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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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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<S> <C>
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.
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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value.............. 352,870 shares $36.1875 $12,769,483 $3,767
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low bid prices as reported on the
Nasdaq National Market on October 2, 1998.
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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 (SUBJECT TO COMPLETION) DATED OCTOBER 5, 1998
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 Peregrine's ("PSI") acquisition 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 October 2, 1998, the last reported sale price of the common stock was
$35.5625 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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OCTOBER , 1998
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TABLE OF CONTENTS
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PAGE
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Available Information.................................................................................... 2
Information Incorporated by Reference.................................................................... 2
Forward Looking Information.............................................................................. 3
The Company.............................................................................................. 4
Risk Factors............................................................................................. 4
Use of Proceeds......................................................................................... 15
Selling Stockholders.................................................................................... 15
Plan of Distribution.................................................................................... 16
Legal Matters........................................................................................... 17
Experts................................................................................................. 18
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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, the "Company," the "Registrant," "Peregrine," "PSI,"
"we," "us," and "our" refer to Peregrine Systems, Inc. and its predecessor.
AVAILABLE INFORMATION
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 those documents. 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. ). 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.
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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.
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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THE COMPANY
We provide enterprise infrastructure management application software. The
objective of our infrastructure management strategy is to provide organizations
control over their infrastructure assets and related information throughout the
asset life cycle. Our applications enable customers to maximize the availability
of assets, minimize investments and expenses, consolidate enterprise data, and
interface to enterprise applications. We develop, market, and support an
integrated suite of applications that automates the management of complex,
enterprise-wide information and infrastructure assets. Our main product suites,
SERVICECENTER and ASSETCENTER, are designed to address the enterprise service
desk and asset management requirements of large organizations. These product
suites can be deployed across all major hardware platforms and network operating
systems and protocols. Each utilizes advanced client/server and intelligent
agent technologies and a modular architecture. To optimize performance and
minimize costs, the SERVICECENTER and ASSETCENTER product suites are intended to
provide organizations a single view of all elements of their infrastructure.
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").
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.
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POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
Our quarterly operating results have varied significantly in the past and
may vary greatly in the future depending upon a number of factors, including
those listed below. Many of the factors are beyond our control:
- our ability to develop, introduce, and market new and enhanced versions of
our software on a timely basis
- market demand for our software products
- the size, timing, and contractual terms of large orders for our software
products
- the timing and impact of new software product announcements or releases by
PSI or our competitors
- changes in our pricing policies or the pricing policies of our competitors
- changes in our business strategies
- the budgeting cycles of our potential customers
- changes in the mix of software products and services sold by PSI or our
competitors
- changes in the mix of revenues attributable to domestic and international
sales
- the impact of acquisitions involving PSI or our competitors
- seasonal trends
- customers canceling license or maintenance agreements
- product life cycles
- software defects and other product quality problems
- personnel changes
We have historically operated with little or no backlog and have often
recognized a substantial portion of our revenues in the last month or weeks of a
quarter. As a result, our license revenues in any quarter are greatly dependent
on orders booked and shipped in the last month or weeks of that quarter. As a
result, it is difficult to accurately predict revenues and operating results for
future quarters.
In addition, if there is any downturn in potential customers' businesses or
the economy in general, customers may defer or cancel planned purchases of our
products. Such deferrals or cancellations could materially adversely affect our
business, operating results, and financial condition.
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
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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, the quarter ended September 30 tends to
reflect the effects of summer slowing of international business activity,
particularly in Europe.
PRODUCT CONCENTRATION
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 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
AND RAPID TECHNOLOGY CHANGE
Until recently, we have focused on developing software products to help
manage many aspects of a business's information technology ("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
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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.
As a result of rapid technology 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 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 engineering teams from Innovative with our
existing teams so that such teams will successfully cooperate and realize any
technological benefits from the combined businesses. 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. 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. 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 have materially adversely affect our business, results of operations,
and financial condition. We expect any such affects to be felt most strongly in
the quarter ending September 30, 1998 and other near-term quarters.
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INTEGRATION OF INTERNATIONAL SOFTWARE SOLUTIONS INTO PSI'S PRODUCTS
Our acquisition of remote control technology from International Software
Solutions ("ISS"), which was completed in September 1998, will require
integrating the ISS technology with SERVICECENTER and ASSETCENTER. 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.
