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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 2000
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 jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(858) 481-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ERIC P. DELLER
VICE PRESIDENT AND GENERAL COUNSEL
PEREGRINE SYSTEMS, INC.
12670 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
(858) 481-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
CHARLES D. MAGUIRE, JR.
Holme Roberts & Owen, LLP
1700 Lincoln Street, Suite 4100
Denver, Colorado 80203
(303) 861-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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.
------------------------------
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 REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock $0.001 par value............... 163,995 $19.875 $3,259,400 $861.00
</TABLE>
(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 sales prices as reported on the
Nasdaq National Market on May 10, 2000.
------------------------------
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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<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION) DATED MAY 10, 2000
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, California 92130
Telephone Number: (858) 481-5000
[PEREGRINE LOGO]
163,995 SHARES
COMMON STOCK
These shares may be offered and sold from time to time by certain
stockholders of Peregrine Systems, Inc., or Peregrine, identified in this
prospectus. See "Selling Stockholders." The selling stockholders acquired
191,267 shares of Peregrine common stock in connection with Peregrine's
conversion of the outstanding share capital of Barnhill Management Group, Inc.
into shares of Peregrine Common Stock in connection with the merger of Barnhill
into a wholly-owned subsidiary of Peregrine. Of the 191,267 shares, 163,995
shares of Peregrine Common Stock are being registered in this offering.
The selling stockholders will receive all of the net proceeds from the sale
of the shares. The stockholders will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. Peregrine will not
receive any proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5 OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
Peregrine's common stock is quoted on the Nasdaq National Market under the
symbol "PRGN." On May 10, 2000, the last reported sale price of our common stock
was $19.375 per share.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
May , 2000
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TABLE OF CONTENTS
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PAGE
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WHERE TO FIND ADDITIONAL INFORMATION ABOUT PEREGRINE........ 3
INFORMATION INCORPORATED BY REFERENCE....................... 3
RECENT DEVELOPMENTS......................................... 3
FORWARD LOOKING INFORMATION................................. 4
PEREGRINE................................................... 4
RISK FACTORS................................................ 5
USE OF PROCEEDS............................................. 17
SELLING STOCKHOLDERS........................................ 18
PLAN OF DISTRIBUTION........................................ 18
LEGAL MATTERS............................................... 19
EXPERTS..................................................... 19
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of Peregrine 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.
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WHERE TO FIND ADDITIONAL INFORMATION ABOUT PSI
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms, including locations of
regional offices. 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 on our web site does not constitute part of this prospectus.
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 until the selling
stockholders sell all the shares. This prospectus is part of a Registration
Statement we filed with the SEC (Registration No. 333- ). The
documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the fiscal year ended March 31,
2000; and
2. The description of our common stock contained in the Registration
Statement on Form 8-A we filed with the SEC on March 7, 1997.
You may request a copy of these filings including any exhibits to such
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 (858) 481-5000.
RECENT DEVELOPMENTS
On April 5, 2000, we announced that we had signed a definitive merger
agreement with Harbinger Corporation, a provider of business-to-business
electronic commerce products and services. If the merger is completed, we will
issue 0.75 of a share of our common stock for each outstanding share of
Harbinger common stock and will assume all outstanding options and warrants to
acquire Harbinger common stock (the number and exercise price of which will be
adjusted based on the exchange ratio). We expect to issue approximately
35.6 million shares of our common stock, including common stock subject to
assumed options, in exchange for all the outstanding equity securities of
Harbinger. We expect the acquisition will be accounted for using the purchase
method of accounting and will be treated as a tax-free reorganization under
federal tax law. The definitive agreement has been approved by the boards of
directors of both Harbinger and Peregrine. Closing of the merger is subject to
approval by Peregrine's and Harbinger's stockholders, regulatory approvals, and
customary closing conditions.
In connection with the proposed merger, we expect to file a proxy statement
and Registration Statement on Form S-4 with the SEC, and Harbinger expects to
file a proxy statement with the SEC. We expect that Harbinger and Peregrine will
mail a Joint Proxy Statement/Prospectus to stockholders of Harbinger and
Peregrine containing additional information about the proposed merger. Investors
and security holders are urged to read the Registration Statement and the Joint
Proxy Statement/ Prospectus carefully when they are available. The Registration
Statement and the Joint Proxy Statement/Prospectus will contain important
information about Harbinger, Peregrine, the proposed merger, risks related to
the merger, the persons soliciting proxies relating to the proposed merger,
their interests in the proposed merger, and related matters.
