<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PEREGRINE SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 7, 1999
1:00 p.m.
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Peregrine Systems, Inc., a Delaware corporation (the "Company"), will be held
on Tuesday, September 7, 1999, at 1:00 p.m., local time, at the Company's
principal executive offices at 12670 High Bluff Drive, San Diego, California
92130 for the following purposes:
1. To elect directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected;
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending March 31, 2000;
and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close
of business on July 23, 1999 are entitled to notice of and to vote at the
meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date, and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose or, for our holders of
record of Common Stock, utilize the convenient option of voting by telephone.
YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE ANNUAL MEETING. ANY
STOCKHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE
HAS RETURNED A PROXY.
For the Board of Directors
PEREGRINE SYSTEMS, INC.
/s/ Richard T. Nelson
Richard T. Nelson
SECRETARY
San Diego, California
August 5, 1999
- -------------------------------------------------------------------------------
- - YOUR VOTE IS IMPORTANT. -
- - -
- - IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED -
- - TO COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND -
- - RETURN IT IN THE ENCLOSED ENVELOPE OR, FOR OUR HOLDERS OF RECORD OF COMMON -
- - STOCK, UTILIZE THE CONVENIENT OPTION OF VOTING BY TELEPHONE. -
- -------------------------------------------------------------------------------
<PAGE>
PEREGRINE SYSTEMS, INC.
_______________________
PROXY STATEMENT FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
_______________________
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Peregrine Systems, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Tuesday, September 7, 1999, at 1:00 p.m., local time, or at any adjournment
or postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Company's principal executive offices at 12670 High Bluff
Drive, San Diego, California 92130. The telephone number at that location is
(858) 481-5000. When proxies are properly dated, executed, and returned, the
shares they represent will be voted at the Annual Meeting in accordance with
the instructions of the stockholder. If no specific instructions are given,
the shares will be voted for the election of the nominees for directors set
forth herein; for the ratification of the appointment of Arthur Andersen LLP
as independent public accountants as set forth herein; and at the discretion
of the proxy holders, upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders
for the year ended March 31, 1999, including financial statements, were first
mailed on or about August 5, 1999, to all stockholders entitled to vote at
the Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on July 23, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
At the Record Date, the Company had issued and outstanding and entitled to
vote 49,721,752 shares of Common Stock, $.001 par value.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by
(i) filing with the Secretary of the Company, at or before the taking of the
vote at the Annual Meeting, a written notice of revocation bearing a later
date than the proxy, (ii) duly executing a later dated proxy relating to the
same shares and delivering it to the Secretary of the Company at or before
the taking of the vote at the Annual Meeting, or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will
not in and of itself constitute a revocation of a proxy). Any written notice
of revocation or subsequent proxy should be delivered to Peregrine Systems,
Inc. at 12670 High Bluff Drive, San Diego, California 92130, Attention:
Secretary, or hand-delivered to the Secretary of the Company at or before the
taking of the vote at the Annual Meeting.
VOTING
Each share of Common Stock outstanding on the Record Date is entitled to
one vote. Stockholders' votes will be tabulated by persons appointed by the
Board of Directors to act as inspectors of election for the Annual Meeting.
Abstentions are considered shares present and entitled to vote and,
therefore, have the same legal effect as a vote against a matter presented at
the Annual Meeting. Any shares held in street name for which the broker or
nominee receives no instructions from the beneficial owner, and as to which
such broker or nominee does not have discretionary voting authority under
applicable New York Stock Exchange rules, will be considered as shares not
entitled to vote and will therefore not be considered in the tabulation of
the votes but will be considered for purposes of determining the presence of
a quorum.
SOLICITATION OF PROXIES
The expense of soliciting proxies in the enclosed form will be borne by
the Company. In addition, the Company may reimburse banks, brokerage firms,
and other custodians, nominees, and fiduciaries representing beneficial
owners of
1
<PAGE>
shares for their expenses in forwarding soliciting materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and employees, personally or by telephone, telegram,
facsimile, or other means of communication. No additional compensation will
be paid for such services.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules
promulgated by the Securities and Exchange Commission. Proposals of
stockholders of the Company intended to be presented for consideration at the
Company's 2000 Annual Meeting of Stockholders must be received by the Company
no later than April 7, 2000, in order that they may be included in the proxy
statement and form of proxy related to that meeting.
The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the Annual Meeting. If a stockholder intends
to submit a proposal at the 2000 Annual Meeting, which is not eligible for
inclusion in the proxy statement and form of proxy relating to that meeting,
the stockholder must do so no later than June 21, 2000. If such a
stockholder fails to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary voting authority when the
proposal is raised at the 2000 Annual Meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, a Board of eight directors will be elected, each
to hold office until his or her successor is elected and qualified, or until
his or her death, resignation, or removal. Shares represented by the
accompanying proxy will be voted for the election of the eight nominees
(recommended by the Board of Directors) who are named in the following table,
unless the proxy is marked in such a manner as to withhold authority so to
vote. The Company has no reason to believe that the nominees for election
will not be available to serve their prescribed terms. If any nominee for
any reason is unable to serve or will not serve, however, the proxy may be
voted for such substitute nominee as the persons appointed in the proxy may
in their discretion determine. The Board of Directors will consider the
names and qualifications of candidates for the Board submitted by
stockholders in accordance with the procedures set forth in "Deadline for
Receipt of Stockholder Proposals for 2000 Annual Meeting" above and in the
Bylaws of the Corporation. The following table sets forth certain
information concerning the nominees, which information is based on data
furnished to the Company by the nominees:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH THE COMPANY SINCE
---- --- ---------------------------- -----
<S> <C> <C> <C>
Stephen P. Gardner........... 45 President, Chief Executive Officer, and Director 1998
David A. Farley.............. 44 Senior Vice President, Finance and Administration, 1995
Chief Financial Officer, and Director
John J. Moores (1)........... 54 Chairman of the Board of Directors 1989
Christopher A. Cole.......... 45 Director 1981
Richard A. Hosley II (1)..... 54 Director 1992
Charles E. Noell III (1)(2).. 47 Director 1992
Norris van den Berg (2)...... 60 Director 1992
Thomas G. Watrous, Sr. (1)... 57 Director 1999
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
There is no family relationship among any of the directors and executive
officers of the Company.