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 PSI ACQUISITIONS
We have recently completed our acquisitions of Apsylog, Innovative, and the
ISS technology. In the future PSI may make acquisitions of, or large investments
in, other businesses that offer products, services, and technologies that
further our goal of providing integrated infrastructure management software
solutions to businesses. Our acquisitions of Apsylog, Innovative and the ISS
technology and any future acquisitions or investments that PSI were to complete
present risks commonly encountered with these types of transactions. The
following are examples of such risks:
- difficulty in combining the technology, operations, or work force of the
acquired business
- disruption of the Company's on-going businesses
- difficulty in realizing the potential financial and strategic position of
PSI through the successful integration of the acquired business
- 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
- difficulty in obtaining preferred acquisition accounting treatment for
these types of transactions
- diversion of management attention
The risks described above, either individually or in the aggregate, could
materially adversely affect our business, operating results, and financial
condition.
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. However, we may not be able to complete any such additional
acquisitions in the future.
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
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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.
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 the past we have experienced difficulty in
recruiting qualified personnel. New employees generally require substantial
training in the use of our products. We may not succeed in attracting and
retaining such personnel. If we do not, our business, operating results, and
financial condition could be materially adversely affected.
FOREIGN EMPLOYEES
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. Currently, Congress is
considering approving an increase in the number of visas available. We cannot
predict whether such legislation will ultimately become law. We also cannot
predict 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 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 have faced 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
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- the internal information technology departments of those companies with
infrastructure management needs
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
10
<PAGE>
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 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. 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.
Recent instability in the Asian-Pacific economies and financial marketsa
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.
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.
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
11
<PAGE>
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 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.
12
<PAGE>
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. 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. Any such
claims, 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. Royalty or license agreements may not be available on
acceptable terms or at all. 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. Although we have not experienced any product liability
claims to date, the sale and support of our products entails the risk of such
claims. We may be subject to such 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
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 believes 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
13
<PAGE>
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.
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.
14
<PAGE>
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 and the volume of PSI
common stock traded has fluctuated greatly as well. We expect such fluctuation
to continue. The fluctuation result due to a number of factors including:
- 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.
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.
<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 sold 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
15
<PAGE>
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 to governing
the ISS Acquisition 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 and
generally includes voting or investment power with respect to securities,
subject to community property laws, where applicable. Shares of common stock
subject to options that are presently exercisable or exercisable within 60
days of September 30, 1998 are deemed to be beneficially owned by the person
holding such options for the purpose of computing the percentage of
ownership of such person but are not treated as outstanding for the purpose
of computing the percentage of any other person. To the extent that any
shares are issued upon exercise of options, warrants or other rights to
acquire the Company's capital stock that are presently outstanding or
granted in the future or reserved for future issuance under the Company's
stock plans, there will be further dilution to new public investors.
(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
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-
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<PAGE>
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, 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 is 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 more than
once. The Company is obligated in the event of such suspension to use its
reasonable efforts 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
up to fifteen calendar days following the effective date of this Prospectus.
Trading of any unsold shares after the expiration of fifteen days following the
effective date of this prospectus 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 it 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.
17
<PAGE>
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, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The consolidated financial statements of Innovative Tech Systems, Inc., as
of January 31, 1998 and 1997, and 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.
18
<PAGE>
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>
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 Exchange
Act) that is incorporated by reference in the Registration Statement shall be
deemed to be a new
II-2
<PAGE>
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 certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 5th day of
October, 1998.
<TABLE>
<S> <C> <C>
PEREGRINE SYSTEMS, INC.
By: /s/ DAVID A. FARLEY
-----------------------------------------
David A. Farley,
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose signature
appears below constitutes and appoints, jointly and severally, Stephen P.
Gardner and David A. Farley their attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-3 (including post-effective amendments), to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, thereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutions, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
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 October 5, 1998
Stephen P. Gardner Officer) and Director
/s/ DAVID A. FARLEY Chief Financial Officer
- ------------------------------ (Principal Financial October 5, 1998
David A. Farley Officer) and Director
/s/ JOHN J. MOORES
- ------------------------------ Chairman of the Board of October 5, 1998
John J. Moores Directors
/s/ CHRISTOPHER A. COLE
- ------------------------------ Director October 5, 1998
Christopher A. Cole
/s/ RICHARD A. HOSLEY, II
- ------------------------------ Director October 5, 1998
Richard A. Hosley, II
/s/ CHARLES E. NOELL, III
- ------------------------------ Director October 5, 1998
Charles E. Noell, III
/s/ NORRIS VAN DEN BERG
- ------------------------------ Director October 5, 1998
Norris Van Den Berg
/s/ MATTHEW GLESS
- ------------------------------ Principal Accounting October 5, 1998
Matthew Gless Officer
</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>
<PAGE>
EXHIBIT 4.3
PEREGRINE SYSTEMS, INC.
