regulations of the local government having jurisdiction,
         including the regulations of serving utilities and any participating
         government agencies having jurisdiction.

1.2.2    All electrical work shall comply with the latest edition under
         enforcement of the following codes and standards or other regulations
         which may apply:

         .1   American Disabilities Act
         .2   American National Standards Institute
         .3   American Society for Testing and Materials
         .4   Institute of Cable Engineers Association
         .5   Institute of Electrical and Electronic Engineers
         .6   Local Code Enforcement Agency Requirements
         .7   National Electrical Code
         .8   National Electrical Contractor's Association
         .9   National Electric Manufacturer's Association
         .10  National Electrical Testing Association
         .11  National Fire Protection Association
         .12  Underwriter's Laboratories, Inc.
         .13  Uniform Building Code

         No requirement of these drawings and specifications shall be
         construed to void any of the provisions of the above standards. Any
         conflicts or changes required to the contract documents in order to
         obtain compliance with the applicable codes shall be brought to the
         immediate attention of the Owner's Representative by the Contractor.

1.2.3    All items shall be listed by Underwriter's Laboratories and shall
         bear the UL label.

1.2.4    Equipment shown to scale is approximate only and based upon a
         general class of equipment specified. The Contractor shall verify all
         dimensions and clearances prior to commencement of work.

1.2.5    The Contractor shall verify all points of connection with the
         manufacturer's requirements, instructions, or recommendations prior to
         installation. The actual dimensions, weights, clearance requirements
         and installation requirements shall be verified and coordinated by the
         contractor.



Section 16460                                                     Transformers
Master Specs                                                           16460-1

                                    SCHEDULE 2
                                       -45-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

1.3      SUBMITTALS

1.3.1    Submit shop drawings per Section 16050 for review including the
         following:

         .1   Voltage, KVA, impedance, frequency, taps, and efficiency
         .2   Temperature rating above ambient
         .3   Regulation and sound levels
         .4   Mounting details and vibration isolation
         .5   Nameplate data

PART 2   PRODUCTS

2.1      Transformers shall be general purpose, ventilated dry type, factory
         assembled, dead-front, metal enclosed, self-supporting floor standing
         as noted in the construction documents.

2.2      Transformers shall be 480V-208Y/120V 3 amps 4W(primary-secondary)
         voltage rated, unless noted otherwise.

2.3      Transformers shall be rated for 80DEG. C rise above an ambient
         temperature of 40DEG C.

2.4      Coils shall be continuously wound non-hygroscopic type with
         thermosetting varnish. Windings shall be aluminum or copper.

2.5      Taps shall be provided at primary windings with (6)2 1/2 % taps,
         three above and three below.

2.6      Intergral vibration isolators shall be provided between the core and
         coil assembly and the transformer enclosure in addition to the
         vibration isolation located between the enclosure and the floor.

2.7      Grounding shall be provided by means of a flexible grounding strap.

2.8      Transformers shall be suitable for the environment in which they are
         located and shall be NEMA 1, indoor, unless noted otherwise on the
         construction documents.

2.9      Transformers shall have lifting lugs and be enclosed in a heavy
         gauge, sheet steel housing with baked enamel finish. The enclosure
         shall be ventilated.

2.10     Transformers located in exterior areas shall be NEMA 3R, with drip
         shield and corrosion resistant finish.

2.11     Acceptable manufacturers shall be General Electric, Cutler-Hammer,
         Siemens, Square D. Cutler Hammer.

PART 3   EXECUTION

3.1      Installation method of transformers shall comply with the latest
         enforced edition of the National Electrical Code and the authority
         having jurisdiction.

3.2      Install all transformers in accordance with the manufacturer's
         recommendations and requirements.



Section 16460                                                     Transformers
Master Specs                                                           16460-2

                                    SCHEDULE 2
                                       -46-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

3.3      Coordinate transformer location and size with architectural and
         interior drawings. Coordinate with other trades to identify conflicts
         with transformer locations and notify the Engineer of any conflicts.

3.4      Coordinate transformer size with concrete housekeeping pads,
         structural frames, and mounting hardware.

3.5      Brace transformers per California Code of Regulations, Title 24,
         Seismic Zone 4 requirements.

3.6      Provide rubber vibration isolation between transformer and floor,
         structure, or any fixed surface (including wireways).

3.7      Test all transformers for voltage level at primary and secondary
         windings.

3.8      Install all transformers plumb and square to structure and adjacent
         surfaces.

3.9      Connect and inspect all ground bonds prior to energizing transformer.

3.10     Install all conduit connections to transformer with liquid tight
         flexible conduit.

3.11     Clean all transformer interiors and exteriors prior to handing over
         to Owner. Touch up scratched paint and finishes as necessary.

3.12     Tighten and test all connections prior to energizing the transformer.

                                END OF SECTION




Section 16460                                                     Transformers
Master Specs                                                           16460-3

                                    SCHEDULE 2
                                       -47-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

Section 16470                                                      PANELBOARDS

PART 1   GENERAL PROVISIONS

1.1      RELATED DOCUMENTS

1.1.1    The general conditions, Division 1, and Electrical General
         Requirements (Section 16050) are part of this section and the contract
         for this work and apply to this section as fully as if repeated herein.

1.2      QUALITY ASSURANCE AND STANDARDS

1.2.1    All work, material or equipment shall comply with the codes,
         ordinances and regulations of the local government having jurisdiction,
         including the regulations of serving utilities and any participating
         government agencies having jurisdiction.

1.2.2    All electrical work shall comply with the latest edition under
         enforcement of the following codes and standards or other regulations
         which may apply:

         .1   American Disabilities Act
         .2   American National Standards Institute
         .3   American Society for Testing and Materials
         .4   Institute of Cable Engineers Association
         .5   Institute of Electrical and Electronic Engineers
         .6   Local Code Enforcement Agency Requirements
         .7   National Electrical Code
         .8   National Electrical Contractor's Association
         .9   National Electrical Manufacturer's Association
         .10  National Electrical Testing Association
         .11  National Fire Protection Association
         .12  Underwriter's Laboratories, Inc.
         .13  Uniform Building Code

         No requirement of these drawings and specifications shall be
         construed to void any of the provisions of the above standards. Any
         conflicts or changes required to the contract documents in order to
         obtain compliance with applicable codes shall be brought to the
         immediate attention of the Owner's Representative by the Contractor.

1.2.3    All items shall be listed by Underwriter's Laboratories and shall
         bear the UL label.

1.2.4    Equipment shown to scale is approximate only and based upon a
         general class of equipment specified. The Contractor shall verify all
         dimensions and clearances prior to commencement of work.

1.2.5    The Contractor shall verify all points of connection with the
         manufacturer's requirements, instructions, or recommendations prior to
         installation. The actual dimensions, weights, clearance requirements
         and installation requirements shall be verified and coordinated by the
         contractor.





Section 16470                                                      Panelboards
Master Specs                                                           16470-1

                                    SCHEDULE 2
                                       -48-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)

<PAGE>

1.3      SUBMITTALS

1.3.1    Submit shop drawings per Section 16050 for review including the
         following:

         .1    Panelboards
         .2    Overcurrent protection, bus capacity, main ratings, AIC rating
         .3    Mounting, enclosure, dimensions
         .4    Dimensions, voltage, ratings and phases
         .5    Device settings, trip ratings, and layout

PART 2  PRODUCTS

2.1      Panelboards shall be factory assembled, dead-front, metal enclosed,
         wall mounted type as noted in the construction documents.

2.2      Panelboards shall be rated 600VAC and shall not exceed 1200A current
         capacity.

2.3      Panelboard finish shall be baked enamel factory paint of manufacturer's
         standard color.

2.4      Provide front accessibility for wireways on each side of overcurrent
         protective devices for entire height of panelboard.

2.5      All bussing shall be silver-plated copper with ratings as indicated in
         the construction documents.

2.6      Panelboard, bussing, and devices shall be rated for the minimum
         available fault current as indicated on the construction documents.

2.7      Enclosures shall be galvanized sheet steel cabinet type with hinged
         and lockable doors, dead front, and permanently adhered identification
         labels on the front.

2.8      Switchboards shall be suitable for the environment in which they are
         located and shall be NEMA 1, indoor, unless noted otherwise on the
         construction documents.

2.9      Circuit breakers shall be molded case type; all circuit breakers shall
         be bolt-on type.

2.10     Main lugs shall be anti-turn solderless pressure type for use with
         copper conductors.

2.11     Instrumentation shall be provided where noted.

2.12     Enclosures, panel interiors, and devices shall be of one manufacture.

2.13     Provide a typewritten panel schedule located in a sleeve on the
         interior of the panelboard door indicating loads and areas connected
         to each circuit.

2.14     Provide a ground bus in each panelboard.

2.15     Acceptable manufacturers shall be General Electric, Siemens, Square D,
         Cutler Hammer.

PART 3   EXECUTION

3.1      Installation method of panelboards shall comply with the latest
         enforced edition of the

Section 16470                                                        Panelboards
Master Specs                                                             16470-2

                                    SCHEDULE 2
                                       -49-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

         National Electrical Code and the authority having jurisdiction.

3.2      Install all panelboards in accordance with the manufacturer's
         recommendations and requirements.

3.3      Coordinate panelboard location and size with architectural and
         interior drawings. Coordinate with other trades to identify conflicts
         with panelboard locations and notify the Engineer of any conflicts.

3.4      Fasten panelboards securely to structural wall or surface to Seismic
         Zone 4 requirements. Panelboards shall be mounted no higher than 6'0"
         to the highest device from finished floor and no lower than 24" above
         finished floor. Provide panel skirts where noted.

3.5      Check all connections, phase rotation, ground resistance and
         insulation resistance levels.

3.6      Complete the panel schedule card and place in the sleeve on the
         interior of the panelboard door.

3.7      Test all panelboards and overcurrent protection devices for voltage
         level, continuity, ground fault, and short circuits.

3.8      Install all panelboards plumb and square to structure and adjacent
         surfaces.

3.9      Connect and inspect all ground bonds prior to energizing panelboard.

3.10     Demonstrate the proper operation of all ground fault protective
         devices.

3.11     Clean all panelboard interiors and exteriors prior to handing over to
         Owner. Touch up scratched paint and finishes as necessary.

3.12     Adjust and set all devices for proper operation.

                                  END OF SECTION

Section 16470                                                        Panelboards
Master Specs                                                             16470-3

                                    SCHEDULE 2
                                       -50-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             (Peregrine Systems)
<PAGE>

                      SCHEDULE 3

         SUMMARY OF BUILDING WORKING DRAWINGS

          BLDG. ONE - PROJECT NO. 4085.10
-------------------------------------------------------
                     SHEET INDEX
-------------------------------------------------------
-------------------------------------------------------
GRADING PERMIT (WO# 980807)

 CIVIL

1D    GENERAL NOTES, LEGEND, KEY MAP
2D    GRADING/UTILITY PLAN

 LANDSCAPE

3D    IRRIGATION PLAN
4D    PLANTING PLAN
5D    ENTRY ROAD IRRIGATION PLAN
6D    ENTRY ROAD PLANTING PLAN                     SEPARATE
7D    IRRIGATION DETAILS                            SITE
8D    IRRIGATION DETAILS                           PACKAGE
9D    PLANTING DETAILS
10D   LANDSCAPE SPECIFICATIONS
11D   LANDSCAPE SPECIFICATIONS
12D   LANDSCAPE SPECIFICATIONS
13D   LANDSCAPE SPECIFICATIONS
14D   LANDSCAPE SPECIFICATIONS
15D   RIGHT OF WAY IRRIGATION PLAN
16D   RIGHT OF WAY PLANTING PLAN

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

SHELL ONLY BUILDING PERMIT
(PLAN FILE #A108210-98)

TS-1 TITLE SHEET 12-18-98
TS-2 ACCESSIBILITY NOTES 12-18-98

 ARCHITECTURAL-ALL "A" DRAWINGS DATED 12-18-98

A1.1  SITE PLAN
A1.2  SITE DETAILS
A2.1  FIRST FLOOR PLAN
A2.2  SECOND FLOOR PLAN
A2.3  THIRD FLOOR PLAN
A2.4  ROOF PLAN
A3.1  EXTERIOR ELEVATIONS
A3.2  EXTERIOR ELEVATIONS
A3.3  BUILDING SECTIONS
A3.4  BUILDING SECTIONS
A3.5  WALL SECTIONS
A3.6  WALL SECTIONS
A3.7  WALL SECTIONS
A4.1  STAIR PLANS AND SECTIONS
A4.2  ENLARGED PLANS, INTERIOR ELEVATIONS
A4.3  ENLARGED DECK PLAN, REFLECTED SOFFIT PLANS
A4.4  SCHEDULES
A5.1  DETAILS
A5.2  DETAILS
A5.3  DETAILS
A5.4  DETAILS

-------------------------------------------------------
FOUNDATION/FRAMING PERMIT
(PLAN FILE #A107551-98)

 STRUCTURAL--ALL "S" DRAWINGS DATED 11-10-98

S1.1  STRUCTURAL NOTES
S1.2  TYPICAL DETAILS
S1.2  TYPICAL DETAILS
S1.4  TYPICAL DETAILS
S2.1  FOUNDATION PLAN
S2.2  SECOND FLOOR FRAMING PLAN
S2.3  THIRD FLOOR FRAMING PLAN
S2.4  ROOF FRAMING PLAN
S3.1  FRAME ELEVATIONS AND STAIR DETAILS
S4.1  SECTIONS AND DETAILS
S4.2  SECTIONS AND DETAILS
S5.2  PANEL ELEVATIONS
S5.3  PANEL DETAILS

-------------------------------------------------------
 MECHANICAL--ALL "M" DRAWINGS DATED 12-18-98

M1    MECHANICAL SYMBOLS, ABBREVIATIONS, SCHEDULES
M2    TITLE 24
M3    MECHANICAL FIRST FLOOR PLAN
M4    MECHANICAL SECOND FLOOR PLAN
M5    MECHANICAL THIRD FLOOR PLAN
M6    MECHANICAL ROOF PLAN
M7    MECHANICAL DETAILS
M8    MECHANICAL DETAILS
M9    MECHANICAL DETAILS

 PLUMBING--ALL "P" DRAWINGS DATED 12-18-98

P1    PLUMBING SYMBOLS, ABBREVIATIONS, SCHEDULES
P2    PLUMBING SITE PLAN
P3    PLUMBING FIRST FLOOR PLAN
P4    PLUMBING SECOND FLOOR PLAN
P5    PLUMBING THIRD FLOOR PLAN
P6    PLUMBING ROOF PLAN
P7    PLUMBING DIAGRAMS
P8    PLUMBING DETAILS

 ELECTRICAL--ALL "E" DRAWINGS DATED 12-18-98

E1    ELECTRICAL SYMBOLS, ABBREVIATIONS, SCHEDULES
E2    SINGLE LINE DIAGRAM
E3    ELECTRICAL SITE PLAN
E4    ELECTRICAL FIRST FLOOR PLAN
E5    ELECTRICAL SECOND FLOOR PLAN
E6    ELECTRICAL THIRD FLOOR PLAN
E7    ELECTRICAL ROOF PLAN
E8    ELECTRICAL PANEL SCHEDULES
E9    ELECTRICAL PARTIAL PLAN AND DETAILS
E10   TITLE 24 AND ELECTRICAL DETAILS
-------------------------------------------------------


                                    SCHEDULE 3
                                       -1-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

          BLDG. TWO - PROJECT NO. 4085.20
-------------------------------------------------------
                     SHEET INDEX
-------------------------------------------------------
-------------------------------------------------------

[ILLEGIBLE]



















                                    SCHEDULE 3
                                       -2-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                     EXHIBIT C

                         PEREGRINE SYSTEMS CORPORATE CENTER

                             NOTICE OF LEASE TERM DATES



To: ______________________

    ______________________

    ______________________

     Re:  Office Lease dated _________________, ______ between KR-CARMEL
          PARTNERS, LLC, a Delaware limited liability company ("LANDLORD"), and
          PEREGRINE SYSTEMS, INC., a Delaware corporation ("TENANT") concerning
          that certain office building located at ______ Valley Center Drive,
          San Diego, California  92130.

Ladies and Gentlemen:

     In accordance with the referenced Office Lease (the "LEASE"), we wish to
advise you and/or confirm as follows:

     1.   The Substantial Completion of the Premises has occurred, and the
Lease Term shall commence on or has commenced on _________________ for a term
of ______________________ ending on __________________.

     2.   Rent commenced to accrue on ____________________, in the amount of
___________________.

     3.   If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment.  Each billing
thereafter, with the exception of the final billing, shall be for the full
amount of the monthly installment as provided for in the Lease.

     4.   Your rent checks should be made payable to _________________ at
______________________________________________________.

     5.   The exact number of rentable and usable square feet within the
Premises are _________ and ___________ square feet, respectively.

     6.   Base Rent, as adjusted based upon the exact number of rentable
square feet within the Premises, is as follows: ______________________________
_____________________.

     7.   Tenant's Share, as adjusted based upon the exact number of rentable
square feet within the Building(s), is _________%.


                                       EXHIBIT C
                                         -1-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     8.   The street address(es) of the Building is _________________ Valley
Center Drive, San Diego, California 92130.

                                        "LANDLORD":

                                        KR-CARMEL PARTNERS, LLC,
                                        a Delaware limited liability company

                                        By:  Kilroy Realty, L.P.,
                                             a Delaware limited partnership
                                             Managing Member

                                             By:  Kilroy Realty Corporation,
                                                  a Maryland corporation
                                                  General Partner


                                                  By: _________________________
                                                  Name: _______________________
                                                       Its: ___________________


                                                  By: _________________________
                                                  Name: _______________________
                                                       Its: ___________________

Agreed to and Accepted as
of _______________, _____.

"TENANT":


_________________________________,
a _______________________________

By:  ____________________________
     Its: _______________________


By:  ____________________________
     Its: _______________________



                                       EXHIBIT C
                                         -2-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                     EXHIBIT D

                         PEREGRINE SYSTEMS CORPORATE CENTER

                               RULES AND REGULATIONS

     Tenant shall faithfully observe and comply with the following Rules and
Regulations.  Landlord shall not be responsible to Tenant for the
nonperformance of any of said Rules and Regulations by or otherwise with
respect to the acts or omissions of any other tenants or occupants of the
Project.

     1.   Tenant shall not alter any lock or install any new or additional
locks or bolts on any doors, windows or mailboxes of the Premises without
giving to Landlord prior written notice.  Tenant shall bear the cost of any
lock changes or repairs required by Tenant.  Two keys will be furnished by
Landlord for the Premises, and any additional keys required by Tenant must be
obtained from Landlord at a reasonable cost to be established by Landlord.
Notwithstanding the foregoing, Tenant shall have the right to install its own
security system within the Premises in accordance with the provisions of the
Lease.

     2.   All doors opening to public corridors (other than Building lobbies
(which shall be kept closed if required by law)) shall be kept closed at all
times except for normal ingress and egress to the Premises.

     3.   Any tenant, its employees, agents or any other persons entering or
leaving any Building at any time when it is considered to be after normal
business hours for such Building will be required to sign the Building
register. Access to the Building may be refused unless the person seeking
access has proper identification or has a previously arranged pass for access
to the Building.  Landlord and its agents shall in no case be liable for
damages for any error with regard to the admission to or exclusion from any
Building of any person.  In case of invasion, mob, riot, public excitement,
or other commotion, Landlord reserves the right to prevent access to the
Building or the Project during the continuance thereof by any means it deems
appropriate for the safety and protection of life and property.
Notwithstanding the foregoing, Tenant may adopt its own rules and regulations
with respect to access to any building for which Tenant leases the entire
building.

     4.   All moving activity into or out of the Building shall be done in
such manner as Landlord reasonably designates; Landlord shall at all times
reasonably cooperate with Tenant with respect to such activities.  Service
deliveries (other than messenger services) shall be allowed only during hours
reasonably approved by Landlord.  Landlord shall have the right to prescribe
the weight, size and position of all safes and other heavy property brought
into the Building.  Safes and other heavy objects shall stand on supports of
such thickness as is necessary to properly distribute the weight.  Landlord
will not be responsible for loss of or damage to any such safe or property in
any case. Any damage to any part of the Building, its contents, occupants or
visitors by moving or maintaining any such safe or other property shall be
the sole responsibility and expense of Tenant.

     5.   No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except
between such hours and in such specific elevator as shall be reasonably
designated by Landlord.  Landlord shall at all times reasonably cooperate
with Tenant with respect to such activities.

     6.   Any requests of Tenant shall be directed to the management office
for the Project or at such office location designated by Landlord.

     7.   Tenant shall not disturb, solicit, or canvass any occupant of the
Project and shall cooperate with Landlord and its agents to prevent such
activities.

                                   EXHIBIT D
                                      -1-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     8.   The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, and
no foreign substance of any kind whatsoever shall be thrown therein.  The
expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the tenant who, or whose employees or agents,
shall have caused it.

     9.   Tenant shall not overload the floor of the Premises, Tenant shall
not mark, drive nails or screws, or drill into the partitions, woodwork or
plaster or deface the Premises without Landlord's prior consent other than in
connection with any Alterations for which Landlord's consent is not required.

     10.  Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machines other than fractional horsepower
office machines shall be installed, maintained or operated upon the Premises
without the written consent of Landlord.  Notwithstanding the foregoing, the
foregoing limitation shall not apply to Tenant's cafeteria, workout facility,
showers and lockers which are contemplated to be a part of Tenant's
improvements.

     11.  Tenant shall not use or keep in or on the Premises, the Building,
or the Project any kerosene, gasoline or other inflammable or combustible
fluid or material other than as expressly permitted in Section 5.2 of the
Lease.

     12.  Tenant shall not without the prior written consent of Landlord use
any method of heating or air conditioning other than that supplied by
Landlord other than supplemental heating and air conditioning approved by
Landlord, which approval shall not be unreasonably withheld.

     13.  Tenant shall not use, keep or permit to be used or kept, any foul
or noxious gas or substance in or on the Premises, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Project by reason of noise, odors, or
vibrations, or interfere in any way with other tenants or those having
business therein.

     14.  Tenant shall not bring into or keep within the Project, the
Building or the Premises any animals or birds.  Bicycles are permitted in
designated areas, and Tenant may install bike racks at appropriate locations
designated by Landlord in the Common Areas to accommodate bicycles.

     15.  No cooking shall be done or permitted on the Premises, nor shall
the Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes.  Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used
in the Premises for heating food and brewing coffee, tea, hot chocolate and
similar beverages for employees and visitors, provided that such use is in
accordance with all applicable federal, state and city laws, codes,
ordinances, rules and regulations.  The foregoing rule and restriction shall
not apply to any cafeteria facility of Tenant.

     16.  Landlord will approve where and how telephone and telegraph wires
are to be introduced to the Premises.  Boring or cutting for wires shall be
allowed only at locations reasonably designated by Landlord.  The location of
telephone, call boxes and other office equipment affixed to the Premises
shall be subject to the approval of Landlord.

     17.  Landlord reserves the right to exclude or expel from the Project
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of these Rules and Regulations.

     18.  Tenant, its employees, contractors and agents (i) shall not loiter
in the entrances or corridors, nor in any way obstruct the sidewalks, lobby,
halls, stairways or elevators, and shall use them only as a means of ingress
and egress for the Premises, and (ii) shall only be permitted to smoke in the
areas of the Project designated for smoking.

                                   EXHIBIT D
                                      -2-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     19.  Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective
operation of the Building's heating and air conditioning system, and shall
refrain from attempting to adjust any controls.

     20.  Tenant shall store all its trash and garbage within the interior of
the Premises.  No material shall be placed in the trash boxes or receptacles
if such material is of such nature that it may not be disposed of in the
ordinary and customary manner of removing and disposing of trash and garbage
in the "Carmel Valley" area of San Diego, California without violation of any
law or ordinance governing such disposal.  All trash, garbage and refuse
disposal shall be made only through entry-ways and elevators provided for
such purposes at such times as Landlord shall designate.

     21.  Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.

     22.  Tenant shall assume any and all responsibility for protecting the
Premises from theft, robbery and pilferage, which includes keeping doors
locked and other means of entry to the Premises closed.

     23.  No awnings or other projection shall be attached to the outside
walls of the Building without the prior written consent of Landlord.  No
curtains, blinds, shades or screens shall be attached to or hung in, or used
in connection with, any window or door of the Premises if visible from the
exterior of the Building without the prior written consent of Landlord.  All
electrical ceiling fixtures hung in offices or spaces along the perimeter of
the Building must be fluorescent and/or of a quality, type, design and bulb
color approved by Landlord provided Tenant shall have the right to install
specialty lighting in the Premises not visible from the exterior of the
Building.  Tenant shall abide by Landlord's regulations concerning the
opening and closing of window coverings which are attached to the windows in
the Premises, if any, which have a view of any interior portion of the
Building or Building Common Areas.

