<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NO. 1)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO .
COMMISSION FILE NUMBER: 000-22209
------------------------
PEREGRINE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3773312
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(Address of principal executive offices, including zip code)
(619) 481-5000
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.001
PAR VALUE
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing sale price of the Common Stock on May 31, 1998,
as reported on the Nasdaq National Market, was approximately $186,241,113.
Shares of Common Stock held by each executive officer and director and by each
person who may be deemed to be an affiliate of the Registrant have been excluded
from this computation. This determination of affiliate status is not necessarily
a conclusive determination for other purposes. As of May 31, 1997, the
Registrant had 19,264,932 shares of Common Stock, $.001 par value, issued and
outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Report on Form 10-K/A (Amendment No. 1) is being filed to disclose
those items previously omitted from Part III of the Annual Report on Form 10-K
filed by Peregrine Systems, Inc., a Delaware Corporation ("Peregrine" or the
"Company") on June 29, 1998, in compliance with General Instruction G(3) to Form
10-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of Peregrine and members of the Board of Directors of Peregrine (the
"Peregrine Board") and their ages as of March 31, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
Stephen P. Gardner (1)................ 44 President, Chief Executive Officer and Director
David A. Farley....................... 43 Vice President, Finance, Chief Financial Officer and Director
William G. Holsten.................... 61 Vice President, Professional Services
David G. Fisher (2)................... 40 Vice President, Marketing
Gary A. Hughes (3).................... 34 Vice President, Worldwide Customer Support
Frederic B. Luddy..................... 43 Vice President, North America Research and Development
Richard T. Nelson..................... 38 Vice President, Secretary and General Counsel
Douglas S. Powanda.................... 41 Vice President, Worldwide Sales
Steven S. Spitzer..................... 38 Vice President, Channel Sales
Gilles Queru.......................... 39 Vice President, Corporate Development
John J. Moores (4).................... 53 Chairman of the Peregrine Board
Christopher A. Cole................... 44 Director
Richard A. Hosley II (4).............. 53 Director
Charles E. Noell III (4)(5)........... 46 Director
Norris van den Berg (5)............... 59 Director
</TABLE>
- ------------------------
(1) Mr. Gardner became Peregrine's President and Chief Executive Officer in
April 1998. From January 1998 to April 1998, he served as Peregrine's
President and Principal Executive Officer.
(2) Mr. Fisher resigned as an executive officer of Peregrine effective in April
1998.
(3) Mr. Hughes became an executive officer of Peregrine in April 1998.
(4) Member of Compensation Committee.
(5) Member of Audit Committee.
STEPHEN P. GARDNER has served as Peregrine's President and Chief Executive
Officer and as a member of the Peregrine Board since April 1998. From January
1998 to April 1998, Mr. Gardner was Peregrine's Executive Vice President and
Principal Executive Officer. From May 1997 to January 1998, Mr. Gardner served
as Peregrine's Vice President, Strategic Acquisitions. From May 1996 until May
1997, Mr. Gardner served as president of Thunder & Lightning Company, an
Internet software start-up company. From 1995 until May 1996 Mr. Gardner served
as the president of Alpharel Inc., a document management software company. From
1993 until 1995, Mr. Gardner served as a vice president of Data General
Corporation, a manufacturer of multiuser computer systems, peripheral equipment,
communications systems, and related products. From 1988 to 1993, Mr. Gardner
served in various capacities with Groupe Bull, most recently as founder and
president of its Integris Business Unit, a systems integration and software
company owned by Groupe Bull of France. Mr. Gardner holds an A.B. in
Geochemistry from Princeton University and an M.B.A. from Harvard University.
DAVID A. FARLEY has served as Peregrine's Vice President, Finance, and Chief
Financial Officer and as a member of the Peregrine Board since October 1995. Mr.
Farley served as Secretary of Peregrine from October 1995 until February 1997.
From November 1994 to November 1995, Mr. Farley was Vice
2
<PAGE>
President, Finance, and Chief Financial Officer and a director of XVT Software
Inc., a development tools software company ("XVT"). From December 1984 until
October 1994, Mr. Farley held various accounting and financial positions at BMC
Software, Inc., a vendor of software system utilities for IBM mainframe
computing environments ("BMC"), most recently as Chief Financial Officer and as
a director. Mr. Farley holds a B.S. in Accounting from the University of
Alabama.
DAVID G. FISHER served as the Company's Vice President, Marketing from April
1996 until April 1998. From March 1993 to April 1996, Mr. Fisher was Vice
President of Sales and Marketing for Restrac, Inc., a developer and vender of
recruitment and staffing software applications). From February 1991 to March
1993, Mr. Fisher was Vice President of Worldwide Marketing for Continuum, Inc.,
a developer and vendor of insurance and banking software applications.
WILLIAM G. HOLSTEN has served as Peregrine's Vice President, Professional
Services since November 1995. From July 1994 until November 1995, Mr. Holsten
was Director of Professional Services for XVT. From August 1992 until June 1994,
he was a consultant with Engineering Software Solutions, a consulting firm
co-owned by Mr. Holsten and a partner, which provided consulting services to XVT
from May 1993 to June 1994. From October 1984 to July 1992, Mr. Holsten held a
variety of positions with Precision Visuals, Inc., a graphics software company,
most recently as Director of Professional Services. Mr. Holsten holds a B.A. in
Mathematics from the University of California at Santa Barbara.