2
<PAGE>
STEPHEN P. GARDNER has served as the Company's President and Chief
Executive Officer and as a member of the Board of Directors since April 1998.
From January 1998 until April 1998, Mr. Gardner served as Executive Vice
President and the Company's Principal Executive Officer. From May 1997 until
January 1998, Mr. Gardner served as the Company's Vice President, Strategic
Acquisitions. From May 1996 until May 1997, Mr. Gardner was President of
Thunder & Lightning Company, an internet software company. From March 1995
until May 1996, Mr. Gardner was President of Alpharel, Inc., a document
management software company. From March 1993 until March 1995, Mr. Gardner
was Vice President of Data General Corporation, a manufacturer of multiuser
computer systems, peripheral equipment, communications systems, and related
products.
DAVID A. FARLEY has served as the Company's Senior Vice President,
Finance and Administration since August 1998, and Chief Financial Officer and
as a member of the Board of Directors since October 1995. Mr. Farley served
as Vice President, Finance from October 1995 until August 1998 and as
Secretary of the Company from October 1995 until February 1997. From November
1994 to November 1995, Mr. Farley was Vice President, Finance, and Chief
Financial Officer and a director of XVT Software Inc., a development tools
software company. From December 1984 until October 1994, Mr. Farley held
various accounting and financial positions at BMC Software, Inc., a vendor of
software system utilities for IBM mainframe computing environments ("BMC"),
most recently as Chief Financial Officer and as a director.
JOHN J. MOORES has served as Chairman of the Company's Board of
Directors since March 1990 and as a member of the Board of Directors since
March 1989. In 1980, Mr. Moores founded BMC and served as its President and
Chief Executive Officer from 1980 to 1986 and as Chairman of its Board of
Directors from 1980 to 1992. Since December 1994, Mr. Moores has served as
owner and Chairman of the Board of the San Diego Padres Baseball Club, L.P.
and since September 1991 as Chairman of the Board of JMI Services, Inc., a
private investment company. Mr. Moores also serves as a director and member
of the Compensation Committee of Bindview Development Corp. and Neon Systems,
Inc.
CHRISTOPHER A. COLE has served as a member of the Company's Board of
Directors since founding the Company in 1981. He also served as its President
and Chief Executive Officer from 1986 until 1989. Since 1992, Mr. Cole has
served as President and Chief Executive Officer of Questrel, Inc., Ur
Studios, Inc., and Headlamp, Inc., each a software development company.
RICHARD A. HOSLEY II has served as a member of the Company's Board of
Directors since January 1992. Prior to retiring from full-time employment,
Mr. Hosley served as President and Chief Executive Officer of BMC. Mr. Hosley
also serves as a director of Bindview Development Corp and a number of
private companies.
CHARLES E. NOELL III has served as a member of the Company's Board of
Directors since January 1992. Since January 1992, Mr. Noell has served as
President and Chief Executive Officer of JMI Services, Inc., a private
investment company, and as a General Partner of JMI Equity Partners, L.P.
("JMI Equity Partners"). JMI Equity Partners is the General Partner of JMI
Equity Fund, L.P., a venture capital investment firm ("JMI Equity Fund"). Mr.
Noell also serves as a director of Transaction Systems Architects, Inc., and
as a director and member of the compensation committee of Neon Systems. Inc.
Mr. Noell is a director of a number of private companies.
NORRIS VAN DEN BERG has served as a member of the Company's Board of
Directors since January 1992. Mr. van den Berg has served as a General
Partner of JMI Equity Partners since July 1991. JMI Equity Partners is the
General Partner of JMI Equity Fund. Mr. van den Berg also serves as director
of Neon Systems, Inc.
THOMAS G. WATROUS, SR. has served as a member of the Company's Board of
Directors since January 1999. Prior to retiring from full-time employment in
September 1999, Mr. Watrous was a senior partner with the management
consulting firm of Andersen Consulting.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Directors will be elected by a plurality of the votes of the shares
present and entitled to vote at the Annual Meeting and entitled to vote on
the election of directors. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE FOREGOING SLATE OF NOMINEES AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ELECTION OF THE NOMINEES LISTED ABOVE.
BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held six meetings during the fiscal
year ended March 31, 1999. No incumbent director during fiscal 1999 attended
fewer than seventy-five percent (75%) of the aggregate of (i) the total
3
<PAGE>
number of meetings of the Board of Directors held during the period for which
such person was a director and (ii) the total number of meetings held by all
committees of the Board of Directors on which such person served (during the
period such person served). The Board of Directors has standing Audit and
Compensation Committees. The Board of Directors does not have a Nominating
Committee.