     24.  The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in
the Building shall not be covered or obstructed by Tenant, nor shall any
bottles, parcels or other articles be placed on the windowsills.

     25.  Any access by Tenant or its agents, employees or contractors to the
roof of any Building shall be subject to coordination with Landlord and
Landlord's reasonable rules and regulations.

     Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to
time be necessary for the management, safety, care and cleanliness of the
Premises, Building, the Common Areas and the Project, and for the
preservation of good order therein, as well as for the convenience of other
occupants and tenants therein; provided, however, Landlord shall not change
or make any Rules and Regulations which materially adversely affects Tenant's
rights under this Lease, including without limitation Tenant's use and
enjoyment of the Premises. Landlord shall cooperate with Tenant in connection
with changing or making any Rules and Regulations.  Tenant shall be deemed to
have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.  Landlord may waive any one or
more of these Rules and Regulations for the benefit of any particular
tenants, but no such waiver by Landlord shall be construed as a waiver of
such Rules and Regulations in favor of any other tenant, nor prevent Landlord
from thereafter enforcing any such Rules or Regulations against any or all
tenants of the Project.

                                   EXHIBIT D
                                      -3-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                     EXHIBIT E

                         PEREGRINE SYSTEMS CORPORATE CENTER

                       FORM OF TENANT'S ESTOPPEL CERTIFICATE

     The undersigned as Tenant under that certain Office Lease (the "LEASE")
made and entered into as of _____________, _____ by and between  as Landlord,
and the undersigned as Tenant, for Premises on the ____ floor(s) of the
office building located at ______ Valley Center Drive, San Diego, California
92130, certifies as follows:

     1.   Attached hereto as EXHIBIT A is a true and correct copy of the
Lease and all amendments and modifications thereto.  The documents contained
in EXHIBIT A represent the entire agreement between the parties as to the
Premises.

     2.   The undersigned currently occupies the Premises described in the
Lease.

     3.   The Lease Term commenced on __________________, and the Lease Term
expires on __________________.

     4.   Base Rent became payable on ________________________.

     5.   The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in EXHIBIT A.

     6.   Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows: __________________________________________________
______________________________.

     7.   Tenant shall not modify the documents contained in EXHIBIT A
without the prior written consent of the holder of the first deed of trust on
the Premises.

     8.   All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through _______________.  The current monthly installment of Base Rent is
$________.

     9.   All conditions of the Lease to be performed by Landlord necessary
to the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder.

     10.  The current amount of the Security Deposit held by Landlord is
$_________.

     11.  No rental has been paid more than thirty (30) days in advance and
no security has been deposited with Landlord except as provided in the Lease.

     12.  As of the date hereof, there are no existing defenses or offsets
that the undersigned has against Landlord nor have any events occurred that
with the passage of time or the giving of notice, or both, would constitute a
default on the part of Landlord under the Lease.

     13.  The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee, or a prospective
purchaser, and acknowledges that said prospective mortgagee or prospective
purchaser will be relying upon the statements contained herein in making the
loan or acquiring the property of which the Premises are a part and that
receipt by it of this certificate is a condition of making of such loan or
acquisition of such property.

     14.  If Tenant is a corporation or partnership, each individual
executing this Estoppel Certificate on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority

                                   EXHIBIT E
                                      -1-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

to execute and deliver this Estoppel Certificate and that each person signing
on behalf of Tenant is authorized to do so.

     Executed at ____________________ on the ____ day of _____________, 19__.

     "TENANT":                          ____________________________________,

                                        a __________________________________

                                        By:  _______________________________

                                             Name:__________________________

                                             Title:_________________________

                                        By:  _______________________________

                                             Name:__________________________

                                             Title:_________________________


                                   EXHIBIT E
                                      -2-

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                    EXHIBIT F

                       PEREGRINE SYSTEMS CORPORATE CENTER

                                     CC&R'S

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

KR-CARMEL PARTNERS, LLC
4365 Executive Drive, Suite 850
San Diego, California 92121
Attention: Mr. Steven L. Black

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                                (Space Above For Recorder's Use)

                          AGREEMENT BETWEEN LANDOWNERS
                                    INCLUDING
                     COVENANTS, CONDITIONS AND RESTRICTIONS
                           AND GRANTS OF EASEMENTS FOR
                                  CARMEL CENTER
                            AND INCLUDING TERMINATION
                           OF BOTH FORMER DECLARATION
                          AND PRIOR GRANTS OF EASEMENTS




                                    EXHIBIT F
                                       -1-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

ARTICLE                                                                     PAGE
<S>        <C>    <C>                                                       <C>
ARTICLE 1  DEFINITIONS...........................................................3

ARTICLE 2  MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION...........................6
           2.1    Membership.....................................................6
           2.2    Voting Rights..................................................6

ARTICLE 3  COVENANT FOR PAYMENT OF ASSESSMENTS TO
           ASSOCIATION...........................................................7
           3.1    Creation of Lien and Personal Obligation for Assessments.......7
           3.2    Purpose of Assessments.........................................7
           3.3    Budgets........................................................7
           3.4    Parcel Area....................................................8
           3.5    Parcels Subject to Assessment; Allocation of Assessments ......8
           3.6    Regular Assessments............................................8
           3.7    Special Assessments............................................9
           3.8    Reimbursement Assessments.....................................10
           3.9    Effect of Non-Payment of Assessments; Remedies of
                  Association...................................................10
           3.10   Right of Owner to Audit Books and Records of Association......11
           3.11   Subordination of the Lien to First Mortgages..................11
           3.12   Estoppel Certificate..........................................11
           3.13   Personal Liability of Owner...................................11

ARTICLE 4  ARCHITECTURAL AND DEVELOPMENT REVIEW COMMITTEE ......................11
           4.1    Committee Composition.........................................12
           4.2    Alternate Members.............................................12
           4.3    Appointment...................................................12
           4.4    Removal.......................................................12
           4.5    Terms of Office...............................................12
           4.6    Resignations; Vacancies.......................................12
           4.7    Duties and Appeals............................................12
           4.8    Meetings......................................................12
           4.9    Design Guidelines.............................................12

ARTICLE 5  LAND USE.............................................................13
           5.1    Permitted Uses................................................13
           5.2    Use Restrictions .............................................13
           5.3    Prohibited Operations and Uses ...............................14


                                      -i-



                                   EXHIBIT F
                                      -2-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

           5.4    Other Operations and Uses.....................................15
           5.5    Laws..........................................................15

ARTICLE 6  REGULATION OF IMPROVEMENTS...........................................16
           6.1    Approval of Application Required..............................16
           6.2    Filing Fee....................................................16
           6.3    Basis for Approval............................................17
           6.4    Result of Inaction............................................17
           6.5    Proceeding With Work..........................................18
           6.6    Completion of Work............................................18
           6.7    Estoppel Certificate..........................................18
           6.8    Indemnity and Limitation of Liability.........................19
           6.9    Limitations on Improvements...................................19
           6.10   Certain Improvements Exempt from Application..................21
           6.11   Disclosure and Waiver of Conflict of Interest.................21

ARTICLE 7  OPERATIONS GENERALLY.................................................22
           7.1    Slope and Drainage Easements..................................22
           7.2    Shared Parking; Common Parking Areas..........................22
           7.3    Storage and Loading Areas.....................................23
           7.4    Inspection....................................................23
           7.5    Division of Land..............................................23
           7.6    Hazardous Materials...........................................23
           7.7    Payment of Taxes, Liens.......................................24

ARTICLE 8  COMMON AREA..........................................................25
           8.1    Use...........................................................25
           8.2    Modification of Common Area...................................26
           8.3    Parking Regulations...........................................26
           8.4    Construction and Repair.......................................26
           8.5    Interim Improvements and Maintenance of Parcels...............27
           8.6    Lighting the Common Area......................................28

ARTICLE 9  EMINENT DOMAIN.......................................................28

ARTICLE 10 MUTUAL RELEASE.......................................................29

ARTICLE 11 EASEMENTS............................................................29
           11.1   Grants of Reciprocal Easements over Common Areas..............29
           11.2   Utility Easements.............................................30
           11.3   Construction and Repair.......................................31
           11.4   Obstructions Within Common Area...............................31
           11.5   Right of Entry by Declarant, Association, Board...............31

                                      -ii-




                                    EXHIBIT F
                                       -3-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

           11.6   Entry by Owners...............................................32
           11.7   Reservation by Declarant......................................32
           11.8   Termination of Former Declaration and Confirmation of
                  Termination of 1990 Grant of Easements........................32

ARTICLE 12 BUILDING MAINTENANCE.................................................33
           12.1   Owner's Maintenance Obligations...............................33
           12.2   Closure.......................................................33
           12.3   Repair or Replacement of Damaged Building.....................34

ARTICLE 13 COMMON AREA MAINTENANCE..............................................34
           13.1   Association Maintenance.......................................34
           13.2   Common Area Insurance.........................................35
           13.3   Association's Right to Repair Neglected Parcels...............36
           13.4   Property Management Company...................................36

ARTICLE 14 THE ASSOCIATION......................................................36
           14.1   Organization..................................................36
           14.2   Duties........................................................36
           14.3   Powers........................................................37
           14.4   Election of New Board of Directors............................38
           14.5   Subsequent Board of Directors.................................38
           14.6   Personal Liability............................................38
           14.7   Annual Membership Meetings....................................38

ARTICLE 15 APPROVAL OF OWNERS AND NOTICES.......................................38

ARTICLE 16 MODIFICATION PROVISION...............................................40

ARTICLE 17 NOT A PUBLIC DEDICATION..............................................40

ARTICLE 18 INJUNCTIVE RELIEF....................................................40

ARTICLE 19 BREACH SHALL NOT PERMIT TERMINATION..................................40

ARTICLE 20 INDEMNITY BY OWNERS..................................................41
           20.1   Indemnity.....................................................41
           20.2   Building Area Liability Insurance.............................41

ARTICLE 21 SEVERABILITY.........................................................41

ARTICLE 22 ENFORCEMENT AND REMEDIES.............................................41
           22.1   Right to Enforce..............................................41


                                     -iii-



                                    EXHIBIT F
                                       -4-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

           22.2   Owner's Remedies..............................................42
           22.3   Waiver........................................................42

ARTICLE 23 LITIGATION EXPENSES..................................................42

ARTICLE 24 NO ASSIGNMENT OR TRANSFER............................................42

ARTICLE 25 SALE BY OWNER........................................................42
           25.1   Notice........................................................42
           25.2   Constructive Notice and Acceptance............................43
           25.3   Release of Owner..............................................43
           25.4   Liability of Transferee.......................................43

ARTICLE 26 TERM OF DECLARATION..................................................43

ARTICLE 27 MISCELLANEOUS........................................................43
           27.1   Captions......................................................43
           27.2   Gender........................................................44
           27.3   Declarant's Reserved Rights...................................44
           27.4   Exhibits......................................................44
           27.5   Governing Law.................................................44
           27.6   Mortgage Protection...........................................44
           27.7   Mutuality, Reciprocity; Runs With Land........................44
</TABLE>


EXHIBITS

Exhibit "A" Site Plan of the Center

Exhibit "B" Legal Descriptions of Parcels Comprising the Center

Exhibit "C" Table of Parcel Areas


                                      -iv-





                                    EXHIBIT F
                                       -5-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                          AGREEMENT BETWEEN LANDOWNERS
                                    INCLUDING
                     COVENANTS, CONDITIONS AND RESTRICTIONS
                           AND GRANTS OF EASEMENTS FOR
                                  CARMEL CENTER
                            AND INCLUDING TERMINATION
                           OF BOTH FORMER DECLARATION
                          AND PRIOR GRANTS OF EASEMENTS

     This AGREEMENT BETWEEN LANDOWNERS INCLUDING COVENANTS, CONDITIONS AND
RESTRICTIONS AND GRANTS OF EASEMENTS FOR CARMEL CENTER AND INCLUDING
TERMINATION OF BOTH FORMER DECLARATION AND PRIOR GRANTS OF EASEMENTS is made as
of _________, 1999, with reference to the following:

                                   RECITALS:

     A. Declarant (defined in Article 1) owns those certain Parcels (defined in
Article 1) of real property located in the City of San Diego, County of San
Diego, California, identified on EXHIBIT "B" attached hereto as Parcels B and E
through K, inclusive (and sometimes referred to herein as the "Carmel Center
Office Campus"). The legal descriptions of such Parcels are also set forth on
EXHIBIT "B".

     B. Piazza Partners, L.P., a California limited partnership, owns that
certain Parcel of real property located in the City of San Diego, County of San
Diego, California, identified on EXHIBIT "B" attached hereto as Parcel A. The
legal description of such Parcel is also set forth on EXHIBIT "B".

     C. Carmel Valley, LLC, a California limited liability company, owns those
certain Parcels of real property located in the City of San Diego, County of San
Diego, California, identified on EXHIBIT "B" attached hereto as Parcels D and M.
The legal descriptions of such Parcels are also set forth on EXHIBIT "B".

     D. Acacia Gasoline and Car Wash of Carmel Valley, LLC, a California limited
liability company, owns that certain Parcel of real property located in the City
of San Diego, County of San Diego, California, identified on EXHIBIT "B"
attached hereto as Parcel L. The legal description of such Parcel is also set
forth on EXHIBIT "B".

     E. RFS Financing Partnership, L.P., a Tennessee limited partnership, owns
that certain Parcel of real property located in the City of San Diego, County of
San Diego, California, identified on EXHIBIT "B" attached hereto as Parcel C.
The legal description of such Parcel is also set forth on EXHIBIT "B". A hotel
is currently open for business on Parcel C.


                                    EXHIBIT F
                                       -6-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     F. Previous owners of the properties comprising the Center (defined in
Article 1) intended to develop a retail shopping center and an adjacent
commercial complex, and in furtherance of that objective recorded that certain
Agreement Between Landowners Including Easements With Covenants and Restrictions
Affecting Land for Carmel Valley Commercial, recorded in the Office of the
County Recorder of San Diego County, California, on September 29, 1994, as
Document No. 19940579026 ("FORMER DECLARATION"). Except for the hotel on Parcel
C, in most respects the properties comprising the Center have not been
developed as contemplated under the Former Declaration. The Former Declaration
is not consistent with the manner in which the current Owners intend to develop
the property comprising the undeveloped portions of the Center. Therefore, the
Owners intend to terminate the Former Declaration and to replace the Former
Declaration in its entirety with this Declaration.

     G. The Owners intend to develop and operate the Center as a commercial
common interest development described in Section 1351(k) of the California
CIVIL CODE as a "Planned Development". The Center will include certain Common
Area which is shown on the Site Plan attached hereto as Exhibit "A". Portions
of the Common Area are or may be designated as Exclusive Use Areas for the
exclusive use of one or more Occupants. "Common Area" and "Exclusive Use
Area" are defined in Article 1.

     H. The Association was formed by certain previous owners of portions of the
property comprising the Center. Substantially concurrently with the recordation
of this Declaration, the membership of the Association will be changed so that
the current Owners of the Parcels become the current members of the Association.
Among other things, the Association will maintain, repair and replace the
portions of the Parcels designated as Common Area, except any Exclusive Use
Areas, and except as otherwise provided in this Declaration. Each Owner or
Occupant will maintain, repair and replace the building(s) and any Exclusive Use
Area(s) on the Owner's or Occupant's Parcel(s).

     I. The Owners wish to subject the Center, in accordance with a common plan,
to certain covenants, conditions and restrictions for the benefit of the Owners
and any and all future owners of the Center or of a Parcel in the Center. The
purposes of this Declaration are to ensure proper development and use of the
Center, to protect the Owner of each Parcel against any improper development or
use of surrounding Parcels which might depreciate the value of the Parcel, to
prevent the erection on the Center of structures built of improper design or
materials, to encourage the erection of attractive Improvements, to prevent
haphazard and inharmonious Improvements, to secure and maintain proper setbacks
from streets and adequate free spaces between structures, to provide for
reciprocal parking and reciprocal pedestrian and vehicular access, ingress and
egress upon certain portions of the Center for the benefit of certain of the
Parcels, to enhance and protect the value, desirability and attractiveness of
the entire Center, and in general to provide adequately for a high type and
quality of improvement of the Center in accordance with a uniform plan of
development.

     J. The Center is presently comprised of thirteen (13) legal parcels as of
the date of this Declaration, which in this Declaration will be designated and
referred to as Parcel A through Parcel M, inclusive. The Owners intend that the
provisions of this Declaration be restrictive


                                      -2-


                                    EXHIBIT F
                                       -7-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

covenants made pursuant to Section 1468 of the California CIVIL CODE, and that
this Declaration will bind and inure to the benefit of the Parcels and the
respective Owners of the Parcels during their respective periods of ownership.
Declarant is processing with the City a new Parcel Map (the "New Parcel Map")
which, upon recordation, shall effect a reparcelization and lot line adjustment
of that portion of the Center owned by Declarant and presently described as Lots
1 through 6 and 9 of Piazza Carmel II, Unit No. 1, of Map No. 13138 into seven
(7) newly configured parcels which will be more particularly described as
Parcels 1 through 7 of the New Parcel Map. Exhibit "B" attached hereto sets
forth the tentative description of these Parcels contained within the New Parcel
Map, and upon recordation of the New Parcel Map, the legal description of the
Parcels contained therein shall supersede those descriptions of their
predecessor Parcels.

     NOW, THEREFORE, the Owners hereby certify, declare and establish the
following general plan for the protection and benefit of the Center, and hereby
fix the following protective covenants, conditions and restrictions upon each
and every ownership interest in the Center. Each ownership interest in the
Center shall be hereafter held, used, occupied, leased, sold, encumbered,
conveyed and transferred under and pursuant to such covenants, conditions and
restrictions. Each and all of the covenants, conditions and restrictions set
forth herein are for the purpose of protecting the value and desirability of the
Center and shall bind and inure to the benefit of the Parcels and the respective
Owners of the Parcels during their respective periods of ownership.

                                    ARTICLE 1
                                   DEFINITIONS

     In addition to any other terms defined in this Declaration, the following
definitions shall apply unless otherwise indicated:

     "APPLICATION" - Any plans, specifications and other documentation required
to be submitted to the Committee pursuant to the provisions of Article 6.

     "APPROVED DECLARANT IMPROVEMENTS" - Those Improvements more particularly
described and defined in Section 4.9.

     "ARCHITECT" - A Person holding a certificate to practice architecture in
the State of California under authority of Division 3, Chapter 3 of the
BUSINESS & PROFESSIONS CODE of the State of California or any successor
legislation thereto.

     "ARTICLES" - The Articles of Incorporation of the Association filed with
the California Secretary of State on September 20, 1994, amended in their
entirety by those Restated Articles of Incorporation of Carmel Center
Association filed with the Secretary of State on ___________, 1999, and as
may be further amended from time to time.

     "ASSOCIATION" - Carmel Center Association, a California Nonprofit Mutual
Benefit Corporation.

     "BOARD" - The Board of Directors of the Association.


                                      -3-


                                    EXHIBIT F
                                       -8-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     "BYLAWS" - The Restated Bylaws of the Association dated _____, 1999, as
may be further amended from time to time.

     "CARMEL CENTER OFFICE CAMPUS" - Parcels B and E through K, inclusive, which
Declarant intends to improve with multi-story buildings primarily for office use
and the Parking Structure.

     "CENTER" - All of the Parcels of real property shown on the Site Plan and
described on EXHIBIT "B".

     "CITY" - The City of San Diego, California, a municipal corporation.

     "COMMITTEE" - The Architectural and Development Review Committee created
pursuant to Article 4.

     "COMMON AREA" - Those portions of the Center shown on Exhibit "A" attached
hereto intended for the common use of Owners and Occupants, and comprised of
parking areas, vehicular and pedestrian access areas and driveways, sidewalks,
Common Landscaping, curbs, loading areas and lighting facilities; EXCEPTING
THEREFROM, HOWEVER, portions of the Common Area which are, or from time to
time may be, designated for the exclusive use of one or more Occupants, and as
such are "Exclusive Use Areas" as defined in this Article 1. The Common Area and
Exclusive Use Areas may be modified from time to time to change the location or
configuration thereof or to reflect the requirements of the City or other
governmental authorities by recordation of a supplement to this Declaration by
Declarant or the Association.

     "COMMON EXPENSES" - The actual and estimated expenses of maintaining and
operating the Association, including property management fees, maintaining and
operating the Common Areas and the Improvements located thereon (excluding
Exclusive Use Areas), the cost of utility services for the Common Areas
(excluding Exclusive Use Areas), the cost of insurance maintained by the Board
as described herein or in the Bylaws, exercising the powers and performing the
duties of the Association and the Board under this Declaration, the Articles,
the Bylaws and any rules or regulations adopted by the Association, and
maintaining any reasonable reserves for such purposes as determined by the
Board.

     "COMMON LANDSCAPING" - The landscaping and related irrigation system
improvements to be maintained by the Association, the approximate location of
which is shown on Exhibit "A" attached hereto.

     "DECLARANT" - KR-CARMEL PARTNERS, LLC, a Delaware limited liability company
("KRCP") and its successor-in-interest (defined below). As used in this
definition, a "SUCCESSOR-IN-INTEREST" of KRCP shall mean a Person which, through
a purchase or acquisition of stock or partnership interest(s), amalgamation,
consolidation, reorganization, dissolution, merger or similar transaction (as
opposed to a purchase, transfer or conveyance of one or more Parcels), becomes
vested with the rights and assumes the obligations of KRCP, as "Declarant",
pursuant to this Declaration. "DECLARANT" shall also mean the transferee from
KRCP or its successor-in-interest of three (3) or more Parcels comprising the
Center, provided KRCP or its


                                      -4-


                                    EXHIBIT F
                                       -9-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

successor-in-interest assigns to such transferee the rights of "Declarant", and
such transferee assumes the obligations of "Declarant", under this Declaration;
any such assignment and assumption of the rights and obligations of "Declarant"
shall be in writing and signed by both KRCP or its successor-in-interest and by
the transferee in recordable form and shall be recorded by the transferee in the
Office of the County Recorder of San Diego County, California.

     "DECLARATION" - This Agreement Between Landowners Including Covenants,
Conditions and Restrictions and Grants of Easements for Carmel Center and
Including Termination of Both Former Declaration and Prior Grants of Easements,
as it may be amended from time to time.

     "DESIGN GUIDELINES" - Guidelines, rules and regulations which may be
prepared and issued from time to time (and which may be amended from time to
time) by the Committee, and approved and adopted by the Board for the purpose of
assisting Owners in preparing plans and specifications for Improvements and in
preparing other plans, specifications and other materials (including designs for
signs and the like) which are subject to review by the Committee pursuant to
this Declaration.

     "ELIGIBLE OCCUPANT" - An Occupant of an Owner's entire Parcel (or of all of
the usable area within the building(s) on the Parcel): (a) pursuant to a lease
or sublease which, as of the date of the Owner's designation of the Occupant as
an Eligible Occupant, has a remaining term which exceeds five (5) years, not
including periods for which the term thereof may be extended by unexercised
options to extend; and (b) designated as such by the Owner of the Parcel
pursuant to Section 2.1.

     "EXCLUSIVE USE AREAS" - Those portions of the Common Area within a Parcel
for the exclusive use of one or more Occupants and either (i) designated as
Exclusive Use Areas on the Site Plan, or (ii) subject to the provisions of
Section 8.2, subsequently designated as Exclusive Use Areas from time to time by
the Board or the Committee in writing.

     "IMPROVEMENTS" - Buildings, outbuildings, underground installations, slope
and grade alterations, roads, curbs, gutters, storm drains, utilities,
driveways, parking areas, fences, screening walls and barriers, retaining walls,
stairs, decks, windbreaks, plantings, planted trees and shrubs, sidewalks,
poles, signs, loading areas, docks and all other structures, land development or
landscaping improvements of every type and kind.

     "MEMBER" - An Owner entitled to membership in the Association as provided
in this Declaration.

     "MORTGAGE" - A deed of trust as well as a mortgage encumbering a Parcel.

     "MORTGAGEE" - The beneficiary of a deed of trust as well as the mortgagee
of a mortgage encumbering a Parcel.

     "OCCUPANT" - Any Person from time to time entitled by right of ownership or
under any lease, sublease or license to use and occupy any portion of the
building Improvements on any Parcel within the Center.


                                      -5-


                                    EXHIBIT F
                                      -10-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     "OWNER" - Any Person (including Declarant) who from time to time holds fee
title to any Parcel within the Center.

