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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1998
REGISTRATION NO. 333-65333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PEREGRINE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 95-3773312
(State or other (IRS Employer
jurisdiction of Identification
incorporation or Number)
organization)
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12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 481-5000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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RICHARD T. NELSON
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
PEREGRINE SYSTEMS, INC.
12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(619) 481-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
DOUGLAS H. COLLOM, ESQ.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
(650) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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PROSPECTUS
Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, California 92130
Telephone Number: (619) 481-5000
352,870 SHARES
[LOGO]
COMMON STOCK
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These shares may be offered and sold from time to time by certain
stockholders of the Company identified in this prospectus. See "Selling
Stockholders." The selling stockholders acquired the shares on September 23,
1998 in connection with the acquisition by Peregrine ("PSI") of certain
technology from International Software Solutions and related companies.
The selling stockholders will receive all of the net proceeds from the sale
of the shares. These stockholders will pay all underwriting discounts and
selling commissions, if any, applicable to the sale of the shares. The Company
will not receive any proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
PSI's common stock is quoted on the Nasdaq National Market under the symbol
"PRGN." On November 11, 1998, the last reported sale price of the common stock
was $30.44 per share.
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The Securities and Exchange Commission and State Securities Regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
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November 12, 1998
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TABLE OF CONTENTS
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Forward Looking Information................................................................................ 2
Peregrine Systems, Inc..................................................................................... 3
Risk Factors............................................................................................... 3
Where to Find More Information about Peregrine............................................................. 16
Information Incorporated by Reference...................................................................... 16
Use of Proceeds............................................................................................ 16
Selling Stockholders....................................................................................... 16
Plan of Distribution....................................................................................... 18
Legal Matters.............................................................................................. 19
Experts.................................................................................................... 19
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of PSI common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the shares.
In this prospectus, unless indicated otherwise, "Peregrine," the "Company,"
"PSI," "we," "us," and "our" refer to Peregrine Systems, Inc., and its
predecessor and subsidiaries.
FORWARD LOOKING INFORMATION
This prospectus, including the information incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Exchange Act. Our actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below. In particular, please review the sections captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
annual report on Form 10-K for the fiscal year ended March 31, 1998, and our
quarterly report on Form 10-Q for the quarter ended June 30, 1998, which reports
are incorporated herein by reference and such section of any subsequently filed
Exchange Act reports. In connection with forward-looking statements which appear
in these disclosures, prospective purchasers of the shares offered hereby should
carefully consider the factors set forth in this prospectus under "Risk
Factors."
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PEREGRINE SYSTEMS, INC.
Peregrine is the "Infrastructure Management Company." We sell software
products that assist large business organizations to manage the assets that
comprise their business infrastructure. Infrastructure assets include all the
assets used in the operation of a business and may be tangible or intangible.
For example, a computer's information technology ("IT") infrastructure includes
the computer hardware comprising the network computer system, the operating
software used to run that network, and the application software used by various
departments and employees. Infrastructure assets also include, among other
things, contractual relationships like leases and license agreements,
telecommunications systems, and, of course, physical assets like desks and
office furniture.
Peregrine's principal software products currently address managing an
organization's information technology infrastructure and its physical plant and
facilities. SERVICECENTER enables organizations to manage their computer
networks and systems and includes software applications that permit a user's
information technology department to identify, resolve, and prevent problems in
the network computer system. ASSETCENTER enables organizations to manage
information technology assets and includes physical asset management, lease
management, procurement management, and cost management products. SPAN-FM
assists organizations in managing their physical plant and facilities and
includes automated tracking and management of assets, maintenance and operations
systems, space design, security system, and safety system products.
Peregrine's products are intended to manage an organization's infrastructure
assets throughout their life cycle from the time they are procured until they
are retired. Peregrine's products may be deployed across all major computer
hardware platforms and network operating systems.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS
OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN
SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY LOSE
ALL OR PART OF YOUR INVESTMENT.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF FACTORS,
INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN, OR
INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS. IN EVALUATING AN INVESTMENT IN
THE SHARES YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS IN ADDITION
TO THE OTHER INFORMATION PRESENTED IN THIS PROSPECTUS OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS.
HISTORY OF OPERATING LOSSES
We have recorded cumulative net losses of approximately $38.2 million
through June 30, 1998. This amount includes approximately $34.8 million related
to the write-off of acquired in-process research and development in connection
with our acquisition of United Software, including its Apsylog S.A. subsidiary
("Apsylog") which was completed in September 1997. In addition, we believe that
we will recognize a significant net loss in the quarter ended September 30, 1998
related to the write-off of acquired in-process research and development in
connection with both our July 1998 acquisition of Innovative Tech Systems, Inc.
("Innovative") and our September 1998 acquisition of certain remote control
technology from International Software Solutions ("ISS").
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Our main product lines have changed substantially in recent years. For
example, our SERVICECENTER product only began shipping in mid-1995 and our
ASSETCENTER product only began shipping in mid-1996. As a result, prediction of
our future operating results is difficult, if not impossible.
Although our operating results were positive during the years ended March
31, 1997 and 1998 (excluding the impact of the $34.8 million charge related to
acquired in-process research and development in connection with our acquisition
of Apsylog), we may not remain profitable on a quarterly or annual basis. In
addition, we do not believe that the growth in our revenues that we have
experienced in recent years is indicative of future revenue growth or future
operating results.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
Potential investors in our Common Stock should understand that revenues for
technology companies are very volatile. Revenues for software companies tend to
be particularly variable, and this is also true of our revenues. Our revenues
are subject to extreme variability for the same reasons as other software
companies and also for reasons that are unique to us. The following factors
could affect our revenues and profitability in a particular quarter or over
several quarterly or annual periods.
- Our products are very complex and expensive. The price of our new software
licenses can be in the multi-million dollars. As a result, potential
customers typically spend a great deal of time reviewing our products to
determine if our products meet their needs. We generally spend six to nine
months with prospective customers trying to educate them about our
products and their benefits. If, by the end of a quarter, our sales people
have not succeeded in selling a large number of new licenses or, in
certain cases, a small number of large licenses, our revenues may be
substantially less than anticipated revenues. Because we will have already
expended resources to generate revenues, our failure to sell new licenses
could result in reduced profits for that quarter or even a loss.
