Document:

Exhibit 10.2

 

PEREGRINE SYSTEMS, INC.

 

1997 EMPLOYEE STOCK PURCHASE PLAN

 

(Amended and Restated effective as of
November 1, 2000)

 

The following
constitute the provisions of the 1997 Employee Stock Purchase Plan of Peregrine
Systems, Inc.

 

1.             Purpose.  The purpose of the Plan is to provide
employees of the Company and its Designated Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll
deductions.  It is the intention of the
Company to have the Plan qualify as an “Employee Stock Purchase Plan” under
Section 423 of the Internal Revenue Code of 1986, as amended.  The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner consistent
with the requirements of that section of the Code.

 

2.             Definitions.

 

(a)           “Board” shall mean the Board
of Directors of the Company or any committee thereof designated by the Board of
Directors of the Company in accordance with Section 15 of the Plan.

 

(b)           “Code” shall mean the Internal
Revenue Code of 1986, as amended.

 

(c)           “Common Stock” shall mean the
common stock of the Company.

 

(d)           “Company” shall mean Peregrine
Systems, Inc., a Delaware corporation,  and any Designated Subsidiary of the
Company.

 

(e)           “Compensation” shall mean all
base straight time gross earnings and commissions, exclusive of payments for
overtime, shift premium, incentive compensation, incentive payments, bonuses
and other compensation.

 

(f)            “Designated Subsidiary” shall
mean any Subsidiary that has been designated by the Board from time to time in
its sole discretion as eligible to participate in the Plan.

 

(g)           “Employee” shall mean any
individual who is an Employee of the Company for tax purposes and whose
customary employment with the Company is at least twenty (20) hours per week
and more than five (5) months in any calendar year.  For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. 
Where the period of leave exceeds 90 days and the individual’s right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.

 

(h)           “Enrollment Date” shall mean
the first day of each Offering Period.

 

 

(i)            “Exercise Date” shall mean
the last day of each Offering Period.

 

(j)            “Fair Market Value” shall
mean, as of any date, the value of Common Stock determined as follows:

 

(i)            If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or the Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system on the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable; or

 

(ii)           If the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean of the closing bid and asked prices for
the Common Stock on the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable; or

 

(iii)          In the absence of an established
market for the Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Board.

 

(k)           “Offering Periods” shall mean
a period of approximately six (6) months during which an option granted
pursuant to the Plan may be exercised, commencing on the first Trading Day on
or after November 1 and terminating on the last Trading Day in the period
ending the following April 30; or commencing on the first Trading Day on or
after May 1 and terminating on the last Trading Day in the period ending the
following October 31.  The duration and
timing of Offering Periods may be changed pursuant to Section 4 of this Plan.

 

(l)            “Plan” shall mean this 1997
Employee Stock Purchase Plan, as amended.

 

(m)          “Purchase Price” shall mean an
amount equal to 85% of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower; provided, however,
that the Purchase Price may be adjusted by the Board pursuant to
Section 20.

 

(n)           “Reserves” shall mean the
number of shares of Common Stock covered by each option under the Plan which
have not yet been exercised and the number of shares of Common Stock which have
been authorized for issuance under the Plan but not yet placed under option.

 

(o)           “Subsidiary” shall mean a
corporation, domestic or foreign, of which not less than 50% of the voting
shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a
Subsidiary.

 

(p)           “Trading Day” shall mean a day
on which national stock exchanges and The Nasdaq Stock Market are open for
trading.

 

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3.             Eligibility.

 

(a)           Any Employee who shall be employed by
the Company on a given Enrollment Date shall be eligible to participate in the
Plan.

 

(b)           Any provisions of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan
(i) to the extent that, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of the capital stock
of the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.

 

4.             Offering Periods.  The Plan shall be implemented by consecutive
Offering Periods, each with a duration of approximately six (6) months, with a
new Offering Period commencing on the first Trading Day on or after November 1
and May 1 of each year, or on such other date as the Board shall determine, and
continuing thereafter until terminated in accordance with Section 21
hereof.  The Board shall have the power
to change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.

 

5.             Participation.

 

(a)           An eligible Employee may become a
participant in the Plan by completing a subscription agreement authorizing
payroll deductions in the form of Exhibit A to this Plan and filing it
with the Company’s payroll office prior to the applicable Enrollment Date.

 

(b)           Payroll deductions for a participant
shall commence on the first payroll following the Enrollment Date and shall end
on the last payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in Section
11 hereof.