     "PARCEL" - Any separate legal lot or parcel which is a portion of the
Center. Any lot or parcel of real property created after this Declaration is
recorded, whether created by a legal split, subdivision or parcelization of a
Parcel, lot line adjustment, or by combination or merger of one or more Parcels,
shall be included in the definition of Parcel for purposes of this Declaration.

     "PARCEL AREA" - The total gross square footage of a Parcel as shown on
EXHIBIT "C".

     "PARKING STRUCTURE" - The multi-level parking garage to be constructed by
Declarant, at Declarant's cost and expense, on Parcels E, F and G (Parcels 1, 6,
and 7 of the New Parcel Map). The Parking Structure and the parking spaces
within the Parking Structure are not Common Area and are for the exclusive use
and benefit of the Owners and Occupants of the Carmel Center Office Campus and
their customers, guests and invitees.

     "PERSON" - An individual, partnership, association, corporation, limited
liability company, trust, governmental agency, administrative tribunal or any
other form of business or legal entity.

     "PROJECT DOCUMENTS" - This Declaration, the exhibits attached hereto, the
Articles and Bylaws, the Sign Plan, and any Design Guidelines and rules and
regulations as may be adopted from time to time by the Board or the Association,
all as amended or supplemented from time to time.

     "SIGN PLAN" - The Carmel Center Sign Guidelines and Criteria, dated
February 24, 1999, on file with the Association, as may be amended and
supplemented from time to time.

     "SITE PLAN" - The Site Plan attached to this Declaration as EXHIBIT "A".

                                    ARTICLE 2
                  MEMBERSHIP AND VOTING RIGHTS IN ASSOCIATION

     2.1 MEMBERSHIP. Every Owner of a Parcel which is subject to assessment by
the Association shall be a Member of the Association. Membership shall be
appurtenant to ownership of any Parcel subject to assessment, and membership
shall not be separated from such ownership or transferred, pledged or alienated
in any way, except that an Owner, upon giving written notice to the Association,
may, at its option, grant to an Eligible Occupant a power coupled with an
interest to act as the Owner's agent in all matters relating to the Association;
any such power shall automatically terminate upon expiration of the Eligible
Occupant's lease or the earlier termination of the Eligible Occupant's tenancy
for any reason. Any attempt to transfer a membership in violation of this
Section shall be void and shall not be reflected in the books and records of the
Association.

     2.2 VOTING RIGHTS. The Association shall have one (1) class of voting
membership.


                                      -6-


                                    EXHIBIT F
                                      -11-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     Each Owner shall be entitled to one (1) vote for each four hundred (400)
square feet of Parcel Area owned which is subject to assessment, rounded down to
the next lowest whole four hundred (400) square feet of Parcel Area subject to
assessment; PROVIDED, HOWEVER, any Owner of a Parcel comprised of less than four
hundred (400) square feet of Parcel Area subject to assessment shall be entitled
to one (1) vote for such Parcel. (For example and illustration only, the Owner
of a Parcel comprised of 16,000 square feet of Parcel Area subject to assessment
would be entitled to 40 votes, and the Owner of a Parcel comprised of 15,950
square feet of Parcel Area subject to assessment would be entitled to 39 votes.)
When more than one (1) Person holds an ownership interest in any Parcel subject
to assessment, all such Persons shall be Members, the vote(s) for such Parcel
shall be exercised as they among themselves determine, and the authorized voter
shall be designated in a writing delivered to the Association signed by a
majority of the co-Owners.

                                    ARTICLE 3
               COVENANT FOR PAYMENT OF ASSESSMENTS TO ASSOCIATION

     3.1 CREATION OF LIEN AND PERSONAL OBLIGATION FOR ASSESSMENTS. Each Owner,
for each Parcel owned which is subject to assessment hereunder, hereby covenants
and agrees to pay to the Association: (a) annual Regular Assessments described
in Section 3.6 for the periodic maintenance, repair and replacement of the
Common Area (except any Exclusive Use Areas); (b) Special Assessments described
in Section 3.7; (c) Reimbursement Assessments described in Section 3.8; and (d)
such other assessments which the Board is authorized to levy pursuant to this
Declaration or the Bylaws, such assessments to be established and collected as
provided in this Declaration. Assessments, together with interest pursuant to
Section 3.9, reasonable collection costs and attorney's fees, shall (except as
otherwise provided in Section 3.8) be a charge on the Parcel and shall be a
continuing lien upon the Parcel against which each such assessment is made, the
lien to be effective upon recordation of a notice of delinquent assessment. Each
such assessment, together with interest pursuant to Section 3.9, reasonable
collection costs and attorney's fees, shall also be the personal obligation of
the Person who was the Owner of such Parcel at the time the assessment fell due.
If more than one Person is the Owner of a Parcel subject to assessment, the
personal obligation to pay such assessment shall be joint and several. The
personal obligation for delinquent assessments shall not pass to an Owner's
successors in title, however, unless expressly assumed by them, but any lien
established hereunder shall remain a charge against the Parcel except to
bonafide purchasers or encumbrancers for value without notice and further except
as set forth in Section 3.11.

     3.2 PURPOSE OF ASSESSMENTS. The assessments levied by the Association shall
be used exclusively to pay the Common Expenses (as defined in Article 1),
reimburse the Association for the costs incurred in bringing an Owner into
compliance with the Project Documents and only such other purposes expressly set
forth in this Declaration.

     3.3 BUDGETS. At least thirty (30) days prior to the date for commencement
of Regular Assessments pursuant to Section 3.6, and at least thirty (30) days
prior to each calendar year thereafter, the Board shall prepare or cause to be
prepared and distribute to all Members of the


                                      -7-


                                    EXHIBIT F
                                      -12-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

Association a pro forma operating budget ("Budget") for such first or successive
calendar year setting forth the estimated revenue and expenses on an accrual
basis. The Budget shall include a reasonable allowance for contingencies,
replacements and reserves. The Association shall deliver, together with the
Budget: (a) notice of the Members' right to obtain copies of minutes of Board
meetings, to the extent required under California Civil Code Section 1363; and
(b) the summary of the provisions of California Civil Code Section 1354, as
required by such Section.

     3.4 PARCEL AREA. The Parcel Area of each Parcel subject to assessment as of
the date of recordation of this Declaration is indicated on EXHIBIT C. The
Parcel Area of one or more Parcels shall be redetermined and shall be subject to
the approval of Declarant and the Board in the event of: (a) resubdivision of
any Parcel or a merger affecting two or more Parcels, in which event the Parcel
Area shall be redetermined for each resulting Parcel; (b) a lot line or boundary
adjustment affecting two or more Parcels; or (c) any other change in the gross
square footage of any Parcel. The Board shall maintain a current schedule of the
Parcel Area of the Parcels, which shall be available for inspection by any Owner
upon request. From time to time, as deemed appropriate by the Board, Declarant
or the Board shall have the right to execute and record a supplement to this
Declaration, which includes the modified Parcel Areas in an updated EXHIBIT C.
Such supplement need only be executed by the Board and the EXHIBIT C
incorporated in such supplement shall replace the EXHIBIT C hereto or in any
previously recorded supplement.

     3.5 PARCELS SUBJECT TO ASSESSMENT; ALLOCATION OF ASSESSMENTS. Except as
provided below, all Parcels within the Center are subject to Regular Assessments
and to Special Assessments. All assessments (except for Reimbursement
Assessments described in Section 3.8) shall be allocated among the Owners in the
proportion the Parcel Area of each Owner's Parcel or Parcels subject to
assessment bears to the total Parcel Area of all Parcels then subject to
assessment under this Declaration. The Parking Structure Parcels shall not be
subject to any assessments levied by the Association or otherwise under this
Declaration. Parcels L and M shall not be assessed for any expenses of
maintenance and repair of the Common Parking Area.

     3.6 REGULAR ASSESSMENTS.

               (a) PURPOSE. Regular Assessments shall be used to defray the
Common Expenses.


               (b) DATE OF COMMENCEMENT OF REGULAR ASSESSMENTS; DUE DATES. The
Regular Assessments shall commence for Parcel C upon recordation of this
Declaration. The Regular Assessments shall commence for each Parcel other than
Parcel C on the date on which construction of any building Improvements on the
Parcel have been substantially completed, and the Regular Assessments for all
Parcels then subject to assessment shall be recalculated, on a going forward
basis, as Parcels are added to the assessment roll. The first Regular Assessment
for a Parcel shall be adjusted according to the number of months and any
partial month (prorated on the basis of a 30-day month) remaining in the
calendar year. The Board shall fix the amount of the Regular Assessment against
each Parcel at least thirty (30) days in advance of each Regular Assessment
period. Written notice of the Regular Assessment shall be sent to every Owner of
a Parcel subject thereto.


                                      -8-


                                    EXHIBIT F
                                      -13-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

               (c) REVISED REGULAR ASSESSMENT. If the Board reasonably
determines that the Regular Assessment established for any year is, or will
become, insufficient to meet all Common Expenses, it may determine the
approximate amount of such deficiency and revise the amount of the Regular
Assessments for each Owner for the balance of such year to reduce or avoid the
deficiency. After the end of each calendar year, the Board shall cause an
accounting to be made of all Common Expenses for such year and the amount of
Regular Assessments paid for such year. If the Regular Assessments collected
exceed the Common Expenses, the Board may refund the excess to Owners, or apply
such excess toward Regular Assessments next becoming due from Owners, in either
event in the same proportion as the Regular Assessments were paid.

               (d) PAYMENT OF ASSESSMENTS. Regular Assessments shall be due and
payable by the Owners to the Association in advance in four (4) equal quarterly
installments, on or before the first (1st) day of January, April, July and
October of each calendar year, or in such other manner as the Board shall
designate.

3.7      SPECIAL ASSESSMENTS.

               (a) PURPOSE. Special Assessments may be levied by the Board:

                    (i)   If the Board determines that the Regular Assessments
     are or will be insufficient to defray actual Common Expenses of the
     Association for a given year due to unanticipated delinquencies or cost
     increases or unexpected repairs, replacements or reconstruction of any
     Improvements in those Common Areas maintained by the Association;

                    (ii)  If funds are otherwise required for any authorized
     activity of the Association; or

                    (iii) For the purpose of defraying, in whole or in part, the
     cost of construction of any capital improvements within the Common Area
     (excluding Exclusive Use Areas) deemed reasonably necessary by the Board
     for the benefit of the Center, provided that any such capital improvement
     assessment in excess of five percent (5%) of all Regular Assessments
     budgeted for that calendar year shall require approval by the vote or
     written consent of Members holding a majority of the voting power of the
     Association Members, and the Declarant for so long as Declarant owns any
     portion of the Center.

               (b) ESTABLISHMENT. The Board shall determine the approximate
amount necessary to defray the expenses set forth in Section 3.7(a), and, if the
amount is approved by the Board, it shall become a Special Assessment; provided,
however, that the Board may, in its discretion, prorate such Special Assessment
over the remaining months of the calendar year or levy the full assessment
immediately against each Parcel subject to assessment. Any Special Assessment in
excess of ten percent (10%) of the budgeted Common Expenses of the Association
for the calendar year in which a Special Assessment is levied shall require
approval by Members holding a majority of the voting power of the Association
Members, and the Declarant for so long as Declarant owns any portion of the
Center.


                                      -9-


                                    EXHIBIT F
                                      -14-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

               (c) PAYMENT OF ASSESSMENTS. Special Assessments shall be due and
payable within thirty (30) days after a Member receives written notice from the
Board specifying the amount of the Special Assessment, unless the Board
specifies in such notice a later date for payment.

     3.8 REIMBURSEMENT ASSESSMENTS. The Association may also impose a
Reimbursement Assessment against any Owner to reimburse the Association for
costs incurred in bringing the Owner and the Owner's Parcel into compliance with
the provisions of this Declaration, the Articles, the Bylaws and the rules and
regulations of the Association, which assessment may be imposed upon the vote of
the Board after notice and an opportunity for a hearing which satisfy the
requirements of Section 7341 of the California CORPORATIONS CODE, as set forth
in the Bylaws; PROVIDED, HOWEVER, except to the extent such Reimbursement
Assessment is to reimburse the Association for the cost of (i) repairing damage
to Common Areas for which the Owner or its Occupants, guests or invitees are
responsible, or (ii) collecting assessments, any Reimbursement Assessment shall
not constitute a lien on the Owner's Parcel.

     3.9 EFFECT OF NON-PAYMENT OF ASSESSMENTS; REMEDIES OF ASSOCIATION. Any
assessment made in accordance with this Declaration shall be a debt of the Owner
of a Parcel from the time the assessment is due. Any assessment not paid within
thirty (30) days after the due date shall bear interest from thirty (30) days
following the due date at the rate of the greater of (a) twelve percent (12%)
per annum, or (b) two percent (2%) per annum over the Prime Rate published in
the California Edition of the Wall Street Journal most recently before the due
date. The Association may bring an action at law against the Owner personally
obligated to pay the assessment, and in addition thereto, or in lieu thereof,
may foreclose the lien against the Parcel. Any assessment not paid within
fifteen (15) days after the due date shall be delinquent. Except as otherwise
provided in Section 3.8, the amount of any such delinquent assessment plus costs
of collection, late charges, penalties, interest and attorneys' fees, shall be
and become a lien upon the Parcel when the Association causes to be recorded in
the Office of the County Recorder of San Diego County, California, a Notice of
Delinquent Assessment, which shall state the amount of such delinquent
assessment and such other charges thereon as may be authorized by this
Declaration, a description of the Parcel against which the same has been
assessed, the name of the record owner of the Parcel and, in order for the lien
to be foreclosed by non-judicial foreclosure, the name and address of the
trustee authorized by the Association to enforce the lien by sale. The Notice of
Delinquent Assessment shall be signed by the person designated by the
Association for that purpose or, if no one is designated, by the President of
the Association. Upon payment of the delinquent assessment and charges in
connection with which the Notice of Delinquent Assessment has been recorded, or
other satisfaction thereof, the Association shall cause to be recorded a further
notice stating the satisfaction and the release of the lien thereof. Such lien
may be enforced by sale by the Association after failure of the Owner to pay
such assessment in accordance with its terms, such sale to be conducted in
accordance with the provisions of Section 2924, Section 2924b and Section 2924c
of the California CIVIL CODE applicable to the exercise of powers of sale in
mortgages or in any other manner permitted by law. The Association shall have
the power to purchase the Parcel at the foreclosure sale and to hold, lease,
mortgage and convey the same. Suit to recover a money judgment for unpaid
assessments, interest and attorney's fees may be commenced and maintained
without foreclosing or waiving the lien

                                      -10-


                                    EXHIBIT F
                                      -15-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

securing the same. Any sale or transfer of any Parcel pursuant to this Section
3.9 shall not disturb the possession, or otherwise diminish the rights or
enlarge the obligations, of any Occupant under any then-existing lease.

     3.10 RIGHT OF OWNER TO AUDIT BOOKS AND RECORDS OF ASSOCIATION. Each year,
each Owner shall have the right, exercisable by delivering ten (10) days advance
written notice to the Chief Financial Officer of the Association, to have
conducted, at such Owner's cost and expense, one (1) audit of the books and
records of the Association. Any such audit may encompass any or all of the three
(3) previous years of the operation of the Association; provided, however, any
Owner shall be entitled to audit any given year only once. If any such audit
discloses any error in the determination of the proportionate share of Regular
Assessments of any Owner or in the composition of any cost comprising the
Regular Assessments: (a) an appropriate adjustment shall be made promptly
between the Owner(s) and the Association to correct the error; and (b) if the
error is greater than ten percent (10%) of the auditing Owner's actual
proportionate share of the Regular Assessments, then the Association shall
reimburse the auditing Owner for the reasonable auditor's fees and costs
incurred by the auditing Owner in having the audit performed.

     3.11 SUBORDINATION OF THE LIEN TO FIRST MORTGAGES. The lien of any
assessment levied upon a Parcel pursuant to this Declaration shall be
subordinate to the lien of any first Mortgage upon such Parcel, and the sale or
transfer of such Parcel pursuant to judicial or nonjudicial foreclosure of a
first Mortgage shall extinguish the lien of such assessments as to payments
which became due prior to such sale or transfer. No sale or transfer shall
relieve such Parcel from lien rights for any assessments thereafter becoming
due. Where the Mortgagee of a first Mortgage or other purchaser of a Parcel
obtains title to the same as a result of foreclosure, such acquirer of title,
its successors and assigns, shall not be liable for the share of assessments
chargeable to such Parcel which became due prior to the acquisition of title to
such Parcel by such acquirer.

     3.12 ESTOPPEL CERTIFICATE. The Association shall furnish or cause an
appropriate officer to furnish, within ten (10) days of a written demand by any
person, a certificate signed by an officer of the Association setting forth
whether the assessments on a specified Parcel have been paid. A properly signed
certificate of the Association with respect to the status of assessments on a
Parcel is binding upon the Association as of the date of its issuance.

     3.13 PERSONAL LIABILITY OF OWNER. No Owner may exempt itself from personal
liability for assessments, nor any part thereof, levied by the Association, nor
release the Parcel it owns from the liens and charges of assessments pursuant to
this Declaration, by waiving the use and enjoyment of the Common Area and
facilities thereof, or by abandonment of its Parcel(s).

                                    ARTICLE 4
                 ARCHITECTURAL AND DEVELOPMENT REVIEW COMMITTEE

     Declarant hereby creates an architectural and development review Committee,
which shall be organized as follows:

                                      -11-


                                    EXHIBIT F
                                      -16-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     4.1 COMMITTEE COMPOSITION. The Committee shall consist of three (3)
individuals, at least one (1) of which shall not be an employee, contractor or
other affiliate of Declarant.

     4.2 ALTERNATE MEMBERS. There shall also be two (2) alternate members,
either of whom may be designated by the Committee to act as a substitute for any
member of the Committee in the event of the member's unavailability or
disability.

     4.3 APPOINTMENT. The Board shall have the right to appoint all members and
alternate members of the Committee.

     4.4 REMOVAL. The right to remove any member or alternate member of the
Committee shall be and is hereby vested solely in the Board.

     4.5 TERMS OF OFFICE. The term of all Committee members appointed shall be
one (1) year. Any new member appointed to replace a member who has resigned or
has been removed shall serve such member's unexpired term. Members whose terms
have expired may be reappointed.

     4.6 RESIGNATIONS; VACANCIES. Any member of the Committee may, at any time,
resign from the Committee upon written notice to the Board.

     4.7 DUTIES AND APPEALS. It shall be the duty of the Committee to perform
the functions required of it pursuant to this Declaration; to consider and
act upon each Application which is submitted to it pursuant to the terms of
this Declaration; to enforce the Design Guidelines if any are adopted; and to
perform all other duties delegated to it by the Board or imposed upon it by
this Declaration. Any Owner may appeal any decision of the Committee to the
Board.

     4.8 MEETINGS. The Committee shall meet as often as it, in its sole,
absolute and unfettered discretion, considers necessary or proper to perform
properly its duties and obligations pursuant to this Declaration. The vote,
written consent or written approval of any two (2) members shall constitute an
act by the Committee, unless the unanimous decision of its members is otherwise
required pursuant to this Declaration. The Committee shall keep written records
of all actions the Committee takes.

     4.9 DESIGN GUIDELINES. The Committee may, from time to time, and in its
sole, absolute and unfettered discretion, adopt Design Guidelines and amend
the Sign Plan and any Design Guidelines adopted by the Committee, provided,
however, that no such amendment shall apply to any previously approved (or
deemed approved) Improvement within the Center. The Design Guidelines may
include (a) standards and procedures for Committee review; and (b) guidelines
for Improvements, which may include, but not necessarily be limited to,
guidelines for the architectural design of Improvements, site plans, floor
plans and exterior elevations, the size and location of buildings (including
setback requirements), the height of buildings (including architectural
features), the location and pitch of slopes, requirements for grading,
excavation and drainage, the location and capacity of facilities for
utilities, parking areas, loading areas and docks, trash areas (including
compactor pads), Exclusive Use Areas, landscaping designs and

                                      -12-


                                    EXHIBIT F
                                      -17-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

irrigation plans, color schemes, signs, exterior lighting, and finishes and
materials for use in the Center. Notwithstanding the foregoing, and
notwithstanding anything in the Design Guidelines to the contrary (or which may
be interpreted as being to the contrary), the following are exempt from the
Design Guidelines: (i) Improvements existing or under construction on the date
of this Declaration; and (ii) Improvements for which the discretionary
governmental approvals have been obtained from the City before the date of this
Declaration including, without limitation, the five office buildings and the
Parking Structure comprising the Carmel Center Office Campus and related
Improvements (herein the "Approved Declarant Improvements") approved by the City
for construction upon Parcel B and Parcels E, F, G, H, I, J and K pursuant to
Carmel Valley Planned District and Coastal Development Permit No. 98-0227
(Amendment to Carmel Valley Planned District, Coastal Development and
Conditional Use Permit No. 93-0451) for Kilroy Carmel Center (the "KILROY CARMEL
CENTER PERMIT").

     4.10 EXERCISE OF RIGHTS. Exercise of the Board's right of appointment and
removal, as set forth in this Declaration, shall be evidenced by the Board's
recording among the Committee's regular records a declaration identifying each
new Committee member appointed and each member replaced or removed from the
Committee.

                                   ARTICLE 5
                                    LAND USE

     5.1 PERMITTED USES. The following Parcels and the Improvements constructed
or to be constructed thereon may be used for those purposes set forth below
provided such uses comply with all Laws as defined in Section 5.5 in effect as
of the date of this Declaration and the provisions of this Declaration and the
other Project Documents:

          (a) With respect to Parcels B and Parcels E through K, inclusive,
those uses set forth in the Kilroy Carmel Center Permit.

          (b) With respect to Parcel C, hotel and other related uses as set
forth in North City West Planned District Development Plan Permit No. 88-0941
("PERMIT NO. 88-0941").

          (c) With respect to Parcel A, restaurant use pursuant to Permit No.
88-0941.

          (d) With respect to Parcel L, those uses set forth in that certain
Carmel Valley Planned District Development/Conditional Use/Coastal Development
Permit Amendment No. 96-7784 issued to Acacia Gasoline and Car Wash of Carmel
Valley, LLC (the "PARCEL L PERMIT")

     5.2 USE RESTRICTIONS. Except as otherwise consented to in writing by the
Declarant (or the Board, after there is no longer a Declarant), which may be
withheld in its sole, absolute and unfettered discretion:

          (a) There shall be no children's play areas or day care facilities in
     the Center, except that (i) a play area may be located and operated on
     Parcel M in connection with any fast-food restaurant located and operated
     thereon; (ii) the hotel on Parcel C may


                                      -13-


                                    EXHIBIT F
                                      -18-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     contain related recreational facilities; and (iii) a day care center and
     related play areas may be located within the Carmel Center Office Campus.

          (b) There shall be no tavern, night club or bar in the Center, except
     that a bar may be located in a restaurant or a hotel.

          (c) Neither Parcels B nor D may be used for a fast food or
     drive-through restaurant.

          (d) No portion of the Center or any Improvements constructed thereon
     may be put to any use which is not allowed pursuant to the Laws applicable
     to the Center and in effect as of the date of this Declaration.

To be effective, any written consent of Declarant for the purpose of this
Section 5.2 must be (i) signed by Declarant in recordable form; and (ii)
recorded in the Office of the County Recorder of San Diego County. After there
is no longer a Declarant, to be effective, any written consent of the Board for
the purpose of this Section must be (A) evidenced by a duly adopted resolution
of the Board, certified as such in writing by the Secretary or an Assistant
Secretary of the Association in recordable form; and (B) recorded in the Office
of the County Recorder of San Diego County.