GARY A. HUGHES has served as Peregrine's Vice President, Worldwide Customer
Support since April 1998. Since joining Peregrine as a customer support
representative in July 1990, Mr. Hughes has held a variety of positions with
Peregrine, including, from January 1998 until April 1998, Peregrine's Director
of Worldwide Customer Support; from August 1997 until January 1998, Peregrine's
manager, Systems Engineers; from October 1995 until August 1997, Peregrine's
Development Manager; and from December 1993 until December 1994, Peregrine's
Vice President, Customer Support.
FREDERIC B. LUDDY has served as Peregrine's Vice President, North American
Research and Development, and Chief Technology Officer since January 1998. Mr.
Luddy has been with Peregrine since April 1990, serving as Product Architect for
SERVICECENTER from October 1995 until January 1998 and as a Product Author prior
to that time.
RICHARD T. NELSON has served as Peregrine's General Counsel since November
1995, as its Vice President since October 1996 and as its Secretary since
February 1997. From August 1991 until November 1995, Mr. Nelson was an associate
in the Houston, Texas office of Jackson & Walker LLP, a law firm. Mr. Nelson
holds a B.S. in Accounting from Bentley College and a J.D. from the University
of Iowa College of Law.
DOUGLAS S. POWANDA has served as Peregrine's Vice President, Worldwide Sales
since January 1998. Mr. Powanda served as Peregrine's Vice President,
International Sales from September 1995 to January 1998. From June 1994 until
September 1995, he served as Peregrine's Vice President, North American Sales.
He was Peregrine's Director of Sales for Europe from September 1993 until June
1994, its Regional Sales Manager from December 1992 to August 1993, and its
Senior Accounts Manager from February 1992 until December 1992. Mr. Powanda
holds a B.S. in Business Management from Trenton State University and an M.B.A.
from Pepperdine University.
STEVEN S. SPITZER has served as Peregrine's Vice President, Channel Sales
since August 1997. From 1986 until August 1997, Mr. Spitzer held various
positions with FileNet Corporation, a provider of workflow, document-imaging,
and electronic document management software solutions, most recently as Vice
President, Channel Sales. Mr. Spitzer holds a B.S. in Business Administration,
Computer Sciences from Long Beach State University.
GILLES QUERU has served as Peregrine's Vice President, Corporate Development
since April 1998. Mr. Queru joined Peregrine in September 1997 as a result of
Peregrine's acquisition of Apsylog S.A., through its parent company, United
Software, Inc. Mr. Queru founded Apsylog in 1987 and served as its
3
<PAGE>
Chief Executive Officer and Chairman of its Board of Directors until the
acquisition. Following the acquisition and until April 1998, he continued to
serve as president of the wholly owned operating subsidiary of Peregrine that
resulted from the merger. Prior to forming Apsylog, Mr. Queru held several
management positions with Hewlett-Packard, a developer and manufacturer of
computer and imaging product hardware. Mr. Queru is a graduate of Ecole Centrale
de Lyon.
JOHN J. MOORES has served as Chairman of the Peregrine Board since March
1990 and as a member of the Peregrine Board since March 1989. In 1980, Mr.
Moores founded BMC and served as its President and Chief Executive Officer from
1980 to 1986 and as Chairman of its Board of Directors from 1980 to 1992. Since
December 1994, Mr. Moores has served as owner and Chairman of the Board of the
San Diego Padres Baseball Club, L.P. and since September 1991 as Chairman of the
Board of JMI Services, Inc., a private investment company ("JMI Services"). Mr.
Moores also serves as a director of Homegate Hospitality, Inc. Mr. Moores holds
a B.S. in economics and a J.D. from the University of Houston.
CHRISTOPHER A. COLE has served as a member of the Peregrine Board since
founding Peregrine in 1981. He also served as its President and Chief Executive
Officer from 1986 until 1989. Since 1992, Mr. Cole has served as President and
Chief Executive Officer of Questrel, Inc., a software development company. Mr.
Cole holds an A.B. and an A.M. in Physics from Harvard University.
RICHARD A. HOSLEY II has served as a member of the Peregrine Board since
January 1992. Prior to retiring from full-time employment, Mr. Hosley served as
President and Chief Executive Officer of BMC. Mr. Hosley also serves as a
director of Logic Works, Inc. and as a director and member of the compensation
committee of Axent Technologies, Inc. Mr. Hosley holds a B.A. in Economics from
Texas A&M University.
CHARLES E. NOELL III has served as a member of the Peregrine Board since
January 1992. Since January 1992, Mr. Noell has served as President and Chief
Executive Officer of JMI Services, Inc., a private investment company, and as a
General Partner of JMI Equity Fund, L.P., a venture capital investment firm
("JMI Equity Fund"). Mr. Noell also serves as a director of Expert Software,
Inc. and Transaction Systems Architects, Inc. and as a director and member of
the compensation committee of Homegate Hospitality, Inc. Mr. Noell holds a B.A.
in History from the University of North Carolina at Chapel Hill and an M.B.A.
from Harvard University.