 

6.             Payroll Deductions.

 

(a)           At the time a participant files his
or her subscription agreement, he or she shall elect to have payroll deductions
made on each pay day during the Offering Period in an amount not exceeding
fifteen percent (15%) of the Compensation which he or she receives on each pay
day during the Offering Period.

 

(b)           All payroll deductions made for a
participant shall be credited to his or her account under the Plan and shall be
withheld in whole percentages only.  A
participant may not make any additional payments into such account.

 

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(c)           A participant may discontinue his or
her participation in the Plan as provided in Section 11 hereof, or may
increase or decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate.  The Board may, in its discretion, limit the
nature and/or number of participation rate changes during any Offering Period,
and may establish such other conditions or limitations as it deems appropriate
for Plan administration.  The change in
rate shall be effective with the first full payroll period following five (5)
business days after the Company’s receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly.  A participant’s subscription
agreement shall remain in effect for successive Offering Periods unless
terminated as provided in Section 11 hereof.

 

(d)           Notwithstanding the foregoing, to the
extent necessary to comply with Section 423(b)(8) of the Code and
Section 3(b) hereof, a participant’s payroll deductions may be decreased
to zero percent (0%) at any time during an Offering Period.  Payroll deductions shall recommence at the
rate provided in such participant’s subscription agreement at the beginning of
the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 11
hereof.

 

(e)           At the time the option is exercised,
in whole or in part, or at the time some or all of the Common Stock issued
under the Plan is disposed of, the participant must make adequate provision for
the Company’s federal, state, or other tax withholding obligations, if any,
which arise upon the exercise of the option or the disposition of the Common
Stock.  At any time, the Company may,
but shall not be obligated to, withhold from the participant’s compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common
Stock by the Employee.

 

7.             Grant of Option.  On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of Common Stock
determined by dividing such Employee’s payroll deductions accumulated prior to
such Exercise Date and retained in the Participant’s account as of the Exercise
Date by the applicable Purchase Price; provided that in no event shall an
Employee be permitted to purchase during each Offering Period more than 100,000
shares of Common Stock (as adjusted through November 1, 2000, and subject
to any further adjustment pursuant to Section 20), and provided further
that such purchase shall be subject to the limitations set forth in
Sections 3(b), 8 and 14 hereof. 
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of Common Stock an Employee
may purchase during such Offering Period. 
Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 11 hereof.  The option shall expire on the last day of
the Offering Period.

 

8.             Exercise of Option.

 

(a)           Unless a participant withdraws from
the Plan as provided in Section 11 hereof, notice of exercise of his or
her option shall be deemed to have been given by the participant and his or her
option for the purchase of shares shall be exercised automatically on the
Exercise

 

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Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account.  No fractional shares shall be
purchased; any payroll deductions accumulated in a participant’s account which
are not sufficient to purchase a full share shall be retained in the
participant’s account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 11 hereof.  Any other monies left over in a
participant’s account after the Exercise Date shall be returned to the
participant.  During a participant’s
lifetime, a participant’s option to purchase shares hereunder is exercisable
only by him or her.

 

(b)           If the Board determines that, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Enrollment Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Exercise Date, the Board may in its sole discretion provide that the
Company shall make a pro rata allocation of the shares of Common Stock
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and either (x) continue all
Offering Periods then in effect, or (y) terminate any or all Offering Periods
then in effect pursuant to Section 21 hereof. 
The Company may make a pro rata allocation of the shares available on
the Enrollment Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional shares for issuance
under the Plan by the Company’s stockholders subsequent to such Enrollment
Date.

 

9.             Holding Period.  Shares purchased by a participant shall be
held in the participant’s account for a certain period of time from the date
such Shares were purchased under the Plan (the “Holding Period”).  The Holding Period for Shares purchased
before November 1, 2000 shall be a period of one (1) year from the date
such Shares were purchased under the Plan. 
The Holding Period for Shares purchased after November 1, 2000
shall be a period of sixty (60) days from the date such Shares were purchased
under the Plan.  In the event of a sale
of all or substantially all of the Company’s assets, or a merger of the Company
with or into another corporation in which the Company is not the surviving
entity, the Holding Period shall lapse.

 

10.           Delivery.  As promptly as practicable after each
Exercise Date on which a purchase of shares occurs, the Company shall credit
each participant’s account under the Plan with the shares purchased upon
exercise of his or her option.  As
promptly as practicable after expiration of each Holding Period, the Company
shall arrange the delivery (electronically or otherwise) of the shares
purchased under the Plan to each participant who purchased shares that are
being released from the Holding Period.