The Audit Committee was comprised of Charles E. Noell III and Norris van
den Berg during fiscal 1999. No formal Audit Committee meetings were held
during fiscal 1999. The members did meet with the Company's independent
auditors after year-end to discuss the audit approach and results. The
purposes of the Audit Committee are to review with the Company's management
and independent accountants such matters as internal accounting controls and
procedures, the plan and results of the annual audit, and suggestions of the
accountants for improvements in accounting procedures; to nominate
independent accountants; and to provide such additional information as the
committee may deem necessary to make the Board of Directors aware of
significant financial matters which require the Board's attention.
The members of the Compensation Committee during fiscal 1999 were John
J. Moores, Richard A. Hosley II, Charles E. Noell III and, since January
1999, Thomas G. Watrous, Sr. The Compensation Committee held five meetings
during fiscal 1999. The purposes of the Compensation Committee are to review
and approve the compensation to be paid or provided to the Company's
executive officers, the aggregate compensation of all employees of the
Company, and the terms of compensation plans of all types.
DIRECTOR COMPENSATION
The Company reimburses each member of the Company's Board of Directors
for out-of-pocket expenses incurred in connection with attending Board
meetings. Prior to fiscal 1999, no member of the Board of Directors received
any additional cash compensation. Beginning in fiscal 1999, each nonemployee
member of the Board receives $2,000 for each meeting of the Board and $1,000
for each meeting of a committee on which he serves, if attended in person,
and $500 for any Board or committee meeting attended telephonically. In
September 1998, the Company granted each of directors Christopher Cole,
Richard A. Hosley II, Charles E. Noell III, and Norris van den Berg options
to acquire 25,000 shares of Common Stock under the Company's 1994 Stock
Option Plan at an exercise price of $15.00, the per share market value of the
Company's Common Stock on the date of grant. All such options become
exercisable over four years, with 25% vesting after one year and the
remaining shares vesting in quarterly installments thereafter. The grants
expire if not exercised prior to September 2008. In May 1992, the Company
granted each of directors Christopher A. Cole, Richard A. Hosley II, Charles
E. Noell III and Norris van den Berg options to acquire 90,000 shares of
Common Stock under the Company's 1991 Nonqualified Stock Option Plan at an
exercise price of $0.67, the per share fair market value of the Company's
Common Stock on the date of grant. All such options vested in annual
installments over four years, are now fully exercisable, and expire if not
exercised prior to May 2002. In addition, in December 1990, the Company
granted Christopher A. Cole an option to acquire 225,000 shares of Common
Stock under the Company's Nonqualified Stock Option Plan at an exercise price
of $0.51 per share, the per share fair market value of the Company's Common
Stock on the date of grant. Following Mr. Cole's resignation as an executive
officer of the Company and in consideration of his continuing service as a
member of the Board of Directors, the Company extended the exercisability of
such option with respect to 56,250 vested shares for so long as Mr. Cole
remains a member of the Board of Directors but no later than December 2000.
The Company's 1997 Director Option Plan (the "Director Plan") provides
that options will be granted to nonemployee directors, other than nonemployee
directors who hold or are affiliated with a holder of three percent or more
of the outstanding Common Stock of the Company, pursuant to an automatic
nondiscretionary grant mechanism. Each new nonemployee director is
automatically granted an option to purchase 25,000 shares of the Company's
Common Stock at the time he or she is first elected to the Company Board.
Each nonemployee director will subsequently be granted an option to purchase
5,000 shares of Company Common Stock at each annual meeting of stockholders.
Each such option will be granted at the fair market value of the Common Stock
on the date of grant. Options granted to nonemployee directors under the
Director Plan will become exercisable over four years, with 25% of the shares
vesting after one year and the remaining shares vesting in quarterly
installments thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company and administers various incentive compensation and
benefit plans. The Compensation Committee consists of directors Richard A.
Hosley II, John J. Moores, Charles E. Noell III and, since January 1999,
Thomas G. Watrous, Sr. The Company's Chief Executive Officer participates in
all
4
<PAGE>
discussions and decisions regarding salaries and incentive compensation for
all employees and consultants of the Company, except that he is excluded from
discussions regarding his own salary and incentive compensation. No
interlocking relationship exists between any member of the Company's
Compensation Committee and any member of any other company's board of
directors or compensation committee.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
accountants, to audit the financial statements of the Company for the current
fiscal year ending March 31, 2000. The Company expects that a representative
of Arthur Andersen LLP will be present at the Annual Meeting, will have the
opportunity to make a statement if he or she desires to do so, and will be
available to answer any appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual
Meeting will be required to approve this proposal. THE BOARD OF DIRECTORS
HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
ACCOUNTANTS.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by (i) each person or
entity who is known by the Company to own beneficially 5% or more of the
Company's outstanding Common Stock; (ii) each member of the Company's Board
of Directors; (iii) each of the Named Executive Officers (as defined in the
Summary Compensation Table appearing on page 8); and (iv) all current
directors and executive officers of the Company as a group. All information
contained in the table below is based on beneficial ownership as of May 28,
1999.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (2)
----------------------
PERCENTAGE
NAME AND ADDRESS (1) NUMBER OWNERSHIP
------------------- ---------- ----------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Putnam Investments, Inc. (3)......................... 3,687,500 7.5%
One Post Office Square
Boston, Massachusetts 02109
Pilgrim Baxter & Associates, Ltd. (4)................ 3,570,200 7.2%
825 Duportail Road
Wayne, PA 19087
CURRENT EXECUTIVE OFFICERS AND DIRECTORS
Stephen P. Gardner (5)............................... 314,423 *
David A. Farley (6).................................. 1,118,816 2.3%
Christopher A. Cole (7).............................. 1,096,642 2.2%
Richard A. Hosley II (8)............................. -- *
Frederic B. Luddy (9)................................ 9,474 *
John J. Moores (10).................................. 10,987,494 22.3%
Charles E. Noell III (11)............................ 120,714 *
Douglas S. Powanda (12).............................. 16,550 *
Gilles Queru (13).................................... 406,986 *
Steven S. Spitzer (14)............................... 27,500 *
Norris van den Berg (15)............................. 66,072 *
Thomas G. Watrous, Sr. (16).......................... 5,000 *
All current executive officers and directors
as a group (16 persons) (17)........................ 14,719,690 29.8%
</TABLE>
- -----------
* Less than 1%
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of the Company's Common Stock shown as
beneficially owned by them, subject to applicable community property laws,
and to the information contained in footnotes to this table. Unless
otherwise indicated, the address for each listed stockholder is c/o
Peregrine Systems, Inc., 12670 High Bluff Drive, San Diego, California
92130.