NORRIS VAN DEN BERG has served as a member of the Peregrine Board since
January 1992. Mr. van den Berg has served as a General Partner of JMI Equity
Fund since July 1991 and also serves as a member of the Board of Directors of
Prism Solutions, Inc. Mr. van den Berg holds a B.A. in Philosophy and
Mathematics from the University of Maryland.
There are no family relationships among any executive officers or directors
of Peregrine.
(b) SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
on Form 3 and changes in ownership on Forms 4 or 5 with the Securities and
Exchange Commission (the "SEC"). Such officers, directors, and 10% stockholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) reports they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that during fiscal 1998, and with the exception of a Form 3
filed late inadvertently by Stephen P. Gardner, all executive officers and
directors of the Company complied with all applicable filing requirements.
4
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION TABLE
The following table sets forth in summary form information concerning the
compensation awarded to, earned by, or paid for services rendered to Peregrine
in all capacities during the fiscal years ended March 31, 1996, 1997, and 1998,
respectively, by (i) Peregrine's President and Chief Executive Officer and (ii)
Peregrine's next five most highly compensated executive officers whose salary
and bonus for fiscal 1998 exceeded $100,000 (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION(1) -------------------------
RESTRICTED SECURITIES
FISCAL ---------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS(#) COMPENSATION
- ---------------------------------------- ------ -------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE OFFICERS
Stephen P. Gardner(2)................... 1998 $139,000 $ 210,000(8) $775,000(15) 150,000 $ 5,156(18)
President and 1997 -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- --
David A. Farley(3)...................... 1998 150,000 296,490(9) -- -- 3,337(19)
Vice President, Finance, 1997 150,000 126,240 -- -- 2,712
and Chief Financial Officer 1996 120,000 73,146 468,000(16) 200,000 100,321
William G. Holsten(4)................... 1998 90,000 159,547(10) -- 30,000 4,723(20)
Vice President, 1997 90,000 120,000 -- 50,000 4,481
Professional Services 1996 90,000 201,574 -- 100,000 35,387
Frederic B. Luddy(5).................... 1998 150,000 729,060(11) -- 25,000 3,946(21)
Vice President, North 1997 150,000 211,925 -- -- 2,712
American Research and 1996 150,000 133,920 -- 25,000 2,712
Development
Douglas S. Powanda...................... 1998 150,000 309,523(12) -- 75,000 3,946(22)
Vice President, 1997 150,000 104,300 -- 50,000 2,885
Worldwide Sales 1996 106,000 179,127 -- -- 7,704
FORMER EXECUTIVE OFFICERS
Alan H. Hunt(6)......................... 1998 187,500 560,336(13) -- -- 57,102(23)
President and Chief 1997 225,000 225,160 -- -- 4,862
Executive Officer 1996 192,500 130,557 936,000(17) 400,000 16,968
Douglas F. Garn(7)...................... 1998 122,747 153,257(14) -- -- 7,845(24)
Vice President, North 1997 150,000 197,324 -- 200,000 18,788
American Sales 1996 -- -- -- -- --
</TABLE>
- ------------------------------
(1) Other than the salary and bonus described herein, Peregrine did not pay any
executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such
executive officer's salary and bonus during either fiscal 1998, fiscal
1997, or fiscal 1996.
(2) Mr. Gardner became Peregrine's President and Chief Executive Officer and a
member of the Peregrine Board in April 1998. From January 1998 to April
1998, Mr. Gardner served as Peregrine's Executive Vice President and acting
Chief Executive Officer and from May 1997 to January 1998 as Peregrine's
Vice President, Strategic Acquisitions.
(3) Mr. Farley became Peregrine's Vice President, Finance, and Chief Financial
Officer in October 1995. Mr. Farley's salary and bonus for fiscal 1996
include amounts paid to him as Vice President, Finance, and Chief Financial
Officer of XVT. Peregrine acquired XVT in October 1995.
(4) Mr. Holsten became Peregrine's Vice President, Professional Services in
November 1995. Mr. Holsten's salary and bonus for fiscal 1996 include
amounts paid to him as Director, Professional Services, of XVT.
(5) Mr. Luddy became Peregrine's Vice President, North American Research and
Development in January 1998. Mr. Luddy's salary and bonus for fiscal 1998,
1997, and 1996 include amounts paid to him as Chief Architect of
SERVICECENTER.
(6) Mr. Hunt resigned as Peregrine's President and Chief Executive Officer in
January 1998. Mr. Hunt's salary and bonus for fiscal 1996 include amounts
paid to him as President and Chief Executive Officer of XVT.
(7) Mr. Garn resigned as Peregrine's Vice President, North American Sales, in
January 1998.
(8) Bonus compensation for fiscal 1998 includes $50,000 earned in fiscal 1998
to be paid in fiscal 1999.
(9) Bonus compensation for fiscal 1998 includes $90,925 earned in fiscal 1998
to be paid in fiscal 1999. Bonus compensation for fiscal 1997 includes
$156,240 earned in fiscal 1997 but paid in fiscal 1998. Bonus compensation
for fiscal 1996 includes $35,000 earned in fiscal 1996 but paid in fiscal
1998.
(10) Bonus compensation for fiscal 1998 includes $15,000 earned in fiscal 1998
to be paid in fiscal 1999.