- Customers use our software products to manage their internal computer
networks, including their network hardware, as well as to manage their
physical facilities. Because of the cost of our products, customers tend
to purchase our products only when their operating budgets permit or when
they determine to upgrade or improve their current systems. As a result,
our quarterly revenues will be generally dependent on the budgeting cycles
of our customers and their ability to make substantial capital
expenditures.
- The accounting rules we must follow only permit us to recognize revenue
when specific criteria are satisfied. We often must negotiate the terms of
licenses, particularly large licenses. Depending on the circumstances, we
may sign a license but be required to defer revenue recognition until
future periods when the necessary criteria are satisfied (if they are
satisfied at all). If we are unsuccessful in negotiating favorable terms,
we may not be able to recognize any or all of the revenue for the
particular quarter in which the license contract is signed.
- Our ability to recognize revenue also depends on the time when contracts
are entered. Like many companies in the software industry, a large
percentage of our revenues are recognized in the last weeks or days of a
quarter. This often results from customer's trying to increase their
negotiating position toward the end of our quarter as well as quarter end
sales incentives to our sales people. We have historically operated with
little backlog from quarter to quarter. As a result, we cannot accurately
predict our quarter to quarter revenues.
- Our revenues can be seasonal. Historically, they have tended to be less
during the summer months because of reduced business activity during the
European holiday season. If we increase our revenues in other parts of the
world, we may also be affected by seasonal business trends in those
markets.
- Our products must be competitive both in terms of price and technology.
Many competing companies may "bundle" one product with other products that
we may or may not sell. Depending
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on the relative profitability of their particular products, a competitor
may be willing to sell a product that competes with our product for a
lower price because they are also selling the higher-margin product. To
the extent competitors pursue such pricing strategies, our products may
appear less price competitive, and our revenues could be affected. In
addition, technology can change very rapidly, and competitors may offer
new products that are technologically superior to ours. If we did not
anticipate the technological improvements and are required to invest in
improving our products, our revenues may decrease during the period we are
trying to make our product competitive, and our expenses may increase as a
result of the unanticipated investment in product improvements.
- A large part of our revenues derive from annual maintenance agreements
with existing customers. If a substantial number of these customers
decided not to renew their maintenance agreements, our revenues and
profitability could be adversely affected.
LENGTHY SALES CYCLES
The timing of revenue recognition in connection with software products sales
can be affected by many factors. Such factors include our ability to finalize a
contract with a customer for the sale of our software products and to deliver
our products to our customers. It often takes a long time from our initial
contact with a customer to when we fulfill the criteria for recognizing revenue
for a sale of our software products to such a customer. As a result, it is
difficult to predict when or if we will be able to recognize revenue for
potential sales that have not been finalized. Revenues in any given quarter can
be adversely affected as a result of such unpredictability.
Selling our software generally requires the Company to engage in a sales
cycle that typically takes approximately six to nine months to complete. The
length of the sales cycle may vary depending on a number of factors over which
we may have little or no control including the size of a potential transaction
and the level of competition which we encounter in our selling activities. In
addition, our sales cycle is typically extended 90 days for product sales made
through third party distributors. During the sales cycle we typically provide a
significant level of training to prospective customers regarding the use and
benefits of our products. Any delay in the sales cycle of a large license or a
number of smaller licenses could materially adversely affect our business,
operating results, and financial condition.
SEASONALITY
GENERAL
We have experienced and expect to continue to experience seasonality in
connection with the sales of our software products. Our revenues and operating
results in our December quarter are typically strong because many of our
customers make purchase decisions based on calendar year-end budgeting
requirements. In addition, our revenues and operating results in the March
quarter typically are strong because our sales force is trying to meet fiscal
year-end sales quotas.
FOREIGN OPERATIONS
We are currently attempting to expand our presence in international markets,
including Europe, the Pacific Rim, and Latin America. Our international revenues
already make up a large significant percentage of our total revenues. Seasonal
buying patterns in such foreign markets may cause additional variability in
demand for our products. In particular, our September quarter tends to reflect
the effects of summer slowing of international business activity, particularly
in Europe.
DEPENDENCE ON KEY PRODUCTS
Almost all of our license revenues results from the sale of our
SERVICECENTER and ASSETCENTER products. We expect these products to continue to
account for a large portion of our revenues for the foreseeable
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future. Our future operating results are dependent upon continued market
acceptance of SERVICECENTER and ASSETCENTER, including future enhancements. In
addition, our operating results will be affected by customer acceptance of
SPAN-FM as a PSI product suite. We acquired SPAN-FM, a facilities automation
software application, through our July 1998 acquisition of Innovative. Any
factors adversely affecting the pricing of, demand for, or market acceptance of
SERVICECENTER, ASSETCENTER, or SPAN-FM, such as competition or technological
change, could materially adversely affect our business, operating results, and
financial condition.
DEPENDENCE ON MARKET ACCEPTANCE OF INFRASTRUCTURE MANAGEMENT SOFTWARE SOLUTIONS
Until recently, we have focused on developing software products to help
manage many aspects of a business' IT systems. In September 1997, we broadened
our IT infrastructure management product suite by acquiring ASSETCENTER, an
asset management product line, through our acquisition of Apsylog. In addition,
we have increased the functionality of SERVICECENTER to manage aspects of the
enterprise infrastructure not necessarily related to IT. In July 1998, we
acquired Innovative, a provider of facilities management software. Innovative's
product strategy has focused on providing building and facilities management and
fire safety and inspection software applications, including SPAN-FM. In
acquiring Innovative, we intend to further broaden our product line beyond
traditional IT infrastructure management. We are seeking to offer a more
comprehensive product suite capable of managing a business's IT infrastructure,
its physical plant and facilities, its communications infrastructure, and its
distribution systems.
In recent years, the market for enterprise software solutions has been
characterized by rapid technological change, frequent new product announcements
and introductions, and evolving industry standards. In response to advances in
technology, customer requirements have become increasingly complex, resulting in
industry consolidation of product lines offering similar or related
functionality. We believe that a market for integrated enterprise-wide
infrastructure management solutions is evolving from existing requirements for
specific IT management solutions. Such enterprise-wide solutions would include
applications for IT management, asset management, building and facilities
management, communications resource management, and distribution systems
management. However, the existence of such a market is unproven. If such a
market does not fully develop, this would materially adversely affect our
business, operating results, and financial condition.