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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 and Section 21E of the Exchange Act. These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations and intentions and other statements contained in the
prospectus that are not historical facts. When used in this prospectus, the
words "expects," "anticipates," "estimates" and similar expressions are intended
to identify forward-looking statements. Because these forward-looking statements
involve risks and uncertainties, there are important facts that could cause
actual results to differ materially from those expressed or implied by these
forward-looking statements, including statements under the caption "Risk
Factors." 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, 2000, which report is
incorporated herein by reference, and in the similarly captioned section of any
quarterly report on Form 10-Q that we may file with the SEC. 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."
PEREGRINE
Peregine refers to itself as "the Infrasture Management Company." We offer
business organizations an integrated suite of packaged infrastructure resource
management application software. In addition, we have recently introduced
additional products designed to automate the processes associated with the
procurement and use of infrastructure assets. These software applications are
designed to manage the various aspects of organizational infrastructure from the
moment an asset is leased, acquired, or taken from existing inventory until the
moment it is taken out of service. Infrastructure assets include computers,
computer networks, telecommunication assets, physical plant and facilities,
corporate car or truck fleets, and many other assets. Our products are designed
to help businesses answer the following questions about each item of corporate
infrastructure:
- What assets does my business own?
- Where are each of these located?
- How well are each of these assets working?
- What is the total cost of owing each asset (I.E.,the cost of acquiring,
maintaining, servicing, and disposing of each asset)?
- How well is each asset supporting my business?
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RISK FACTORS
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS MADE IN THIS
PROSPECTUS OR IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN THAT ARE NOT
DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED BECAUSE OF A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED HEREIN UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS OR IN
DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
RISKS RELATING TO PEREGRINE
WE HAVE A HISTORY OF LOSSES, CANNOT PREDICT OUR FUTURE OPERATING RESULTS,
AND CANNOT ASSURE OUR FUTURE PROFITABILITY. IN ADDITION, MANAGEMENT DOES NOT
BELIEVE RECENT REVENUE GROWTH RATES ARE NECESSARILY SUSTAINABLE.
Prediction of our future operating results is difficult, if not impossible,
and we have incurred substantial losses in recent years. If we continue to incur
losses, if our revenues decline or grow at a slower rate, or if our expenses
increase without commensurate increases in revenues, our operating results will
suffer and our stock price may fall. Through March 31, 2000, we had recorded
cumulative net losses of approximately $64.9 million, including approximately
$113.4 million related to the write-off of acquired in-process research and
development and the amortization of goodwill and other intangible assets in
connection with several acquisitions completed since late 1997. We have also
incurred, and expect to continue to incur, substantial expenses associated with
the amortization of intangible assets. In addition, our management does not
believe our recent growth rates are necessarily sustainable in the future or
indicative of future growth rates. If our revenue growth rates slow or our
revenues decline, our operating results could be seriously impaired because many
of our expenses are fixed and cannot be easily or quickly changed.
OUR REVENUES VARY SIGNIFICANTLY FROM QUARTER TO QUARTER FOR NUMEROUS REASONS
BEYOND OUR CONTROL. QUARTER-TO-QUARTER VARIATIONS COULD RESULT IN SUBSTANTIAL
DECREASES IN OUR STOCK PRICE IF OUR REVENUES OR OPERATING RESULTS ARE LESS THAN
MARKET ANALYSTS ANTICIPATE.
Our revenues or operating results in a given quarter could be substantially
less than anticipated by market analysts, which could result in substantial
declines in our stock price. In addition, quarter-to-quarter variations could
create uncertainty about the direction or progress of our business, which could
also result in stock price declines. Our revenues and operating results will
vary from quarter to quarter for many reasons beyond our control. As a result,
our quarterly revenues and operating results are not predictable with any
significant degree of accuracy. Reasons for variability of our revenues and
operating results include the following:
- SIZE, TIMING, AND CONTRACTUAL TERMS OF ORDERS. Our revenues in a given
quarter could be adversely affected if we are unable to complete one or
more large license agreements, if the completion of a large license
agreement is delayed, or if the contract terms prevent us from recognizing
revenue during that quarter. In addition, when negotiating large software
licenses, many customers tend to time their negotiations until quarter-end
in an effort to improve their ability to negotiate more favorable pricing
terms. As a result, we tend to recognize a substantial portion of our
revenues in the last month or weeks of a quarter, and license revenues in
a given quarter will substantially depend on orders booked during the last
month or weeks of a quarter. Our revenue growth in recent periods has been
attributable in part to an increase in the number of large license
transactions we completed in a given period. We expect our reliance on
these large transactions to continue for the forseeable future. If we are
unable to complete a large license transaction in a particular quarter,
our revenues and operating results could be substantially below the
expectations of market analysts, and our stock price could fall
dramatically.