5
<PAGE>
(11) Bonus compensation for fiscal 1998 consists of (i) $555,519 of product
authorship commission income earned and paid in fiscal 1998 and (ii)
$173,541 of product authorship commission income earned in fiscal 1998 to
be paid in fiscal 1999. Bonus compensation for fiscal 1997 and 1996
consists entirely of product authorship commissions.
(12) Bonus compensation for fiscal 1998 consists of (i) $10,000 of bonus
compensation and $195,053 of commission income earned and paid in fiscal
1998 and (ii) $115,570 of commission income earned in fiscal 1998 to be
paid in fiscal 1999. Bonus compensation for fiscal 1997 consists of (i)
$32,531 of bonus compensation and $26,769 of commission income earned and
paid in fiscal 1997 and (ii) $34,000 of bonus compensation and $11,000 of
commission income earned in fiscal 1997 but paid in fiscal 1998. Bonus
compensation for fiscal 1996 consists of (i) $131,492 of bonus
compensation and $4,725 of commission income earned and paid in fiscal
1996 and (ii) $37,351 of bonus compensation and $5,559 of commission
income earned in fiscal 1996 but paid in fiscal 1997.
(13) Bonus compensation for fiscal 1997 includes $136,500 earned in fiscal 1997
but paid in fiscal 1998. Bonus compensation for fiscal 1996 includes
$65,000 earned in fiscal 1996 but paid in fiscal 1997.
(14) Bonus compensation for fiscal 1998 consists of $46,602 of bonus
compensation and $106,646 in commission income. Bonus compensation for
fiscal 1997 consists of (i) $68,426 of bonus compensation and $75,898 of
commission income earned and paid in fiscal 1997 and (ii) $33,000 of bonus
compensation and $20,000 of commission income earned in fiscal 1997 but
paid in fiscal 1998.
(15) In October 1997, Peregrine issued Mr. Gardner an aggregate of 50,000
shares of Peregrine Common Stock pursuant to a restricted stock agreement.
The closing sale price of Peregrine Common Stock on the Nasdaq National
Market on October 31, 1997, the last trading date prior to the date of
issuance, was $15.50. Such shares vest incrementally over ten years,
subject to earlier vesting over six years contingent upon Peregrine's
achieving certain financial milestones.
(16) In November 1995, Peregrine issued Mr. Farley an aggregate of 200,000
shares of Peregrine Common Stock pursuant to a restricted stock agreement
in connection with his initial employment. The estimated fair value of
such shares at the time of issuance was $2.34 per share. Such shares vest
incrementally over ten years subject to earlier vesting over six years
contingent upon Peregrine's achieving certain financial milestones.
(17) In November 1995, Peregrine issued Mr. Hunt an aggregate of 400,000 shares
of Peregrine Common Stock pursuant to a restricted stock agreement in
connection with his initial employment. The estimated fair value of such
shares at the time of issuance was $2.34 per share. Pursuant to an
agreement entered into with Mr. Hunt in connection with his resignation as
Peregrine's President and Chief Executive Officer in January 1998, the
shares of Peregrine Common Stock subject to such restricted stock
agreement will continue to vest through March 31, 1998.
(18) Represents $281 in group life insurance excess premiums and $4,875 in
matching contribution under Peregrine's 401(k) paid by Peregrine in fiscal
1998.
(19) Represents $337, $337 and $84 in group life insurance excess premiums paid
by Peregrine in fiscal 1998, 1997 and 1996, respectively; $3,000, $2,375
and $1,875 in matching contributions under Peregrine's 401(k) plan paid by
Peregrine in fiscal 1998, 1997 and 1996, respectively; and $98,362 in
relocation expenses paid by Peregrine in fiscal 1996.
(20) Represents $2,317, $2,106 and $509 in group life insurance excess premiums
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; $2,406,
$2,375 and $594 in matching contributions under Peregrine's 401(k) plan
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; and $34,284
in relocation expenses paid by Peregrine in fiscal 1996.
(21) Represents $337, $337 and $337 in group life insurance premiums paid by
Peregrine in fiscal 1998, 1997 and 1996, respectively and $2,500, $2,375
and $2,375 in matching contributions under Peregrine's 401(k) plan paid by
Peregrine in fiscal 1998, 1997 and 1996, respectively.
(22) Represents $337, $337 and $248 in group life insurance excess premiums
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; $3,609,
$2,548 and $2,340 in matching contributions under Peregrine's 401(k) plan
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; and $5,116
in relocation expenses paid by Peregrine in fiscal 1996.
(23) Represents $1,114, $1,084 and $238 in group life insurance excess premiums
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; $2,628,
$3,778 and $844 in matching contributions under Peregrine's 401(k) plan
paid by Peregrine in fiscal 1998, 1997 and 1996, respectively; $37,500 and
$15,860 in consulting services and accrued vacation payments,
respectively, paid by Peregrine in fiscal 1998; and $15,886 in relocation
expenses paid by Peregrine in fiscal 1996. Amounts paid for consulting
were made in accordance with the terms of Mr. Hunt's severance
arrangements with the Company.