RAPID TECHNOLOGICAL CHANGE
As a result of rapid technological change in our industry, our position in
existing markets or other markets that we may enter can be eroded rapidly by
product advances. The life cycles of our products are difficult to estimate. Our
growth and future financial performance depends in part upon our ability to
improved existing products, develop and introduce new products that keep pace
with technological advances, meet changing customer needs, and respond to
competitive products. Our product development efforts will continue to require
substantial investments. We may not have sufficient resources to make the
necessary investments.
INTEGRATION OF INNOVATIVE TECH SYSTEMS INTO PSI'S BUSINESS
Our acquisition of Innovative, which was completed in July 1998, will
require integrating Innovative into PSI. Prior to the acquisition, Innovative
and PSI were two geographically separated companies that had been operated
independently. We believe that the acquisition of Innovative will further our
strategy to provide customers with a complete infrastructure management software
solution. However, difficulties may be encountered in integrating the product
offerings, operations and technology of Innovative with those of PSI. We may not
be able to successfully complete or market new products currently in development
or develop any new products that relate to the Innovative products. Anticipated
marketing, distribution, or other operational benefits and efficiencies from the
acquisition of Innovative may not be
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achieved. The morale of PSI and Innovative employees may be adversely affected
as a result of the acquisition and the resulting integration.
Integrating Innovative into our existing business may prove difficult given
that the two companies were geographically separated, have different corporate
cultures and have personnel with different business backgrounds. We may not be
able to retain a sufficient number of Innovative's key employees. Additionally,
we may have problems combining the development teams from Innovative with our
existing teams so that such teams will successfully cooperate and realize any
technological benefits from the combined businesses. In particular, Innovative's
products and Peregrine's products are substantially different. If PSI determines
that it should integrate the PSI and Innovative product lines more fully, such
integration could present technical challenges that our respective developers
cannot overcome. To date, PSI has focused primarily on integrating the marketing
and distribution of its products with those of Innovative. Nevertheless, sales
of Innovative products may not be markedly enhanced by the broader distribution
and marketing opportunities available through PSI. We may not be able to benefit
from the broader product offerings available as a result of the acquisition or
from any other anticipated benefits. Any failure to integrate the businesses and
technologies of the companies successfully or any failure to realize the
anticipated benefits of the acquisition could materially adversely affect our
business, results of operations, and financial condition. In addition, if our
management devotes too much time and attention to the integration of Innovative
into our existing business, this also could materially adversely affect our
business, operating results, and financial condition.
In addition, certain of Innovative's suppliers, distributors, or customers
may end their agreements with Innovative as a result of the acquisition. This
would occur if such suppliers, distributors, or customers determined for
competitive or other business reasons that a business relationship with PSI was
undesirable (E.G., a distributor of Innovative may also distribute other
products that are directly competitive with those of PSI). In addition,
prospective customers of Innovative may delay their orders as a result of
uncertainties resulting from the acquisition. For example, customers or
potential customers of Innovative could terminate or delay orders with PSI
because they may feel that we are not committed to providing products and
enhancements or support services for Innovative products. Alternatively, such
customers or potential customers of Innovative could terminate or delay orders
if they currently deploy IT management systems that are competitive with those
of Peregrine. If a significant number of Innovative customers or potential
customers cancel or do not renew their arrangements with Innovative or PSI or
delay their orders of our products, this could materially adversely affect our
business, results of operations, and financial condition. We expect any such
effects to be felt most strongly in the quarter ended September 30, 1998 and
other near-term quarters.
INTEGRATION OF INTERNATIONAL SOFTWARE SOLUTIONS TECHNOLOGY INTO PSI'S PRODUCTS
In September 1998, Peregrine acquired a remote control technology from
International Software Solutions ("ISS"). This technology will permit, among
other things, one user on a networked computing system (E.G., an operator on a
business' network help desk) to access the computer of another desktop user
remotely (E.G., an employee experiencing a network problem). PSI believes that
achieving the anticipated benefits of this acquisition will require that ISS'
technology be integrated with PSI's existing products. Difficulties, including
technological difficulties, may be encountered in this integration process. In
addition, we may not be able to successfully complete and market new products
that use the ISS technology. The marketing, distribution, or other operational
benefits and efficiencies anticipated from the acquisition of the ISS technology
may not be achieved.
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We plan to continue to work with employees of ISS to integrate the ISS
technology with our products. However, there may be problems combining the
engineering teams from ISS with our existing teams. As a result, we may not
fully realize the expected technological benefits from the acquired ISS
technology. Any failure to integrate the ISS technology into our products could
materially adversely affect our business, operating results, and financial
condition.
RISKS ASSOCIATED WITH POTENTIAL FUTURE ACQUISITIONS
In the future we may make acquisitions of, or large investments in,
businesses that offer products, services, and technologies that further our goal
of providing integrated infrastructure management software solutions to
businesses. Any future acquisitions or investments would present risks commonly
encountered in acquisitions of businesses or products. The following are
examples of such risks:
- difficulty in combining the technology, operations, or work force of the
acquired business
- disruption of PSI's on-going businesses
- difficulty in realizing the potential anticipated financial and strategic
benefits of the acquisition if PSI is not successful in integrating the
acquired businesses
- difficulty in maintaining uniform standards, controls, procedures, and
policies
- possible impairment of relationships with employees and clients as a
result of any integration of new businesses and management personnel
- diversion of management attention
If such acquisitions or investments were to take place, the risks described
above could materially adversely affect our business, operating results, and
financial condition.
Additionally, our ability to acquire complementary business or product lines
may be affected by issues regarding accounting for these acquisitions or
investments. Specifically, we may determine not to pursue a particular
acquisition that would otherwise offer strategic business or product benefits if
the required accounting treatment would have an adverse effect on operating
revenues and financial condition as well as our business and competitive
positions in future periods.
We expect that future acquisitions, if any, could provide for consideration
to be paid in cash, shares of PSI common stock, or a combination of cash and PSI
common stock. Issuance of additional shares of PSI common stock could result in
dilution to existing stockholders.
DEPENDENCE ON KEY PERSONNEL
Our success will depend to a significant extent on the continued service of
our senior executives and certain other key employees, including certain sales,
consulting, technical, and marketing personnel. Few of our employees, including
senior executives, are bound by an employment or non-competition agreement. In
addition, we do not generally maintain key man life insurance on our employees.
If we lost the services of one or more of our key executives or employees
(including if one or more of our officers or employees decided to join a
competitor or otherwise compete directly or indirectly with PSI), this could
materially adversely affect our business, operating results, and financial
condition.