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("DECLARATION") is made September
23, 1998, by Peregrine Systems, Inc., a Delaware corporation (the "COMPANY"),
for the benefit of the Sellers and the Partners (as defined in the Asset
Purchase Agreement of even date herewith (the "ASSET PURCHASE AGREEMENT") by and
among the Company, the Sellers, and the Partners (as such terms are defined in
the Asset Purchase Agreement), and in consideration of the Sellers' and the
Partners' entering into the Asset Purchase Agreement and the transactions
contemplated thereby. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement.
1. DEFINITIONS. As used in this Declaration:
(a) "EFFECTIVE TIME" means the time of the purchase and sale of the
Acquired Assets.
(b) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
(c) "HOLDER" means (i) a Seller to whom shares of Common Stock of the
Company are issued pursuant to the Asset Purchase Agreement or (ii) any
transferee (including a Partner) to whom registration rights granted under
this Declaration are assigned pursuant to Section 7 of this Declaration.
(d) "REGISTRABLE SECURITIES" means, for each Holder, the number of
shares of Common Stock of the Company issued to such Holder pursuant to the
Asset Purchase Agreement; PROVIDED, HOWEVER, that (i) any Common Stock of
the Company (other than Escrow Shares) that were Registrable Securities
hereunder shall cease to be Registrable Securities after the Company has
satisfied its obligations to register for resale and maintain the
effectiveness of a registration statement relating to such shares on the
terms and conditions set forth in Section 2(b) and (ii) any Escrow Shares
shall cease to be Registrable Securities hereunder at such time as they may
be resold in reliance on Rule 144 under the Securities Act.
(e) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
(f) "SEC" means the United States Securities and Exchange Commission.
2. HOLDER REGISTRATION.
(a) The Company shall use its best efforts to cause the Registrable
Securities (other than the Escrow Shares) held by each Holder to be
registered under the Securities Act so as to permit the sale thereof, and in
connection therewith shall prepare and file with the SEC not later than
October 5, 1998, a registration statement covering all the Registrable
Securities (other than the Escrow Shares) on such form as is then available
under the Securities Act; PROVIDED, HOWEVER, that each Holder shall provide
all such information and materials regarding such Holder and take all such
action as may be required by a Holder under applicable laws and regulations
in order to permit the Company to comply with all applicable requirements of
the Securities Act, the Exchange Act, and the SEC, and to obtain any desired
acceleration of the effective date of such registration statement, such
provision of information and materials to be a condition precedent to the
obligations of the Company pursuant to this Declaration to register the
Registrable Securities (other than the Escrow Shares) held by each such
Holder. Notwithstanding the foregoing, the Company shall not be required
(assuming no review by the SEC) to request acceleration of such registration
statement for any date prior to October 15, 1998. The offerings made
pursuant to such registration shall not be underwritten.
(b) The Company shall (i) prepare and file with the SEC the registration
statement in accordance with Section 2 hereof with respect to the
Registrable Securities and shall use its best efforts to cause such
registration statement to become effective as promptly as practicable after
filing (but shall not be required to request acceleration for any date prior
to October 15, 1998) and to keep such registration statement effective until
the first to occur of (A) the date on which all Registrable
<PAGE>
Securities included within such registration statement have been sold or (B)
the expiration of fifteen (15) calendar days after the day on which such
registration statement has been declared effective; (ii) prepare and file
with the SEC such amendments to such registration statement and amendments
or supplements to the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities registered by such
registration statement; (iii) furnish to each Holder such number of copies
of any prospectus (including any preliminary prospectus and any amended or
supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably
request in order to effect the offering and sale of the Registrable
Securities to be offered and sold, but only while the Company shall be
required under the provisions hereof to cause the registration statement to
remain effective; (iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request (provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such jurisdiction
where it has not been qualified or is not otherwise subject to a general
consent for service of process), and do any and all other acts or things
which may be necessary or advisable to enable each Holder to consummate the
public sale or other disposition of such Registrable Securities in such
jurisdictions; and (v) notify each Holder, promptly after it shall receive
notice thereof, of the date and time the registration statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed.