(24) Represents $163 and $218 in group life insurance excess premiums paid by
Peregrine in fiscal 1998 and 1997, respectively; $896 and $4,604 in
matching contributions under Peregrine's 401(k) plan paid by Peregrine in
fiscal 1998 and 1997, respectively; $6,786 in accrued vacation payments
paid by Peregrine in fiscal 1998; and $13,966 in relocation expenses paid
by Peregrine in fiscal 1997.
6
<PAGE>
(b) OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information relating to stock options
awarded to the Named Executive Officers during the fiscal year ended March 31,
1998. All such options were awarded under Peregrine's 1994 Stock Option Plan
(the "1994 Plan").
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUES
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
------------------------------------------------------ RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED FISCAL 1998(2) SHARE(3)(4) DATE(5) 5% 10%
- ----------------------------------- ---------- -------------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE OFFICERS
Stephen P. Gardner................. 100,000 7.47% $ 9.00 05/12/07 $566,005 $ 1,434,368
50,000 3.74 12.50 01/23/08 393,059 996,089
David A. Farley.................... -- -- -- -- -- --
William G. Holsten................. 30,000 2.24 18.00 03/31/08 339,603 860,621
Frederic B. Luddy.................. 25,000 1.87 12.50 01/23/08 196,530 498,045
Douglas S. Powanda................. 75,000 5.6 12.50 01/23/08 589,589 1,494,134
FORMER EXECUTIVE OFFICERS
Alan H. Hunt....................... -- -- -- -- -- --
Douglas F. Garn.................... -- -- -- -- -- --
</TABLE>
- ------------------------------
(1) Potential realizable value is based on the assumption that the Peregrine
Common Stock appreciates at the annual rate shown (compounded annually) from
the date of grant until the expiration of the ten year option term. These
numbers are calculated based on the requirements promulgated by the
Commission and do not reflect Peregrine's estimate of future prices for
Peregrine Common Stock.
(2) Based on options to acquire 1,338,000 shares granted under Peregrine's 1994
Stock Option Plan during fiscal 1998. All options granted to the Peregrine
Named Executive Officers during fiscal 1998 are governed by Peregrine's 1994
Stock Option Plan.
(3) Options were granted at an exercise price equal to the closing sales of the
Peregrine Common Stock on the date of grant as reported by the Nasdaq
National Market.
(4) Exercise price may be paid in cash, check, by delivery of already-owned
shares of Peregrine Common Stock subject to certain conditions, or pursuant
to a cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased shares
and to remit to Peregrine, out of the sale proceeds, an amount equal to the
exercise price plus all applicable withholding taxes.
(5) Twenty-five percent (25%) of the shares issuable upon exercise of options
granted under Peregrine's 1994 Stock Option Plan become vested on the first
anniversary of the date of grant, and the remaining shares vest over three
years at the rate of 6.25% of the shares subject to option at the end of
each three-month period thereafter.
7
<PAGE>
(c) AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
The following table sets forth certain information regarding the exercise of
options by the Peregrine Named Executive Officers during the fiscal year ended
March 31, 1998 and stock options held as of March 31, 1998 by the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT MARCH 31, 1998(2)
SHARES VALUE MARCH 31, 1998 --------------------------------
ACQUIRED REALIZED ---------------------------------- EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE ($)(1) EXERCISABLE (#) UNEXERCISABLE (#) ($) ($)
- ----------------------- ----------- -------------- --------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE
OFFICERS
Stephen P. Gardner..... -- -- -- 150,000 -- 1,343,750
David A. Farley........ 112,500 1,202,375 -- 87,500 -- 1,468,688
William G. Holsten..... 25,000 291,500 47,819 108,125 800,848 1,345,078
Frederic B. Luddy...... -- -- 81,250 43,750 1,463,681 477,844
Douglas S. Powanda..... 25,101 362,217 122,399 127,500 2,069,467 1,378,088
FORMER EXECUTIVE
OFFICERS
Alan H. Hunt(3)........ -- -- 225,000 175,000 3,776,625 2,937,375
Douglas F. Garn(4)..... 87,500 1,316,188 -- 112,500 -- 1,888,318
</TABLE>
- ------------------------------
(1) Based on the fair market value of Peregrine Common Stock on the date of
exercise minus the exercise price.
(2) Amounts reflecting gains on outstanding stock options are based on the
closing price of Peregrine Common Stock on March 31, 1998 of $19.125.
(3) In April 1998, Mr. Hunt exercised options to purchase an aggregate of
185,000 shares of Peregrine Common Stock which resulted in an aggregate
realized value of $4,238,968.
(4) In May 1998, Mr. Garn exercised options to purchase 12,500 shares of
Peregrine Common Stock which resulted in an aggregate realized value of
$245,750.
(d) EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Peregrine does not currently have any employment contracts in effect with
any Named Executive Officer. Peregrine and certain Named Executive Officers are
parties to separate agreements relating to restricted stock issuances, severance
arrangements and consulting arrangements.
Peregrine and David A. Farley, its Chief Financial Officer and a member of
the Peregrine Board, are parties to a restricted stock agreement dated November
1, 1995 pursuant to which Peregrine issued Mr. Farley 200,000 shares of
Peregrine Common Stock. Peregrine and Stephen P. Gardner, its President and
Chief Executive Officer and a member of the Peregrine Board, are parties to a
similarly structured restricted stock agreement dated November 1, 1997 pursuant
to which Peregrine issued Mr. Gardner 50,000 shares of Peregrine Common Stock.