In addition, several of our executive officers, including our President and
Chief Executive Officer, Chief Financial Officer, and certain operating vice
presidents, have been employed by the Company for a relatively short period of
time. This new management team has devoted substantial effort in refocusing our
product, sales, and marketing strategies. In connection with such changes, we
have restructured our sales and marketing departments. This has involved
replacing a large number of employees in these departments. As a result, many of
the Company's current employees have been with the Company for only a limited
period of time. The ultimate results of such restructuring is impossible to
predict.
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ABILITY TO RECRUIT PERSONNEL
EXECUTIVE OFFICERS AND KEY PERSONNEL
Our future success will likely depend in large part on our ability to
attract and retain additional highly skilled technical, sales, management and
marketing personnel. Competition for such personnel in the computer software
industry is intense, and in recent years, the available pool of qualified
personnel has been insufficient to satisfy the requirements of many technology
companies. In the past we have experienced difficulty in recruiting personnel
with the required skills and qualifications. Our products are technical, and new
employees generally require substantial training in the use of our products. We
may not succeed in attracting and retaining sufficiently qualified personnel to
develop new products, improve existing products, or to sell and market our
products. If we do not, our business, operating results, and financial condition
could be materially adversely affected.
FOREIGN EMPLOYEES AND TECHNICAL RECRUITING
To achieve our business objectives, we must be able to recruit and employ
skilled technical professionals from other countries. Any future shortage of
qualified technical personnel who are either United States citizens or otherwise
eligible to work in the United States could increase our reliance on foreign
professionals. Many technology companies have already begun to experience
shortages of such personnel. Any failure to attract and retain qualified
personnel as necessary, including as a result of limitations imposed by federal
immigration laws and the availability of visas issued thereunder, could
materially adversely affect our business and operating results. Foreign computer
professionals such as those employed by us typically become eligible for
employment in the United States by obtaining a nonimmigrant visas. The number of
nonimmigrant visas is limited by federal immigration law. Congress has recently
approved a marginal but temporary increase in the number of visas available. We
cannot predict whether this increase will improve the recruiting impediments
faced by many technology companies, including PSI, or what effect any future
changes in the federal immigration laws will have on our business, operating
results, or financial condition.
COMPETITION
The market for our products is highly competitive and diverse. The
technology for infrastructure management software products has only recently
developed and can change rapidly. New products are frequently introduced and
existing products are continually enhanced. Competitors vary in size and in the
scope and breadth of the products and services offered.
EXISTING COMPETITION
We face competition from a number of sources, including:
- providers of internal help desk software applications such as Remedy
Corporation and Software Artistry, Inc. (now a division of Tivoli Systems,
Inc.)
- customer interaction software companies such as Clarify Inc. and The
Vantive Corporation, whose products include internal help desk
applications
- information technology and systems management companies such as IBM,
Computer Associates International, Inc., Network Associates, Inc.
(recently formed as a result of the business combination of McAfee
Associates, Inc. and Network General Corporation), and Hewlett-Packard
Company through its acquisition of PROLIN
- providers of asset management and facilities management software
- the internal information technology departments of those companies with
infrastructure management needs
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FUTURE COMPETITION
Because competitors can easily penetrate the software market, we anticipate
additional competition from other established and new companies as the market
for enterprise infrastructure management applications develops. In addition,
current and potential competitors have established or may in the future
establish cooperative relationships among themselves or with third parties.
Large software companies may acquire or establish alliances with smaller
competitors of PSI. We expect that the software industry will continue to
consolidate. It is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share.
Our ability to sell our products depends in part on their compatibility with
and support by providers of system management products, including Tivoli,
Computer Associates, and Hewlett-Packard. Both Tivoli and Hewlett-Packard have
recently acquired providers of help desk software products. These providers of
system management products may decide to close their systems to competing
vendors like PSI. They may also decide to bundle their infrastructure management
and/or help-desk software products with other products for enterprise licenses
for promotional purposes or as part of a long-term pricing strategy. If that
were to happen, our ability to sell our products could be adversely affected.
Increased competition may result from acquisitions of help desk and other
infrastructure management software vendors by system management companies. The
results of increased competition including price reductions of our products,
reduced gross margins, and reduction of market share, could materially adversely
affect our business, operating results, and financial condition.
GENERAL
Some of our current and many of our potential competitors have much greater
financial, technical, marketing, and other resources than PSI. As a result, they
may be able to respond more quickly to new or emerging technologies and changes
in customer needs. They may also be able to devote greater resources to the
development, promotion, and sale of their products than we can. We may not be
able to compete successfully against current and future competitors. In
addition, competitive pressures faced by PSI may materially adversely affect our
business, operating results, and financial condition.
MANAGEMENT OF GROWTH
We have grown greatly in recent periods, with total revenues increasing from
$19.6 million in fiscal 1995 to $23.8 million in fiscal 1996, to $35.0 million
in fiscal 1997, and to $61.9 million in fiscal 1998.
If we achieve our growth plans, including the integration of Apsylog,
Innovative, and the technology acquired from ISS, such growth may burden our
operating and financial systems. This burden will require large amounts of
senior management attention and will require the use of other PSI resources. Our
ability to compete effectively and to manage future growth (and our future
operating results) will depend in part on our ability to implement and expand
operational, customer support, and financial control systems and to expand,
train, and manage our employees. In particular, in connection with the
acquisitions, we will be required to integrate additional personnel and to
augment or replace existing financial and management systems. Such integration
could disrupt our operations and could adversely affect our financial results.
We may not be able to augment or improve existing systems and controls or
implement new systems and controls in response to future growth, if any. Any
failure to do so could materially adversely affect our business, operating
results, and financial condition.
EXPANSION OF DISTRIBUTION CHANNELS
We sell our products through our direct sales force and a limited number of
distributors and we provide maintenance and support services through our
technical and customer support staff. We plan to continue to invest large
amounts of resources to our direct sales force, particularly in North America
where we have recently opened several new sales offices. In addition, we are
developing additional sales and
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marketing channels through system integrators and original equipment
manufacturers and other channel partners. We may not be able to attract channel
partners that will be able to market our products effectively or that will be
qualified to provide timely and cost-effective customer support and service. If
we establish distribution through such indirect channels, our agreements with
channel partners may not be exclusive. As a result, such channel partners may
also carry competing product lines. If we do not establish and maintain such
distribution relationships, this could materially adversely affect our business,
operating results, and financial condition.