 

11.           Withdrawal.

 

(a)           A participant may withdraw all but
not less than all the payroll deductions credited to his or her account and not
yet used to exercise his or her option under the Plan at any time by giving
written notice to the Company in the form of Exhibit B to this
Plan.  All of the participant’s payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant’s option
for the Offering Period shall be automatically terminated, and no further
payroll deductions for the purchase of shares shall

 

5

 

be made for
such Offering Period.  If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.

 

(b)           A participant’s withdrawal from an
Offering Period shall not have any effect upon his or her eligibility to
participate in any similar plan which may hereafter be adopted by the Company
or in succeeding Offering Periods which commence after the termination of the
Offering Period from which the participant withdraws.

 

12.           Termination of Employment.

 

Upon a
participant’s ceasing to be an Employee for any reason, he or she shall be
deemed to have elected to withdraw from the Plan and the payroll deductions
credited to such participant’s account during the Offering Period but not yet
used to exercise the option shall be returned to such participant or, in the
case of his or her death, to the person or persons entitled thereto under
Section 16 hereof, and such participant’s option shall be automatically
terminated.  The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant’s customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.

 

13.           Interest.  No interest shall accrue on the payroll
deductions of a participant in the Plan.

 

14.           Stock.

 

(a)           The maximum number of shares of the
Company’s Common Stock which shall be made available for sale under the Plan
shall be one million (1,000,000) shares (as adjusted through November 1,
2000), subject to adjustment upon changes in capitalization of the Company as
provided in Section 20 hereof.  If, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.

 

(b)           The participant shall have no
interest or voting right in shares covered by his option until such option has
been exercised.

 

(c)           Shares to be delivered to a
participant under the Plan shall be registered in the name of the participant
or in the name of the participant and his or her spouse.

 

15.           Administration.  The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board.  The Board or its committee shall have full
and exclusive discretionary authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all disputed
claims filed under the Plan.  Every
finding, decision and determination made by the Board or its committee shall,
to the full extent permitted by law, be final and binding upon all parties.

 

6

 

16.           Designation of Beneficiary.

 

(a)           A participant may file a written
designation of a beneficiary who is to receive any shares and cash, if any,
from the participant’s account under the Plan in the event of such participant’s
death subsequent to an Exercise Date on which the option is exercised but prior
to delivery to such participant of such shares and cash.  In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant’s account under the Plan in the event of such participant’s death
prior to exercise of the option.  If a
participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

 

(b)           Such designation of beneficiary may
be changed by the participant at any time by written notice.  In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant’s death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or relatives
of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.

 

17.           Transferability.  Neither payroll deductions credited to a
participant’s account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 16 hereof) by the participant.  Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds from an Offering Period in
accordance with Section 11 hereof.

 

18.           Use of Funds.  All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

 

19.           Reports.  Individual accounts shall be maintained for
each participant in the Plan. 
Statements of account shall be given to participating Employees at least
annually, which statements shall set forth the amounts of payroll deductions,
the Purchase Price, the number of shares purchased and the remaining cash
balance, if any.

 

20.           Adjustments Upon
Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.

 

(a)           Changes in Capitalization.  Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Offering Period pursuant to Section 7, as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of

 

7

 

any
convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” 
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive.  Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
option.

 

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the “New Exercise Date”), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board.  The New Exercise Date shall be before the date of the Company’s
proposed dissolution or liquidation. 
The Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for the
participant’s option has been changed to the New Exercise Date and that the
participant’s option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 11 hereof.

 

(c)           Merger or Asset Sale.  In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or
an equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. 
In the event that the successor corporation refuses to assume or
substitute for the option, any Offering Periods then in progress shall be
shortened by setting a new Exercise Date (the “New Exercise Date”) and all such
Offering Periods shall end on the New Exercise Date.  The New Exercise Date shall be before the date of the Company’s
proposed sale or merger.  The Board
shall notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the participant’s option
has been changed to the New Exercise Date and that the participant’s option
shall be exercised automatically on the New Exercise Date, unless prior to such
date the participant has withdrawn from the Offering Period as provided in
Section 11 hereof.