3. PIGGYBACK REGISTRATIONS. In the event the Escrow Shares are not, upon
release from the Escrow Funds, eligible for resale in reliance on Rule 144 under
the Securities Act, the Holders shall be entitled to piggy-back registration
rights as set forth in this Section 3. If (i) the Escrow Shares are not so
eligible and (ii) the Company shall determine to register any of its securities,
either for its own account or the account of another holder of the Company's
securities, the Company will promptly give each Holder written notice thereof
and include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Escrow Shares that are then Registrable Securities. In the event a Holder elects
not to participate in any registration hereunder (including as a result of such
Holder's disapproval of the terms of any underwriting), such Holder's rights
under this Section 3 shall terminate. Notwithstanding any other provision of
this Section 3, if the managing underwriter (in the case of an underwritten
offering by the Company) determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting (or exclude the Registrable Securities altogether); PROVIDED,
HOWEVER, that (i) in no event may the number of Registrable Securities included
in such registration statement be limited in any manner if the securities of any
other security holder of the Company are included in such registration and (ii)
any Registrable Securities so excluded shall continue to be Registrable
Securities, subject to the terms of this Declaration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 3 prior to the effectiveness of such registration, but any such
termination shall not result in a forfeiture by any Holder of any rights
hereunder.
4. SUSPENSION OF PROSPECTUS. Under any registration statement filed
pursuant to this Declaration, the Company may restrict disposition of
Registrable Securities, and a Holder will not be able to dispose of such
Registrable Securities, if the Company shall have delivered a notice in writing
to such Holder stating that a delay in the disposition of such Registrable
Securities is necessary because the Company, in its reasonable judgment, has
determined that such sales would require public disclosure by the Company of
material non-public information that is not included in such registration
statement. In the event of the delivery of the notice described above by the
Company in the case of a registration statement filed pursuant to Section 2, the
Company shall amend such registration statement and/or amend or supplement the
related prospectus if necessary to take all other actions necessary to allow the
proposed sale to take
2
<PAGE>
place as promptly as possible, subject, however, to the right of the Company to
delay further sales of Registrable Securities until the conditions or
circumstances referred to in the notice have ceased to exist or have been
disclosed. In the case of the registration statement filed pursuant to Section
2, such right to delay sales of Registrable Securities shall not exceed fifteen
(15) days and may not be exercised by the Company more than once. Any such delay
shall result in a corresponding extension of the period of time that the Company
is required to maintain the effectiveness of the registration statement under
Section 2.
5. EXPENSES. All of the out-of-pocket expenses incurred in connection with
any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all SEC, Nasdaq National Market and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees, and the fees and disbursements of the Company's outside
counsel and independent accountants shall be paid by the Company. The Company
shall not be responsible to pay any legal fees for any Holder or any selling
expenses of any Holder (including, without limitation, any broker's fees or
commissions, including underwriter commissions).
6. INDEMNIFICATION. In the event of any offering registered pursuant to
this Declaration:
(a) The Company will indemnify each Holder and each of its officers,
directors, and partners and such Holder's legal counsel, and each person
controlling such Holder (each, a "Seller Indemnified Party"), with respect
to any registration, qualification or compliance effected pursuant to this
Declaration against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act,
or state securities laws, or common law, applicable to the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Seller Indemnified Party for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that the Company
will not be liable in any such case to the extent (but solely to the extent)
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company in an instrument duly executed by such Seller
Indemnified Party and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors
and officers and its legal counsel and independent accountants, and each
other such Holder (each, a "Company Indemnified Party"), against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse each
Company Indemnified Party for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed
by such Holder and stated to be specifically for use therein; PROVIDED,
HOWEVER, that the obligations of such Holders hereunder shall be limited to
an amount equal
3
<PAGE>
to the gross proceeds (after deducting reasonable expenses and commissions)
to each such Holder of Registrable Securities sold as contemplated herein.