INTERNATIONAL OPERATIONS
International sales represented approximately 29% of our total revenues in
fiscal 1997 and 36% of our total revenue in fiscal 1998, and a substantial
majority of those sales are generated in Europe. PSI currently generates limited
revenues in the Asian-Pacific economies but is attempting to increase its
presence in those markets. We currently have international sales offices in
London, Paris, Frankfurt, Amsterdam, and Copenhagen. Our continued growth and
profitability will require continued expansion of our international operations,
particularly in Europe, Latin America, and the Pacific Rim. Accordingly, we
intend to expand our current international operations and enter additional
international markets. Such expansion will require significant management
attention and financial resources. Our international operations are subject to a
variety of risks associated with conducting business internationally, including
the following:
- fluctuations in currency exchange rates
- longer payment cycles
- difficulties in staffing and managing international operations
- problems in collecting accounts receivable
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world
- increases in tariffs, duties, price controls, or other restrictions on
foreign currencies trade barriers imposed by foreign countries
These factors could materially adversely affect our business, operating
results, and financial condition. We have only limited experience in developing
local-language versions of our products and marketing and distributing its
products internationally. We may not be able to successfully translate, market,
sell and deliver our products internationally. If we are unable to expand our
international operations successfully and in a timely manner, our business,
operating results, and financial condition could be adversely affected.
Although PSI's revenues in the Pacific Rim have been limited to date, recent
instability in the Asian-Pacific economies and financial markets could adversely
affect our business, operating results, and financial condition in future
quarters as well.
CURRENCY FLUCTUATIONS
A large portion of our business is conducted in foreign currencies,
principally the British Pound, the Deutsche Mark, and the French Franc.
Fluctuations in the value of foreign currencies relative to the U.S. dollar have
caused and will continue to cause currency transaction gains and losses. We
cannot predict the effect of exchange rate fluctuations upon future operating
results. We may experience currency losses in the future. We currently maintain
a foreign exchange hedging program, consisting principally of purchases of one
month forward-rate currency contracts. However, our hedging activities may not
adequately protect us against the risks associated with foreign currency
fluctuations.
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ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION
On January 1, 1999, certain member states of the European Economic Community
(the "EEC") will fix their respective currencies to a new currency, the euro. On
that day, the euro will become a functional legal currency within these
countries. During the three years beginning on January 1, 1999, business in
these EEC member states will be conducted in both the existing national
currency, such as the French franc or deutsche mark, and the euro. Companies
operating in or conducting business in EEC member states will need to ensure
that their financial and other software systems are capable of processing
transactions and properly handling the existing currencies, as well as the euro.
Our ASSETCENTER product was originally developed for the European market and is
capable of managing currency data measured in euros. We are still assessing the
impact that the euro will have on our internal systems and our other products.
We will take corrective actions based on the results of such assessment. We have
not yet determined the costs related to this problem. Issues related to the
introduction of the euro may materially adversely affect our business, operating
results, and financial condition.
CONTROL BY EXISTING STOCKHOLDERS
Based on shares outstanding as of September 30, 1998, PSI's officers,
directors, and entities directly related to such individuals together
beneficially own approximately 42.0% of the outstanding shares of PSI common
stock. In particular, John J. Moores, Chairman of PSI's board of directors, owns
approximately 36.3% of the outstanding shares. As a result, PSI's officers and
directors will be able to control most matters requiring stockholder approval,
including the election of directors and the approval of mergers, consolidations,
and sales of all or substantially all of the assets of PSI. Such concentrated
share ownership may prevent or discourage potential bids to acquire PSI unless
the terms of acquisition are approved by such officers and directors.
PRODUCT DEVELOPMENT DELAYS
We have experienced product development delays in the past and may
experience delays in the future. Difficulties in product development could delay
or prevent the successful introduction or marketing of new or improved products.
Any such new or improved products may not achieve market acceptance. Our current
or future products may not conform to industry requirements. If we are unable,
for technological or other reasons, to develop and introduce new and improved
products in a timely manner, our business, operating results, and financial
condition could be adversely affected.
Because our software products are complex, these products may contain errors
that could be detected at any point in a product's life cycle. In the past we
have discovered software errors in certain of our products and have experienced
delays in shipment of our products during the period required to correct these
errors. Despite testing by PSI and by current and potential customers, errors in
our products may be found in the future. Detection of such errors may result in,
among other things, loss of, or delay in, market acceptance and sales of our
products, diversion of development resources, injury to our reputation, or
increased service and warranty costs. If any of these results were to occur, our
business, operating results, and financial condition could be materially
adversely affected.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Our success will be heavily dependent upon proprietary technology. We rely
primarily on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. Such laws provide only limited protection. Despite precautions that we
take, it may be possible for unauthorized third parties to copy aspects of our
current or future products or to obtain and use information that we regard as
proprietary. In particular, we may provide our licensees with access to our data
model and other proprietary information underlying our licensed applications.
Such means of protecting our proprietary rights may not be adequate.
Additionally, our competitors may
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independently develop similar or superior technology. Policing unauthorized use
of software is difficult and, while we do not expect software piracy to be a
persistent problem, some foreign laws do not protect our proprietary rights to
the same extent as United States laws. Litigation may be necessary in the future
to enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. Litigation
could result in substantial costs and diversion of resources to PSI and could
materially adversely affect our business, operating results, and financial
condition.
RISKS OF INFRINGEMENT
While we are not aware that any of our software product offerings infringes
the proprietary rights of third parties, third parties may claim infringement
with respect to our current or future products. Because we are dependent on a
limited number of products, any claim of infringement, whether with or without
merit, could be time consuming, result in costly litigation, cause product
shipment delays, or require us to enter into royalty or licensing agreements. In
addition, such claims could impair our relationships with existing customers and
our ability to sell our products to new customers. Royalty or license agreements
may not be available on acceptable terms or at all. We expect that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the software industry segment grows and
the functionality of products in different industry segments overlaps. In
addition, Peregrine has recently acquired a number of technologies through
acquisition, including those technologies acquired from ISS, Apsylog, and
Innovative. Although PSI carefully reviewed issues relating to the ownership of
the acquired technology and obtained representations and warranties relating to
such ownership, PSI was not involved in the development of those products, and
unanticipated infringement or similar claims could arise with respect to these
or other acquired technologies. As a result, infringement claims could have a
material adverse affect on our business, operating results, and financial
condition.