 

21.           Amendment or Termination.

 

(a)           The Board of Directors of the Company
may at any time and for any reason terminate or amend the Plan.  Except as provided in Section 20 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Offering Period or the
Plan is in the best interests of the Company and its stockholders.  Except as provided in Section 20 hereof and
this Section 21, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant.  To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.

 

(b)           Without stockholder consent and
without regard to whether any participant rights may be considered to have been
“adversely affected,” the Board (or its committee) shall be entitled to change
the Offering Periods, limit the frequency and/or number of changes in the
amount

 

8

 

withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company’s processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with amounts
withheld from the participant’s Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its
sole discretion advisable which are consistent with the Plan.

 

(c)           In the event the Board determines
that the ongoing operation of the Plan may result in unfavorable financial
accounting consequences, the Board may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate such
accounting consequence including, but not limited to:

 

(i)            altering the Purchase Price for any
Offering Period including an Offering Period underway at the time of the change
in Purchase Price;

 

(ii)           shortening any Offering Period so
that Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Board action; and

 

(iii)          changing the allocation of shares.

 

Such
modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.

 

22.           Notices.  All notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

 

23.           Conditions Upon Issuance of Shares.  Shares shall not be issued with respect to
an option unless the exercise of such option and the issuance and delivery of
such shares pursuant thereto shall comply with all applicable provisions of
law, domestic or foreign, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

 

As a condition
to the exercise of an option, the Company may require the person exercising
such option to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

 

24.           Term of Plan.  The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company.  It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 21 hereof.

 

9

 

EXHIBIT A

 

PEREGRINE SYSTEMS, INC.

 

1997 EMPLOYEE STOCK PURCHASE PLAN

 

SUBSCRIPTION AGREEMENT

 

	
   

  	
  Original
  Application

  	
  Enrollment
  Date:                   

  
	
   

  	
  Change in
  Payroll Deduction Rate

  	
   

  
	
   

  	
  Change of
  Beneficiary(ies)

  	
   

  

 

1.                                                     
hereby elects to participate in the Peregrine Systems, Inc. 1997 Employee Stock
Purchase Plan, as amended, (the “Employee Stock Purchase Plan” or the “Plan”)
and subscribes to purchase shares of the Company’s Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.

 

2.             I hereby authorize payroll
deductions from each paycheck in the amount of
       % of my Compensation on each payday
(from 1% to 15%) during the Offering Period in accordance with the Employee
Stock Purchase Plan.  (Please note that
no fractional percentages are permitted.)

 

3.             I understand that said payroll
deductions shall be accumulated for the purchase of shares of Common Stock at
the applicable Purchase Price determined in accordance with the Employee Stock
Purchase Plan.  I understand that if I
do not withdraw from an Offering Period, any accumulated payroll deductions
will be used to automatically exercise my option.  I further understand that shares of Common Stock purchased for me
under the Employee Stock Purchase Plan upon exercise of my option are subject
to the Holding Period described in Section 9 of the Employee Stock Purchase
Plan.

 

4.             I have received a copy of the
complete Employee Stock Purchase Plan. 
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan.  I understand that my ability to exercise the option under this
Subscription Agreement is subject to stockholder approval of the Employee Stock
Purchase Plan.

 

5.             Shares purchased for me under the
Employee Stock Purchase Plan should be issued in the name(s) of (Employee or
Employee and Spouse
only):                                                     .

 

6.             I understand that if I dispose of
any shares received by me pursuant to the Plan within 2 years after the
Enrollment Date (the first day of the Offering Period during which I purchased
such shares) or one year after the Exercise Date, I will be treated for federal
income tax purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value of the
shares at the time such shares were purchased by me

 

 

over the price which I paid for the shares.  I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for federal, state or other tax withholding obligations, if any,
which arise upon the disposition of the Common Stock.  The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me.  If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such disposition,
and that such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period.  The remainder
of the gain, if any, recognized on such disposition will be taxed as capital
gain.

 

7.             I hereby agree to be bound by the
terms of the Employee Stock Purchase Plan, including the prohibition on sales
by me of any shares purchased under the Employee Stock Purchase Plan as
follows: (i) shares purchased under the Plan before November 1,
2000 shall be held for a period of one year from the date of purchase, and (ii)
shares purchased under the Plan after November 1, 2000 shall be
held sixty (60) days from the date of purchase.  I acknowledge that the administrator of the Plan will have no
discretion to release any shares purchased by me until the expiration of such
holding period.  The effectiveness of
this Subscription Agreement is dependent upon my eligibility to participate in
the Employee Stock Purchase Plan.