     5.3 PROHIBITED OPERATIONS AND USES. No use or operation will be made,
conducted or permitted on or with respect to all or any part of any Parcel or
Improvement which is obnoxious to, or out of harmony with the development or
operation of the business conducted on any other Parcel or on other sites in the
general vicinity of the Center. Included among the uses or operations which are
prohibited because of their obvious detrimental effect on the general appearance
of the Parcels and their conflict with the reasonable standards of appearance
and maintenance required by Declarant and the Board, are uses or operations
which produce, or are accompanied by, the following characteristics:

          (a) Any public or private nuisance;

          (b) Any use which, in the Board's sole and absolute discretion, is
     considered to be objectionable as an intrusion into the environment of
     sound, odor, visual effect or physical impact or that will disturb or tend
     to disturb the other Owners or Occupants or their customers or invitees in
     the Center;

          (c) Any use that produces intense glare or heat, unless such use is
     performed only within an enclosed or screened area in a manner such that
     the glare or heat emitted will not be discernible from any property line of
     the Parcel;

          (d) Any use or operation that results in a discharge or release of
     Hazardous Materials (defined in Section 7.7) on or under the surface of a
     Parcel or into the surface or ground water of the Center, unless such
     discharge or release is in compliance with all applicable Laws relating to
     Hazardous Materials;


                                      -14-


                                    EXHIBIT F
                                      -19-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

          (e) Any use or operation that results in air omissions of pollutants
     or contaminants unless such emissions are in compliance with all applicable
     laws relating to Hazardous Materials;

          (f) Any emission of odorous, noxious, caustic or corrosive matter or
     gas, whether toxic or non-toxic;

          (g) Any unusual litter, dust, dirt or debris, except as generated
     during construction of Improvements;

          (h) Any unusual firing, explosion or other damaging or dangerous
     hazard, including, but not limited to, storage, display or sale of
     explosives or fireworks;

          (i) Any mobile home or trailer court, labor camp, junk yard, stock
     yard, distillation of bones, or raising, storing, slaughtering or disposing
     of animals of any kind;

          (j) Any drilling for, excavation, refining and/or removal of earth
     materials, oil, gas, hydrocarbon substance, water, geothermal steam or any
     other subsurface substance of any nature whatsoever, except as part of
     normal grading operations in connection with construction of
     approved Improvements;

          (k) Any dumping, disposal, incineration or reduction of garbage or
     reuse of the same, other than handling or reducing such garbage in a
     reasonably clean and sanitary manner;

          (l) Any auction, public sale (except as may be conducted inside the
     hotel Improvements located on Parcel C by clients or patrons of the hotel)
     or other auction house operation;

          (m) Any display or sale of merchandise or any storage or placement of
     merchandise, portable signs or other objects belonging to an Owner or
     Occupant of the Center outside the defined exterior walls, roof and
     permanent doorways of any building.

          (n) Any commercial excavation of building or construction materials;
     and

          (o) Any smelting of iron, tin, zinc or other metals or ores.

     5.4 OTHER OPERATIONS AND USES. Operations and uses which are neither
specifically prohibited nor specifically authorized by this Declaration may
be permitted in a specific case if an Application containing operational
plans and specifications are submitted to and approved in writing by the
Committee. Approval or disapproval of and compatibility with such operational
plans and specifications shall be based upon the effect of such proposal
operations or uses on the balance of the Center and the Owners and Occupants
thereof, but shall be in the sole discretion of the Committee.

     5.5 LAWS. As used herein, "Laws" means, collectively, all laws, statutes,
ordinances, rules, regulations, requirements, permits, approvals, or
certificates of occupancy promulgated by


                                      -15-


                                    EXHIBIT F
                                      -20-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

any federal, state or local governmental entity with jurisdiction over the
Center or any business, use or operation thereon. No Owner or Occupant shall
permit any activity, use or operation on any portion of the Center in violation
of any Law. Each Owner and Occupant shall, upon written notice from Declarant,
or the Board, discontinue any use which is finally determined by any
governmental entity having such jurisdiction to be a violation of any Law. Each
Owner and Occupant shall, immediately upon receipt from any governmental entity
of an alleged violation of any Law, provide a copy of such allegation to the
Board, notwithstanding such party's belief that meritorious defenses to such
allegations exist.

                                    ARTICLE 6
                           REGULATION OF IMPROVEMENTS

     6.1 APPROVAL OF APPLICATION REQUIRED. Subject to Section 6.10, no
Improvement shall be constructed, reconstructed, rebuilt, erected, placed,
altered, used, maintained or permitted to remain in the Center (i) unless the
Improvement and intended use thereof conforms with all applicable Laws; and (ii)
until plans, specifications and other documentation required by the Committee
(or as otherwise specified in any Design Guidelines adopted by the Committee)
for the Improvement and the intended use thereof ("APPLICATION") have been
submitted to and approved in writing by the Committee. Each Application,
including all exhibits and supporting materials and documentation, must be
submitted in duplicate. Such Applications shall be in such form and shall
contain such information as may be required by the Committee, but shall in any
event include the following:

          (a) A site development plan of the Parcel showing the nature, grading
scheme, kind, shape, composition, and location of all structures with respect to
the particular Parcel (including proposed front, rear and side setback lines),
and with respect to structures on adjoining Parcels, and the number and location
of all parking spaces and driveways on the Parcel;

          (b) A landscaping plan for the particular Parcel;

          (c) A plan for the location of signs and lighting; and

          (d) A building elevation plan showing dimensions, materials and
exterior color scheme in no less detail than required by the appropriate
governmental authority for the issuance of a building permit.

          Material changes to previously approved plans must be similarly
submitted to and approved by the Committee.

     6.2 FILING FEE. As a means of defraying its costs and expenses, the
Committee may institute and require that a reasonable filing and review fee
("REVIEW FEE") accompany an Application. The initial schedule of Review Fees is
set forth in the following schedule:

          (a) If an Application is prepared by an Architect, the Review Fee
     shall be Two Hundred Fifty Dollars ($250) per building per Parcel.


                                      -16-


                                    EXHIBIT F
                                      -21-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

          (b) In all other cases, the Review Fee shall be Five Hundred Dollars
     ($500) per building per Parcel.

          (c) If an Application is resubmitted, the Committee may require an
     additional Review Fee in an amount not to exceed One Hundred Dollars ($100)
     for each resubmission.

          (d) The schedule of Review Fees may be modified from time to time by
     the Committee to reflect increased costs and expenses or changed
     circumstances, such as, but not limited to, inflation.

     6.3 BASIS FOR APPROVAL. The Committee shall have the right to disapprove an
Application submitted to it in the event any part of the Application: (a) is not
in accordance with this Declaration, the Sign Plan and any Design Guidelines or
other requirements adopted by the Committee; or (b) is incomplete; or (c) is not
in compliance with the applicable governmental approvals and regulations for the
Center; or (d) is deemed by the Committee to be contrary to the best interests
of the Center or the Owners; or (e) any combination of the foregoing. The
Committee shall not unreasonably withhold its approval of an Application
submitted to it, but may condition its approval on the satisfaction of one or
more conditions set forth in writing. In this regard, the Committee may base its
approval or disapproval on criteria which may include, but are not limited to,
the following: (i) the adequacy of the building locations and dimensions on the
Parcel; (ii) the adequacy of the parking to be provided; (iii) conformity and
harmony of external design with neighboring structures; (iv) effect of location
and proposed use of proposed Improvements on neighboring Parcels and the types
of operations and uses thereof; (v) relation of topography, grade and finish
ground elevation of the Parcel being improved to that of neighboring Parcels;
(vi) proper facing of main elevation with respect to nearby streets and other
buildings; (vii) adequacy of screening trash facilities and mechanical, air
conditioning or other rooftop installations; (viii) adequacy of landscaping; and
(ix) conformity of the Application to the purpose and general plan and intent of
this Declaration. No Application shall be approved which does not provide for
the underground installation of all utility services. The Committee may
condition its approval of an Application on such changes therein as it deems
appropriate such as, and without limitation, the approval of such Improvements
by a holder of an easement which may be impaired thereby or upon approval of any
such Improvements by the appropriate governmental entity. Any Committee approval
conditioned upon the approval by a governmental entity shall not imply the
Association is enforcing any government codes or regulations, nor shall the
failure to make such conditional approval imply that any such governmental
entity approval is not required.

     6.4 RESULT OF INACTION. The Committee shall approve or disapprove an
Application within thirty (30) days after receipt of a complete Application
and the Review Fee. If the Committee fails either to approve or disapprove an
Application within such thirty-day (30-day) period, then it shall be
conclusively presumed that the Committee has disapproved the Application,
unless the applicant has delivered to the Committee, within fifteen (15) days
after the expiration of the thirty-day (30-day) period, a notice in writing
setting forth a date of initial submittal of the complete Application to the
Committee and the fact that no approval or

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                                    EXHIBIT F
                                      -22-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

disapproval has been given as of the date of such notice. If the Committee
thereafter fails to either approve or disapprove the Application on or before
the fifteenth (15th) day after the Committee's receipt of such notice, the
provisions of this Declaration requiring approval of such Application shall be
deemed to have been waived by the Committee with respect to such Improvements;
provided, however, that such waiver shall not be deemed to be a waiver of any
other covenant, condition or restriction provided herein. One (1) set of the
Application shall, with the approval or disapproval of the Committee endorsed
thereon, be returned to the Owner submitting it, and the other set shall be
retained by the Committee for its permanent files. In the case of a conditional
approval of an Application, the written conditions shall accompany the
Committee's written conditional approval.

     6.5 PROCEEDING WITH WORK. Upon the Committee's approval of an Application
pursuant to this Article 6, the Owner to whom the approval is granted and
delivered, shall, as soon as practicable, satisfy all conditions thereof (if
any) and diligently proceed with the commencement and completion of all approved
construction, refinishing, alterations, excavations and landscaping so that no
Improvement remains in a partly-finished condition any longer than reasonably
necessary for completion thereof. In addition, each Owner shall cause all work
to be as nondisruptive as practicable to the Center and the guests, invitees,
tenants, employees and Owners who use the Center. Each Owner shall disrupt
traffic flow and parking as little as possible during construction and shall
clean up daily any construction debris to the extent reasonably practicable. In
all cases, work shall be commenced within one (1) year following the date of
such approval. If work is not commenced within one (1) year following the date
of such approval, then the approval given pursuant to this Article 6 shall be
deemed revoked; PROVIDED, HOWEVER, upon written request made prior to the
expiration of said one (1) year period, the Committee may, in its sole, absolute
and unfettered discretion, extend the time for commencing work.

     6.6 COMPLETION OF WORK. Construction, refinishing, alteration or excavation
of any Improvements previously approved under this Article 6 shall be completed
within two (2) years following the commencement thereof, except for so long as
such completion is rendered impossible or would result in hardship due to action
of the elements, fire or other casualty, war, riot, labor dispute, inability to
procure or general shortage of labor or material in the normal channels of
trade, delay in transportation, delay in inspections, governmental action or
inaction or moratorium or any other cause beyond the reasonable control of the
Owner so obligated, whether similar or dissimilar to the foregoing, financial
inability excepted. Failure to comply with this Section 6.6 shall constitute a
breach of this Declaration and subject the defaulting Owner or Owners to all
enforcement procedures set forth in this Declaration or any other remedies
provided by law or in equity. Upon completion of construction of any
Improvement, one complete set of as-built plans shall be submitted to and
maintained by the Committee.

     6.7 ESTOPPEL CERTIFICATE. The Committee shall deliver to any Owner an
estoppel certificate within thirty (30) days following receipt of a written
request therefor. If the Committee does not have an as-built survey of the
Owner's Parcel in its files, then any such request shall be accompanied by an
ALTA map of survey or a certified as-built survey of the Owner's Parcel. The
estoppel certificate shall certify that as of the date of the certificate either


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                                    EXHIBIT F
                                      -23-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

(a) all Improvements made or work done on or within the Owner's Parcel
comply with this Declaration; or (b) such Improvements or work do not
so comply, in which event the certificate shall identify the
non-complying Improvements and shall set forth the cause or causes for
such noncompliance. Any existing or prospective Owner, Occupant or
Mortgagee in good faith for value shall be entitled to rely on the
certificate with respect to the matters set forth therein, such matters
being conclusive as between the Committee and all such subsequent
parties in interest.

     6.8 INDEMNITY AND LIMITATION OF LIABILITY. Neither Declarant, the
Association, the Board nor the Committee, nor any member of the Board or the
Committee, nor any agents, employees or contractors of Declarant, the
Association, the Members, Occupants, the Board or the Committee (individually or
collectively, "INDEMNITEE") shall be liable for any liability, damage, loss,
cost, expense or prejudice suffered, incurred or claimed by any Owner, Occupant
or other person (an "Applicant") who submits an Application, or by any other
Person (including any other Owner or Occupant); and each Applicant who submits
an Application shall forever hold each and every Indemnitee harmless from and
against any liability, damage, loss, cost, expense or prejudice suffered,
incurred or claimed by such Applicant, and shall forever indemnify, defend,
protect and hold each Indemnitee harmless for any liability, damage, loss, cost,
expense or prejudice suffered, incurred or claimed by any other Person
(including any other Owner or Occupant), arising from, our of or in connection
with (a) any defects in any plans, drawings, specifications or other
documentation submitted in any Application, revised or approved in accordance
with this Declaration, or for any structural or other defects in any work done
according to such plans, drawings, specifications or other documentation; (b)
the approval or disapproval of any Application, whether or not defective; (c)
the construction or performance of any work, whether or not constructed or
performed pursuant to an approved Application; (d) the development of any Parcel
within the Center; (e) the execution and filing of an estoppel certificate
pursuant to Section 6.7, whether or not the facts therein are correct, provided
that the Committee has acted in good faith in issuing such estoppel certificate
on the basis of such information as may be possessed by it; or (f) any
combination of the foregoing.

     6.9 LIMITATIONS ON IMPROVEMENTS. All limitations contained in this
Declaration supplement the controls established by applicable zoning, land
use-related entitlements and approvals granted for development of the Center and
applicable building, fire and other governmental ordinances, codes, rules and
regulations; and of the foregoing, the more restrictive shall apply. Each Owner
and Occupant is responsible for identifying and conforming with all Laws.

          (a) SETBACK LINES. Buildings, structures of any kind (or any part
     thereof), Exclusive Use Areas and parking areas shall be subject to the
     minimum setback requirements of applicable zoning, land use-related
     entitlements and approvals granted for development of the Center and
     applicable building, fire and other governmental ordinances, codes, rules
     and regulations.

          (b) LANDSCAPING. Every Parcel on which a building is constructed in
     the Center shall be landscaped by the Owner in accordance with the
     Application approved by the Committee pursuant to this Article 6; and, if
     not previously installed, the Owner shall


                                      -19-


                                    EXHIBIT F
                                      -24-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     also install the Common Landscaping upon the Parcel in accordance with the
     plans and specifications adopted by the Declarant, or as otherwise approved
     by the Committee. Landscaping for each Parcel, as approved by the
     Committee, shall be installed before the earlier of (a) the date on which
     the first Occupant occupies the building (or any portion thereof) on the
     Parcel; or (b) the date of substantial completion of the building;
     PROVIDED, HOWEVER, the Committee may, in its sole, absolute and unfettered
     discretion, approve in writing another final date of landscape
     installation. As used in this Section, "SUBSTANTIAL COMPLETION" means the
     date on which final City inspection is obtained for the building shell.
     Once installed, landscaping in the Center shall be maintained, repaired and
     replaced as provided in Section 12.1 and Section 13.1 of this Declaration.

          (c) EXCLUSIVE USE AREAS. Any Exclusive Use Areas within a Parcel shall
     be as designated on the Site Plan, or as otherwise approved by the Board or
     by the Committee in its written approval of an Application pursuant to this
     Article 6. Exclusive Use Areas shall be maintained, repaired and replaced
     in accordance with Article 12.

          (d) SIGNS. Except for street and traffic control signs and such other
     signs as may be required by applicable law, no sign, billboard or other
     advertising shall be erected, placed or maintained within the Center
     without written approval by the Committee, which, unless such signage is
     consistent with the Sign Plan, may be withheld in its sole, absolute and
     unfettered discretion. Nothing contained herein shall preclude Declarant or
     any subsequent Owner of the Carmel Center Office Campus from renaming it
     after such Owner, an Eligible Occupant, or a major tenant that leases in
     excess of twenty-five percent (25%) of the space within the buildings
     comprising the Carmel Center Office Campus, and installing signage
     consistent with the Sign Plan to reflect such name change.

          (e) PARKING AREAS. The Committee shall have the authority to
     disapprove any Application for the construction of any building on a Parcel
     in the Center if the Application does not provide for parking substantially
     in accordance with the Site Plan and in compliance with applicable
     ordinances, rules and regulations of the City. The purpose and intent of
     this requirement is to ensure that all development and parking arrangements
     comply with the Site Plan and that this Declaration satisfies any
     City-imposed requirements for shared parking existing on the date of this
     Declaration.

          (f) EXTERIOR LIGHTING. Exterior lighting shall conform to the Design
     Guidelines and shall not be of such intensity, size, color or location as
     to be a nuisance to Owners or the public.

          (g) UTILITY LINES AND ANTENNAS. No sewer, drainage or utility
     lines, cables or wires or other devices for the communication or
     transmission of electric current, power or signals (including, but not
     limited to, telephone, television, microwave or radio signals) shall be
     constructed, placed or maintained anywhere in or upon any Parcel other than
     within buildings or structures unless contained in underground conduits;
     PROVIDED, HOWEVER, transformers and terminal equipment related thereto may
     be installed above


                                      -20-


                                    EXHIBIT F
                                      -25-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

     ground if screened from view of adjacent streets and Parcels in a manner
     satisfactory to the Committee. No antenna, satellite dish or disc for
     transmitting or receiving telephone, television, microwave or radio signals
     shall be placed on any Parcel unless (i) such antenna, dish or disc,
     whether on the ground or on a building, is screened from view of adjacent
     streets and Parcels in a manner satisfactory to the Committee; and (ii) the
     prior written consent of the Committee is obtained. Nothing contained in
     this Section shall prohibit (x) the erection or use of temporary power or
     telephone facilities incidental to the construction or repair of
     Improvements on any Parcel, or (y) the installation and maintenance of
     security and surveillance devices upon the exterior of buildings, within
     Common Areas adjacent to such buildings or elsewhere upon an Owner's Parcel
     and Exclusive Use Areas. No Owner shall enter into any contract or
     agreement with the City, the County of San Diego or any other governmental
     agency or entity or public utility with respect to sewer lines or
     connections, water lines or connections, or street improvements (including,
     but not limited to, curbs, gutters, parkways, street lighting or other
     utility connections, lines or easements) relating to the Center or any
     Parcel without the prior written consent of the Committee (including the
     Committee's approval of the contract or agreement proposed to be entered
     into), which may be withheld if the Committee determines such contract or
     agreement, or the improvements to be constructed pursuant thereto, are not
     consistent with the Declaration or any of the other Project Documents.

          (h) EXCAVATION AND UNDERGROUND UTILITIES. No excavation shall be made
     except in connection with construction of an Improvement, and upon
     completion thereof, exposed openings shall be back filled and disturbed
     ground shall be graded, leveled and restored to its original or approved
     similar condition.

     6.10 CERTAIN IMPROVEMENTS EXEMPT FROM APPLICATION. Notwithstanding
anything in this Declaration to the contrary (or which may be interpreted as
being to the contrary), the following Improvements shall be exempt from the
provisions of this Article 6 and are not required to be the subject of an
Application pursuant to this Article 6: (i) Improvements existing or under
construction on the date of this Declaration; (ii) Improvements which are
substantially consistent with the Site Plan and for which the discretionary
governmental approvals have been obtained from the City before the date of this
Declaration which include, without limitation, the Approved Declarant
Improvements; and (iii) Improvements within the interior of a building such as
tenant improvements, lobbies and other interior space.

     6.11 DISCLOSURE AND WAIVER OF CONFLICT OF INTEREST. Committee members may
be appointed by, affiliated with or employed by Declarant. If Declarant submits
an Application to the Committee for approval, Committee members appointed by
Declarant may have a conflict of interest in rendering their decisions. Neither
Declarant nor any Committee member shall have any liability to any Owner,
Occupant or other Person as a result of decisions which may benefit Declarant
rendered in good faith by the Committee or any Committee member, and each Owner
hereby waives any claim of liability against Declarant, the Committee or any
Committee member, based upon such conflict of interest. Nothing in this Section
6.11 is intended to limit the application or meaning of Section 14.6.


                                      -21-


                                    EXHIBIT F
                                      -26-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

                                    ARTICLE 7
                              OPERATIONS GENERALLY

     7.1 SLOPE AND DRAINAGE EASEMENTS. The Owner of each Parcel will permit free
access by Owners of adjacent or adjoining Parcels and by Declarant to slopes or
drainageways located on the Owner's Parcel which affect such adjacent or
adjoining Parcels when such access is required for the maintenance of permanent
stabilization on said slopes, or maintenance of the drainage facilities for the
protection and use of property other than the Parcel on which the slope or
drainageway is located. No Owner shall in any way interfere with the established
drainage pattern over the Owner's Parcel from adjoining or other Parcels, and
each Owner shall make adequate provisions for proper drainage in the event it is
necessary to change the established drainage over the Owner's Parcel. For the
purpose of this paragraph, "ESTABLISHED" drainage is defined as the drainage
patterns at the time the overall grading of each Parcel is completed in
accordance with the City-approved grading plans therefor. Upon completion of
final grading of a Parcel, no surface drainage shall be directed across any
portion of an adjoining Building Area, all surface drainage shall be directed to
a public street or into the underground drainage system.

     7.2 SHARED PARKING; COMMON PARKING AREAS.

          (a) The Owners intend that this Declaration satisfies any City-imposed
     requirements for shared parking existing on the date of this Declaration.

          (b) Those portions of the Common Area improved, or to be improved,
     with parking spaces as generally shown on the Site Plan and not designated
     or subsequently designated as Exclusive Use or Exclusive Parking Area or,
     with respect to Parcel D, improved with a building (herein "Common Parking
     Area") shall be reciprocal parking area for the common use and enjoyment of
     all Parcels (excluding Parcels L and M) and their respective Owners,
     Occupants, customers, guests and invitees. The Owners of Parcels L and M
     shall have no rights to use any of the Common Parking Area.

          (c) The Parking Structure, the parking spaces included therein and
     those additional surface parking areas within the Carmel Center Office
     Campus and shown on the Site Plan as Exclusive Parking Area shall be for
     the exclusive use and enjoyment of the Carmel Center Office Campus and
     their respective Owners, Occupants, customers, guests and invitees (herein
     "Exclusive Parking Area").

          (d) In addition to the Exclusive Parking Areas described in subsection
     (c) above, Declarant (and the Board when there no longer is a Declarant)
     may designate other portions of a Parcel improved as parking as Exclusive
     Parking Area, subject to the provisions of Section 8.2.

          (e) No commercial truck is permitted to be parked on any Parcel unless
     hidden from view from other Parcels within the Center and from public
     streets by attractive visual barriers. Notwithstanding the immediately
     preceding sentence, commercial trucks may park for the purpose of loading
     and unloading on all Parcels; PROVIDED HOWEVER, reasonable restrictions
     concerning permitted times for parking,


                                      -22-


                                    EXHIBIT F
                                      -27-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]

<PAGE>

     loading and unloading commercial trucks, which may be applicable to one or
     more Parcels, may be adopted by the Board.

          (f) No charge of any kind shall ever be made for ingress to, egress
     from or parking in the Center, unless ordered or permitted by governmental
     authority. The Owner of the Carmel Center Office Campus may install a card
     access system in the Parking Structure and receive reimbursement from the
     Occupants of the Carmel Center Office Campus for the cost of installing
     such system and the cost of access cards and replacement cards.

     7.3 STORAGE AND LOADING AREAS. Subject to Committee approval, which may be
withheld in its sole, absolute and unfettered discretion:

          (a) No materials, supplies or equipment, including any trucks, shall
     be stored in any area on a Parcel, except inside a closed building or on a
     temporary basis behind a Committee approved visual barrier which screens
     such areas from the view of adjoining Parcels and public streets.

          (b) Loading areas and docks shall be set back and screened to
     minimize the visual and noise effects from the street. All loading areas
     shall be hidden from view from public streets by visual barriers approved
     by the Committee. Notwithstanding the foregoing, it may not be practical or
     feasible for all loading areas and docks to comply with this restriction,
     in which event, as to those loading areas and docks, the Committee shall
     have the right to designate hours for loading and unloading and the rules
     reasonably necessary to minimize the visual and noise effects thereof.

     7.4 INSPECTION. Declarant, members of the Board, members of the Committee
and their authorized representatives may from time to time, at any reasonable
hours, enter upon and inspect any Parcel, or any portion thereof, or
Improvements thereon, to ascertain compliance with this Declaration and other
Project Documents, but without obligation to do so or liability therefor
provided, however, no such entry shall be permitted to inspect the interior or
exterior of any building improvements without at least five (5) business days'
prior written notice and a statement for the reasons such entry is permitted or
required under the Project Documents.

     7.5 DIVISION OF LAND. No Parcel shall be subdivided or resubdivided without
the prior written approval of Declarant (or the Board, if there is no
Declarant), which may be withheld in its sole, absolute and unfettered
discretion. The creation of a "condominium project" on any Parcel or Parcels
pursuant to Section 1351, ET SEQ. of the California CIVIL CODE shall not
constitute a subdivision or resubdivision of a Parcel which is prohibited by the
provisions of this Section.