- ANNOUNCEMENTS BY PEREGRINE OR OUR COMPETITORS. Announcements of new
products or releases by us or our competitors could cause customers to
delay purchases pending the introduction of the
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new product or release. In addition, announcements by us or our
competitors concerning pricing policies could have an effect on our
revenues in a given quarter.
- CUSTOMER BUDGETING CYCLES. Our quarter-to-quarter revenues will depend on
customer budgeting cycles. If customers change their budgeting cycles, or
reduce their capital spending on technology, our revenues could decline.
- CHANGES IN PRODUCT MIX. Changes in our product mix could adversely affect
our operating results because some products provide higher margins than
others. For example, margins on software licenses tend to be higher than
margins on maintenance services.
- CHANGES IN METHOD OF SALE. Our profit margins will tend to vary based on
whether a sale was made through our direct sales force or through a
reseller or other strategic partner. Sales through indirect channels tend
to be less profitable, and if sales through indirect channels increased
relative to direct sales, our operating results could be harmed. Sales
through indirect channels, including distributors, third party resellers,
and system integrators, represent a significant percentage of our total
sales. We expect this trend to continue in the future. As a result, we
could experience a shortfall in our revenues, or a substantial decline in
our rate of revenue growth, if sales through our indirect channels were to
decrease or were to increase at a slower rate. We have less ability to
manage our sales through indirect channels and less visibility about our
channel partners' success in selling our products. As a result, we could
experience unforeseen variability in our revenues and operating results
for a number of reasons, including the following:
- inability of our channel partners to sell our products;
- a decision by our channel partners to favor products that compete with
Peregrine's;
- inability of our channel partners to manage the timing of their
purchases from Peregrine against their sales to end-users, resulting in
substantial inventories of unsold licenses held by our channel
partners; or
- our inability to increase the number of channel partners that sell our
products and to maintain relationships with existing channel partners.
- CANCELLATION OF LICENSES OR MAINTENANCE AGREEMENTS. Cancellations of
licenses or maintenance contracts could reduce our revenues and harm our
operating results. In particular, our customers tend to renew their
maintenance contracts on an annual basis. Substantial cancellations of
maintenance agreements, or a substantial failure to renew maintenance
contracts, would reduce our revenues and harm our operating results.
THE LONG SALES CYCLE FOR OUR PRODUCTS MAY CAUSE SUBSTANTIAL FLUCTUATIONS IN
OUR REVENUES AND OPERATING RESULTS.
Delays in customer orders could result in our revenues being substantially
below the expectations of market analysts. In addition, we may incur substantial
sales and marketing expenses during a particular period in an effort to obtain
orders. If we are unsuccessful in generating offsetting revenues during that
period, our revenues and earnings could be substantially reduced or we could
experience a large loss. We are likely to experience delays in customer orders
because the sales cycle for our products is long and unpredictable.
Specifically, our customers' planning and purchase decisions involve a
significant commitment of resources and a lengthy evaluation and product
qualification process. The sales cycle for our products requires us to engage in
a sales cycle that, if it results in a sale, takes six to nine months to
complete. The length of the sales cycle may be extended beyond six or nine
months due to factors over which we have little or no control, including the
size of the transaction and the level of competition we encounter in our sales
activities. During the sales cycle, we typically provide a significant level of
education to prospective customers regarding the use and benefits of our
products.
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Any delay in the sales cycle of a large license or a number of smaller licenses
could have an adverse effect on our results of operation and financial
condition.
SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS MAY RESULT IN A PERIODIC
REDUCTION IN OUR REVENUES AND IMPAIRMENT OF OUR OPERATING RESULTS.
Seasonality in our business could result in our revenues in a given period
being less than market estimates. Seasonality could also result in
quarter-to-quarter decreases in our revenues. In either of these events,
seasonality could have an adverse impact on our results of operations.