The shares issued to each of Messrs. Farley and Gardner vest incrementally over
ten years, subject to earlier vesting over six years contingent upon Peregrine's
achieving certain financial milestones. The restricted stock agreements permit
Messrs. Farley or Gardner to surrender shares subject to their respective
restricted stock agreements to satisfy withholding tax obligations that arise as
the shares vest. Accordingly, in connection with the vesting of 8,333 shares of
his restricted stock in April 1998, Mr. Gardner surrendered 2,955 shares to
satisfy withholding tax obligations. In the event of a merger or change in
control of Peregrine, all such shares will become automatically vested.
Peregrine is also party to a restricted stock agreement dated November 1,
1995 with Alan H. Hunt, who resigned in January 1998 as Peregrine's President
and Chief Executive Officer and as a member of the Peregrine Board. Pursuant to
the restricted stock agreement with Mr. Hunt, Peregrine issued Mr. Hunt 400,000
shares of Peregrine Common Stock. Such shares were to vest incrementally over
ten years, subject to earlier vesting over six years contingent upon Peregrine
achieving certain financial milestones. In connection with the vesting of 66,000
shares in each of April 1997 and April 1998, Mr. Hunt surrendered
8
<PAGE>
28,296 and 27,296 shares, respectively, to satisfy withholding tax obligations
as permitted by his restricted stock agreement. In January 1998, in connection
with his resignation, Peregrine and Mr. Hunt entered a separate agreement
pursuant to which Peregrine retained Mr. Hunt as a consultant through January
1999 at a monthly fee of $18,750. In addition, the agreement provides that
options held by Mr. Hunt to acquire 215,000 shares of Peregrine Common Stock
will continue to vest through January 1999 (such that 115,000 shares would be
fully vested as of January 31, 1999) and remain exercisable until May 1, 1999.
In addition, the shares subject to the restricted stock agreement between
Peregrine and Mr. Hunt will also continue to vest through March 31, 1999 (such
that 142,408 shares will be vested on March 31, 1999, subject to Peregrine's
achieving the financial milestones set forth in the original restricted stock
agreement). In connection with his resignation, Mr. Hunt also agreed not to
engage in any activities that are competitive with those of Peregrine for a
period of three years ending January 2001.
In connection with his resignation as Peregrine's Vice President, North
American Sales in January 1998, Douglas F. Garn and Peregrine entered into an
agreement whereby Mr. Garn agreed not to engage in activities that are
competitive with those of Peregrine for a period of one year ending January
1999. Pursuant to the terms of Mr. Garn's agreement, Peregrine has agreed that
the options under Peregrine's 1994 Stock Option Plan to acquire 12,500 shares of
Peregrine Common Stock held by Mr. Garn will continue to vest until July 1, 1998
(such that such options would be vested with respect to all 12,500 shares at
such date) and remain exercisable until September 29, 1998.
Under the 1994 Plan, in the event of a merger or a change in control of
Peregrine, vesting of options outstanding under the 1994 Plan will automatically
accelerate such that outstanding options will become fully exercisable,
including with respect to shares for which such options would be otherwise
unvested.
(e) DIRECTOR COMPENSATION
Peregrine reimburses each member of the Peregrine Board for out-of-pocket
expenses incurred in connection with attending Board meetings. No member of the
Peregrine Board currently receives any additional cash compensation. In May
1992, Peregrine granted each of directors Christopher A. Cole, Richard A. Hosley
II, Charles E. Noell III and Norris van den Berg options to acquire 45,000
shares of Common Stock under Peregrine's 1991 Nonqualified Stock Option Plan at
an exercise price of $1.34, the per share fair market value of Peregrine Common
Stock on the date of grant. All such options vested in annual installments over
four years, are now fully exercisable, and expire if not exercised prior to May
2002. In addition, in December 1990, Peregrine granted Christopher A. Cole an
option to acquire 225,000 shares of Peregrine Common Stock under Peregrine's
Nonqualified Stock Option Plan at an exercise price of $0.51 per share, the per
share fair market value of Peregrine Common Stock on the date of grant.
Following Mr. Cole's resignation as an executive officer of Peregrine and in
consideration of his continuing service as a member of the Peregrine Board,
Peregrine extended the exercisability of such option with respect to 56,250
vested shares for so long as Mr. Cole remains a member of the Peregrine Board
but no later than December 2000.
Peregrine's 1997 Director Option Plan (the "Director Plan") provides that
options will be granted to non-employee directors, other than non-employee
directors who hold or are affiliated with a holder of three percent or more of
the outstanding Peregrine Common Stock, pursuant to an automatic
nondiscretionary grant mechanism. Each new non-employee director is
automatically granted an option to purchase 25,000 shares of Peregrine Common
Stock at the time he or she is first elected to the Peregrine Board. Each
non-employee director will subsequently be granted an option to purchase 5,000
shares of Peregrine Common Stock at each annual meeting of stockholders
beginning with the 1998 Annual Meeting of Stockholders. Each such option will be
granted at the fair market value of the Peregrine Common Stock on the date of
grant. Options granted to non-employee directors under the Director Plan will
become exercisable over four years, with 25% of the shares vesting after one
year and the remaining shares vesting in quarterly installments thereafter.