(2) Applicable percentage ownership is based on 49,336,278 shares of Company
Common Stock outstanding as of May 28, 1999. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities subject to community property laws, where applicable. Shares
of the Company's Common Stock subject to options that are presently
exercisable or exercisable within 60 days of May 28, 1998 are deemed to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person. To the extent that any shares are issued upon exercise of
options, warrants or other rights to acquire 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 investors.
(3) Based solely on a Schedule 13G/A, dated June 14, 1999, filed with the
Commission on June 7, 1999.
(4) Based solely on a Schedule 13G, dated February 8, 1999, filed with the
Commission on February 9, 1999.
(5) Includes 214,041 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999 and 66,668 shares subject to a
restricted stock agreement. Mr. Gardner is the Company's President and
Chief Executive Officer and a member of the Board of Directors.
(6) Includes 202,000 shares subject to a restricted stock agreement. Mr. Farley
is the Company's Senior Vice President, Finance and Administration and
Chief Financial Officer and a member of the Board of Directors.
(7) Mr. Cole is a member of the Board of Directors.
(8) Mr. Hosley is a member of the Board of Directors.
(9) Includes 6,250 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999. Mr. Luddy is the Company's Vice
President, North American Research and Development.
(10) Includes 4,441,681 shares held by Mr. Moores as trustee under various
trusts, substantially all of which were established for members of Mr.
Moores's family. Mr. Moores is Chairman of the Board of Directors.
(11) Includes 90,000 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently or will become exercisable
within 60 days of May 28, 1999. Mr. Noell is a member of the Board of
Directors.
6
<PAGE>
(12) Includes 16,548 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999. Mr. Powanda is the Company's
Executive Vice President, Worldwide Operations.
(13) Includes 93,750 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently or will become exercisable
within 60 days of May 28, 1999. Mr. Queru is the Company's Vice President,
Corporate Development.
(14) Includes 27,500 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999. Mr. Spitzer is the Company's
Vice President, Channel Sales.
(15) Includes 45,000 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999. Mr. van den Berg is a member
of the Board of Directors.
(16) Mr. Watrous is a member of the Board of Directors.
(17) Includes 638,026 shares of Company Common Stock issuable upon exercise of
outstanding stock options which are presently exercisable or will become
exercisable within 60 days of May 28, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth in summary form information concerning
the compensation awarded to, earned by, or paid for services rendered to the
Company in all capacities during the fiscal years ended March 31, 1999, 1998,
and 1997 respectively by (i) the Company's President and Chief Executive
Officer and (ii) the Company's next four most highly compensated executive
officers whose salary and bonus for fiscal 1999 exceeded $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION (1) RESTRICTED SECURITIES
FISCAL ----------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS(#) COMPENSATION
--------------------------- ---- -------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Gardner(2)........ 1999 $250,040 $343,750(6) -- 730,000 $2,599(13)
President and 1998 139,000 210,000 $775,000(11) 150,000 5,156
Chief Executive Officer 1997 -- -- -- -- --
Frederic B. Luddy(3)......... 1999 150,000 555,726(7) -- 112,564 3,143(14)
Vice President, North 1998 150,000 729,060 -- 25,000 2,837
American Research and 1997 150,000 211,925 -- -- 2,712
Development
Douglas S. Powanda........... 1999 180,000 359,991(8) -- 400,000 3,143(15)
Executive Vice President, 1998 150,000 309,523 -- 75,000 3,946
Worldwide Operations 1997 150,000 104,300 -- 50,000 2,885
Gilles Queru(4).............. 1999 122,500 356,875(9) -- -- 11,321
Vice President, Corporate 1998 49,913 1,242 -- 250,000 --
Development 1997 -- -- -- -- --
Steven S. Spitzer(5)......... 1999 150,000 247,960(10) -- -- 428(17)
Vice President, Channel 1998 99,519 46,250 -- 420,000(12) 127
Sales 1997 -- -- -- -- --
</TABLE>
- --------
(1) Other than the salary and bonus described herein, the Company did not pay
any executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such
executive officer's salary and bonus during either fiscal 1999, fiscal
1998, or fiscal 1997.
(2) Mr. Gardner became the Company's President and Chief Executive Officer and
a member of the Board of Directors in April 1998. From January 1998 to
April 1998, Mr. Gardner served as the Company's Executive Vice President
and Principal Executive Officer and from May 1997 to January 1998 as the
Company's Vice President, Strategic Acquisitions.
(3) Mr. Luddy became the Company's Vice President, North American Research and
Development in January 1998. Mr. Luddy's salary and bonus for fiscal 1998
and 1997 include amounts paid to him as Chief Architect of the Company's
SERVICECENTER product line.