     7.6 HAZARDOUS MATERIALS. Each Owner with respect to the Parcel(s) owned by
such Owner covenants to do as follows:

          (a) At all times and in all respects to comply, and cause all of its
     Occupants to comply, with all federal, state and local laws, ordinances and
     regulations, including, but


                                      -23-


                                    EXHIBIT F
                                      -28-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     not limited to, the Federal Water Pollution Control Act (33 U.S.C. Section
     1251, ET SEQ.), Resource Conservation & Recovery Act (42 U.S.C. Section
     6901, ET SEQ.), Safe Drinking Water Act (42 U.S.C. Section 3000f, ET SEQ.),
     Toxic Substances Control Act (15 U.S.C. Section 2601, ET SEQ.), the Clean
     Air Act (42 U.S.C. Section 7401, ET SEQ.), Comprehensive Environmental
     Response, Compensation and Liability Act (42 U.S.C. Section 9601, ET
     SEQ.), California Health & Safety Code (Section 25100, ET SEQ.; Section
     39000, ET SEQ.), California Safe Drinking Water & Toxic Enforcement Act of
     1986 (California Health & Safety Code Section 25249.5, ET SEQ.), California
     Water Code (Section 13000, ET SEQ.), and other comparable state and federal
     laws, currently in force or enacted in the future ("HAZARDOUS MATERIALS
     LAWS"), relating to industrial hygiene, environmental protection or the
     use, analysis, generation, manufacture, storage, disposal or transportation
     of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive
     materials or waste, or other hazardous, toxic, contaminated or polluting
     materials, substances or wastes, including, without limitation, any
     "hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
     substances" under any such laws, ordinances or regulations (collectively,
     "HAZARDOUS MATERIALS").

          (b) Each Owner, Occupant and all other users of a Parcel shall, at its
     own expense, procure, maintain in effect and comply with all conditions of
     any and all permits, licenses, and other governmental and regulatory
     approvals required for its or its use of the Center, including, without
     limitation, discharge of (appropriately treated) materials or wastes into
     or through any sanitary sewer serving the Center. Except as discharged into
     the sanitary sewer in strict accordance and conformity with all applicable
     Hazardous Materials Laws, no Person shall cause any and all Hazardous
     Materials removed from the Center to be removed and transported except
     solely by duly licensed haulers to duly licensed facilities for final
     disposal of such materials and wastes. Each Owner, Occupant and user shall
     in all respects handle, treat, deal with and manage any and all Hazardous
     Materials in, on, under or about the Center in total conformity with all
     applicable Hazardous Materials Laws and prudent industry practices
     regarding management of such Hazardous Materials.

     7.7 PAYMENT OF TAXES, LIENS. Each Owner shall pay or cause to be paid prior
to delinquency the real estate taxes, assessments, special district charges and
all other public, governmental, quasi-public or quasi-governmental charges which
are or may become a lien upon the Owner's Parcel or Parcels ("Impositions"), and
all other liens or charges which may be or become superior to this Declaration
or any amendments thereto. If any Owner fails to pay any Imposition or other
lien or charge as provided herein, the Association shall have the right, but no
obligation, to cure such default. All costs and expenses, including attorneys'
fees and costs, incurred by the Association in connection with any such cure may
be recovered by the Association as a Reimbursement Assessment against said Owner
and its Parcel or Parcels. An Owner shall have the right, at its own cost and
expense, and in its own name, to contest or protest or seek to have reviewed,
reduced, equalized or abated any Imposition levied upon its Parcel(s) by first
paying such Imposition and thereafter filing a claim for refund or pursuing
such other remedy as may then be available under and in accordance with
California law. Upon final determination of any such proceeding, the protesting
Owner shall pay the Impositions for which

                                      -24-


                                    EXHIBIT F
                                      -29-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

it is responsible pursuant to this Section as they are finally determined and
all penalties, interest, costs and expense which may thereupon be due or have
resulted therefrom. An Owner shall notify the Association in writing of any
contest or protest so filed by an Owner, and shall provide the Association,
upon request, with any and all documents pertaining thereto.

                                    ARTICLE 8
                                   COMMON AREA

     8.1 USE. Subject to the provisions of this Article 8 and such other
provisions of the Declaration regarding restrictions upon use, the Common Area
of each Parcel shall be used solely for the purposes specified in Sections
7.2(b) and 11.1. In addition, no Owner or Occupant shall use or permit to be
used the Common Area for any use other than the following:

          (a) Parking motor vehicles, and pedestrian and vehicular ingress and
     egress by Occupants, their agents, employees, customers and other invitees,
     to and from buildings, the Common Area and adjacent public streets;

          (b) Parking stalls, sidewalks, walls, ramps, driveways, lanes, curbs,
     gutters, seating areas, flagpoles, bike racks, kiosks, automatic teller
     machines, bus stops and similar facilities for accommodating public
     transportation, traffic control areas, signals, traffic islands, landscaped
     areas, traffic and parking lighting facilities and monument signs with
     appropriate underground electrical connections, and all things incidental
     thereto, all as approved by the Committee and only in locations approved by
     the Committee;

          (c) Public utility installations serving buildings or the Common Area;

          (d) Ingress and egress of delivery and service vehicles to and from
     the Center or any portion thereof and adjacent public streets, and parking
     thereof only in unloading and truck loading and unloading areas;

          (e) Delivery of goods, wares, merchandise and providing services to
     Occupants of the Center;

          (f) Perimeter walls and fences shown on the Site Plan;

          (g) If required by law, recycling facilities or pickup points, the
     location of which are approved by the Committee; and

          (h) Lighting standards, Common Landscaping, and any other landscaping
     or Common Area Improvements as may be required under applicable controls
     and regulations of the City. The Owners and/or Eligible Occupants of
     Parcels may also install and maintain security and surveillance devices
     upon the Common Areas within their respective Parcels.


                                      -25-


                                    EXHIBIT F
                                      -30-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

The Common Area shall be used reasonably for the foregoing purposes so as not to
interfere with parking.

     8.2 MODIFICATION OF COMMON AREA. The initial design of the Common Parking
Areas and pattern of traffic flow over the Common Area within the Center shall
be as shown on the Site Plan, and there shall be no material change thereto
unless:

          (a) In the case of any material change to the Common Area located on
     Parcels A, B, C, D, E and H, the prior written consent of Declarant and the
     Owners of all such Parcels, which shall not be unreasonably withheld, has
     been obtained;

          (b) With respect to any material change to the Common Area (excluding
     Common Parking Area) within Parcels G, K, L or M, the prior written consent
     of Declarant and the Owners of all such Parcels, which shall not be
     unreasonably withheld, has been obtained;

          (c) With respect to any material change to the Common Parking Area
     within Parcels E through K, the prior written consent of the Declarant and
     the Owners of all such Parcels, which shall not be unreasonably withheld by
     any of them, has been obtained;

          (d) In all other cases, the prior written consent of Declarant (or the
     Board, after there is no longer a Declarant), which may be withheld in its
     sole, absolute and unfettered discretion, has been obtained; and

          (e) In all cases, the resulting Common Parking Area layout and pattern
     of traffic flow over the Common Area comply with all applicable Laws.

     8.3 PARKING REGULATIONS. Occupants within the Center will have widely
varying parking requirements. To ensure Common Parking Areas are used in the
most efficient manner and in the best interest of all Occupants entitled to the
use thereof, the Board may adopt reasonable rules and regulations governing
the use of the Common Parking Areas; PROVIDED, HOWEVER, that no such rule or
regulation shall diminish the parking rights of any Occupant under any lease
existing at the time such rule or regulation is adopted; and PROVIDED FURTHER,
any and all such rules or regulations shall be subject to Section 8.2.

     8.4 CONSTRUCTION AND REPAIR. All construction, alteration or repair work
requiring workers to perform activity or to use or locate materials, tools or
equipment (such as, but not limited to, compressors, sawhorses, tool boxes,
scaffolds, ladders and barricades) in the Common Area (other than Exclusive Use
Areas) during the course of performing such work, whether such work is
undertaken with respect to building Improvements located on a Parcel or in the
Common Area, shall be subject to the prior written approval of the Board (or any
committee of the Board established in accordance with the Bylaws for the purpose
of administering this Section) and shall be accomplished in the most expeditious
and speedy manner consistent with ongoing business operations within the Center.
The Owner or Occupant undertaking such work shall take all measures necessary to
minimize any disruption or inconvenience caused by such work. Such work shall be
accomplished by the Owner or Occupant undertaking it in a reasonable manner so


                                      -26-


                                    EXHIBIT F
                                      -31-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

that any damage or adverse effect which might be caused by such work to any
other Owner or Occupant or to any Parcel (including the Parcel on which the work
is being accomplished) is minimized. The Owner or Occupant undertaking such work
shall repair at its own cost any and all damage caused by such work and shall
restore the affected portion of any Parcel (including the Parcel upon which such
work is performed) to a condition which is equal to or better than the condition
which existed prior to the beginning of such work. In addition, the Owner or
Occupant undertaking such work shall pay all costs and expenses associated
therewith and shall indemnify, protect, defend and hold the Association and all
other Owners and Occupants harmless from all liabilities, damages, losses,
costs, expenses or claims arising out of, in connection with or attributable to
the performance of such work. Except in cases of emergency, all such work
shall be undertaken only after giving the Board ten (10) days prior written
notice of the work to be undertaken, the scope and nature of the work, the
duration of the work and the area in which the work is to be performed.
Notwithstanding the foregoing, construction, alteration or repair work to be
accomplished outside the Common Area may be made without the consent of or
prior written notice to the Board (or committee thereof) required under this
Section.

     8.5 INTERIM IMPROVEMENTS AND MAINTENANCE OF PARCELS.

          (a) Commencing as required in paragraph (b) of this Section and
continuing until such time as the commencement of construction of a building
or buildings upon a Parcel in the Center, the Owner of such Parcel shall, at its
sole cost, and subject to the discretion and approval of the Committee, pave
with asphalt for parking or landscape with ground cover (or both) and take such
other measures as are reasonably necessary to control weeds, blowing dirt and
sand, accumulation of refuse and other matters with respect to the undeveloped
portions of such Parcel. The cost of design and construction of such interim
parking or landscaping improvements (or, if applicable, both) shall be borne
solely by the Owners of the respective Parcels upon which such improvements are
constructed. Once constructed, the Association shall maintain any such interim
improvements within the Common Area and the cost and expense thereof shall be
Common Expenses; and the Owner shall maintain such other interim improvements.
Each Owner's paving plans or landscaping plans (or, if applicable, both) for the
Parcel shall be subject to the Committee's written approval to ensure
consistency and harmony with (a) the landscaping plan and theme of the Center;
and (b) the parking configuration and pattern of traffic flow in the Center. The
Committee's approval shall not be unreasonably withheld or delayed, and neither
paving nor landscaping the Parcel shall commence unless and until the
Committee's written approval has been obtained. After the Committee's written
approval has been obtained, the Parcel shall be paved and landscaped pursuant to
and in accordance with the plans approved by the Committee. Nothing contained in
this Section 8.5 regarding interim improvements of Parcels shall restrict or
impair the Owners' rights to fully develop and improve their respective Parcels
with buildings and other Improvements consistent with the Project Documents.

          (b) The Owners of all Parcels shall pave with asphalt or landscape
with ground cover, or a combination of both as provided in subsection (a)
above, the otherwise unimproved portions of their respective Parcels within
six (6) months after the first Occupant of any building constructed within
the Carmel Center Office Campus opens for business in its


                                      -27-


                                    EXHIBIT F
                                      -32-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

premises; PROVIDED, HOWEVER, the Owner of any Parcel on which construction of a
building and related improvements has commenced before or during such six (6)
month period shall not be bound by this subparagraph (b) as to such Parcel.

          (c) At least ten (10) days before commencing construction of any
Improvements upon a Parcel, the Owner of the Parcel must deliver written notice
to the Board of its intent to commence construction, and the Association shall
have the right to remove any Association property from the Parcel.

     8.6 LIGHTING THE COMMON AREA. The provisions of this Section shall be
subject to any resolution or resolutions to the contrary which may be adopted by
the Board from time to time. Lighting for the Common Area (other than lighting
necessary for security of the Center or portions thereof) shall be turned on at
least thirty (30) minutes before sunset (but not more than one (1) hour before
sunset) and shall remain on each day until at least 11:00 p.m., unless to do so
is contrary to any law, rule, statute or ordinance then in effect, in which
event, the standard so prescribed shall be adhered to while in effect. Lighting
representing not less than twenty-five percent (25%) of full intensity of the
Common Area lighting system, uniformly distributed throughout the Common Area,
shall remain on each day after 11:00 p.m. until dawn for security purposes,
unless all of the Owners consent to a lesser amount of lighting in writing, or
unless to do so is contrary to any law, rule, statute or ordinance then in
effect, in which event, the standard so prescribed shall be adhered to while in
effect. If "special" lighting (other than lighting necessary for security of the
Center) is required or if regular lighting is required for a time later than the
foregoing by any Owner or Occupant of the Center, then the electricity to
service such lighting requirements shall, if reasonably feasible, be separately
metered and all expenses thereof shall be paid by the Owner(s) or Occupant(s)
who requires the special service. If such separate metering is not reasonably
feasible, then the cost of such special lighting shall be determined and
equitably prorated based on the amount of time required by each such Owner or
Occupant and the Parcel Area of each Owner or Occupant in relation to the Parcel
Area of all of the Owners or Occupants requiring the special service; all such
prorated expenses shall be paid by the Owners or Occupants which require the
special service.

                                    ARTICLE 9
                                 EMINENT DOMAIN

     In the event the whole or any part of the Center is taken by right of
eminent domain or any similar authority of law, the entire award for the value
of the land and improvements so taken shall belong to the Owner(s) of the
property so taken or to their Occupants, as their interest may appear, and no
other Owner of land in the Center shall claim any portion of such award by
virtue of any interest, easement or other right created by this Declaration;
PROVIDED, HOWEVER, any such other Owner may file a collateral claim with the
condemning authority over and above the value of the land and improvements being
so taken to the extent of any damage suffered by such Owner resulting from the
severance of the area so taken, provided such collateral claim does not diminish
the amount recoverable by the Owner(s) of the property so taken. In the event of
a partial taking, the Owner(s) of the portion of the Center so condemned shall
restore the remaining portion of the Center owned by such Owner(s), including
improvements in the


                                      -28-


                                    EXHIBIT F
                                      -33-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

Common Area, as nearly as possible to the condition existing just prior to such
condemnation, without contribution from the Owners of the area not so taken and
any condemnation award necessary therefore shall be held in trust and applied
for such purpose; PROVIDED, HOWEVER, that if any Mortgagee of any property in
the Center makes the requirement pursuant to a provision in a Mortgage that the
portion of the award representing compensation for severance damage to property
not taken be paid to the Mortgagee, then the party required to make such payment
to such Mortgagee shall not be obligated to restore the remaining portion of its
Parcel(s) so taken, except to the extent necessary to clear and pave for parking
and/or landscape in accordance with plans approved by the Committee.

                                   ARTICLE 10
                                 MUTUAL RELEASE

     Each Owner, for itself and, to the extent it is legally possible for it to
do so, on behalf of its insurer, hereby releases the other Owners from any
liability for (a) any loss or damage to the property of each Owner located upon
or in the Center, including buildings or other improvements in the Center or the
contents thereof caused by fire or other risks of the type generally covered by
a standard policy insuring against "all risk" perils (also known as "special
causes of loss"); and (b) any other direct or indirect loss or damage caused by
fire or other risks, which loss or damage is of the type generally covered by a
standard policy insuring against "all risk" perils (also known as "special
causes of loss").

                                   ARTICLE 11
                                   EASEMENTS

     11.1 GRANTS OF RECIPROCAL EASEMENTS OVER COMMON AREAS. Each Owner, as
grantor, grants to and reserves from all other Owners, for the benefit of the
Association and each other Owner and their respective successors, assigns,
Occupants, customers and invitees, and for the benefit of the respective
Parcel(s) belonging to said other Owners, as grantees, the following
non-exclusive easements upon, over, under, across and through that portion of
the Common Area lying within the grantor's Parcel(s):

          (a) For ingress and egress by vehicular and pedestrian traffic and
     vehicle parking upon, over and through the Common Area and the entryways,
     driveways, roads, pedestrian pathways and parking areas as may be
     constructed thereon for those purposes, provided, that, Parcels L and M and
     their Owners, Occupants, guests, customers and invitees shall have no
     rights hereunder to use the Common Parking Areas;

          (b) For grading and installation of utilities, landscaping, irrigation
     and drainage facilities, and other Improvements, as necessary or
     appropriate to complete the improvement of such Common Areas within the
     Center pursuant to City approvals and other applicable Laws;

          (c) To the Declarant and Association, and their agents and
     representatives, an easement over all Common Areas for the purpose of
     operation, maintenance, repair,


                                      -29-


                                    EXHIBIT F
                                      -34-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     reconstruction, restoration and landscaping, and, as necessary, to exercise
     the rights and to perform the duties set forth in this Declaration.

          (d) For the installation, maintenance, repair and replacement from
     time to time of any monument or other freestanding sign permitted under
     this Declaration and in accordance with the Sign Plan, including any
     permitted Occupant identification signs which have been placed thereon or
     made a part thereof;

          (e) For construction staging, storage of construction materials and
     equipment, temporary construction trailers, erection of ladders,
     scaffolding and barricades upon Common Areas owned by the Owner during
     construction, remodeling or repair of buildings and building appurtenances
     upon such Owner's Parcel or Parcels; and

          (f) For the purpose of entering onto the grantor's Parcel(s) to cure
     any default or breach under this Declaration.

     11.2 UTILITY EASEMENTS. There is hereby reserved for the use and benefit of
the Association and all Owners, non-exclusive easements within the Common Areas
for the location, installation and maintenance of utilities and drainage
facilities of convenience or necessity as may be requested or required by the
Association or any Owner provided that the grant thereof does not unreasonably
interfere with the normal operation, improvement, and use of the Common Area and
the buildings constructed within the Center, and no affirmative monetary
obligation is imposed upon the Owners (other than the Owner benefiting from such
easement). The Declarant (and the Board where there no longer is a Declarant)
shall have the authority to grant easements or rights-of-way for utilities over
the Common Areas as necessary to serve the Common Areas and/or the Parcels. The
Owner of any Parcel and any of his Occupants or licensees shall have the right
at all reasonable times to enter upon the land subject to said easements and to
install, maintain, operate, repair and service utilities and drainage facilities
thereon for the use and benefit of his Parcel; provided, however, any such
Person shall restore said land, at his own expense, as nearly as practicable, to
the same condition as existed prior to such entry and shall comply with the
provisions of Section 11.6. The Owner of any Parcel shall have the right to
assign the benefit and use of any such easement to any public or private utility
company, agency or district for the purpose of installing, operating, repairing,
servicing and maintaining utilities or drainage facilities and enforcing the
easement rights. For purposes hereof, "utilities" shall include electricity, gas
mains and lines, water distribution lines, storm water sewers, sanitary sewers,
telephone, fiberoptic, cable TV, and telegraph cables and lines, and other
similar or related facilities commonly regarded as utilities.

     All storm drains, utility lines, transformers and meters shall be
maintained under the terms of this Declaration in a safe and good working
condition by the party responsible therefor. No grantee of a utility easement
shall in the use, construction, reconstruction, operation, maintenance or repair
of any storm drains, utility lines, transformers and meters in any way
interfere, obstruct or delay the business of the grantor of said easement or any
other Owner or Occupant, or the public access to and from said business or
interfere, obstruct or delay in any way the receiving of merchandise by said
grantor or any Owner or Occupant.


                                      -30-


                                    EXHIBIT F
                                      -35-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     11.3 CONSTRUCTION AND REPAIR. In addition to the foregoing and in
connection with any work performed upon a Parcel, incidental encroachments into
or upon the Common Area within that Parcel shall be permitted in connection with
the use of ladders, scaffolding, storefront barricades and similar facilities
resulting in temporary obstruction of portions of the Common Area, all of which
are permitted under this Section so long as their use is kept within reasonable
requirements of construction work expeditiously pursued. The Common Area may be
used for ingress and egress of vehicles transporting construction materials,
equipment and Persons employed in connection with any work provided for in this
Declaration and that Common Area within the Parcel upon which the construction
is taking place may also be used for temporary storage of material and vehicles
being used in connection with such construction, subject to all of the other
terms of this Declaration. Reasonable precautions and measures shall be taken so
that any disturbance to the use of the Common Area generated by such
encroachments will be minimized.

     11.4 OBSTRUCTIONS WITHIN COMMON AREA. Except as otherwise expressly
provided in Sections 8.1, 8.4, 11.1 and 11.3, no walls, fences, barriers or
obstructions of any sort or kind shall be constructed or maintained in the
Center, or any portion thereof, by any Owner, its agent or Occupant, which
prevent or impair the use or exercise of any of the easements granted in this
Article 11, including, but not limited to, the ingress and egress of vehicular
and pedestrian traffic and parking within the Common Area and the Common Parking
Area; PROVIDED, HOWEVER, reasonable traffic controls (including speed bumps) as
may be necessary to guide and control the orderly flow of traffic may be
installed so long as access driveways to the Common Parking Area are not closed
or blocked and the traffic circulation pattern of the Common Area, as shown on
the Site Plan, is not changed or affected in a substantial way; AND PROVIDED
FURTHER, temporary fences made of security chain link may be erected to cordon
off areas of construction activity (including staging areas for equipment and
materials). The Owners and Occupants of the Parking Structure and the Exclusive
Parking Areas may also establish and install control devices and measures such
as a card entry system to the Parking Structure, restricted parking signs,
security gates, or other mechanisms to secure the Parking Structure and
Exclusive Parking Areas from unauthorized use and traffic.

     11.5 RIGHT OF ENTRY BY DECLARANT, ASSOCIATION, BOARD. Declarant, the
Association, the Board, and their employees, agents, and contractors are hereby
granted the right to enter upon the Common Areas and upon any other portion of
the Center, to the extent reasonably necessary, to repair, improve, maintain and
operate the Common Areas and to exercise the rights and to perform the duties
imposed by this Declaration on the Board or the Association. Such right of entry
upon portions of the Center other than the Common Areas shall be exercised so as
to interfere as little as reasonably possible with the possession, use and
enjoyment of the Owner or Occupants of such portion and shall be subject to the
provisions of Section 7.4. The Association shall indemnify, protect, hold
harmless and defend the Owner and Occupants of each Parcel over which the
foregoing easements are reserved from and against all liabilities, losses,
liens, damages, claims, costs and expenses and arising from or caused by the use
of such Common Areas by the Declarant, Association, and Board.


                                      -31-


                                    EXHIBIT F
                                      -36-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     11.6 ENTRY BY OWNERS. In connection with any entry by an Owner onto any
Common Areas for purposes of exercising such Owner's rights pursuant to utility
or drainage easements pursuant to Section 11.2, or performing any other work on
the Common Areas (not including Exclusive Use Areas within such Owner's Parcel)
permitted under this Declaration or otherwise approved by the Board, such Owner
shall, at its expense:

          (a) Maintain, at all times during such period of entry, commercial
     general liability insurance with a combined single limit per occurrence of
     at least $1,000,000, naming the Association (and the Owner and Occupants
     of such Common Areas if not owned by the entering Owner) as additional
     insureds, and providing that such coverage shall not be terminated or
     modified without at least thirty (30) days' prior written notice to the
     Board;

          (b) Deliver to the Board a certificate evidencing that such insurance
     is in full force and effect prior to entry onto such Common Areas;

          (c) Perform all work in a safe manner, insure that no hazardous
     condition remains on such Common Areas, and repair any damage thereto;

          (d) Keep such Common Areas free and clear of all mechanics' or
     materialmen's liens arising out of such Owner's activities;

          (e) Comply with all applicable Laws in connection with such work;
     and

          (f) Indemnify, protect, hold harmless and defend the Association, the
     Board and the Owner and Occupants of such Common Areas from and against all
     liabilities, losses, liens, claims, damages, costs and expenses (including
     attorneys' fees and court costs) for labor or services performed
     or materials furnished to or for such Owner, or for personal injury, death
     or property damage, arising out of or related to such Owner's entry or
     breach of the provisions of this Section 11.6.

     11.7 RESERVATION BY DECLARANT. The Declarant hereby reserves the right to
subsequently grant and create additional easements over one or more of the
Parcels owned by Declarant, including the Common Areas contained therein, for
the benefit of one or more other Parcels owned by Declarant provided, and upon
condition that, the grant of any such additional easements shall not materially
interfere or impede with the grant and use of the other easements established
hereunder.

     11.8 TERMINATION OF FORMER DECLARATION AND CONFIRMATION OF TERMINATION OF
1990 GRANT OF EASEMENTS. The Former Declaration (defined in Recital F) is hereby
terminated in its entirety and is declared to be of no further force or effect;
PROVIDED, HOWEVER, the termination of the 1990 Grant of Easements (as defined in
Section X(e) of the Former Declaration), which is set forth in Section X(e) of
the Former Declaration, shall remain in effect (I.E., the 1990 Grant of
Easements are hereby confirmed previously terminated and of no further force or
effect). The easements granted in this Article 11 replace and supersede the
easements


                                      -32-


                                    EXHIBIT F
                                      -37-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

granted in that Grant of Easement dated February 12, 1990 and recorded in the
Office of the County Recorder at San Diego County on February 13, 1990 as
Document No. 1990-080110, and that Grant of Easement and the easements granted
thereunder are hereby terminated and declared to be of no further force or
effect.