PRODUCT LIABILITY
Our license agreements with our customers typically contain provisions
designed to limit exposure to potential product liability claims. Such
limitation of liability provisions may, however, not be effective under the laws
of certain jurisdictions to the extent local laws would treat certain warranty
exclusions as unenforceable. Although we have not experienced any product
liability claims to date, the sale and support of our products entails the risk
of such claims. In particular, issues relating to Year 2000 compliance have
increased awareness of the potential adverse effects of software defects and
malfunctions. We may be subject to product liability claims in the future. A
product liability claim could materially adversely affect our business,
operating results, and financial condition.
YEAR 2000 RISKS
Many computer systems and software products are coded to accept only two
digit entries in the date code field. These date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates. As
a result, many companies' software and computer systems may need to be upgraded
or replaced in order to comply with such Year 2000 requirements.
We use third party equipment and software that may not be Year 2000
compliant. We are conducting a review of products provided by outside vendors to
determine if their products are Year 2000 compliant. This review has not been
completed. However, we have received assurances from the suppliers of all third
party software that we believe is critical to our business that their software
is Year 2000 compliant. If this third party equipment or software does not
operate properly with regard to the Year 2000, we may incur unexpected expenses
to remedy any problems. Such costs may materially adversely affect our business,
operating results, and financial condition. In addition, if our key systems, or
a significant number of our systems, failed as a result of Year 2000 problems we
could incur substantial costs and disruption of our business. We may also
experience delays in implementing Year 2000 compliant software products. Any of
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these problems could potentially materially adversely affect our business,
operating results, or financial condition.
We are still reviewing the impact the Year 2000 issue will have on our
proprietary software products and internal information systems. We plan to take
necessary actions based on the results of such analyses. We have not yet
determined the costs related to achieving Year 2000 compliance. However, we do
not believe such costs will be material. If these costs are material, the costs
will materially adversely affect our business, operating results, and financial
condition.
In the ordinary course of our business, we test and evaluate our software
products. We believe that our software products are generally Year 2000
compliant, meaning that the use or occurrence of dates on or after January 1,
2000 will not materially affect the performance of such software products with
respect to four digit date dependent data or the ability of such products to
correctly create, store, process, and output information related to such data.
However, we may learn that certain of our software products do not contain all
necessary software routines and codes necessary for the accurate calculation,
display, storage, and manipulation of data involving dates. In addition, in
certain cases, we have warranted that the use or occurrence of dates on or after
January 1, 2000 will not adversely affect the performance of our products with
respect to four digit date dependent data or the ability to create, store,
process, and output information related to such data. If any of our licensees
experience Year 2000 problems, those licensees could assert claims for damages.
In addition, the purchasing patterns of our customers and potential
customers may be affected by Year 2000 issues. Many companies are expending
significant resources to correct their current software systems for Year 2000
compliance. These expenditures may result in reduced funds available to purchase
software products such as those offered by us. This may adversely affect on our
business, operating results, and financial condition.
UNDESIGNATED PREFERRED STOCK
PSI's board of directors has the authority to issue up to 5,000,000 shares
of preferred stock in one or more series. The board of directors can fix the
price, rights, preferences, privileges, and restrictions of such preferred stock
without any further vote or action by PSI's stockholders. The issuance of
preferred stock allows PSI to have flexibility in connection with possible
acquisitions and other corporate purposes. However, the issuance of shares of
preferred stock may delay or prevent a change in control transaction without
further action by the PSI stockholders. As a result, the market price of the PSI
common stock and the voting and other rights of the holders of PSI common stock
may be adversely affected. The issuance of preferred stock may result in the
loss of voting control to others. PSI has no current plans to issue any shares
of preferred stock.
CHARTER PROVISIONS
Certain provisions of PSI's charter documents eliminate the right of
stockholders to act by written consent without a meeting and specify certain
procedures for nominating directors and submitting proposals for consideration
at stockholder meetings. Such provisions are intended to increase the likelihood
of continuity and stability in the composition of the PSI board of directors and
in the policies set by the board. These provisions also discourage certain types
of transactions which may involve an actual or threatened change of control
transaction. These provisions are designed to reduce the vulnerability of PSI to
an unsolicited acquisition proposal. As a result, these provisions could
discourage potential acquisition proposals and could delay or prevent a change
in control transaction. These provisions are also intended to discourage certain
tactics that may be used in proxy fights. However, they could have the effect of
discouraging others from making tender offers for PSI's shares. As a result,
these provisions may prevent the market price of PSI common stock from
reflecting the effects of actual or rumored takeover attempts. These provisions
may also prevent changes in the management of PSI.
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ANTITAKEOVER EFFECTS OF DELAWARE LAW
PSI is subject to the antitakeover provisions of the Delaware General
Corporation Law, which regulates corporate acquisitions. The Delaware law
prevents certain Delaware corporations, including PSI, from engaging, under
certain circumstances, in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
interested stockholder. For purposes of Delaware law, a "business combination"
includes, among other things, a merger or consolidation involving PSI and the
interested stockholder and the sale of more than 10% of PSI's assets. In
general, Delaware law defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of a
company and any entity or person affiliated with or controlling or controlled by
such entity or person. Under Delaware law, a Delaware corporation may "opt out"
of the antitakeover provisions. PSI has not "opted out" of the antitakeover
provisions of Delaware Law.
VOLATILITY OF TRADING PRICES
We completed the initial public offering of PSI common stock in April 1997.
Prior to April 1997, no public market existed for PSI common stock. In the past,
the market price of PSI common stock has varied greatly, including extreme price
movements in fairly short periods of time, and the volume of PSI common stock
traded has fluctuated greatly as well. These fluctuations often occur
independently of any announcements by PSI or of general market fluctuations. We
expect such fluctuations to continue. Factors that may result in such
fluctuations include:
- any shortfall in revenues or net income from revenues or net income
expected by securities analysts
- announcements of new products by PSI or our competitors
- quarterly fluctuations in our financial results or the results of other
software companies, including those of our direct competitors
- changes in analysts' estimates of our financial performance, the financial
performance of our competitors, or the financial performance of software
companies in general
- general conditions in the software industry
- changes in prices for our products or the products of our competitors
- changes in our revenue growth rates or the growth rates of our competitors
- sales of large blocks of the PSI common stock
- conditions in the financial markets in general
In addition, the stock market may from time to time experience extreme price
and volume fluctuations. Many technology companies in particular have
experienced such fluctuations. Often such fluctuations have been unrelated to
the operating performance of the specific companies. The market prices of PSI's
common stock may experience significant fluctuations in the future.