 

8.             In the event of my death, I hereby
designate the following as my beneficiary(ies) to receive all payments and
shares due me under the Employee Stock Purchase Plan:

 

	
  NAME:  (Please print)

  	
   

  
	
   

  	
  (First)

  	
  (Middle)

  	
  (Last)

  
					

 

 

	
   

  	
   

  	
   

  
	
  Relationship

  	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  

 

2

 

	
  Employee’s
  Name  (please print):

  	
   

  
	
   

  	
   

  
	
  Employee’s
  Social

  	
   

  
	
  Security
  Number:

  	
   

  
	
   

  	
   

  
	
  Employee’s
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

I UNDERSTAND THAT THIS
SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING
PERIODS UNLESS TERMINATED BY ME.

 

	
  Dated:

  	
   

  
	
   

  	
  Signature of
  Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Spouse’s
  Signature (If beneficiary other than spouse)

  

 

[Peregrine Systems, Inc. ESPP Subscription Agreement]

 

3

 

EXHIBIT B

 

PEREGRINE SYSTEMS, INC.

 

1997 EMPLOYEE STOCK PURCHASE PLAN

 

NOTICE OF WITHDRAWAL

 

The
undersigned participant in the Offering Period of the Peregrine Systems, Inc.
1997 Employee Stock Purchase Plan which began on
                      ,
             (the
“Enrollment Date”) hereby notifies the Company that he or she hereby withdraws
from the Offering Period.  He or she
hereby directs the Company to pay to the undersigned as promptly as practicable
all the payroll deductions credited to his or her account with respect to such
Offering Period.  The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated.  The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.

 

	
   

  	
  Name and
  Address of Participant:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:Exhibit 10.3

 

PEREGRINE
SYSTEMS, INC.

 

1997
DIRECTOR OPTION PLAN

 

(As Amended January 18, 2000 and Effective April 8,
1997)

 

1.             Purposes of the Plan.  The
purposes of this 1997 Director Option Plan are to attract and retain the best
available personnel for service as Outside Directors (as defined herein) of the
Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.

 

All
options granted hereunder shall be nonstatutory stock options.

 

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

 

(a)           “Board” means the Board of Directors of the Company.

 

(b)           “Code” means the Internal Revenue Code of 1986, as amended.

 

(c)           “Common Stock” means the Common Stock of the Company.

 

(d)           “Company” means Peregrine Systems, Inc., a Delaware corporation.

 

(e)           “Director” means a member of the Board.

 

(f)            “Employee” means any person, including
officers and Directors, employed by the Company or any Parent or Subsidiary of
the Company. The payment of a Director’s fee by the Company shall not be
sufficient in and of itself to constitute “employment” by the Company.

 

(g)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

(h)           “Fair Market Value” means, as of any date, the value of Common
Stock determined as follows:

 

(i)            If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;

 

(ii)           If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low asked prices for
the Common Stock on the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;

 

 

(iii)          In
the absence of an established market for the Common Stock, the Fair Market
Value thereof shall be determined in good faith by the Board.

 

(i)            “Inside
Director” means a Director who is an Employee.

 

(j)            “Option”
means a stock option granted pursuant to the Plan.

 

(k)           “Optioned
Stock” means the Common Stock subject to an Option.

 

(1)           “Optionee”
means a Director who holds an Option.

 

(m)          “Outside
Director” means a Director who is not an Employee.

 

(n)           “Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

 

(o)           “Plan”
means this 1997 Director Option Plan.

 

(p)           “Share”
means a share of the Common Stock, as adjusted in accordance with Section 10 of
the Plan.

 

(q)           “Subsidiary”
means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Section 424(f) of the Internal Revenue Code of 1986.

 

3.             Stock
Subject to the Plan.  Subject to the
provisions of Section 10 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 600,000 Shares of Common Stock
(the “Pool”).  The Shares may be
authorized, but unissued, or reacquired Common Stock.

 

If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

 

4.             Administration
and Grants of Options under the Plan.

 

(a)           Procedure
for Grants. All grants of Options to Outside Directors under this Plan
shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:

 

(i)            No
person shall have any discretion to select which Outside Directors shall be
granted Options or to determine the number of Shares to be covered by Options
granted to Outside Directors.