                                   ARTICLE 12
                              BUILDING MAINTENANCE

     12.1 OWNER'S MAINTENANCE OBLIGATIONS. Subject to Section 12.3, each Owner
shall maintain, repair and replace (or cause to be maintained, repaired and
replaced) the following:

          (a) All exterior surfaces and roofs of buildings and other structures
     located on the Owner's Parcel(s), so that the exterior walls, exterior
     signs, roofing materials and painted surfaces, are at all times maintained
     in a first-class condition. All painted portions of building exteriors
     shall be repainted no less frequently than once each five (5) years with
     the same colors as such portions were originally painted or stained, unless
     the Committee approves a change in color, which approval may be withheld in
     the Committee's sole, absolute and unfettered discretion.

          (b) All other portions of the Owner's Parcel, other than Common Area,
     in a neat, clean, sightly and well-kept condition, free and clear of
     weeds, debris and rubbish. All landscaping, other than Common Landscaping,
     shall be maintained in a first-class condition and, as and when necessary,
     replaced.

          (c) Any and all monument signs on which the name of an Occupant of the
     Owner's Parcel appears, even if the monument sign is located on another
     Owner's Parcel.

          (d) Those portions of facilities for water, sewer, gas, telephone,
     electricity and other utilities serving such Owners' buildings so as to not
     interfere, interrupt or otherwise impair delivery of utilities required for
     maintenance of the Common Areas and by other buildings within the Center.

          (e) Each Owner and or its Occupants shall also contract for the
     removal of trash from its buildings.

Each Owner shall also adopt and maintain such standards of property maintenance,
appearance and housekeeping as are necessary or appropriate to keep and maintain
the foregoing in first-class condition, repair and appearance.

     12.2 CLOSURE. The Owner of a Parcel shall, following the permanent closure
or cessation of any business operation which is expected to continue for any
extended period of time take such measures as may be reasonably required under
the circumstances to prevent vandalism, including preventing graffiti and
preventing windows from being broken, and to keep the vacant building or
premises in a reasonably attractive manner.


                                      -33-


                                    EXHIBIT F
                                      -38-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     12.3 REPAIR OR REPLACEMENT OF DAMAGED BUILDING. In the event of any damage
to or destruction of any building within the Center, the Owner of the Parcel
upon which such building is located shall, subject to the requirements and
limitations stated in this Declaration and any Mortgage encumbering such Parcel,
(a) repair, restore and rebuild such building as quickly as reasonably
practicable subject to the requirements and limitations stated in this
Declaration; (b) tear down and remove all parts of said damaged or destroyed
building then remaining and the debris resulting therefrom and otherwise clean
and restore the Building Area affected by such casualty to a level and clean
condition; or (c) any combination of the above in a manner satisfactory to the
Committee. The Owner of any Parcel on which damaged building improvements are
located shall be obligated to proceed with all due diligence hereunder, and such
Owner shall cause cleanup and/or reconstruction to commence within three (3)
months after the damage occurs and to be completed within twelve (12) months
thereafter, unless prevented by causes beyond such Owner's reasonable control.

                                   ARTICLE 13
                             COMMON AREA MAINTENANCE

     13.1 ASSOCIATION MAINTENANCE. Upon completion of construction of the
Improvements on a Parcel (which as of the date of this Declaration includes only
Parcel C), the Association shall manage, maintain, repair and replace (or cause
to be managed, maintained, repaired and replaced) the Common Area on such Parcel
(except any portion thereof which is an Exclusive Use Area) and all Improvements
within the Common Area on such Parcel (except in any portion of the Common Area
which is an Exclusive Use Area) in good repair and appearance, including, but
not limited to, contracting for and paying costs of or related to (i) utility
services provided to such Common Area including, but not limited to, water,
electricity and natural gas (if applicable); (ii) sweeping and cleaning
(including steam cleaning) the parking areas, sidewalks and other hardscape, as
necessary; (iii) repairing and replacing asphalt paving using materials equal to
or better than those originally installed; (iv) bumpers; (v) parking lot
striping and directional signs; (vi) light bulbs and light standards; (vii)
perimeter walls; (viii) electrical lines, gas lines (if applicable), storm
drains, water lines and sanitary sewers which serve such Common Area or which
are within such Common Area; (ix) planters, landscaping and sprinkler systems
comprising the Common Landscaping; (x) hiring and supervising private security,
if any; (xi) the insurance for which Section 13.2 provides; and (xii) all other
items of maintenance, repair or replacement that may be needed from time to time
to maintain such Common Area properly and in a first-class condition.

     The foregoing notwithstanding, the following exceptions shall apply:

          (a) During the period of construction or repair of any building on any
     Parcel, the Owner of such Parcel shall maintain (or cause to be maintained)
     those portions of the Common Area within its Parcel, if any, which are
     affected by such building construction or repair and shall be responsible
     for controlling blowing dust and debris resulting from such construction or
     repair activity.


                                      -34-


                                    EXHIBIT F
                                      -39-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

          (b) With respect to those portions of facilities for water, sewer,
     gas, telephone, electricity and other utilities serving more than one
     building with different Owners and lying beneath the Common Area (e.g., an
     electric trunk line from which individual lateral lines are routed to serve
     different individual buildings), the Association will perform any required
     maintenance, repair or replacement (or cause the same to be performed), and
     will bill each Owner's share of the cost of the work to the Owners of the
     Parcels whose buildings are served by the facilities. Each Owner's share of
     the total bill shall be determined by multiplying the total bill by a
     fraction, the numerator of which is the Parcel Area of the Owner's Parcel
     or Parcels served by the facility, and the denominator of which is the
     Parcel Area of all Parcels served by the facility. Each Owner shall be
     responsible for maintenance and repair of the lateral lines serving his
     Parcel or Parcels.

          (c) With respect to those portions of facilities for water, sewer,
     gas, telephone, electricity and other utilities serving one or more
     buildings owned by the same Owner and lying beneath the Common Area, the
     Association will perform any required maintenance, repair or replacement
     (or cause the same to be performed), and will bill the Owner of the
     Parcel(s) whose building(s) is served by the facilities. With the consent
     of the Association, the Owner of the affected building or buildings may
     contract directly for any such required maintenance, repair or replacement
     work to be performed at the sole cost and expense of such Owner.

     13.2 COMMON AREA INSURANCE.

          (a) As part of its obligation to maintain the Common Area within
the Center except those portions designated Exclusive Use Areas, the
Association shall at all times maintain in force and effect commercial or
comprehensive general liability insurance insuring the Association and, as
additional insureds, all Owners and Eligible Occupants who now or hereafter
own or hold any Parcel or any qualifying leasehold estate (I.E., qualifying the
lessee thereunder to be an Eligible Occupant) or other interest therein as
their respective interests may appear (provided that the Association is given
prior written notice of such interest), against claims for bodily injury,
personal injury, death or property damage occurring in, upon or about the
Common Area. Such insurance shall be written with an insurer licensed to do
business in the State of California. All such insurance shall be primary
coverage, endorsed to name as additional insureds all Owners and Eligible
Occupants under leases of which the Association has been notified in writing,
and shall not require that any other insurance be called upon to contribute
to a loss under such coverage, and shall have liability limits of not less
than Three Million Dollars ($3,000,000) combined single limit coverage for
bodily injury, personal injury, death and/or property damage arising out of
any single occurrence, which amount shall be reviewed annually and changed to
reflect the current practice in mixed use commercial centers in San Diego
County, California which are of a similar size and which have a similar mix
of Occupants. The Association shall cause certificates of insurance to be
issued by the insurer to each of the Owners and Eligible Occupants of whom
the Association has been notified in writing, certifying that such insurance
is in full force and effect and shall not be canceled or materially amended
without thirty (30) days prior written notice thereof to each of such Owners
and Eligible Occupants.

                                      -35-


                                    EXHIBIT F
                                      -40-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

          (b) Association shall obtain and maintain in force property damage
     insurance under a standard form policy or policies of all-risk insurance
     then in use in California, covering retaining walls and other walls,
     lighting facilities and lighting standards, landscaping (in the reasonable
     business judgment of the Association), and other improvements in the Common
     Area (excluding Exclusive Use Areas);

          (c) Worker's compensation insurance, as required by law;

          (d) Association Directors' and Officers' errors and omissions
     insurance, in form and amount determined by the Board; and

          (e) Insurance against any other risk which the Board considers
     appropriate.

     13.3 ASSOCIATION'S RIGHT TO REPAIR NEGLECTED PARCELS. In addition to
maintaining the Common Area, if an Owner fails to maintain the Improvements, and
other portions of Owner's Parcel so as to violate Section 12.1, then the
Association, after approval of the Board, shall have the right, through its
agents, contractors and employees, to enter onto the Owner's Parcel to repair,
maintain and restore the Parcel, any Exclusive Use Areas, and the exteriors of
any building and other Improvements erected thereon. However, entry into a
Building Area or Exclusive Use Area may be made only after not less than five
(5) business days notice has been given to the Owner and any Eligible Occupant.
Entry shall be made with as little inconvenience to the Owner and Occupants as
possible and any damage caused thereby shall be repaired by the Association at
its cost and expense. The cost of such exterior maintenance shall be levied as a
Reimbursement Assessment against such Parcel pursuant to Section 3.8.

     13.4 PROPERTY MANAGEMENT COMPANY. Nothing in this Article 13 or in this
Declaration shall preclude or be interpreted as precluding the Association from
retaining a "managing agent" within the meaning of Section 1363.1 of the
California CIVIL CODE, as it may be amended or replaced from time to time. In
the event the Association so retains such a "managing agent", then the "managing
agent" and the Association shall make all arrangements necessary or proper to
ensure that funds accepted or received by the "managing agent" and belonging to
the Association are deposited and handled in compliance with Section 1363.2 of
the California CIVIL CODE, as it may be amended or replaced from time to time.
The Association may retain the Declarant or an affiliate of the Declarant as
managing agent.

                                   ARTICLE 14
                                 THE ASSOCIATION

     14.1 ORGANIZATION. The Association is a California nonprofit mutual benefit
corporation.

     14.2 DUTIES. The Association shall be charged with the duties set forth in
the Articles, the Bylaws and this Declaration, including, but not limited to,
the following:

               (a) ASSESSMENTS. The Association shall fix, levy, collect and
enforce Assessments as further described in Article 3.


                                      -36-


                                    EXHIBIT F
                                      -41-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

               (b) COMMON AREAS. The Association shall maintain, repair,
replace, restore, operate, control and manage the Common Areas (excluding
Exclusive Use Areas) and all facilities, Improvements and equipment located
thereon, as further described in Article 13, except to the extent such
maintenance has been assumed by a governmental agency or public or private
utility, and except as otherwise set forth herein.

               (c) PAYMENT OF EXPENSES. The Association shall pay all expenses
and obligations incurred by the Association in the conduct of its business,
including, without limitation, all licenses, taxes or governmental charges
levied or imposed against the property of the Association.

     14.3 POWERS. The Association shall have the following powers, rights and
duties, in addition to those provided elsewhere in this Declaration, the
Articles and the Bylaws and those powers granted to a nonprofit mutual benefit
corporation pursuant to the California Corporations Code:

               (a) ACQUISITION OF PROPERTY. The Association shall have the power
to acquire (by gift, purchase or otherwise), own, hold, improve, operate,
maintain, convey, sell, lease, transfer, dedicate for public use or otherwise
dispose of real or personal property in connection with the affairs of the
Association.

               (b) ASSESSMENTS, LIENS. The Association shall have the power to
levy and collect assessments pursuant to Article 3 and to perfect and enforce
liens in accordance with the provisions of Article 3.

               (c) BORROWING. The Association shall have the power to borrow
funds to pay costs of operation, secured by assessment revenues due for
succeeding years or by assignment or pledge of rights against delinquent Owners;
provided, however, that the affirmative vote or written consent of Declarant and
other Owners holding a majority of the total voting power of the Class A Members
shall be required to borrow, during any calendar year, in excess of an amount
equal to Ten Thousand Dollars ($10,000) multiplied by the number of Parcels
within the Center subject to assessment. Such borrowing may be from Declarant if
Declarant agrees to advance funds; and, in such event, Declarant shall receive,
as interest, no more than the published Wall Street Journal Prime Rate, as
modified from time to time, plus two percent (2%).

               (d) CONTRACTS. The Association shall have the power to contract
for goods and/or services for the Common Areas or for the performance of any
power or duty of the Association, subject to limitations set forth elsewhere in
this Declaration, the Articles or the Bylaws. The Association's power to
contract shall include, but is not limited to, the right to enter into
agreements with one or more other owners' associations for the purposes
described in this Section.

               (e) DELEGATION. The Association shall have the power to delegate
its authority and powers to committees, officers or employees of the
Association.


                                      -37-


                                    EXHIBIT F
                                      -42-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

               (f) ENFORCEMENT. The Association shall have the power to enforce
this Declaration pursuant to the provisions hereof.

               (g) SECURITY SERVICES. The Association shall have the power to
provide, or to contract for the provision of, security patrols or other security
measures, or both, as the Board deems necessary.

               (h) VARIANCES. The Board, acting for the Association, shall have
the power to grant reasonable variances from the provisions of this Declaration
from time to time, as the Board may deem, in its sole discretion, to be in the
best interests of the Center, in order to overcome practical difficulties and to
prevent unnecessary hardship in the application of the provisions contained
herein; provided, however, that: (a) a variance shall not materially injure any
of the Parcels or Improvements in the Center; and (b) the Owner seeking the
variance shall otherwise be subject to and conform with all applicable
governmental laws, ordinances, regulations and requirements. No variance granted
pursuant to the authority granted herein shall constitute a waiver of any
provision of this Declaration as applied to any person or real property.

     14.4 ELECTION OF NEW BOARD OF DIRECTORS. Concurrently with the recordation
of this Declaration, the Members shall elect a new Board of Directors of the
Association consisting of three (3) directors who shall hold office until the
next annual meeting of Members pursuant to Section 14.7.

     14.5 SUBSEQUENT BOARD OF DIRECTORS. At each annual meeting of Members, a
new Board consisting of three (3) directors shall be elected, and such Board
shall serve until the next annual meeting. The Bylaws may provide for staggered
terms and lengths of terms for directors different from those initially set
forth in this Declaration and may provide for a greater or lesser number of
directors than set forth herein; provided, however, in no event shall there be
more than seven (7) directors or less than three (3) directors. The Board shall
undertake all duties and responsibilities of the Association and the management
and conduct of the affairs thereof, except as expressly reserved herein to a
vote of the Members.

     14.6 PERSONAL LIABILITY. No member of the Board, or of any committee of the
Association, or any officer or manager of the Association shall be personally
liable to any Owner, or to any other party, including the Association, for any
damage, loss or prejudice suffered or claimed on account of any act, omission,
error or negligence of any such Person.

     14.7 ANNUAL MEMBERSHIP MEETINGS. The Association shall hold annual meetings
of the Members in accordance with the Bylaws of the Association.

                                   ARTICLE 15
                         APPROVAL OF OWNERS AND NOTICES

     All notices, demands or requests for consent or approval of any kind which
the Association or any Owner or Occupant is required or desires to give or make
upon the


                                      -38-


                                    EXHIBIT F
                                      -43-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

Association or any other Owner or Occupant shall (a) be in writing; (b) specify
the Section of this Declaration which requires or authorizes that such notice be
given or requires that such consent or approval be obtained; and (c) be given or
made (subject to the right of the Association or any Owner or Occupant to
designate a different address by giving notice of such change in the manner
provided in this Section) by personal delivery, private express courier, or by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed, in the case of Declarant and the consenting parties, as
follows:

DECLARANT:                               KR-Carmel Partners, LLC
                                         c/o Kilroy Realty Corporation
                                         4365 Executive Drive, Suite 850
                                         San Diego, CA 92121
                                         Attention: Mr. Steven L. Black

PIAZZA PARTNERS, L.P.:                   Piazza Partners, L.P.
                                         c/o The Allen Group
                                         401 "B" Street, Suite 2150
                                         San Diego, CA 9101
                                         Attention: Mr. David L. Dick

CARMEL VALLEY, LLC:                      Carmel Valley, LLC
                                         ___________________________________
                                         ___________________________________
                                         Attention:_________________________

ACACIA GASOLINE AND CAR WASH             Acacia Gasoline and Car Wash of
OF CARMEL VALLEY, LLC                    Carmel Valley, LLC
                                         ___________________________________
                                         ___________________________________
                                         ___________________________________
                                         Attention:_________________________

RFS FINANCING PARTNERSHIP, L.P.:         RFS Financing Partnership, L.P.
                                         ___________________________________
                                         ___________________________________
                                         Attention:_________________________

ASSOCIATION:                             Carmel Center Association
                                         c/o Kilroy Realty Corporation
                                         4365 Executive Drive, Suite 850
                                         San Diego, CA 92121
                                         Attention: Mr. Steven L. Black

     When given in the manner prescribed in this Section, all notices, demands
or requests for consent or approval shall be deemed given, received, made or
communicated on the date


                                      -39-


                                    EXHIBIT F
                                      -44-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

personal delivery is effected or, if mailed, on the delivery date or the date on
which delivery is refused by the addressee.

                                   ARTICLE 16
                             MODIFICATION PROVISION

     This Declaration may not be modified in any respect whatsoever, or
rescinded, in whole or in part, except by written instrument duly recorded in
the Office of the County Recorder of San Diego County, after first being duly
signed and acknowledged by Declarant for so long as there is a Declarant, and by
those Owners (which may include Declarant) holding at least seventy-five percent
(75%) of the Members' voting power. Notwithstanding the foregoing, any
modification or rescission of any of the provisions of Section 8.2 regarding the
Common Area and the provisions of Article 11 regarding the grant of easements
with respect to the Common Area shall require the written consent of those
Owners as set forth in Section 8.2.

                                   ARTICLE 17
                             NOT A PUBLIC DEDICATION

     Nothing contained in this Declaration shall be deemed to be a gift or
dedication of any portion of the Center to the general public or for the benefit
of the general public or for any public purposes whatsoever, it being the intent
of Declarant that this Declaration shall be strictly limited to and for the
purposes expressed in this Declaration. The right of the public or any Person to
make any use whatsoever of the Center or any portion thereof (other than any use
expressly allowed by a written or recorded map, agreement, deed or dedication)
is by permission and subject to control of the Owners.

                                   ARTICLE 18
                                INJUNCTIVE RELIEF

     In the event of any violation or threatened violation by any Owner or
Occupant of any portion of the Center of any of the terms, covenants, conditions
and obligations of this Declaration, in addition to the other remedies for which
this Declaration provides, any or all of the Owners shall have the right to
enjoin such violation or threatened violation in a court of competent
jurisdiction.

                                   ARTICLE 19
                       BREACH SHALL NOT PERMIT TERMINATION

     No breach of this Declaration shall entitle any Owner to cancel, rescind or
otherwise terminate this Declaration, but such limitation shall not affect in
any manner any other rights or remedies which such Owner may have under this
Declaration by reason of any breach of this Declaration. Any breach of any of
the covenants, conditions or restrictions set forth in this Declaration,
however, shall not defeat or render invalid the lien of any Mortgage made in
good faith and for value, but such covenants, conditions or restrictions shall
be binding upon and be effective against such Owner of any of said property or
any portion thereof whose title thereto is acquired by foreclosure, trustee's
sale or otherwise.


                                      -40-


                                    EXHIBIT F
                                      -45-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

                                   ARTICLE 20
                               INDEMNITY BY OWNERS

     20.1 INDEMNITY. Each Owner shall indemnify, protect, defend and hold the
Association and the other Owners harmless from and against all claims, expenses,
liabilities, loss, damage and costs, including any actions or proceedings in
connection therewith and including reasonable attorneys' fees and costs,
incurred in connection with, arising from, due to or as a result of the death of
or any accident, injury, loss or damage, howsoever caused, to any Person or loss
or damage to the property of any Person as shall occur on the indemnifying
Owner's Parcel (excluding Common Areas), except claims resulting from the
negligence or willful act or omission of (a) the Association or the indemnified
Owner, whichever is applicable; (b) any Occupant of the indemnified Owner's
Parcel (including such Occupant's agents, servants and employees); or (c) the
agent, servants or employees of such indemnified Owner, wherever such negligence
or willful act or omission may occur.

     20.2 BUILDING AREA LIABILITY INSURANCE. Each Owner shall at all times
during the term of this Declaration maintain or cause to be maintained
commercial or comprehensive general liability insurance covering the Owner's
Parcel (excluding Common Area) insuring against the risks of bodily injury,
property damage and personal injury liability, with a limit of not less than
Three Million Dollars ($3,000,000) per occurrence, which amount shall be
reviewed and adjusted by the Board every three (3) years for increases
recommended by insurance industry-recommended standards for mixed use commercial
centers in San Diego County, California.

                                   ARTICLE 21
                                  SEVERABILITY

     If any provision of this Declaration is held by a court of competent
jurisdiction to be invalid, the invalidity of such provision shall not affect
the validity of the remaining provisions of this Declaration, and all remaining
provisions shall continue unimpaired, in full force and effect.

                                   ARTICLE 22
                            ENFORCEMENT AND REMEDIES

     22.1 RIGHT TO ENFORCE. The Declarant or the Association shall have the
right to enforce, by all appropriate legal and equitable proceedings, all
conditions, covenants, restrictions, reservations, liens, and charges now or
hereafter imposed by the provisions of this Declaration. It is hereby agreed
that money damages are an inadequate remedy for breach of any of the conditions,
covenants and restrictions contained herein, other than a default in the payment
of any assessment when due. Every Owner and Occupant of a Parcel subject to
these restrictions expressly waives the benefit of California Code of Civil
Procedure Section 731 (a) and any other comparable statute or rule, and agrees
that such violation or breach may be enjoined whether or not monetary damages
may be provided or provable. Prior to commencing litigation, the requirements of
California Civil Code Section 1354 relating to alternative dispute resolution
shall be satisfied.


                                      -41-


                                    EXHIBIT F
                                      -46-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     22.2 OWNER'S REMEDIES. After written request to the Association to prevent
any violation of this Declaration, and failure to act by Declarant or the
Association within fifteen (15) days after receipt of such request, any Owner
shall additionally have all enforcement rights provided for in this Declaration.
In addition, any other party to whose benefit this Declaration inures shall have
the right, in the event of violation or breach of this Declaration, to prosecute
a proceeding at law or in equity against the Person or Persons who have violated
or are attempting to violate this Declaration, to enjoin or prevent them from
doing so, to cause said violation to be remedied and to recover damages for said
violation.

     22.3 WAIVER. The failure of any Owner, Declarant or the Association to
enforce any provision of this Declaration shall in no event be deemed a waiver
of the right to do so thereafter, and neither any Owner, Declarant nor the
Association shall have any liability for such failure of such Owner, Declarant
or the Association to enforce any provision of this Declaration.

                                   ARTICLE 23
                               LITIGATION EXPENSES

     If any Owner or the Association brings an action against any other Owner or
Occupant by reason of a breach or alleged violation of any covenant, term or
obligation of this Declaration, or for the enforcement of any provision of this
Declaration or otherwise arising out of this Declaration, the prevailing party
in such action shall be entitled to its cost of suit and reasonable attorneys'
fees, which shall be made part of any judgment rendered in such action.

                                   ARTICLE 24
                            NO ASSIGNMENT OR TRANSFER

     The rights, powers, duties and obligations conferred upon the Owners
pursuant to this Declaration shall not at any time be transferred or assigned by
any Owner, except (a) in the case of the rights, powers, duties and obligations
of Declarant, by Declarant pursuant to the definition of "Declarant" set forth
in Article 1; or (b) in the case of any Owner, (i) through a transfer of the
Owner's interest in its Parcel in the manner provided in Article 25, or (ii) to
an Eligible Occupant pursuant to Section 2.1.

                                   ARTICLE 25
                                  SALE BY OWNER

     Upon the sale, transfer, conveyance or assignment by any Owner of its
right, title and interest in its Parcel, the following shall apply:

     25.1 NOTICE. The transferring Owner shall give prompt written notice of the
sale, transfer, conveyance or assignment to the Association, Declarant and each
other Owner. Such notice shall set forth the name of the transferee and the
transferor, the description of the affected Parcel, the nature of the interest
transferred, the transferee's mailing address and the date of transfer. Prior to
receipt of such notification, any and all communications required or permitted
to be given under the Project Documents shall be deemed to be duly given to the
transferee if duly and timely given to said transferee's transferor.