(c) Each Company Indemnified Party or Seller Indemnified Party entitled
to indemnification under this Section 6 (each referred to herein as an
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified
Party has written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Declaration, except to
the extent, but only to the extent, that the Indemnifying Party's ability to
defend against such claim or litigation is impaired as a result of such
failure to give notice. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) If the indemnification provided for in the preceding paragraphs of
this Section 6 is unavailable to an Indemnified Party in respect of any
expenses, claims, losses, damages or liabilities referred to herein, or is
insufficient to hold such Indemnified Party harmless, then, except to the
extent that contribution is not permitted under Section 11(f) of the
Securities Act, the Company and the Holders, as the case may require, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such expenses, claims, losses, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company,
such Holder, or such Indemnified Party, as the case may be, in connection
with the actions, statements or omissions that resulted in such expenses,
claims, losses, damages or liabilities. The relative fault of the Company,
such Holder, and such Indemnified Party, shall be determined by reference
to, among other things, whether any action in question, including any untrue
statement of a material fact or omission to state a material fact, has been
taken or made by, or relates to information supplied by, the Company, such
Holder, or such Indemnified Party, and the parties' relative intent,
knowledge, access to information concerning the matter with respect to which
the claim was asserted and opportunity to correct or prevent such action,
statement or omission, as well as any other relevant equitable
considerations appropriate under the circumstances. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
paragraph (d) were determined by PRO RATA allocation or by any other method
of allocation that does not take into account the equitable considerations
referred to in the immediately preceding sentence. Notwithstanding the
provisions of this paragraph (d), no Holder shall be required to contribute
any amount in excess of the amount by which the gross proceeds (after
deducting reasonable expenses and commissions) received by such Holder from
the sale of Registrable Securities exceeds the amount of any damages that
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The obligations of the Company and each Holder under this Section 6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Declaration.
(f) Notwithstanding the foregoing, to the extent the provisions of this
Section 6 are inconsistent with or conflict with the terms of any
indemnification, selling or similar agreement entered into by a Holder in
connection with the offer and sale of Registrable Securities pursuant to a
registration effected pursuant to this Declaration, the terms of such
agreement shall govern and shall supersede the provisions of this
Declaration.
4
<PAGE>
7. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Declaration may be assigned by
a Holder to a transferee of Registrable Securities only if: (a) the Company is,
prior to such transfer, furnished with written notice of the name and address of
such transferee and the Registrable Securities with respect to which such
registration rights are being assigned and a copy of a duly executed written
instrument in form reasonably satisfactory to the Company by which such
transferee assumes all of the obligations and liabilities of its transferor
hereunder and agrees itself to be bound hereby; (b) immediately following such
transfer the disposition of such Registrable Securities by the transferee is
restricted under the Securities Act; and (c) such assignment includes all of the
Registrable Securities originally issued to the transferee; PROVIDED, HOWEVER,
that such share limitation shall not apply to transfers by a Holder to
shareholders, partners, or members of the Holder (including spouses and
ancestors, lineal descendants, and siblings (or trusts for the benefit of any of
the foregoing) of such shareholders, partners, or members who acquire
Registrable Securities by right, will, or intestate succession) if all such
transferees or assignees agree in writing to appoint a single representative as
their attorney-in-fact for the purpose of receiving any notices and exercising
their rights under this Declaration.
8. NO ADDITIONAL SECURITIES. The Company agrees it will not include any
additional securities of the Company (other than the Registrable Securities),
and will not permit any other person or entity to include any additional
securities, in the registration statement to be filed pursuant to Section 2
hereof.
9. AMENDMENT OF REGISTRATION RIGHTS. Holders of a majority of the
Registrable Securities from time to time outstanding may, with the consent of
the Company, amend the registration rights granted hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
<TABLE>
<S> <C> <C>
PEREGRINE SYSTEMS, INC.
By: /s/ DAVID A. FARLEY
-----------------------------------------
David A. Farley
VICE PRESIDENT, FINANCE,
AND CHIEF FINANCIAL OFFICER
</TABLE>
[SIGNATURE PAGE TO DECLARATION OF REGISTRATION RIGHTS]
6
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
October 5, 1998
Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, California 92130
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you
with the Securities and Exchange Commission on October 5, 1998 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 352,870 shares of your common stock (the
"Shares"), all of which are authorized and have been previously issued to the
selling stockholders named therein in connection with the acquisition by the
Company of certain of the assets and assumption of certain liabilities of
International Software Solutions, L.P. and related persons or entities. The
Shares are to be offered by the selling stockholders for sale to the public as
described in the Registration Statement. As your counsel in connection with this
transaction, we have examined the proceedings taken and proposed to be taken in
connection with the sale of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated to be taken prior to the registration of the Shares, including such
proceedings to be carried out in accordance with the securities laws of the
various states, where required, the Shares, when sold in the manner referred to
in the Registration Statement, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<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.
ARTHUR ANDERSEN, LLP
San Diego, California
October 5, 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.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 5, 1998