9
<PAGE>
(f) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of Peregrine and administers various incentive compensation and
benefit plans. The Compensation Committee consists of directors Richard A.
Hosley II, John J. Moores and Charles E. Noell III. Stephen P. Gardner,
Peregrine's President, Chief Executive Officer and a member of the Peregrine
Board, participates in all discussions and decisions regarding salaries and
incentive compensation for all employees and consultants of Peregrine, except
that he is excluded from discussions regarding his own salary and incentive
compensation. No interlocking relationship exists between any member of the
Peregrine Compensation Committee and any member of any other company's board of
directors or compensation committee.
10
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Peregrine Common Stock by (i) each person or entity who is
known by Peregrine to own beneficially 5% or more of the outstanding Peregrine
Common Stock; (ii) each member of the Peregrine Board; (iii) each of the Named
Executive Officers; and (iv) all current directors and executive officers of
Peregrine as a group. All information contained in the table below is based on
beneficial ownership as of May 31, 1998.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------
PERCENTAGE
NAME AND ADDRESS (1) NUMBER OWNERSHIP(2)
- ------------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Putnam Investments, Inc. (3) ........................................................ 1,063,401 5.5%
One Post Office Square
Boston, Massachusetts 02109
CURRENT EXECUTIVE OFFICERS AND DIRECTORS
Stephen P. Gardner (4)............................................................... 77,045 *
David A. Farley (5).................................................................. 504,408 2.6
William G. Holsten (6)............................................................... 78,194 *
Frederic B. Luddy (7)................................................................ 83,674 *
Douglas S. Powanda (8)............................................................... 71,150 *
John J. Moores (9)................................................................... 9,524,167 49.4
Norris van den Berg (10)............................................................. 102,336 *
Christopher A. Cole (11)............................................................. 630,821 3.3
Richard A. Hosley II (12)............................................................ -- *
Charles E. Noell III (13)............................................................ 99,587 *
All current executive officers and directors as a group (14 persons) (14)............ 11,123,244 58.6%
FORMER EXECUTIVE OFFICERS
Alan H. Hunt (15).................................................................... 409,408 2.1
Douglas F. Garn (16)................................................................. 12,500 *
</TABLE>
- ------------------------------
* Less than 1%
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of Peregrine's Common Stock shown as
beneficially owned by them, subject to applicable community property laws,
and to the information contained in footnotes to this table. Unless
otherwise indicated, the address for each listed stockholder is c/o
Peregrine Systems, Inc., 12670 High Bluff Drive, San Diego, California
92130.
(2) Applicable percentage ownership is based on 19,264,932 shares of Peregrine
Common Stock outstanding as of May 31, 1998. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities subject to community property laws, where applicable. Shares
of Peregrine's Common Stock subject to options that are presently
exercisable or exercisable within 60 days of May 31, 1998 are deemed to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person. To the extent that any shares are issued upon exercise of
options, warrants or other rights to acquire Peregrine's capital stock that
are presently outstanding or granted in the future or reserved for future
issuance under Peregrine's stock plans, there will be further dilution to
new investors.
(3) Based solely on a Schedule 13G, dated January 16, 1998, filed with the
Commission on January 21, 1998.
(4) Includes 25,000 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998 and 47,045 shares subject to a
restricted stock agreement. Mr. Gardner is Peregrine's President and Chief
Executive Officer and a member of the Peregrine Board.
11
<PAGE>
(5) Includes 200,000 shares subject to a restricted stock agreement. Mr. Farley
is Peregrine's Vice President, Finance, and Chief Financial Officer and a
member of the Peregrine Board.
(6) Includes 57,194 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. Mr. Holsten is Peregrine's Vice
President, Professional Services.
(7) Includes 81,250 shares of Peregrine Common stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. Mr. Luddy is Peregrine's Vice
President, North American Research and Development.
(8) Includes 71,149 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. Mr. Powanda is Peregrine's Vice
President, Worldwide Sales.
(9) Includes 3,623,700 shares held by Mr. Moores as trustee under various
trusts, substantially all of which were established for members of Mr.
Moores's family. Mr. Moores is Chairman of the Peregrine Board.
(10) Includes 45,000 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. Mr. van den Berg is a member
of the Peregrine Board.
(11) Mr. Cole is a member of the Peregrine Board.
(12) Mr. Hosley is a member of the Peregrine Board.
(13) Includes 45,000 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. Mr. Noell is a member of the
Peregrine Board.
(14) Includes 391,125 shares of Peregrine Common Stock issuable upon exercise
of outstanding stock options which are presently exercisable or will
become exercisable within 60 days of May 31, 1998.
(15) Includes 65,000 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998 and 344,408 shares subject to a
restricted stock agreement. In connection with his resignation as
Peregrine's President and Chief Executive Officer in January 1998, Mr.
Hunt and Peregrine entered into an agreement pursuant to which 215,000
shares of Peregrine Common Stock subject to options held by Mr. Hunt will
continue to vest through January 1999 (such that 115,000 shares would be
fully vested as of January 31, 1999 assuming Mr. Hunt does not elect to
exercise any additional vested options prior to such time) and remain
exercisable until May 1, 1999. In addition, 344,408 shares of Peregrine
Common Stock subject to Mr. Hunt's restricted stock agreement will
continue to vest through March 31, 1998 (such that 142,408 shares will be
fully vested on March 31, 1998).