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WHERE TO FIND MORE INFORMATION ABOUT PEREGRINE
We file annual, quarterly and special reports, proxy statements, and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at http:// www.peregrine.com or at the SEC's web site at
http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to documents that we have previously filed with the SEC or documents that we
will file with the SEC in the future. The information incorporated by reference
is considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of
1934 (the "Exchange Act"), until the selling stockholders sell all the shares.
This prospectus is part of a Registration Statement we filed with the SEC
(Registration No. 333-65333). The documents we incorporate by reference are:
1. the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1998, as amended through the date hereof;
2. the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998;
3. the Company's Current Report on Form 8-K dated July 31, 1998 relating to the
acquisition of Innovative Tech Systems, Inc.;
4. the Company's current Report on Form 8-K dated October 5, 1998 relating to
the acquisition of certain assets of ISS; and
5. the description of the Company's common stock contained in its Registration
Statement on Form 8-A as filed with the SEC on March 7, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: General Counsel, Peregrine Systems,
Inc., 12670 High Bluff Drive, San Diego, California 92130; telephone number
(619) 481-5000.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares by the
selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock by each selling stockholder. All
information contained in the table below is based on beneficial ownership as of
September 30, 1998. None of the selling stockholders has held any position or
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office or had a material relationship with the Company or any of its
predecessors or affiliates within the past three years other than as a result of
the ownership of the Company's common stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(2) NUMBER OF AFTER OFFERING(2)
---------------------- SHARES --------------------------
SELLING STOCKHOLDERS(1) NUMBER PERCENT OFFERED(3) NUMBER PERCENT
- -------------------------------------------------------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
International Software Solutions, L.P................... 392,080 1.7% 352,870 39,210 *
International Software Solutions UK, Ltd................ 392,080 1.7% 352,870 39,210 *
International Software Solutions USA, L.C............... 392,080 1.7% 352,870 39,210 *
International Software Solutions GmbH................... 392,080 1.7% 352,870 39,210 *
International Software Solutions Production SARL........ 392,080 1.7% 352,870 39,210 *
International Software Solutions France
Diffusion SARL........................................ 392,080 1.7% 352,870 39,210 *
</TABLE>
- ------------------------
* Less than 1%.
(1) The selling stockholders acquired the shares in connection with the
acquisition by the Company of certain technology of ISS (the "ISS
Acquisition"). All of the shares offered hereby are being offered by the
selling stockholders. Pursuant to the terms of the Declaration of
Registration Rights, dated as of September 23, 1998, which was made in
connection with the ISS Acquisition (the "Registration Rights Declaration"),
the Company undertook to use its best efforts to effect the registration of
the shares issued to the selling stockholders. The Registration Rights
Declaration also includes certain indemnification arrangements with the
selling stockholders. The number of shares attributed to each selling
stockholder is the number of shares attributed to the selling stockholders
in the aggregate, as the selling stockholders beneficially own all of the
shares as a group. Of the 392,080 shares held as a group, 337,910 shares are
held of record by International Software Solutions, L.P., 4,005 shares are
held of record by International Software Solutions UK, Ltd., 16,173 shares
are held of record by International Software Solutions USA, L.C., 15,708
shares are held of record by International Software Solutions GmbH, 31
shares are held of record by International Software Solutions Production
SARL, and 18,253 shares are held of record by International Software
Solutions France Diffusion SARL. The number of shares beneficially owned by
the selling stockholders, as a group, includes an aggregate of 39,210 shares
of Common Stock that have been deposited in escrow pursuant to the asset
purchase agreement governing the ISS Acquisition to secure the respective
indemnification obligations of the selling stockholders thereunder (the
"Escrowed Shares"). The Escrowed Shares will be released from escrow on
September 23, 2000 to the extent that no claims have been made against the
Escrowed Shares. The number of Escrowed Shares attributed to each selling
stockholder is the number of Escrowed Shares attributed to the selling
stockholders in the aggregate. Of the 39,210 Escrowed shares, 33,791 shares
are held of record by International Software Solutions, L.P., 401 shares are
held of record by International Software Solutions UK, Ltd., 1,618 shares
are held of record by International Software Solutions USA, L.C., 1,571
shares are held of record by International Software Solutions GmbH, 3 shares
are held of record by International Software Solutions Production SARL, and
1,826 shares are held of record by International Software Solutions France
Diffusion SARL.
(2) Applicable percentage ownership is based on 23,210,942 shares of common
stock outstanding as of September 30, 1998, which reflects the issuance of a
total of 392,080 shares in connection with the ISS Acquisition. Beneficial
ownership is determined in accordance with the rules of the SEC under Rule
13d-3 of the Exchange Act and generally includes voting or investment power
with respect to securities, subject to community property laws, where
applicable.
(3) Excludes the Escrowed Shares. Of the 352,870 shares held as a group which
may be sold pursuant to this prospectus, 304,119 shares are held of record
by International Software Solutions, L.P., 3,604 shares are held of record
by International Software Solutions UK, Ltd., 14,555 shares are held of
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record by International Software Solutions USA, L.C., 14,137 shares are held
of record by International Software Solutions GmbH, 28 shares are held of
record by International Software Solutions Production SARL, and 16,427
shares are held of record by International Software Solutions France
Diffusion SARL.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. Such sales may be made on the NASDAQ National
Market, in the over-the-counter market or otherwise, at prices and under terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares may be sold by means of one or more of the
following: (a) a block trade in which the broker-dealer so engaged will attempt
to sell the shares as agent, but may position and resell a portion of the block
as principal to facilitate the transaction; (b) purchases by a broker-dealer as
principal and resale by such broker-dealer for its account pursuant to this
prospectus; (c) an over-the-counter distribution in accordance with the rules of
the NASDAQ National Market; (d) ordinary brokerage transactions in which the
broker solicits purchasers; and (e) privately negotiated transactions. In
effecting sales, broker-dealers engaged by the selling stockholders may arrange
for other broker-dealers to participate in the resales.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered hereunder in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders may also sell the
shares short and redeliver the shares to close out such short positions. The
selling stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this prospectus. The selling stockholders may also loan or pledge
the shares registered hereunder to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default the broker-dealer may effect sales
of the pledged shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders in amounts
to be negotiated in connection with the sale. Such broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Company has advised the selling stockholders that the anti-manipulation
rules under the Exchange Act may apply to sales of shares in the market and to
the activities of the selling stockholders and their affiliates. In addition,
the Company will make copies of this prospectus available to the selling
stockholders and has informed them of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of the shares
offered hereby.