                                      -42-


                                    EXHIBIT F
                                      -47-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

     25.2 CONSTRUCTIVE NOTICE AND ACCEPTANCE. Each Owner and Occupant, and every
other person who now or hereafter owns or acquires any right, title, estate or
interest in or to any portion of the Center, by acceptance of a deed, lease or
other interest therein, shall be conclusively deemed to have consented and
agreed to hold such title, leasehold or interest subject to and to comply with
every covenant, condition and restriction contained herein and to the rights of
Declarant and the Association hereunder, whether or not any reference to this
Declaration is contained in the deed, lease or other instrument by which such
person acquired said interest in the Center. Every provision of this
Declaration, regardless of its characterization herein, shall be deemed a
covenant, condition, restriction, reservation, easement or servitude, as the
circumstances may require, to permit the enforcement thereof and to carry out
the intent of this Declaration.

     25.3 RELEASE OF OWNER. A transferring Owner shall be released from all
obligations of this Declaration as of the effective date of the transfer;
provided that with respect to the period before the effective date of the
transfer, such Owner is not in default in the performance of any duties or
obligations arising under this Declaration or in the payment of any amounts due
and payable under this Declaration.

     25.4 LIABILITY OF TRANSFEREE. In no event shall any transferee of any Owner
be liable for any default of the transferring Owner under this Declaration which
occurred prior to the effective date of the transfer; PROVIDED, HOWEVER, nothing
contained in this Section shall affect the existence, priority, validity or
enforceability of any lien placed upon the transferred Parcel or portion thereof
pursuant to Section 3.9.

                                   ARTICLE 26
                              TERM OF DECLARATION

     This Declaration shall continue for a period of fifty (50) years and
thereafter year to year, unless, before the expiration of the term (as it may be
so extended), this Declaration is terminated or modified by written instrument
duly signed and acknowledged by the Declarant, if the Declarant still owns a
Parcel within the Center, and Owners (which may include Declarant) holding at
least seventy-five percent (75%) of the Members voting power, and such
instrument is recorded in the Office of the County Recorder of San Diego County,
California. This Declaration shall terminate upon the expiration of the term
following such recordation. Notwithstanding any such termination, the provisions
of Section 8.2 regarding the Common Area and the provisions of Article 11
regarding the grant of easements with respect to the Common Area shall survive
and remain in full force and effect unless terminated or otherwise modified by
the requisite written consent of the Owners as set forth in Section 8.2.

                                   ARTICLE 27
                                  MISCELLANEOUS

     27.1 CAPTIONS. Captions and Section headings, where used in this
Declaration, are for convenience of reference only, are not intended to be a
part of this Declaration and in no way


                                      -43-


                                    EXHIBIT F
                                      -48-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

define, limit, amplify, change, alter or describe the scope or intent of the
particular paragraphs to which they refer.

     27.2 GENDER. For the purpose of this Declaration, the neuter gender
includes the feminine or masculine and the singular number includes the plural.

     27.3 DECLARANT'S RESERVED RIGHTS. Wherever it appears in this Declaration
that the Declarant has the right to waive compliance with certain provisions,
the right to approve or deny certain matters or the right to exercise its
discretion in various areas, these rights of the Declarant are expressly
reserved or retained by the Declarant, and all of the provisions of this
Declaration are subject to such retained and reserved rights.

     27.4 EXHIBITS. All exhibits referred to herein are attached hereto and
incorporated by reference.

     27.5 GOVERNING LAW. This Declaration shall be governed, construed and
enforced in accordance with the laws of the State of California.

     27.6 MORTGAGE PROTECTION. No breach of this Declaration shall affect,
impair, defeat or render invalid the lien of any Mortgage now or hereafter
executed in good faith and for value upon any part of the Center. However, if
any portion of the Center is sold under a foreclosure of any Mortgage or is
conveyed to the party so secured in lieu of foreclosure, any purchaser at such
sale, and his successors and assigns, shall hold any and all property so
acquired subject to all of the restrictions and other provisions of this
Declaration. Such a purchaser shall not be obligated to cure any preexisting
breach of this Declaration which is non-curable by payment of money (subject to
the provisions of Section 3.11 subordinating the lien of delinquent assessments
to the lien of a first priority Mortgage) or of a type which is not practical or
feasible to cure. Any loan to facilitate the resale of any portion of the
Property after a foreclosure sale or deed in lieu of foreclosure is a loan made
in good faith and for value. If a Mortgagee delivers written notice of its
Mortgage to the Board together with a request for notices of default with
respect to the Parcel or Parcels encumbered by the Mortgage, the Association
shall deliver copies of all such notices of default to such Mortgagee (a
"Requesting Mortgagee") concurrently with delivery to the Owner or Owners. A
Requesting Mortgagee shall also be entitled to timely written notice of any
destruction, taking or threatened taking that affects a material portion of the
Common Area (including without limitation any Common Parking Area) benefiting a
Parcel securing the Mortgage, and any lapse, cancellation or material
modification of any insurance policy maintained by the Association. Mortgagees
are hereby authorized to furnish information to the Board concerning the status
of any Mortgage. Nothing contained in this Declaration or the other Project
Documents shall give the Association, any Owner, or any other party priority
over the rights of a first Mortgagee with respect to distributions of insurance
proceeds or condemnation awards for losses to or a taking of a Parcel, or any
portion thereof, encumbered by a Mortgage held by such Mortgagee.

     27.7 MUTUALITY, RECIPROCITY; RUNS WITH LAND. This Declaration is made for
the direct, mutual and reciprocal benefit of each and every Parcel; shall create
mutual, equitable servitudes upon each Parcel in favor of every other Parcel;
shall create reciprocal rights and


                                      -44-


                                    EXHIBIT F
                                      -49-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

obligations between and among the respective Owners during their respective
periods of ownership and privity of contract and estate between and among all
grantees of each Parcel, their respective heirs, successors and assigns; and
shall, with respect to the Owner of each Parcel, its heirs, successors and
assigns during their respective periods of ownership, operate as covenants
running with the land, for the benefit of all other Parcels.

     IN WITNESS WHEREOF, the Owners have signed and made this Declaration as of
the date first above written.


                                      -45-


                                    EXHIBIT F
                                      -50-
                                             PEREGRINE SYSTEMS CORPORATE CENTER
                                                            [Peregrine Systems]
<PAGE>

DECLARANT                          KR-CARMEL PARTNERS, LLC, a Delaware
                                   limited liability company

                                   By: Kilroy Realty, L.P., a Delaware limited
                                       partnership, Managing Member

                                       By: Kilroy Realty Corporation, a
                                           Maryland corporation, its
                                           General Partner

                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

                                          By:
                                             -----------------------------------
                                          Name:
                                               ---------------------------------
                                          Title:
                                                --------------------------------

PIAZZA PARTNERS, L.P.              PIAZZA PARTNERS, L.P.,
                                   a California
                                   limited partnership

                                   By: Allen Development, Inc., a California
                                       corporation, Its General Partner

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

CARMEL VALLEY, LLC                 CARMEL VALLEY, LLC, a California limited
                                   liability company

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


                                      -46-


                                     EXHIBIT F
                                       -51-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


ACACIA GASOLINE AND CAR WASH       ACACIA GASOLINE AND CAR WASH OF
OF CARMEL VALLEY, LLC              CARMEL VALLEY, LLC, a California limited
                                   liability company

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


RFS FINANCING PARTNERSHIP, L.P.    RFS FINANCING PARTNERSHIP, L.P., a
                                   Tennessee limited partnership

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


                             ASSENT OF ASSOCIATION

     The Association hereby manifests its assent to the foregoing Declaration as
of the date of its recordation in the Office of the County Recorder of San Diego
County, California.

                                   CARMEL CENTER ASSOCIATION, a California
                                   nonprofit mutual benefit corporation


                                      -47-


                                     EXHIBIT F
                                       -52-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------


                                      -48-


                                     EXHIBIT F
                                       -53-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State




STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -49-


                                     EXHIBIT F
                                       -54-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State








STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ____________________________
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -50-


                                     EXHIBIT F
                                       -55-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State









STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -51-


                                     EXHIBIT F
                                       -56-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State










STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -52-


                                     EXHIBIT F
                                       -57-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State











STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -53-


                                     EXHIBIT F
                                       -58-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State













STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State


                                      -54-


                                     EXHIBIT F
                                       -59-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                            SUBORDINATION AGREEMENT

     _______________________________________________________, being the
beneficiary under that certain deed of trust dated _____________________, 199__
and recorded in the Office of the County Recorder of San Diego County,
California on ____________, 1999__ as Document No. ________________, hereby
declares that the lien and charge of said deed of trust are and shall be
subordinate and inferior to the Agreement Between Landowners Including
Covenants, Conditions and Restrictions and Grants of Easements for Carmel Center
and Including Termination of Both Former Declaration and Prior Grants of
Easements to which this Subordination Agreement is attached.


                                   [NAME OF LENDER]

                                   By:
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

STATE OF_____________________)
                             )ss.
COUNTY OF____________________)

     On _________________________, before me, ______________________, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the person, or the entity upon
behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

                                   ---------------------------------------------
                                   Notary Public in and for said State



                                     EXHIBIT F
                                       -60-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                  EXHIBIT "A"

                            SITE PLAN OF THE CENTER

                                      [MAP]












                                     EXHIBIT F
                                       -61-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                  EXHIBIT "B"

              LEGAL DESCRIPTIONS OF PARCELS COMPRISING THE CENTER

PARCEL A:    Parcel 2 of Parcel Map 15957 (NW corner site)

PARCEL B:    Parcel 1 of Parcel Map 17382 (office building - west of parking
             garage)

PARCEL C:    Parcel 1 of Parcel Map 18098 (hotel)

PARCEL D:    Parcel 2 of Parcel Map 18098 (Frank's pad immediately east of
             hotel)

PARCEL E:    Parcel 1 of New Parcel Map (parking garage)*

PARCEL F:    Parcel 6 of New Parcel Map (parking garage)*

PARCEL G:    Parcel 7 of New Parcel Map (parking garage)*

PARCEL H:    Parcel 2 of New Parcel Map (office building - most westerly)*

PARCEL I:    Parcel 3 of New Parcel Map (office building)*

PARCEL J:    Parcel 4 of New Parcel Map (office building)*

PARCEL K:    Parcel 5 of New Parcel Map (office building - most easterly)*

PARCEL L:    Lot 7 of Parcel Map 13138 (gas station - car wash)

PARCEL M:    Lot 8 of Parcel Map 13138 (Frank's pad at far east end of site)



                                    EXHIBIT "B"


                                     EXHIBIT F
                                       -62-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

     * - These Parcels are presently described as Lots 1 through 6 and 9 of
Piazza Carmel II, Unit No. 1, in the City of San Diego, County of San Diego,
State of California, according to map thereof No. 13138, filed in the Office of
the County Recorder of San Diego County, September 13, 1994.












                                     EXHIBIT F
                                       -63-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                           EXHIBIT "C"

                  TABLE OF PARCEL AREAS (PRELIMINARY)

     PARCEL A:      47,568 square feet of Parcel Area

     PARCEL B:      104,326 square feet of Parcel Area

     PARCEL C:      168,839 square feet of Parcel Area

     PARCEL D:      18,861 square feet of Parcel Area

     PARCEL E:      N/A (Parking Garage) square feet of Parcel Area

     PARCEL F:      N/A (Parking Garage) square feet of Parcel Area

     PARCEL G:      N/A (Parking Garage) square feet of Parcel Area

     PARCEL H:      756,677 (total for Parcels H-K) square feet of Parcel Area

     PARCEL I:      _________________ square feet of Parcel Area

     PARCEL J:      _________________ square feet of Parcel Area

     PARCEL K:      _________________ square feet of Parcel Area

     PARCEL L:      76,404 square feet of Parcel Area

     PARCEL M:      58,501 square feet of Parcel Area

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

Total Parcel Area   1,229,176 square feet
Subject to Assessment








                                     EXHIBIT F
                                       -64-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                    EXHIBIT G

                       PEREGRINE SYSTEMS CORPORATE CENTER

                          HVAC AND ELECTRICAL STANDARDS

                                  HEATING, VENTILATING & AIR CONDITIONING

                                  Description of System: The system design
                                  shall include grade-mounted water source
                                  heat pump central plant with associated
                                  pumps, boiler, valves, pipes and fittings.
                                  Capacity and number of units as indicated
                                  on the plans. Supply and return water loop
                                  on each floor included as part of Base,
                                  Shell and Core.

                                  A.  One (1) water source cooling tower,
                                      boiler and pumps connected to below grade
                                      supply and return water loop to building.

                                  B.  Air Distribution: The sheet metal ducts
                                      will all be designated and installed in
                                      accordance with A.S.H.R.A.E. and
                                      S.M.A.C.N.A. recommendations. The supply
                                      diffusers in the core will be a
                                      combination of modular ceiling lay-in
                                      type and fixed linear type.

                                  C.  Controls: The controls will be a
                                      electronic type and give individual zone
                                      control.

                                  D.  Exhaust System: Provide all toilet rooms
                                      with acceptable exhaust systems with
                                      quiet operation. Exhaust to roof.
                                      Exhausting to meet code requirements.
                                      Provide exhaust in stair enclosures as
                                      required by code.

                                  E.  The electrical contractor shall provide
                                      all starters, connections and live
                                      voltage wiring and conduit required in
                                      the Base, Shell and Core space. All work
                                      shall be done in accordance with all
                                      required ordinances.

                                  ELECTRICAL

Main Service                      Main service to Building to be
                                  277/480 volt, 3 phase 4 wire, 1200 amp
                                  located within an electric room with
                                  distribution and subpanel to each floor as
                                  a part of the Base, Shell and Core
                                  improvements.

Building Power and Lighting       Electrical work shall include metering
                                  facilities, conduit, conductors, main
                                  switch board, subpanels, branch circuits,
                                  J-boxes, lighting fixtures, wall light
                                  switches, power receptacles, etc. for the
                                  site common areas and Base, Shell and Core
                                  improvements.

Power & Utility Core              Electrical for the Base, Shell and Core
                                  improvements shall include a service and
                                  distribution including a conduit,
                                  conductors, switch board, subpanels, branch
                                  circuits, J-boxes, lighting fixtures, wall
                                  light switches, power receptacles, etc.

Power for Equipment               Power wiring and connection to air
                                  conditioning equipment as well as control
                                  wiring and control devices shall be
                                  provided.

Telephone & Data Communication    Telephone and data communication cabling
                                  provided by Tenant.

Installation                      All electrical work to be in accordance
                                  with applicable codes. All necessary
                                  outlets, conduit, wiring, trenching and
                                  concrete encasing shall be provided as
                                  required.

Interior Lighting                 Fluorescent lighting (exit corridor,
                                  janitor closet): Provide 2' x 4' recessed
                                  fixtures with parabolic lens and electronic
                                  ballast in suspended ceilings. Provide
                                  recessed down lighting in lobbies. Provide
                                  1' x 4' recess mounted fixtures at toilet
                                  rooms, electrical and telephone rooms. All
                                  lighting in lobby and exit enclosures to be
                                  controlled by wall mounted motion sensors
                                  with override switch as required by Title
                                  24.



                                    EXHIBIT G

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                 EXHIBIT H-1

                     PEREGRINE SYSTEMS CORPORATE CENTER

                          JANITORIAL SPECIFICATIONS

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 1 OF 6
                                                                  --------------
SPECIFICATIONS

ENTRANCE LOBBIES/BUILDING CORRIDORS

Daily Services: Five (5) Days Per Week

     1.   Sweep and spot clean non-resilient flooring.

     2.   Vacuum carpets completely.

     3.   Empty all waste containers and spot-clean.

     4.   Spot clean carpeted floor surface.

     5.   Dust ledges within reach.

     6.   Damp mop spillage as needed.

     7.   Empty cigarette receptacles.

     8.   Spot clean walls and doors.

     9.   Clean entrance mats as necessary.

     10.  Clean all metal door frames and thresholds.

     11.  Clean building directory board glass.

     12.  Vacuum entrance mats as necessary.

     13.  Only designated lights will be left on.

Weekly Services:

     1.   Spot clean walls, woodwork, and doors.

     2.   Perform high dusting.

     3.   Edge all carpets.

     4.   Polish entrance metals.

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


                                  EXHIBIT H-1
                                      -1-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 2 OF 6
                                                                  --------------
SPECIFICATIONS - CONTINUED

     5.   Dust all baseboards.

     6.   Dust all horizontal surfaces.

Monthly Services:

     1.   Dust and vacuum air supply and exhaust diffusers.

     2.   Vacuum all furniture in lobby area.

ELEVATORS

Daily Services: Five (5) Days Per Week

     1.   Sweep and spot clean non-resilient flooring.

     2.   Vacuum and spot clean carpets.

     3.   Clean and polish doors.

     4.   Clean and polish interior of cab.

     5.   Vacuum tracks thoroughly.

     6.   Clean all bright work.

Weekly Services:

     1.   Polish all bright work.

     2.   Clean tracks thoroughly.

Monthly Services:

     1.   Vacuum ceiling grate.

STAIRWAYS AND LANDINGS

Daily Services: Five (5) Days Per Week

     1.   Police area to remove refuse.

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


                                  EXHIBIT H-1
                                      -2-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 3 OF 6
                                                                  --------------
SPECIFICATIONS - CONTINUED

     2.   Damp mop to remove spillage as needed.

     3.   Spot sweep stairs as needed.

Weekly Services:

     1.   Sweep stairways and landings.

     2.   Dust all handrails.

     3.   Wet mop as needed.

OFFICE/TENANT AREAS

Daily services: Five (5) Days Per Week

     1.   Sweep with chemically treated dust-mop or vacuum all high traffic
          areas.

     2.   Spot clean composition floors.

     3.   Dust desks, chairs, and all other office furniture.

     4.   Clean all ash trays and sand urns.

     5.   Empty all waste baskets and carry trash to pick up area.

     6.   Spot clean partition door glass.

     7.   Clean and polish drinking fountains.

     8.   Install plastic waste basket liners furnished by customer, replace as
          necessary.

Weekly Services:

     1.   Dust ledges and window sills.

     2.   Perform High Dusting.

     3.   Dust picture frames and book shelves.

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


                                  EXHIBIT H-1
                                      -3-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 4 OF 6
                                                                  --------------
SPECIFICATIONS - CONTINUED

     4.   Remove fingerprints from woodwork, walls and partitions.

     5.   Dust vertical surfaces of office furniture.

     6.   Dust chair rungs and furniture legs.

     7.   All in suite carpet to be vacuumed completely.

     8.   Spot clean around wall switches.

     9.   Spot clean doors, door frames, and counters.

     10.  Dust all horizontal surfaces.

     11.  Spot clean all glass partitions.

Monthly Services:

     1.   Perform high dusting, i.e. door sashes and tops of partitions.

     2.   Wipe down plastic and leather furniture.

     3.   Dust venetian blinds.

     4.   Dust and vacuum ceiling and wall vents.

RESTROOM AND LOUNGES

Daily Services: Five (5) Days Per Week

     1.   Empty and wipe out all waste paper containers.

     2.   Empty sanitary napkin containers and replace insert.

     3.   Polish all metal and mirrors.

     4.   Clean all dispensers.

     5.   Clean and disinfect wash basins, toilets and urinals.

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


                                  EXHIBIT H-1
                                      -4-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 5 OF 6
                                                                  --------------
SPECIFICATIONS - CONTINUED

     6.   Disinfect undersides and tops of toilet seats.

     7.   Clean floors with germicidal solution.

     8.   Vacuum carpets.

     9.   Refill soap, towel, and tissue dispensers.

     10.  Report to Building Manager any fixture not working.

Weekly Services:

     1.   Perform high dusting.

     2.   Dust all air supply and exhaust diffusers.

     3.   Polish all dispensers.

     4.   Spot clean tile walls and toilet partitions.

     5.   Spot clean walls around wash basins.

Monthly Services:

     1.   Wash down toilet compartment partitions.

KITCHEN, VENDING OR LUNCHROOM

Daily Services: Five (5) Days Per Week

     1.   Clean sink if empty.

     2.   Clean counter top.

     3.   Empty trash.

     4.   Damp mop floor.

     5.   Wipe off tables and chairs and arrange.

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


                                  EXHIBIT H-1
                                      -5-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 6 OF 6
                                                                  --------------
SPECIFICATIONS - CONTINUED

     6.   Wipe off fronts of vending machines.

     7.   Vacuum carpeting.

     8.   Wipe down microwaves.

FLOOR CARE

ENTRANCE LOBBIES AND BUILDING CORRIDORS

     1.   Scrub and refinish floors monthly.

     2.   Strip and refinish floors semi-annually.

OFFICE/TENANT AREAS

     1.   Scrub and refinish floors monthly.

     2.   Strip and refinish floors semi-annually.

RESTROOMS

     1.   Scrub and seal floors monthly.





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


                                  EXHIBIT H-1
                                      -6-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                 EXHIBIT H-2

                      PEREGRINE SYSTEMS CORPORATE CENTER

                           DAY PORTER SPECIFICATIONS

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 1 OF 2
                                                                  --------------
SPECIFICATIONS

                           DAY PORTER JOB DESCRIPTION

A.   ENTRANCE LOBBY AND BUILDING CORRIDORS

     1.   Spot clean entrance door glass and lobby glass.

     2.   Wipe down all interior and exterior window sills at lobby level.

     3.   Dust lobby, including guard station and vacuum as needed. Empty trash
          at guard station and clean counters.

     4.   Remove trash from receptacles in elevator lobbies on each floor.

     5.   Clean lobby directory as necessary throughout the day.

     6.   Empty and clean sand urns and replace sand as needed.

     7.   Polish and clean all metal and brightwork as necessary.

     8.   Spot clean carpets for spills.

     9.   Spot vacuum carpets as necessary.

     10.  Clean drinking fountains.

B.   BUILDING EXTERIOR

     1.   Police for trash, sidewalks, curbs, around trees, planters and pots
          around entire building.

     2.   Damp mop walkway for spills and stains.

     3.   Clean hose bib cover plates, as needed.

     4.   Sweep entrance sidewalks as needed.

     5.   Police balconies daily for leaves and debris.

     6.   Sweep balconies as needed.

     7.   Wipe down handrails on balconies.

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


                                  EXHIBIT H-2
                                      -1-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                                                  --------------
------------------------------------------------------------------     YOUR
                                                                  SPECIFICATIONS

                                                                    PAGE 2 OF 2
                                                                  --------------
SPECIFICATIONS - CONTINUED

C.   PARKING GARAGE AND TRASH ENCLOSURES

     1.   Police and clean around trash bins.

     2.   Empty and break down all boxes before disposing in dumpsters.

     3.   Clean pay phones in garage and keep area around them clean.

     4.   Spot clean garage lobby door and glass.

     5.   Dust exterior of lobby doors and wall in garage.

     6.   Check mail room daily, and wipe down counters and mail boxes.
          Vacuum as needed.

D.   STAIRWELLS, LANDINGS AND ELEVATORS

     1.   Police stairwells daily for trash and debris.

     2.   Damp mop for spills and stains.

     3.   Thoroughly sweep two flights of stairs per day.

     4.   Check stairwells for cobwebs, dustballs and burned out lights.

     5.   Dust and wipe handrails after sweeping.

     6.   Check elevator cabs several times daily.

     7.   Spot vacuum elevator cabs as necessary.

     8.   Spot clean elevator doors and walls.

     9.   Keep elevator cab emergency phones clean and sanitary at all times.

E.   RESTROOMS

     1.   Empty trash containers if necessary.

     2.   Clean and restock restroom supplies after the noon hour.

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


                                EXHIBIT H-2
                                    -2-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

                                    EXHIBIT I

                       PEREGRINE SYSTEMS CORPORATE CENTER

                         SECURITY SYSTEMS AND PERSONNEL

A card key access system will be included in the Base, Shell and Core. One
(1) security guard will be on duty at the Project on a twenty-four (24) hour
per day, seven (7) days per week basis commencing upon the Lease Commencement
Date. Security rounds will be made at applicable shift changes. If Tenant
constructs a security desk and security console (as a Tenant Improvement or
as an Alteration), Tenant shall have the option to cause such security guard
to be stationed at such desk and console; however, if Tenant elects to
construct such desk and console on a permanent basis at the Building, and if
Tenant's occupancy in the Project falls below 182,000 rentable square feet,
Landlord shall have the option, at Landlord's sole cost and expense, to
relocate such security desk and console to a location in Building 2
reasonably designated by Landlord. An additional security guard will be hired
to patrol the Project during the hours of 6:00 a.m. to 10:00 p.m. Monday
through Friday and 8:00 a.m. to 12:00 noon on Saturday (except Holidays)
commencing upon the Lease Commencement Date for Building 2; the cost of such
additional security guard will be included in Operating Expenses and
Operating Expenses for the Base Year shall be grossed up to include such
guard's services as if provided throughout the Base Year.