(16) Includes 12,500 shares of Peregrine Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 31, 1998. In connection with his
resignation as Peregrine's Vice President, North American sales in January
1998, Mr. Garn and Peregrine entered into an agreement pursuant to which
12,500 shares of Peregrine Common Stock subject to outstanding options
held by Mr. Garn will continue to vest through July 1, 1998 (such that all
12,500 shares will be fully vested as of July 1, 1998) and remain
exercisable until September 29, 1998.
ITEM 13. CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
John J. Moores, chairman of the Peregrine Board and the majority stockholder
of Peregrine, was party to a Continuing and Unconditional Guaranty dated
November 13, 1995 (as subsequently amended) with NationsBank of Texas, N.A.,
pursuant to which Mr. Moores guaranteed Peregrine's obligations under its bank
line of credit agreement and term loan with NationsBank. Both the credit line
and term loan were repaid from proceeds of Peregrine's April 1997 initial public
offering, and Peregrine terminated the line of credit agreement in September
1997. Peregrine's current line of credit agreement with another bank is not
guaranteed by Mr. Moores.
Peregrine and JMI Services, Inc., an investment management company ("JMI
Services"), are parties to a sublease pursuant to which Peregrine subleases
approximately 13,310 square feet of office space at its San Diego headquarters
to JMI Services. The term of the sublease is from June 1, 1996 through October
21, 2003. The sublease provides for initial monthly rental payments of $16,638
to increase by $666 per month on each anniversary of the sublease. Mr. Moores
serves as Chairman of the Board of JMI Services, and Charles E. Noell, III, a
member of the Peregrine Board, serves as JMI Services' President and Chief
Executive Officer. Peregrine believes that the terms of the sublease are at
competitive market rates.
12
<PAGE>
Peregrine leases a suite at San Diego's Qualcomm Stadium at competitive
rates and on an informal basis from the San Diego Padres Baseball Club, L.P.
(the "Padres"). Mr. Moores has served as owner and Chairman of the Board of the
Padres since December 1994. Peregrine's annual payments for such suite total
approximately $45,000.
From October 1993 through September 1994, Peregrine made various short-term
advances to Frederic B. Luddy, Peregrine's Vice President North American
Research and Development, totalling approximately $360,000. The advances were
non-interest bearing and were paid back each pay period, beginning in March
1994, at the rate of one half of Mr. Luddy's product authorship commission
amount payable for that pay period. On January 15, 1998, the final installment
was made, and the advance was repaid in full.
Pursuant to an Acquisition Agreement dated November 29, 1995 among
Peregrine, Skunkware, Inc. ("Skunkware") and Peregrine/Bridge Transfer
Corporation, at the time a database software subsidiary of Peregrine ("PBTC"),
Peregrine sold all the outstanding shares of PBTC to Skunkware. Under the
Acquisition Agreement, Peregrine receives a royalty on certain license sales of
PBTC and provides certain computer and administrative resources to PBTC for a
monthly fee of $37,500. JMI Equity Fund L.P. ("JMI Equity Fund") is the
controlling stockholder of Skunkware. Mr. Noell and Norris van den Berg, a
member of the Peregrine Board, are general partners of JMI Equity Fund, and Mr.
Moores is a limited partner of JMI Equity Fund.
Peregrine is a party to restricted stock agreements with Messrs. Farley,
Gardner and Hunt pursuant to which Peregrine has issued an aggregate of 650,000
shares of Peregrine's Common Stock. Such agreements are described in Item 11(d)
of this report.
Peregrine has entered into certain agreements with Alan H. Hunt and Douglas
F. Garn relating to their resignation as officers of Peregrine as described in
Item 11(d) of this report.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego, State of California, on July 29, 1998.
<TABLE>
<S> <C> <C>
PEREGRINE SYSTEMS, INC.
By: /s/ DAVID A. FARLEY
-----------------------------------------
David A. Farley
VICE PRESIDENT, FINANCE, AND
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
President and Chief
*/s/ STEPHEN P. GARDNER Executive Officer
- ------------------------------ (Principal Executive July 29, 1998
(Stephen P. Gardner) Officer) and Director
Vice President, Finance,
/s/ DAVID A. FARLEY and Chief Financial
- ------------------------------ Officer (Principal July 29, 1998
(David A. Farley) Financial and Accounting
Officer) and Director
*/s/ JOHN J. MOORES
- ------------------------------ Chairman of the Board of July 29, 1998
(John J. Moores) Directors
*/s/ CHRISTOPER A. COLE
- ------------------------------ Director July 29, 1998
(Christopher A. Cole)
*/s/ RICHARD A. HOSLEY II
- ------------------------------ Director July 29, 1998
(Richard A. Hosley II)
*/s/ CHARLES E. NOELL III
- ------------------------------ Director July 29, 1998
(Charles E. Noell III)
*/s/ NORRIS VAN DEN BERG
- ------------------------------ Director July 29, 1998
(Norris van den Berg)
<TABLE>
<S> <C> <C>
/s/ DAVID A. FARLEY
- ------------------------------
(David A. Farley,
Attorney-in-Fact)
</TABLE>
14