(4) Mr. Queru became the Company's Vice President, Corporate Development in
April 1998. Mr. Queru's compensation for fiscal 1998 includes amounts
paid to him as an employee of Peregrine Systems, SA (the former
Apsylog, SA) acquired by the Company in August 1997.
(5) Mr. Spitzer became the Company's Vice President, Channel Sales in August
1997.
(6) Bonus compensation for 1999 consists of (i) $93,750 of bonus compensation
earned and paid in fiscal 1999 and (ii) $250,000 of bonus compensation
earned in fiscal 1999 to be paid in fiscal 2000. Bonus compensation
for fiscal 1998 includes $50,000 earned in fiscal 1998 to be paid in
fiscal 1999.
(7) Bonus compensation for 1999 consists of (i) $381,406 of product author
commission and $11,250 of bonus earned and paid in fiscal 1999 and (ii)
$148,070 of product author commission and $15,000 of bonus earned in fiscal
1999 to be paid in fiscal 2000. Bonus compensation for fiscal 1998
consists of (i) $555,519 of product authorship commission income earned
and paid in fiscal 1998 and (ii) $173,541 of product authorship commission
income earned in fiscal 1998 to be paid in fiscal 1999. Bonus compensation
for fiscal 1997 and 1996 consists entirely of product authorship
commissions.
(8) Bonus compensation for 1999 consists of (i) $91,648 of commission and
$80,551 of bonus earned and paid in fiscal 1999 and (ii) $87,792 of
commission and $100,000 of bonus earned in fiscal 1999 to be paid in
fiscal 2000. Bonus compensation for fiscal 1998 consists of (i) $10,000
of bonus compensation and $195,053 of commission income earned and paid
in fiscal 1998 and (ii) $115,570 of commission income earned in fiscal
1998 to be paid in fiscal 1999. Bonus compensation for fiscal 1997
consists of (i) $32,531 of bonus compensation and $26,769 of commission
income earned and paid in fiscal 1997 and (ii) $34,000 of bonus
compensation and $11,000 of commission income earned in fiscal 1997 but
paid in fiscal 1998.
(9) Bonus compensation for 1999 consists of (i) $316,870 of bonus compensation
earned and paid in fiscal 1999 and (ii) $40,000 of bonus compensation
earned in fiscal 1999 to be paid in fiscal 2000. Bonus compensation for
1998 consists entirely of a car allowance.
8
<PAGE>
(10) Bonus compensation for 1999 consists of (i) $56,195 of commission and
$19,875 of bonus earned and paid in fiscal 1999 and (ii) $89,077 of
commission and $82,813 of bonus earned in fiscal 1999 to be paid in
fiscal 2000.
(11) In November 1997, the Company issued Mr. Gardner an aggregate of 100,000
shares of Common Stock pursuant to a restricted stock agreement. The
closing sale price of the Company's Common Stock on the Nasdaq National
Market on October 31, 1997, the last trading date prior to the date of
issuance, was $7.75. Such shares vest incrementally over ten years, subject
to earlier vesting over six years contingent upon the Company's achieving
certain financial milestones.
(12) Includes an option to purchase 200,000 shares subsequently canceled.
(13) Represents $1,037 and $281 in group life insurance excess premiums and
$1,562 and $4,875 in matching contribution under the Company's 401(k)
paid by the Company in fiscal 1999 and 1998, respectively.
(14) Represents $643, $337 and $337 in group life insurance excess premiums paid
by the Company in fiscal 1999, 1998 and 1997, respectively; $2,500, $2,500
and $2,375 in matching contributions under the Company's 401(k) plan paid
by the Company in fiscal 1999, 1998 and 1997, respectively.
(15) Represents $643, $337 and $337 in group life insurance excess premiums paid
by the Company in fiscal 1999, 1998 and 1997, respectively; $2,500, $3,609
and $2,548 in matching contributions under the Company's 401(k) plan paid
by the Company in fiscal 1999, 1998 and 1997, respectively.
(16) Represents $257 in group life insurance premiums paid by the Company in
fiscal 1999; $1,608 in relocation expenses paid by the Company in fiscal
1999; and $9,456 in paid out earned vacation in fiscal 1999.
(17) Represents $428 and $127 in group life insurance excess premiums paid by
the Company in fiscal 1999 and 1998, respectively.
9
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information relating to stock
options awarded to each of the Named Executive Officers during the fiscal
year ended March 31, 1999. All such options were awarded under the Company's
1994 Stock Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUES AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION FOR OPTIONS TERM (1)
NAME GRANTED FISCAL 1999 (2) SHARE (3)(4) DATE (5) 5% 10%
- -------------------------- -------- --------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Gardner........ 600,000 10.07% $ 9.13 4/3/08 $3,445,085 $8,730,521
130,000 2.18 15.22 11/22/08 1,244,331 3,153,379
Fredric B. Luddy.......... 112,564 1.89 14.22 10/9/08 1,006,647 2,551,040
Douglas S. Powanda........ 240,000 4.03 14.22 10/9/08 2,146,292 5,439,124
160,000 2.69 15.22 11/12/08 1,531,484 3,881,082
Gilles Queru.............. -- -- -- -- -- --
Steve S. Spitzer.......... -- -- -- -- -- --
</TABLE>
_______________
(1) Potential realizable value is based on the assumption that the Company's
Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Commission and do not reflect the Company's estimate of future prices for
the Company Common Stock.