 

(ii)           Each
Outside Director shall be automatically granted an Option to purchase 25,000
Shares (the “First Option”) on the date on which such person first becomes an
Outside Director, whether through election by the shareholders of the Company
or appointment by

 

2

 

the
Board to fill a vacancy; provided, however, that a Director who was an Inside
Director immediately prior to becoming an Outside Director shall not receive a
First Option; provided further, however, that no Director who is an Outside
Director on the effective date of this Plan shall be granted a First Option.

 

(iii)          Each Outside Director shall be automatically granted an Option to
purchase 5,000 Shares (a “Subsequent Option”) on the day following each Annual
Meeting of the Company’s Shareholders commencing with the 1998 Annual Meeting
of the Company’s Shareholders; provided that he or she is then an Outside
Director and if, as of such date, he or she shall have served on the Board for
at least the preceding six (6) months.

 

(iv)          The terms of a First Option granted hereunder shall be as follows:

 

(A)          the term of the First Option shall be ten (10) years.

 

(B)           the First Option shall be exercisable only while the Outside Director
remains a Director of the Company, except as set forth in Sections 8 and 10
hereof.

 

(C)           the exercise price per Share shall be 100% of the Fair Market Value per
Share on the date of grant of the First Option.  In the event that the date of grant of the First Option is not a
trading day, the exercise price per Share shall be the Fair Market Value on the
next trading day immediately following the date of grant of the First Option.

 

(D)          subject to Section 10 hereof, the First Option shall become exercisable
as to twenty-five percent (25%) of the Shares subject to the First Option on
the first anniversary of its date of grant, and as to six and one-quarter
percent (63%) on the last day of each consecutive three-month period
thereafter, provided that the Optionee continues to serve as a Director on such
dates.

 

(v)           The terms of a Subsequent Option granted hereunder shall be as follows:

 

(A)          the term of the Subsequent Option shall be ten (10) years.

 

(B)           the Subsequent Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Sections 8
and 10 hereof.

 

(C)           the exercise price per Share shall be 100% of the Fair Market Value per
Share on the date of grant of the Subsequent Option. In the event that the date
of grant of the Subsequent Option is not a trading day, the exercise price per
Share shall be the Fair Market Value on the next trading day immediately
following the date of grant of the Subsequent Option.

 

(D)          subject to Section 10 hereof, the Subsequent Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject to the
Subsequent Option on the first anniversary of its date of grant, and as to six
and one-quarter percent (63%) on the last day of each consecutive three-month
period thereafter, provided that the Optionee continues to serve as a Director
on such dates.

 

3

 

(vi)          Notwithstanding any provision of Section 10 hereof, in no event shall
either (i) the number of shares of Common Stock, issuable upon exercise of a
First Option or Subsequent Option granted pursuant hereto or (ii) the number of
shares of Common Stock issuable upon exercise of a then-outstanding First
Option or Subsequent Option, or the exercise price thereof, be adjusted in
connection with any forward split of the Company’s Common Stock (including any
stock split effected in the form of a stock dividend).

 

(vii)         In the event that any Option granted under the Plan would cause the
number of Shares subject to outstanding Options plus the number of Shares
previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.

 

5.             Eligibility. Options may be granted only to Outside Directors; provided, however,
no Outside Director shall be granted an Option hereunder if (A) he or she is
directly or indirectly the beneficial owner of three percent (3%) or more of
the Company’s outstanding Common Stock, or (B) he or she is an affiliate of any
person or group of persons or entity or group of entities who individually or
in the aggregate are directly or indirectly the beneficial owner(s) of three
percent (3%) or more of the Company’s outstanding Common Stock.  All Options shall be automatically granted
in accordance with the terms set forth in Section 4 hereof.

 

The
Plan shall not confer upon any Optionee any right with respect to continuation
of service as a Director or nomination to serve as a Director, nor shall it
interfere in any way with any rights which the Director or the Company may have
to terminate the Director’s relationship with the Company at any time.

 

6.             Term of Plan.  The
Plan shall become effective upon the earlier to occur of its adoption by the
Board or its approval by the shareholders of the Company as described in
Section 16 of the Plan.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of the Plan.

 

7.             Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.

 

8.             Exercise of Option.

 

(a)           Procedure for Exercise: Rights as
a Shareholder. Any Option granted hereunder shall be exercisable at such
times as are set forth in Section 4 hereof; provided, however,

 

4

 

that
no Options shall be exercisable until shareholder approval of the Plan in
accordance with Section 16 hereof has been obtained.

 

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

 

An
Option shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may consist of any consideration and method of payment allowable under
Section 7 of the Plan. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10
of the Plan.