Historically, our revenues and operating results in our December quarter have
tended to benefit, relative to our June and September quarters, from purchase
decisions made by the large concentration of customers with calendar year-end
budgeting requirements. Revenues and operating results in our March quarter have
tended to benefit from the efforts of our sales force to meet fiscal year-end
sales quotas. These historical patterns may change over time, however,
particularly as our operations become larger and the sources of our revenue
change or become more diverse. For example, our international operations have
expanded significantly in recent years, particularly in Europe. We also have an
international presence in the Pacific Rim and Latin America. We may experience
variability in demand associated with seasonal buying patterns in these foreign
markets. As an example, the September quarter is typically weaker in Europe for
many technology companies, including Peregrine, due to the European summer
holiday season.
IF A MARKET FOR OUR INFRASTRUCTURE RESOURCE MANAGEMENT SOFTWARE AND ASSET
PROCUREMENT SOLUTIONS DOES NOT DEVELOP, WE WILL BE UNABLE TO SELL OUR PRODUCTS
OR INCREASE OUR REVENUES. THE MARKET FOR OUR PRODUCTS IS STILL RELATIVELY NEW
AND UNPROVEN.
If the market for our infrastructure management software products does not
continue to develop as we anticipate, our business and operating results would
be adversely affected, and our financial condition could deteriorate. Until
recently, our product strategy focused on providing software products that help
to manage business computer networks and other information technology assets.
Beginning in late 1997, we began to broaden our product line to offer products
capable of managing multiple aspects of a business enterprise's infrastructure,
including its physical plant and facilities, its telecommunications networks,
its distribution systems, and its corporate car and rail fleets. Prior to our
introduction of these products, an integrated software solution for managing
corporate infrastructure assets did not exist in the market. Rather,
corporations purchased software to manage specific components of their
infrastructure. In the second half of fiscal 2000, we attempted to further
expand our infrastructure management product line by introducing GET.IT!, a line
of employee self-service products that facilitate the acquisition and use of
infrastructure assets, services, and information. As a result, the market for
our products is still new and unproven and is continuing to develop. If a market
for infrastructure management solutions fails to develop, or develops in ways we
do not anticipate, our business would be seriously impaired. In particular, our
revenues and operating results would decrease, and we could experience losses.
IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S EVOLVING TECHNOLOGY
STANDARDS, OR DO NOT CONTINUE TO MEET THE SOPHISTICATED NEEDS OF OUR CUSTOMERS,
SALES OF OUR PRODUCTS MAY DECREASE.
As a result of rapid technological change in our industry, our competitive
position in existing markets, or in markets we may enter in the future, can be
eroded rapidly by product advances and technological changes. We may be unable
to improve the performance and features of our products as necessary to respond
to these developments. In addition, the life cycles of our products are
difficult to estimate. Our growth and future financial performance depend in
part on our ability to improve existing products and 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 these
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investments. In addition, if we are required to expend substantial resources to
respond to specific technological or product changes, our operating results
would be adversely affected.
IF WE CANNOT ATTRACT EXPERIENCED SALES PERSONNEL, SOFTWARE DEVELOPERS, AND
HIGHLY-TRAINED CUSTOMER SERVICE PERSONNEL, WE WILL NOT BE ABLE TO SELL AND
SUPPORT OUR PRODUCTS.
If we are not successful in attracting and retaining qualified sales
personnel, software developers, and customer service personnel, our revenue
growth rates could decrease, or our revenues could decline, and our operating
results could be materially harmed. Our products and services require a
sophisticated selling effort targeted at several key people within our
prospective customers' organizations. This process requires the efforts of
experienced sales personnel as well as specialized consulting professionals. In
addition, the complexity of our products, and issues associated with installing
and maintaining them, require highly trained customer service and support
personnel. We intend to hire a significant number of these personnel in the
future and train them in the use of our products. We believe our success depends
in large part on our ability to attract and retain these key employees.
Competition for these employees is intense, and we have in the past experienced
difficulty recruiting qualified employees.
OUR BUSINESS WOULD BE HARMED IF ONE OR MORE MEMBERS OF OUR SENIOR MANAGEMENT
TEAM CHOSE TO LEAVE US.
The loss of the services of one or more our executive officers or key
employees, or the decision of one or more of these individuals to join a
competitor, could adversely affect our business and harm our operating results
and financial condition. Our success depends to a significant extent on the
continued service of our senior management and other key sales, consulting,
technical, and marketing personnel. None of our senior management is bound by an
employment agreement. In addition, only a few employees who were significant
shareholders of businesses we acquired are bound by noncompetition agreements.