(2) Based on options to acquire 5,958,600 shares granted under the Company's
1994 Stock Option Plan during fiscal 1999. All options granted to the
Company's Named Executive Officers during fiscal 1999 are governed by the
Company's 1994 Stock Option Plan.
(3) Options were granted at an exercise price equal to the closing sales of
the Company's Common Stock on the date of grant as reported by the Nasdaq
National Market.
(4) Exercise price may be paid in cash, check, by delivery of already-owned
shares of the Company's Common Stock subject to certain conditions, or
pursuant to a cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased shares
and to remit to the Company, out of the sale proceeds, an amount equal to
the exercise price plus all applicable withholding taxes.
(5) Twenty-five percent (25%) of the shares issuable upon exercise of options
granted under the Company's 1994 Stock Option Plan become vested on the
first anniversary of the date of grant, and the remaining shares vest over
three years at the rate of 6.25% of the shares subject to option at the end
of each three-month period thereafter.
AGGREGATE OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise
of options by the Named Executive Officers during the fiscal year ended
March 31, 1999 and stock options held as of March 31, 1999 by the Named
Executive Officers.
<TABLE>
<CAPTION> NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
MARCH 31, 1999 MARCH 31, 1999(2)
SHARES VALUE --------------------------- ---------------------------
ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ON EXERCISE ($)(1) (#) (#) ($) ($)
- ---------------------------- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Gardner.......... 100,000 2,017,563 12,500 917,500 342,188 22,419,338
Frederic B. Luddy........... 160,000 3,060,030 30,625 171,939 930,434 3,920,820
Douglas S. Powanda.......... 337,000 5,401,480 6,548 556,250 212,515 12,101,594
Gilles Queru................ -- -- 62,500 187,500 170,938 5,132,813
Steven S. Spitzer........... 55,000 1,040,312 -- 165,000 -- 4,516,875
</TABLE>
- ----------
(1) Based on the fair market value of Peregrine Common Stock on the date of
exercise minus the exercise price.
(2) Amounts reflecting gains on outstanding stock options are based on the
closing price of the Company's Common Stock on March 31, 1999 of $33.625.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company does not currently have any employment contracts in effect
with any Named Executive Officer.
The Company and Stephen P. Gardner, its Chief Executive Officer, are
parties to a restricted stock agreement dated November 1, 1997 pursuant to
which the Company issued Mr. Gardner 100,000 shares of Common Stock. The
Company and
10
<PAGE>
David A. Farley, its Chief Financial Officer, are parties to a substantially
equivalent restricted stock agreement dated November 1, 1995 pursuant to
which the Company issued Mr. Farley 400,000 shares of Common Stock. The
shares issued to each of Messrs. Gardner and Farley vest incrementally over
ten years, subject to earlier vesting over six years contingent upon the
Company's achieving certain financial milestones. The restricted stock
agreements permit either Mr. Gardner or Mr. Farley to surrender shares to
satisfy withholding tax obligations that arise as the shares vest. In
connection with the lapsing of restrictions on 16,666 shares in April 1999,
Mr. Gardner surrendered 16,666 shares subject to his restricted stock
agreement. In connection with the lapsing of restrictions on 66,000 shares
in April 1999, Mr. Farley surrendered 33,000 shares subject to his restricted
stock agreement. In the event of a merger or change in control of the
Company, all such shares will become automatically vested.
Under the Stock Plan, in the event of a merger or a change in control of
the Company, vesting of options outstanding under the Stock Plan will
automatically accelerate such that outstanding options will become fully
exercisable, including with respect to shares for which such options would be
otherwise unvested.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS SHALL NOT BE
DEEMED "FILED" WITH THE COMMISSION OR "SOLICITING MATERIAL" UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and the specific compensation levels for senior
executives, including the Company's Chief Executive Officer.
GENERAL COMPENSATION PHILOSOPHY
The primary objectives of the Company's executive compensation policies
include the following:
- To attract, motivate, and retain a highly qualified executive
management team;
- To link executive compensation to the Company's financial
performance as well as to defined individual management objectives
established by the Committee;
- To compensate competitively with the practices of similarly
situated technology companies; and
- To create management incentives designed to enhance stockholder
value.
The Company competes in an aggressive and dynamic industry and, as a
result, believes that finding, motivating, and retaining quality employees,
particularly senior managers, sales personnel, and technical personnel are
key factors to the Company's future success. The Committee's compensation
philosophy seeks to align the interests of stockholders and management by
tying compensation to the Company's financial performance, either directly in
the form of salary and bonuses paid in cash or indirectly in the form of
appreciation of stock options and in certain instances, restricted stock
granted to principal executive officers of the Company.
CASH COMPENSATION
The Company seeks to provide cash compensation to its executive
officers, including base salary and an annual cash bonus, at levels that are
commensurate with cash compensation of executives with comparable
responsibility at similarly situated technology companies. Annual increases
in base salary are determined on an individual basis based on market data and
a review of the officer's performance and contribution to various individual,
departmental, and corporate objectives. Cash bonuses are intended to provide
additional incentives to achieve such objectives.
The salaries and cash bonuses of each of the executive officers of the
Company, other than the Chief Executive Officer, were determined by the Board
of Directors, upon the recommendation of the Chief Executive Officer. The
Chief Executive Officer's base salary was determined by the Board of
Directors, upon the recommendation of the Committee. In January 1998,
Stephen P. Gardner became the Company's Executive Vice President and
Principal Executive Officer and in April 1998 became the Company's President
and Chief Executive Officer. The Board of Directors has set Mr. Gardner's
base annual salary for fiscal 1999 at $250,000.