                                    EXHIBIT I

                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

                                  EXHIBIT J

                       PEREGRINE SYSTEMS CORPORATE CENTER

                               SIGNAGE CRITERIA










                                 CARMEL CENTER
                         SIGN GUIDELINES AND CRITERIA

                               February 24, 1999










                                   EXHIBIT J
                                      -1-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
-------------------------------------------------------------------------------

                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<S>                                                                          <C>
SUBMITTALS AND APPROVALS.....................................................1

RESTRICTIONS.................................................................2
   NONCONFORMING SIGNS.......................................................4
   ILLEGAL SIGNS.............................................................4
   ABANDONED SIGNS...........................................................4

GENERAL PROVISIONS...........................................................5

CONSTRUCTION REQUIREMENTS....................................................7

DESIGN GUIDELINES............................................................9

SIGN CRITERIA...............................................................12
   PROJECT AND TENANT SIGNAGE...............................................12
   GAS STATION IDENTIFICATION SIGNS.........................................14
   SECONDARY SITE SIGNS.....................................................15
   ANCILLARY SIGNAGE........................................................15

TEMPORARY SIGNAGE: .........................................................16
   PROJECT LEASING / CONSTRUCTION / FUTURE FACILITIES.......................16
   TENANT LEASE SPACE BANNERS...............................................16
   SEASONAL / SPECIAL EVENT SIGNAGE.........................................16

EXHIBITS....................................................................17
</TABLE>


                                   EXHIBIT J
                                      -2-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
-------------------------------------------------------------------------------

OBJECTIVE

The objective of The Carmel Center Sign Guidelines and Criteria is to provide
design standards and specifications that assure consistency in quality,
color, size, placement, and configuration for signage throughout the project,
and to provide signage that will be an integral part of the overall
architectural character and design theme suitable for the prestigious
corporate image of the Carmel Center project.

SUBMITTALS AND APPROVALS

1. There is a formal process for the creation, review and approval of
   signage throughout The Carmel Center project. Prior to sign fabrication,
   plans for all proposed signage shall be submitted to the Owner who will
   review plans for conformance with the Sign Guidelines and Criteria. All plans
   submitted for approval must conform to requirements of the criteria contained
   in The Carmel Center Sign Guidelines and Criteria. Only those sign types
   specifically approved in writing by the Owner will be allowed. The Owner
   shall have the discretionary authority to deny approval for any submittal
   which does not comply with the intent or purpose of the sign criteria.

   The Tenant shall submit all sign designs to Owner and obtain his written
   approval prior to sign fabrication. Approval or disapproval shall remain the
   sole right and discretion of the Owner. The Tenant must continue to revise
   and resubmit rejected designs until approval is obtained.

   Prior to sign fabrication, the Tenant or his sign contractor shall submit for
   Owner approval three (3) sets of complete and fully-dimensioned shop drawings
   reflecting the sign design approved by the Owner. The shop drawings submittal
   shall include:

      a.   Name, address and phone number of tenant / user

      b.   Name, address and phone number of Sign Contractor, Designer.

      c.   Elevation of structure showing all proposed signs indicating sign
           type, design, location, size and layout of sign drawn to scale and
           indicating dimensions, attachment devices and construction details,
           colors, materials and lighting details.

      d.   Section detail of letters and/or sign element showing the
           dimensioned projection of the face of letters, method and intensity
           of illumination.

      e.   Color board with actual sample colors (8-1/2" x 11" format).

      f.   Site plan showing property lines, buildings, location and
           dimensions from public right of way.


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                                   EXHIBIT J
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3. Requests to establish signs that vary from the provisions of this sign
   program shall be submitted to the Owner for approval in writing prior to
   being submitted to the City of San Diego.

4. Following approval of proposed signage by the Owner, applications for all
   permits for fabrication and installation by Sign Contractor may be submitted
   to the City of San Diego for approval, along with applicable sign permit
   applications.

5. Fabrication and installation of all signs shall be performed in accordance
   with the standards and specifications outlined in these guidelines and in the
   final approved plans and working drawings.


RESTRICTIONS

Only those sign types provided for herein and specifically approved in writing
by the Owner will be allowed. The following signs are prohibited:

1.   PROHIBITED SIGNS

     a.  Exposed junction boxes, transformers, lamps, tubing, conduits,
         raceways or neon crossovers of any type.

     b.  Signs using "Trim Cap" retainers that do not match the color of the
         letter returns and logo returns.

     c.  Rooftop signs.

     d.  Rotating, revolving, flashing or moving signs, except as provided in
         this text.

     e.  Advertising or promotional signs on parked vehicles.

     f.  Advertising signs on bus benches, within or outside of the public
         right-of-way.

     g.  Off-premise signs (other than directional signs) installed for the
         purpose of advertising a project, event, person or subject not related
         to the premises upon which said sign is located.

     h.  No signs, decals or advertising may be placed on windows except as
         provided for in the Sign Guidelines and Criteria and specifically
         approved in writing by the Owner.

     i.  No temporary promotional signs, appliances, or advertising shall be
         permitted such as banners, pennants, streamers, temporary wall signs,
         portable signs, including


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                                      -4-
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         signs on vehicles, sandwich boards, inflatable displays or any other
attention getting devices except as provided for herein.


                                                                               3


                                   EXHIBIT J
                                      -5-
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2.  NONCONFORMING SIGNS

    The Owner may, at its sole discretion, correct, replace or remove any
    sign that is installed without written approval and/or that is deemed not to
    be in conformance with the plans as submitted and with the Carmel Center
    Signage Plan.


3.  ILLEGAL SIGNS

    Any sign that is deemed not to be in conformance with the approved
    guidelines or erected without government approval or permits is considered
    an illegal sign. The Owner may, at its sole discretion, correct, replace or
    remove any illegal sign.


4.  ABANDONED SIGNS

    An abandoned sign is one whose use is discontinued because the premises
    upon which it is located becomes vacated and unoccupied for a period of more
    than 90 days. The Owner may, at its sole discretion, replace or remove any
    abandoned sign.


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                                   EXHIBIT J
                                      -6-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
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CARMEL CENTER SIGN GUIDELINES AND CRITERIA
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GENERAL PROVISIONS

1.  Signs shall be designed in a manner that is compatible with and
    complementary to the overall project and adjacent facades.

2.  Only those sign types provided for in the Sign Guidelines and Criteria
    and/or specifically approved in writing by the Owner will be allowed.

3.  Signage that incorporates logos, business identity, and/or images
    denoting the type of business shall be encouraged. Logo design and colors
    to be approved by the Owner.

4.  Logo, letter heights and sign square footages, where specified, shall be
    determined by measuring the normal capital letter of type exclusive of
    typographic swashes, ascenders, descenders or exaggerated initial capitals.
    Maximum copy areas shall be calculated exclusive of display surfaces,
    backings, architectural elements, and mounting devices.

    Logos and/or images that are in use on similar buildings operated by the
    tenant in California may be used, provided that said images are
    architecturally compatible and approved by the Owner and shall be counted in
    overall allowable square footage for tenant signs.

5.  Notwithstanding the maximum square footages specified for copy area
    allowances, signs and typography in all cases shall appear balanced and in
    scale within the context of the sign spaces - monuments and building walls -
    as a whole. Thickness, height, and color of sign lettering shall be visually
    balanced and in proportion to other signs on the building.

6.  Wall signs shall be affixed without visible means of attachment, unless
    attachments make an intentional statement. Wall signs need not be attached
    directly to the lease space to which they refer.


                                                                               5


                                   EXHIBIT J
                                      -7-
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CARMEL CENTER SIGN GUIDELINES AND CRITERIA
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7.  Ground signs or monument signs may be located within landscaped zones
    between property lines and building setback lines, allowing for adequate
    site-lines for approaching vehicular traffic at street intersections and
    project entries, but may not be located in the public right-of-way. Ground
    signs identifying any tenant or use within the project area may be located
    on any lot within the project area.

8.  All sign fabrication work shall be of excellent quality. All logo images
    and typestyles shall be accurately reproduced. Lettering that approximates
    typestyles shall not be acceptable. The Owner reserves the right to reject
    any fabrication work deemed to be below standard.







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                                   EXHIBIT J
                                      -8-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
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CONSTRUCTION REQUIREMENTS

1.  All formed metal, such as letter forms, shall be fabricated using
    full-weld construction.

2.  All ferrous and non-ferrous metals shall be separated with non-conductive
    gaskets to prevent electrolysis. In addition to gaskets, stainless steel
    fasteners shall be used to secure ferrous to non-ferrous metals.

3.  Threaded rods or anchor bolts shall be used to mount sign letters which
    are spaced out from background panel. Angle clips attached to letter sides
    will not be permitted.

4.  Surfaces with color mixes and hues prone to fading (e.g., pastels,
    fluorescent, complex mixtures, and intense reds, yellows and purples) shall
    be coated with ultraviolet-inhibiting clear coat in a matte, gloss, or
    semi-gloss finish.

5.  Joining of materials (e.g., seams) shall be finished in such a way as to
    be unnoticeable. Visible welds shall be continuous and ground smooth.
    Rivets, screws, and other fasteners that extend to visible surfaces shall
    be flush, filled, and finished so as to be unnoticeable.

6.  Finished surfaces of metal shall be free from canning and warping. All
    sign finishes shall be free of dust, San Diego peel, drips, and runs and
    shall have a uniform surface conforming to the highest standards of the
    industry.

7.  Reverse channel letters shall be pinned 2" off building wall. Return
    depth shall be 2-1/4", maximum, for letters less than 12" in height, and
    such signs shall have a clear acrylic backing. Double tube neon shall be
    used where width of letter stroke exceeds 2-1/4".

8.  Depth of open channel letters shall not exceed 2". All hardware and neon
    tube supports inside open channel letters shall be painted to match interior
    letter color. Neon tubing shall be sufficient to make letters read "solid"
    and shall be installed so that top surface of neon is flush with front edges
    of open channel.

9.  Signs illuminated with neon shall use 30 m.a. transformers. The ballast
    for fluorescent lighting shall be 430 m.a. Fluorescent lamps shall be single
    pin (slimline) with 12" center-to-center lamp separation. All lighting must
    match the exact specifications of the approved shop drawings.

10. Surface brightness of all illuminated materials shall be consistent in
    all letters and components of the sign. Light leaks will not be permitted.


                                                                               7


                                   EXHIBIT J
                                      -9-
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11.  The back side of all bare neon used for signage shall be painted to
     provide an opaque finish. Paint color shall exactly match the
     Owner-approved specification.

12.  All conduit, raceways, crossovers, wiring, ballast boxes, transformers,
     and other equipment necessary for sign connection shall be concealed. All
     bolts, fastenings and clips shall consist of enameling iron with porcelain
     enamel finish, stainless steel, anodized aluminum, brass or bronze; or
     carbon-bearing steel with painted finish. No black iron materials will be
     allowed.

13.  Underwriter's Laboratory-approved labels shall be affixed to all
     electrical fixtures. Fabrication and installation of electrical signs shall
     comply with all national and local building and electrical codes.

14.  Penetrations into building walls, where required, shall be made
     waterproof.

15.  Location of all openings for conduit sleeves and support in sign panels
     and building walls shall be indicated by the sign contractor on drawings
     submitted to the Owner. Sign contractor shall install same in accordance
     with the approved drawings.

16.  In no case shall any manufacturer's label be visible from normal viewing
     angles.

17.  Sign permit stickers shall be affixed to the bottom edge of signs, and
     only that portion of the permit sticker that is legally required to be
     visible shall be exposed.


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                                   EXHIBIT J
                                     -10-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
-------------------------------------------------------------------------------

DESIGN GUIDELINES

1.   DESIGN OBJECTIVE

     The primary objective of these guidelines is to generate signage of the
     highest quality design, fabrication and installation, consistent with the
     project architecture and design theme.


2.   ACCEPTABLE SIGN TREATMENTS

     The following treatments are considered appropriate:

     - painted metal
     - etched or polished metal
     - dimensional letter forms with seamless edge treatment
     - opaque acrylic materials with matte finishes
     - internally illuminated channel or reverse channel letters


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                                   EXHIBIT J
                                     -11-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>


CARMEL CENTER SIGN GUIDELINES AND CRITERIA
-------------------------------------------------------------------------------

3.   LIGHTING

     The following treatments are considered appropriate:

     - reverse channel neon with silhouette illumination
     - open channel neon
     - exposed neon
     - internal illumination
     - front lighting
     - area lighting

     All front lighting should be baffled and obscured in channels where
     possible. Where fixtures, shades, or other elements are exposed, they
     should contribute to the design of the tenant's lease space.

     All exposed or skeletal neon must be backed with a opaque coating,
     unless otherwise specified herein or approved in writing by the Owner. All
     housings and posts for exposed neon signs must be painted out to match the
     building background immediately behind and adjacent to the sign.

     The following shall be prohibited:

     - animated lights
     - exposed conduits and raceways
     - front lighting fixtures that compete with the storefront design


4.   COLORS

     The following guidelines are to be adhered to in selecting colors for
     tenant signage:

     - sign colors should be selected to provide sufficient contrast against
       building background colors
     - colors within each sign should be harmoniously blended
     - sign colors should be compatible with building background colors
     - color of letter returns should contrast with face colors for good
       daytime readability
     - interior of open channel letters should be painted dark when against
       light backgrounds
     - neon colors should complement related signage elements

     All sign colors are subject to review and approval by the Owner as part
     of the tenant sign submittal.


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                                   EXHIBIT J
                                     -12-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

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5.   TYPESTYLES AND LOGOS

     Tenants may adapt established typestyles, logos and/or images that are in
     use on similar buildings operated by them in California, provided that
     said images are architecturally compatible and approved by the Owner. Type
     may be arranged in one or more lines of copy and may consist of upper
     and/or lower case letters.

6.   SIZES AND QUANTITIES

     Sizes and quantities for tenant signs shall be as outlined in the
     criteria for each sign type. Notwithstanding the maximum square footage
     specified for copy area allowances, adequate amounts of visual open space
     shall be provided around wall signs so that signs appear balanced and in
     scale in relation to their backgrounds.


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                                   EXHIBIT J
                                     -13-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
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CARMEL CENTER SIGN GUIDELINES AND CRITERIA
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SIGN CRITERIA
PROJECT AND TENANT SIGNAGE
Signs shall be designed to be harmonious with the overall project design
theme and architecture, and shall be consistent with the provisions of the
Sign Guidelines and Criteria for the project. Minor tenant or directional
signs not oriented towards the public right-of-way are allowed with Owner's
prior written approval in addition to the signs below.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Sign Type          Max. Qty.           Single-Faced/        Dimensions, Wall/  Max. Copy           Copy                Location
                                       Double-faced         Monument Height    Area
-----------------------------------------------------------------------------------------------------------------------------------
<S>                <C>                 <C>                  <C>                <C>                 <C>                 <C>
(B) Building       (1) sign per bldg.  s.f.                                    24" max. letter     Building address/   Address
    Address Wall   elevation, not to                                           height              street number       locations to
    Signs          exceed four signs                                                                                   satisfy Fire
                   max. per bldg.                                                                                      Dept.
                                                                                                                       regulations
-----------------------------------------------------------------------------------------------------------------------------------
(C) Directional    As required for     s.f. or d.f.        5'                  12 sq. ft. +        - Directional       As necessary
    Signs          facilitating                                                project logo per      information and
                   traffic                                                     sign face             arrows
                                                                                                   - Project name
                                                                                                     and logo
-----------------------------------------------------------------------------------------------------------------------------------
(D) Secondary      As required/
    Site Signs     see general
                   guidelines and
                   provisions for
                   secondary site
                   signage
-----------------------------------------------------------------------------------------------------------------------------------
(E) Restaurant     (1) sign per        s.f., d.f.          6'                  40 sq. ft.          Restaurant name     As shown on
    Identification restaurant                                                                      and/or logo         sign location
    Monument Sign  frontage                                                                                            plan
-----------------------------------------------------------------------------------------------------------------------------------
(E2)Restaurant     2 signs per         s.f.                                    50 sq. ft.          Restaurant name     On
    Identification restaurant                                                  each                and logo            restaurant
    Wall Sign                                                                                                          building
                                                                                                                       wall
-----------------------------------------------------------------------------------------------------------------------------------
(H1)Carmel Center  2 along El          s.f.                6 ft max. ht.       60 sq. ft.          - Project name,     As shown on
    Project        Camino Real                                                 each                  logo and address  site map
    Identification
    Monument
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


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                                   EXHIBIT J
                                     -14-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

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

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Sign Type               Max Qty.         Single-         Dimensions.       Max.          Copy                    Location
                                         Faced /         Wall /            Copy
                                         Double-         Monument          Area
                                         faced           Height
-------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>              <C>             <C>               <C>           <C>                     <C>
(H2) Office Project     2 per entry      s.f. or         5 ft. max ht.     32 sq. ft.    - Project               As shown on
     Entry                               d.f.                              each            Identification        sign location
     Identification                                                                        logo and address      plan
     Monument                                                                            - Tenant
                                                                                           Identification and
                                                                                           /or logo
-------------------------------------------------------------------------------------------------------------------------------
(H3) Tenant             2 signs          s.f.            --                100 sq.       Building                As shown on
     Identification     total each                                         ft.             identification        sign location
     Wall Signs         building; 1                                        Max.            and/or tenant name    plan
                        max. per                                           each            and/or logo
                        tenant each
                        building
                        elevation
-------------------------------------------------------------------------------------------------------------------------------
(H4) Office Building    (1) sign per    s.f. or          4' max. ht.       32 sq. ft.    Building and/or
     Monument           building        d.f.                               each            tenant
     Sign                                                                                  identification
                                                                                         Note:  Where signs
                                                                                           orient to the
                                                                                           public right of
                                                                                           way, tenant
                                                                                           listings will not
                                                                                           be allowed.
-------------------------------------------------------------------------------------------------------------------------------
(H5) Tenant             (1) sign per    s.f.             4 ft.             12 sq. ft.    Tenant name             As shown on
     Identification     tenant with                                        Max.            and/or logo           sign location
     Signs              individual                                         each                                  plan. May be
                        entry                                                                                    wall or ground
                                                                                                                 sign
-------------------------------------------------------------------------------------------------------------------------------
(H6) Project            1 on            s.f.                                             Project name and        On retaining
     Identification     retaining                                                          logo                  wall south side
     Sign (on           wall south                                                                               of project
     retaining wall)    side of
                        project
-------------------------------------------------------------------------------------------------------------------------------
(J5) Retail Pad         2 per pad       s.f.                               32 sq. ft.    Tenant name and/or      On exterior
     Tenant             tenant                                                             logo                  building wall
     Identification     (a third wall
     Wall Sign          sign may be
                        allowed in
                        lieu of Sign
                        Type J6
                        monument
                        sign)
-------------------------------------------------------------------------------------------------------------------------------
(J6) Retail Pad         1 per pad       s.f., d.f.       5 ft.             25 sq. ft.    Tenant name and/or      As shown on
     Tenant             tenant                                             12" max         logo                  sign location
     Identification                                                        letter ht.                            plan.
     Monument
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


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                                   EXHIBIT J
                                     -15-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
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GAS STATION IDENTIFICATION SIGNS

G1.  Gas Station Identification Wall Sign

1 per each street frontage, single or double-faced; 50 sq. ft. each maximum
copy area. Copy limited to name and logo of company and product/service.
Color, letter style and logo may be used with Owner's prior written approval.
Signs for associated uses (e.g. car wash) shall conform to criteria for
Tenant Identification Sign Type H5.

G2.  Gas Station Identification Monument Sign

1 per street frontage, single or double-faced; 6 ft max. ht., 60 sq. ft. each
face maximum copy area. Copy limited to name and logo of company, associated
uses and gas pricing information.


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                                   EXHIBIT J
                                     -16-
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SECONDARY SITE SIGNS

Secondary Site Signs are signs other than the primary project or tenant
identification signs and include:

     -  address signage

     -  entrance signs

     -  directory maps and listings

     -  directional signs, both pedestrian and automobile-oriented

     -  unit number signs

     -  parking and traffic control signs

     -  informational signs such as identification for public restrooms

     -  building entrance signs

     -  restaurant menuboards

     -  other code required signs

Secondary site signs are not to be visible from the public right-of-way, with
the exception of entrance signs, parking control signs, and address signs
which should be oriented toward the public right-of-way. All secondary site
signs shall be designed as a family of signs. Selected elements such as
typestyle, layout, form, detail, colors and materials, shall remain
consistent within each sign "family".

A strong connection shall be maintained between secondary site signs and the
project architecture and landscaping. Elements of color, material, scale,
form and detail shall be reflected in the signage. Signs shall fit
comfortably, never crowding the architectural and landscape elements in the
immediate vicinity.

Secondary signs may be freestanding or wall-mounted. Freestanding signs
should generally be less than (4) feet in height, with the exception of
tow-away, handicapped, address, clearance and traffic regulatory signs, which
shall conform to the regulations and safety standards established by the City
of San Diego. Traffic regulatory signs may be reduced in scale where viewing
distances are diminished. Maximum copy area for all secondary site signs shall
be 12 square feet.

ANCILLARY SIGNAGE

Ancillary signage are signs other than primary tenant identification signs,
and are not included in maximum tenant signage area. Ancillary signage is
subject to Owner's prior written approval. Typical ancillary signage includes:

     -  Window Signs

     -  Suite Identification Signs

     -  Tenant Door Signs

     -  Delivery Entrance Identification Signs


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                                   EXHIBIT J
                                     -17-
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<PAGE>

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TEMPORARY SIGNAGE:

PROJECT LEASING/CONSTRUCTION/FUTURE FACILITIES

Temporary signs will be required for various activities at Carmel Center
during and after completion of the development phase. Shapes, base colors and
proportions of the signage must be consistent with sign design guidelines
(see Exhibit for specific sign type).

-    may be ground-mounted.

-    may be externally illuminated.

TENANT LEASE SPACE BANNERS

-    temporary signs may be allowed at individual lease spaces displaying
     "for lease", "coming soon" and similar messages.

-    tenants will be allowed use of a temporary identification banner for a
     period of time not to exceed 60 days with prior written approval of the
     Owner:

     -  one sign per street frontage

     -  32 square feet maximum copy area per banner

     -  placed below roof eave


SEASONAL/SPECIAL EVENT SIGNAGE

Cooperative seasonal or special event signage will be permitted upon review
and approval by the Owner.

-    Typical message:

     -  "Now Open"

     -  "Grand Opening"

     -  Themes related to seasonal, holiday or community events

     -  Design to be compatible with project design theme

     -  50 square feet maximum copy area per banner

     -  placed below roof eave

     -  use of special event signage for a period of time not to exceed 45
        days per event


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                                   EXHIBIT J
                                     -18-
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                                   EXHIBITS




  NOTE:  All maps and figures indicate typical design concepts and locations.
   Exhibits are not intended to suggest final sign designs or exact locations







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                                   EXHIBIT J
                                     -19-
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                                    EXHIBIT J
                                       -20-
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                                     [MAP]





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                                    EXHIBIT J
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                                     [MAP]





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                                    EXHIBIT J
                                       -22-
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                                   [DIAGRAM]





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                                    EXHIBIT J
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                                   [DIAGRAM]





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                                    EXHIBIT J
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------------------------------------------------------------------------------ D




                                   [DIAGRAM]





                                                                              23


                                   EXHIBIT J
                                     -25-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- E1




                                   [DIAGRAM]





                                                                              24


                                   EXHIBIT J
                                     -26-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]

<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- F2




                                   [DIAGRAM]





                                                                              25


                                   EXHIBIT J
                                     -27-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
------------------------------------------------------------------------------ G




                                   [DIAGRAM]





                                                                              26


                                   EXHIBIT J
                                     -28-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- H1




                                   [DIAGRAM]





                                                                              27


                                   EXHIBIT J
                                     -29-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- H2




                                   [DIAGRAM]





                                                                              28


                                   EXHIBIT J
                                     -30-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- H3




                                  [DIAGRAM]





                                                                              29


                                   EXHIBIT J
                                     -31-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- H4




                                  [DIAGRAM]





                                                                              30


                                   EXHIBIT J
                                     -32-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]
<PAGE>

CARMEL CENTER SIGN GUIDELINES AND CRITERIA
----------------------------------------------------------------------------- H5




                                  [DIAGRAM]





                                                                              31


                                   EXHIBIT J
                                     -33-
                                              PEREGRINE SYSTEMS CORPORATE CENTER
                                                             [Peregrine Systems]