We do not maintain key man life insurance on any of our employees.
IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, THIS WILL PLACE A SIGNIFICANT
STRAIN ON OUR MANAGEMENT AND OPERATIONAL RESOURCES.
Our recent growth rates have placed a significant strain on our management
and operational resources. We have expanded our operations rapidly in recent
years and intend to continue to expand in order to pursue market opportunities
that our management believes are attractive. Our customer relationships could be
strained if we are unable to devote sufficient resources to them as a result of
our growth, which could have an adverse effect on our future revenues and
operating results.
NEW PRODUCT INTRODUCTIONS OR ENHANCEMENTS OF EXISTING PRODUCTS BY OUR
COMPETITORS COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS.
If we cannot compete effectively in our market by offering products that are
comparable in functionality, ease of use, and price to those of our competitors,
our revenues will decrease, and our operating results would be adversely
affected. The market for our products is highly competitive and diverse, and the
technologies for infrastructure management software products can change rapidly.
New products are introduced frequently and existing products are continually
enhanced.
We face competition from a number of sources in the markets for our
infrastructure resource management and e-procurement software solutions.
- In the markets for our infrastructure resource management solutions, we
face competition from:
- providers of internal help desk software applications for managing
information technology service desks, such as Remedy Corporation and
Tivoli Systems, that compete with our enterprise service desk software;
- providers of asset management software, including Remedy, MainControl,
and Janus Technologies;
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- providers of facilities management software, including Archibus,
Facilities Information Systems, and Assetworks (a division of
CSI-Maximus);
- providers of transportation management software that competes with our
fleet management and rail management software, including Control
Software (a division of CSI-Maximus) and Project Software and
Development Inc.;
- information technology and systems management companies such as IBM,
Computer Associates, Network Associates, Hewlett-Packard, and
Microsoft;
- numerous start-up and other entrepreneurial companies offering products
that compete with the functionality offered by one or more of our
infrastructure management products; and
- the internal information technology departments of those companies with
infrastructure management needs.
- In the markets for procurement and e-procurement solutions, we have
experienced competition from:
- established competitors in the business-to-business internet commerce
solution market, such as Ariba and CommerceOne; and
- established providers of enterprise resource planning software that are
entering the market for procurement and e-procurement solutions,
including Oracle and SAP.
Many of our current and potential competitors have substantially greater
financial, technical, marketing, and other resources than we have. 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
than we can to the development, promotion, and sale of their products. We may
not be able to compete successfully against current and future competitors,
which could have an adverse effect on our future revenues and operating results.
NEW COMPETITORS AND ALLIANCES AMONG EXISTING COMPETITORS COULD IMPAIR OUR
ABILITY TO RETAIN AND EXPAND OUR MARKET SHARE.
Additional competition from new entrepreneurial companies or established
companies entering our markets could have an adverse effect on our business,
revenues, and operating results. In addition, alliances among companies that are
not currently direct competitors could create new competitors with substantial
market presence. Because few barriers to entry exist in the software industry,
we anticipate additional competition from new and established companies as well
as business alliances. We expect that the software industry will continue to
consolidate. In particular, we expect that large software companies will
continue to acquire or establish alliances with our smaller competitors, thereby
increasing the resources available to these competitors. These new competitors
or alliances could rapidly acquire significant market share at our expense.
SYSTEM MANAGEMENT COMPANIES MAY ACQUIRE INFRASTRUCTURE MANAGEMENT AND/OR
HELP DESK SOFTWARE COMPANIES AND CLOSE THEIR SYSTEMS TO OUR PRODUCTS, HARMING
OUR ABILITY TO SELL OUR PRODUCTS.
If large system management providers close their systems to our products,
our revenues and operating results would be seriously harmed. Our ability to
sell our products depends in large part on our products' compatibility with and
support by providers of system management products, including Tivoli, Computer
Associates, and Hewlett-Packard. Both Tivoli and Hewlett-Packard have acquired
providers of help desk software products. These large, established providers of
system management products and services may decide to close their systems to
competing vendors like us. They may also decide to bundle the products that
compete with our 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
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acquisitions of help desk and other infrastructure management software vendors
by system management companies. Increased competition could result in price
reductions, reductions in our gross margins, or reductions in our market share.
Any of these events would adversely affect our business and operating results.