All costs, expenses and fees in connection with the registration of the
shares will be borne by the Company. Commissions and discounts, if any,
attributable to the sales of the shares will be borne by the selling
stockholders. The selling stockholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act. The
Company will not receive any proceeds from the sale of the shares.
The Company may suspend the use of this prospectus for a discrete period of
time, not exceeding 15 days, if, the Company delivers a written notice to the
selling stockholders stating that, in the reasonable judgment of the Company, a
development has occurred or condition exists as a result of which the
Registration Statement or the prospectus does not contain material non-public
information which in the reasonable judgment of the Company is required to be
included in the Registration Statement or the prospectus for sales of the shares
to be made hereunder. The Company may not exercise this delay right
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more than once. The Company is obligated in the event of such suspension to take
all actions necessary to ensure that the use of the prospectus may be resumed as
soon as practicable.
The Company has agreed with the selling stockholders to keep the
registration statement of which this prospectus constitutes a part effective for
fifteen calendar days following the effective date of this prospectus. Trading
of any unsold shares after such date will be subject to compliance with all
applicable securities laws, including Rule 144.
There can be no assurance that the selling stockholders will sell any or all
of the shares of common stock offered by them hereunder.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of the Company as of
March 31, 1998 and 1997, and for each of the years in the three-year period
ended March 31, 1998, have been incorporated by reference in this prospectus and
the Registration Statement which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in the reports with respect thereto
and are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said reports.
The consolidated financial statements of Innovative Tech Systems, Inc., as
of January 31, 1998 and 1997, and for each of the three years in the period
ended January 31, 1998 incorporated in this prospectus by reference to Peregrine
Systems, Inc.'s current report on Form 8-K dated July 31, 1998 have been so
incorporated in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
Company in connection with the sale of common stock being registered. All
amounts are estimates except the SEC registration fee and Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC registration fee.............................................................. $ 4,027
Nasdaq National market listing fee................................................ 7,057
Printing expenses................................................................. 10,000
Legal fees and expenses........................................................... 10,000
Accounting fees and expenses...................................................... 7,500
Miscellaneous expenses............................................................ 6,416
-----------
Total......................................................................... $ 45,000
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article IX of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permitted under Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the corporation to the
fullest extent permitted under the General Corporation Law of Delaware.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
In addition, pursuant to the terms of the Agreement and Plan of
Reorganization entered into by the Company in connection with its acquisition of
Innovative, the Registrant has agreed to fulfill and honor in all respects the
obligations of Innovative pursuant to any indemnification agreements between
Innovative and its directors and officers as of the effective time of the merger
that effected such acquisition (the "Indemnified Parties") and any
indemnification provisions under Innovative's Certificate of Incorporation or
Bylaws as in effect immediately prior to the merger for a period of six years
from the effective date. The Certificate of Incorporation and Bylaws of the
surviving corporation in the merger contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the Certificate of Incorporation and
Bylaws of Innovative as in effect immediately prior to the merger, which
provisions will not be amended, repealed or otherwise modified for a period of
six years from the effective time of the acquisition in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the effective time, were directors, officers, employees, or agents of
Innovative, unless such modification is required by law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-1
<PAGE>
The Declaration of Registration Rights dated September 23, 1998, by the
Registrant made in connection with the Company's purchase of certain technology
from ISS provides that the Company will indemnify the selling stockholders
against certain liabilities, including liabilities under the Securities Act.
At present, there is no pending litigation or proceeding involving a
director, officer, employee, or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee ,or other agent of the Registrant.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.3* Declaration of Registration Rights dated September 23, 1998, granted by the Registrant to certain
individuals identified therein
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants (relating to financial statements of
Peregrine Systems, Inc.)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants (relating to financial statements of
Innovative Tech Systems, Inc.)
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (See II-4)
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, that paragraphs (a) and (b) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. That, for the purpose of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
II-2
<PAGE>
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
5. To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Exchange Act; and, where interim financial information required to be presented
by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
6. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement on
Form S-3 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 12th day of
November, 1998.
<TABLE>
<S> <C> <C>
PEREGRINE SYSTEMS, INC.
By: /s/ DAVID A. FARLEY
-----------------------------------------
David A. Farley,
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President and Chief
/s/ STEPHEN P. GARDNER* Executive Officer
- ------------------------------ (Principal Executive November 12, 1998
Stephen P. Gardner Officer) and Director
/s/ DAVID A. FARLEY Chief Financial Officer
- ------------------------------ (Principal Financial November 12, 1998
David A. Farley Officer) and Director
/s/ JOHN J. MOORES*
- ------------------------------ Chairman of the Board of November 12, 1998
John J. Moores Directors
/s/ CHRISTOPHER A. COLE*
- ------------------------------ Director November 12, 1998
Christopher A. Cole
/s/ RICHARD A. HOSLEY, II*
- ------------------------------ Director November 12, 1998
Richard A. Hosley, II
/s/ CHARLES E. NOELL, III*
- ------------------------------ Director November 12, 1998
Charles E. Noell, III
/s/ NORRIS VAN DEN BERG*
- ------------------------------ Director November 12, 1998
Norris Van Den Berg
/s/ MATTHEW GLESS*
- ------------------------------ Principal Accounting November 12, 1998
Matthew Gless Officer
*By: /s/ DAVID A.
FARLEY
--------------------------
David A.
Farley
(Attorney-in-Fact)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.3* Declaration of Registration Rights dated September 23, 1998, granted by the Registrant to certain
individuals identified therein
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants (relating to financial statements of
Peregrine Systems, Inc.)
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants (relating to financial statements of
Innovative Tech Systems, Inc.)
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1* Power of Attorney (See II-4)
</TABLE>
- ------------------------
* Previously filed
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report for Peregrine Systems, Inc. and to all references to our Firm included in
or made a part of this Registration Statement.
/s/ ARTHUR ANDERSEN, LLP
ARTHUR ANDERSEN, LLP
San Diego, California
November 11, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Peregrine
Systems, Inc. of our reports dated April 2, 1996 and April 27, 1998 relating to
the consolidated financial statements of Innovative Tech Systems, Inc., which
appear in Exhibit 99.2 of the Current Report on Form 8-K of Peregrine Systems,
Inc. dated July 31, 1998. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 11, 1998