11
<PAGE>
In addition to annual salary, cash bonuses for the Company's President
and Chief Executive Officer and its Chief Financial Officer are based on
various Company performance targets established by the Board of Directors.
Cash bonuses may also be earned by operational vice presidents based on their
divisional financial performance.
Based on a review of public company proxy data, compensation data
supplied by independent executive compensation research and consulting firms,
and other relevant market data, the Committee believes that cash compensation
paid to the Company's executive officers, including those individuals who
served as its Chief Executive Officer, were generally consistent with amounts
paid to officers with similar responsibilities at similarly situated software
companies. The Company notes that competition for qualified management and
technical personnel in the technology industry is extremely intense, and the
Company expects such competition to remain intense for the foreseeable
future. As a result, in order to insure access to qualified personnel, the
Company believes that it will continue to be necessary to provide
compensation packages, consisting of cash compensation and equity incentives,
that are at least competitive with, and in certain instances superior to,
compensation paid by other technology companies.
EQUITY-BASED COMPENSATION
RESTRICTED STOCK. In November 1995, the Company granted David A.
Farley, its Chief Financial Officer, in connection with his becoming an
officer of the Company, 400,000 shares of Common Stock pursuant to a
restricted stock agreement. The shares issued to Mr. Farley under his
restricted stock agreement vest incrementally over ten years, subject to
earlier vesting over six years, contingent upon the Company's achieving
certain financial milestones.
The Company believes that such restricted stock arrangements effectively
implement its philosophy of aligning management interests with stockholder
interests. Mr. Farley joined the Company prior to its initial public
offering. At the time, the Company had incurred substantial operating losses,
and the Board of Directors charged him and the then Chief Executive Officer
with improving the Company's financial condition and operating performance.
Because restrictions on the shares issued under the restricted stock
agreement lapse early if the Company achieves certain targeted financial
performance milestones, the Board of Directors believed that such grants
provided an effective incentive to the Chief Financial Officer to take the
necessary actions to improve the Company's financial performance. The
financial targets in the restricted stock agreement were intended to be
aggressive yet realizable. As a result of attaining the targets in fiscal
1997, 1998 and 1999, restrictions have lapsed with respect to an aggregate of
198,000 shares for Mr. Farley. In addition, the restricted stock agreement
permits the stockholder to surrender shares to satisfy withholding tax
obligations that arise as the restrictions lapse. In connection with the
lapse of vesting restrictions, Mr. Farley surrendered 33,000 shares in April
1999.
In November 1997, the Company issued 100,000 shares of Common Stock to
Stephen P. Gardner, then the Company's Vice President, Strategic Acquisitions
and now the Company's President and Chief Executive Officer, under a
restricted stock agreement containing substantially similar terms to the
agreements previously entered between the Company and Mr. Farley. The
targeted financial milestones, however, were adjusted upward to reflect the
Company's improved financial performance but were again set at levels the
Board determined to be aggressive yet realizable based on information
available concerning the Company's prospects at the time of grant. In
connection with the lapse of vesting restrictions on 16,666 shares in each of
April 1998 and 1999, Mr. Gardner surrendered 5,910 and 16,666 shares in April
1998 and 1999, respectively, to satisfy tax withholding obligations.
STOCK OPTIONS. Stock options are periodically granted to provide
additional incentive to executives and other employees to maximize long-term
total return to the Company's stockholders. Stock options are a particularly
strong incentive because they are valuable to employees only if the fair
market value of the Company's Common Stock increases above the exercise
price, which is set at the fair market value of the Company Common Stock on
the date the option is granted. In addition, employees must remain employed
with the Company for a fixed period of time in order for the options to vest
fully. Options generally vest over a four year period to encourage option
holders to continue in the employ of the Company.
All of the options granted in the year ended March 31, 1999 were
approved by the Committee, pursuant to its delegated authority, or the full
Board of Directors. In making its determinations, the Committee considers the
executive's position at the Company, such executive's individual performance,
the number of options held (if any) and the extent to which such options are
vested, and any other factors that the Committee may deem relevant.
12
<PAGE>
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the federal income
tax deductibility of compensation paid to the Company's Chief Executive
Officer and to each of the other four most highly-compensated executive
officers. The Company may deduct such compensation only to the extent that
during any fiscal year the compensation paid to such individual does not
exceed $1 million or meet certain specified conditions (including stockholder
approval). Based on the Company's current compensation plans and policies
and proposed regulations interpreting this provision of the Code, the Company
and the Committee believe that, for the near future, there is little risk
that the Company will lose any significant tax deduction for executive
compensation.
THE COMPENSATION COMMITTEE
John J. Moores
Charles E. Noell III
Richard A. Hosley II
Thomas G. Watrous, Sr.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own more than
10% of a registered class of the Company's equity securities to file reports
of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Such officers, directors,
and 10% stockholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) reports they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that during fiscal 1999
all executive officers and directors of the Company complied with all
applicable filing requirements, except for a single Form 4 inadvertently
filed late by Mr. Cole.
CERTAIN TRANSACTIONS
The Company and JMI Services, Inc., an investment management company
("JMI Services"), are parties to a sublease pursuant to which the Company
subleases approximately 13,310 square feet of office space at its San Diego
headquarters to JMI Services. The term of the sublease is from June 1, 1996
through October 21, 2003. The sublease provides for initial monthly rental
payments of $16,638 to increase by $666 per month on each anniversary of the
sublease. Mr. Moores serves as Chairman of the Board of JMI Services, and
Charles E. Noell, III, a director of the Company, serves as President and
Chief Executive Officer of JMI Services. The Company believes that the terms
of the sublease are at competitive market rates.