 

Exercise
of an Option in any manner shall result in a decrease in the number of Shares
which thereafter may be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.

 

(b)           Termination of Continuous Status as a
Director. Subject to Section
10 hereof, in the event an Optionee’s status as a Director terminates (other
than upon the Optionee’s death or total and permanent disability (as defined in
Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option,
but only within three (3) months following the date of such termination, and
only to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

 

(c)           Disability of Optionee. In the event Optionee’s status as a
Director terminates as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option,
but only within twelve (12) months following the date of such termination, and
only to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10)
year term).  To the extent that the
Optionee was not entitled to exercise an Option on the date of termination, or
if he or she does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.

 

(d)           Death of Optionee.  In
the event of an Optionee’s death, the Optionee’s estate or a person who
acquired the right to exercise the Option by bequest or inheritance may
exercise the Option, but only within twelve (12) months following the date of
death, and only to the extent that the Optionee was entitled to exercise it on
the date of death (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on

 

5

 

the
date of death, and to the extent that the Optionee’s estate or a person who
acquired the right to exercise such Option does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.

 

9.             Non-Transferability of Options.  An
Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descentor
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.

 

10.           Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale.

 

(a)           Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” 
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.

 

(b)           Dissolution or Liquidation.  In
the event of the proposed dissolution or liquidation of the Company, to the
extent that an Option has not been previously exercised, it shall terminate
immediately prior to the consummation of such proposed action.

 

(c)           Merger or Asset Sale.  In
the event of a merger of the Company with or into another corporation or the
sale of substantially all of the assets of the Company, outstanding Options may
be assumed or equivalent options may be substituted by the successor
corporation or a Parent or Subsidiary thereof (the “Successor
Corporation”).  If an Option is assumed
or substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee’s status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable.  Thereafter, the Option or
option shall remain exercisable in accordance with Sections 8(a) through (d)
above.

 

If
the Successor Corporation does not assume an outstanding Option or substitute
for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.

 

6

 

For
the purposes of this Section 10(c), an Option shall be considered assumed if,
following the merger or sale of assets, the Option confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares). If such consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

 

11.           Amendment and Termination of the Plan.

 

(a)           Amendment and Termination.  The
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with any applicable law, regulation or stock exchange rule, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such
a degree as required.

 

(b)           Effect of Amendment or Termination.  Any
such amendment or termination of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if this Plan
had not been amended or terminated.

 

12.           Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.

 

13.           Conditions Upon Issuance of Shares. 
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, state securities laws, and
the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

 

As
a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

 

Inability
of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of

 

7

 

the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.

 

14.           Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

 

15.           Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.

 

16.           Stockholder Approval. 
Stockholder approval of amendments to the Plan shall be obtained in the
degree and manner required under applicable state and federal law and any stock
exchange rules.

 

8

 

PEREGRINE SYSTEMS, INC.

 

DIRECTOR STOCK OPTION
AGREEMENT

 

 

Peregrine
Systems, Inc., a Delaware corporation (the “Company”), has granted to
                                                       
(the “Optionee”), an option to purchase a total of 
                             
(              )
shares of the Company’s Common Stock (the “Optioned Stock”), at the price
determined as provided herein, and in all respects subject to the terms, definitions,
and provisions of the Company’s 1997 Director Option Plan (the “Plan”) adopted
by the Company, which is incorporated herein by reference.  The terms defined in the Plan shall have the
same defined meanings herein.

 

1.             Nature of the
Option.  This Option is a
nonstatutory option and is not intended to qualify for any special tax benefits
to the Optionee.

 

2.             Exercise Price.  The exercise price is
$             
for each share of Common Stock.

 

3.             Exercise of Option.  This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as
follows:

 

(i)            Right to Exercise.

 

(a)           This Option shall
become exercisable in installments cumulatively with respect to twenty-five
percent (25%) of the Optioned Stock on the first anniversary of the date of
grant, and six and one-quarter percent (6.25%) of the Optioned Stock on the
last day of each consecutive three month period thereafter so that one hundred
percent (100%) of the Optioned Stock shall be exercisable four (4) years after
the date of grant.  In no event shall
any Option be exercisable prior to the date the shareholders of the Company
approve the Plan.

 

(b)           This Option may not be
exercised for a fraction of a share.

 

(c)           In the event of
Optionee’s death, disability, or other termination of service as a Director,
the exercisability of the Option shall be governed by Section 8 of the Plan.

 

(ii)           Method of Exercise.  This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised.  Such written notice, in the form attached
hereto as Exhibit A, shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.  The written notice shall be accompanied by
payment of the exercise price.

 

4.             Method of Payment.  Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:

 

(i)            cash;

 

(ii)           check;

 

(iii)          surrender of other
shares which (x) in the case of Shares acquired upon exercise of an
Option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised; or

 

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

 

5.             Restrictions on
Exercise.  This Option may not be
exercised if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable

 

1

 

federal or state securities or
other law or regulations, or if such issuance would not comply with the
requirements of any stock exchange upon which the Shares may then be
listed.  As a condition to the exercise
of this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.

 

6.             Non-Transferability
of Option.  This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee.  The terms of this Option
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.

 

7.             Term of Option.  This Option may not be exercised more than
ten (10) years from the date of grant of this Option, and may be exercised
during such period only in accordance with the Plan and the terms of this
Option.

 

8.             Taxation Upon
Exercise of Option.  Optionee
understands that, upon exercise of this Option, he or she will recognize income
for tax purposes in an amount equal to the excess of the then Fair Market Value
of the Shares purchased over the exercise price paid for such Shares.  Since the Optionee is subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, under certain limited
circumstances the measurement and timing of such income (and the commencement
of any capital gain holding period) may be deferred, and the Optionee is
advised to contact a tax advisor concerning the application of Section 83 in
general and the availability a Section 83(b) election in particular in
connection with the exercise of the Option. 
Upon a resale of such Shares by the Optionee, any difference between the
sale price and the Fair Market Value of the Shares on the date of exercise of
the Option, to the extent not included in income as described above, will be treated
as capital gain or loss.

 

	
  DATE OF
  GRANT:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PEREGRINE
  SYSTEMS, INC.

  	
   

  
	
   

  	
  a Delaware
  corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

Optionee
acknowledges receipt of a copy of the Plan, a copy of which is attached hereto,
and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof.  Optionee hereby
agrees to accept as binding, conclusive, and final all decisions or
interpretations of the Board upon any questions arising under the Plan.

 

	
   

  
	
  Dated:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee

  
	
  [Peregrine
  Systems 1997 Director Option Plan — Option Agreement Signature Page]

  
					

 

2

 

EXHIBIT A

 

DIRECTOR STOCK OPTION
EXERCISE NOTICE

 

 

Peregrine Systems, Inc.

12670 High Bluff Drive

San Diego, California  92130

 

Attention:  Corporate Secretary

 

1.             Exercise of Option.  The undersigned (“Optionee”) hereby elects
to exercise Optionee’s option to purchase
             
shares of the Common Stock (the “Shares”) of Peregrine Systems, Inc. (the
“Company”) under and pursuant to the Company’s 1997 Director Option Plan and
the Director Option Agreement dated
                    
(the “Agreement”).

 

2.             Representations of
Optionee.  Optionee acknowledges
that Optionee has received, read, and understood the Agreement.

 

3.             Federal
Restrictions on Transfer.  Optionee
understands that the Shares must be held indefinitely unless they are
registered under the Securities Act of 1933, as amended (the “1933 Act”), or
unless an exemption from such registration is available, and that the
certificate(s) representing the Shares may bear a legend to that effect.  Optionee understands that the Company is
under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at
the times proposed by Optionee.

 

4.             Tax Consequences.  Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee’s purchase or
disposition of the Shares.  Optionee
represents that Optionee has consulted with any tax consultant(s) Optionee
deems advisable in connection with the purchase or disposition of the Shares
and that Optionee is not relying on the Company for any tax advice.

 

5.             Delivery of
Payment.  Optionee herewith delivers
to the Company the aggregate purchase price for the Shares that Optionee has
elected to purchase and has made provision for the payment of any federal or
state withholding taxes required to be paid or withheld by the Company.

 

6.             Entire Agreement.  The Agreement is incorporated herein by
reference.  This Exercise Notice and the
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof. 
This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.

 

	
  Submitted
  by:

  	
   

  	
  Accepted by:

  	 

	
   

  	
   

  	
   

  	 

	
  OPTIONEE:

  	
   

  	
  PEREGRINE SYSTEMS, INC.

  	 

	
   

  	
   

  	
   

  	 

	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  Title:

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Address:

  	
   

  	
  Address:

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  3611 Valley Centre Drive

  	 

	
   

  	
   

  	
  San Diego, California 92130

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
											

 

1

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