The Company leases a suite at San Diego's Qualcomm Stadium at
competitive rates and on an informal basis from the San Diego Padres Baseball
Club, L.P. (the "Padres"). Mr. Moores has served as owner and Chairman of the
Board of the Padres since December 1994. The Company's annual payments for
such suite and game tickets total approximately $50,000.
The Company is a party to restricted stock agreements with Messrs.
Farley and Gardner pursuant to which the Company has issued an aggregate of
500,000 shares of Company Common Stock. These agreements are discussed in
detail under the caption "Employment Agreements and Change in Control
Arrangements."
During fiscal year 1999, the Company issued options to purchase Common
Stock to certain directors pursuant to the terms of the Company's 1994 Stock
Option Plan. These grants are discussed in detail under the caption "Director
Compensation."
During fiscal year 1999, the Company purchased a golf club membership
for business entertainment use by Mr. Powanda, at a cost of $70,000. The
Company and Mr. Powanda have agreed that upon termination of his employment
with the Company, he may purchase the membership from the Company at cost.
Subsequent to March 31, 1999, the Company purchased a similar membership at
$70,000 under a similar agreement with Mr. Gardner.
13
<PAGE>
COMPANY PERFORMANCE
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, THE
FOLLOWING INFORMATION RELATING TO THE PRICE PERFORMANCE OF THE COMPANY'S
COMMON STOCK SHALL NOT BE DEEMED "FILED" WITH THE COMMISSION OR "SOLICITING
MATERIAL" UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SHALL
NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS
The Company's registration statement covering the Company's initial
public offering became effective April 8, 1997, and the Company's Common
Stock began trading on the Nasdaq National Market on April 9, 1997. The
following graph shows a comparison, from April 9, 1997 through March 31,
1999, of cumulative total return for the Company's Common Stock, the Standard
& Poors 500 Index (the "S&P 500"), and the Goldman Sachs Software Index (the
"Goldman Sachs Index"). Such returns are based on historical results and are
not intended to suggest future performance. Data for the Nasdaq Index and the
Goldman Index assume reinvestment of dividends. The Company has never paid
dividends on its Common Stock and has no present plans to do so.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONT PEREGRINE SYSTEMS, THE S&P INDEX, AND THE GOLDMAN SACHS SOFTWARE INDEX
<TABLE>
<CAPTION>
PSI S&P GOLDMAN/SACHS
--- --- -------------
<S> <C> <C> <C>
04/09/97 100 100 100
06/30/97 170.833 116.374 125.044
09/30/97 197.222 124.544 140.583
12/31/97 148.611 127.587 133.745
03/31/98 212.5 144.853 171.677
06/30/98 316.66 149.072 179.87217
09/30/98 447.22 133.7118 164.56828
12/31/98 515.28 161.6135 208.46627
03/31/99 747.22 169.126 230.60726
</TABLE>
- -------
Assumes $100 invested on April 9, 1997 in the Company's Common Stock, the
S & P 500, and the Goldman Sachs Index.
14
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the enclosed proxy card to vote the
shares they represent as the Board of Directors may recommend.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged
to mark, sign, date, and return the accompanying proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose or, for
our holders of record of Common Stock, utilize the convenient option of
voting by telephone.
For the Board of Directors
PEREGRINE SYSTEMS, INC.
/s/ Richard T. Nelson
Richard T. Nelson
SECRETARY
Dated: August 5, 1999
15
<PAGE>
PEREGRNE SYSTEMS, INC.
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of PEREGRINE SYSTEMS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated August 5, 1999, and hereby
appoints Stephen P. Gardner and David A. Farley and each of them proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1999 Annual
Meeting of Stockholders of PEREGRINE SYSTEMS, INC. to be held on Tuesday,
September 7, 1999 at 11:00 p.m., local time at 12670 High Bluff Drive, San
Diego, California, and any adjournment(s) thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and
there personally present, on the matters set forth on the reverse side.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- -------------------------------------------------------------------------------
/ FOLD AND DETACH HERE /
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL-FREE 1-800-840-1208 using a touch-tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
2. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE VOTE
<PAGE>
1. Election of Directors.
FOR all
nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all
the Company below) nominees listed below
/ / / /
Nominees:
01 Stephen P. Gardner 05 Richard A. Hosley, II
02 David A. Farley 06 Charles E. Noell, III
03 John J. Moores 07 Norris van den Berg, and
04 Christopher A. Cole 08 Thomas G. Waterous, Sr.
INSTRUCTION: To withhold authority to vote for all individual nominee, write
that nominee's name on the line below.
-----------------------------------------
- -------------------------------------------------------------------------------
* * IF YOU WITH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW * *
- -------------------------------------------------------------------------------
-------
-
-
-
2. Proposal to ratify the appointment of Arthur Anderson LLP as independent
accountants for the fiscal year ending March 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the proxies are authorized to vote upon such other
manner(s) which may properly come before the meeting and at any
adjournment(s) thereof.
MARK HERE FOR
ADDRESS CHANGE / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS AND FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSON LLP AS INDEPENDENT
ACCOUNTANTS FOR THE 2000 FISCAL YEAR.
Both of such attorneys or substitutes (if both are present and acting at said
meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.
Signature(s)________________________________________ Dated __________, 1999
This proxy should be marked, dated and signed by the stockholder(s) exactly
as his or her name appears hereon, and returned proptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)
/ FOLD AND DETACH HERE /