WE MAY BE UNABLE TO EXPAND OUR BUSINESS AND INCREASE OUR REVENUES IF WE ARE
UNABLE TO EXPAND OUR DISTRIBUTION CHANNELS.
If we are unable to expand our distribution channels effectively, our
business, revenues, and operating results could be harmed. In particular, we
will need to expand our direct sales force and establish relationships with
additional system integrators, original manufacturers, and other third party
channel partners who market and sell our products. If we cannot establish these
relationships, or if our channel partners are unable to market our products
effectively or provide cost-effective customer support and service, our revenues
and operating results will be harmed. Even where we are successful in
establishing a new third-party relationship, our agreement with the third party
may not be exclusive. As a result, our partner may carry competing product
lines.
IF WE ARE UNABLE TO EXPAND OUR BUSINESS INTERNATIONALLY, OUR BUSINESS,
REVENUES, AND OPERATING RESULTS COULD BE HARMED.
In order to grow our business, increase our revenues, and improve our
operating results, we believe we must expand internationally. If we expend
substantial resources pursuing an international strategy and are not successful,
our revenues would be less than we or market analysts anticipate, and our
operating results would suffer. International revenues represented approximately
36.0% of Peregrine's business in each of fiscal 1998 and 1999 and approximately
41.0% of Peregrine's business in fiscal 2000. We have several international
sales offices in Europe as well as offices in Japan, Singapore, and Australia.
International expansion will require significant management attention and
financial resources, and we may not be successful expanding our international
operations. We have limited experience in developing local language versions of
our products or in marketing our products to international customers. We may not
be able to successfully translate, market, sell, and deliver our products
internationally.
CONDUCTING BUSINESS INTERNATIONALLY POSES RISKS THAT COULD AFFECT OUR
FINANCIAL RESULTS.
Even if we are successful in expanding our operations internationally,
conducting business outside North America poses many risks that could adversely
affect our operating results. These include the following:
- gains and losses resulting from fluctuations in currency exchange rates,
for which hedging activities may not adequately protect us;
- longer payment cycles;
- difficulties in staffing and managing international operations;
- problems in collecting accounts receivable; and
- the adverse effects of tariffs, duties, price controls, or other
restrictions that impair trade.
IF IMMIGRATION LAWS LIMIT OUR ABILITY TO RECRUIT AND EMPLOY SKILLED
TECHNICAL PROFESSIONALS FROM OTHER COUNTRIES, OUR BUSINESS AND OPERATING RESULTS
COULD BE HARMED.
Limitations under United States immigration laws could prevent us from
recruiting skilled technical personnel from foreign countries, which could harm
our business if we do not have sufficient personnel to develop new products and
respond to technological changes. This inability to hire technical personnel
could lead to future decreases in our revenues, or decreases in our revenue
growth rates, either of which would adversely affect our operating results.
Because of severe shortages for
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qualified technical personnel in the United States, many companies, including
Peregrine, have recruited engineers and other technical personnel from foreign
countries. Foreign computer professionals such as those we have employed
typically become eligible for employment in the United States by obtaining a
nonimmigrant visa. The number of nonimmigrant visas is limited annually by
federal immigration laws. In recent years, despite increases in the number of
available visas, the annual allocation has been exhausted well before year end.
WE HAVE MADE SUBSTANTIAL CAPITAL COMMITMENTS THAT COULD HAVE AN ADVERSE
EFFECT ON OUR OPERATING RESULTS AND FINANCIAL CONDITION IF OUR BUSINESS DOES NOT
GROW.
We have made substantial capital commitments as a result of recent growth in
our business that could seriously harm our financial condition if our business
does not grow and we do not have adequate resources to satisfy our obligations.
In June 1999, we entered into a series of leases providing us with approximately
540,000 square feet of office space and an option to lease 118,000 square feet.
Even excluding the exercise of the option, the leases require a minimum
aggregate lease payment of approximately $124.0 million over the twelve year
term of the leases. The office space (including the option) is intended for a
five building campus in San Diego, California. We plan to fully occupy three of
these buildings by the summer of 2000 and for the present time to sublease the
remaining two buildings. The capital commitments, construction oversight, and
movement of personnel and facilities involved in a transaction of this type and
magnitude present numerous risks, including:
- failure to properly estimate the future growth of our business;
- inability to sublease excess office space if we underestimate future
growth;
- disruption of operations; and
- inability to match fixed lease payments with fluctuating revenues, which
could impair our earnings or result in losses.
PRODUCT DEVELOPMENT DELAYS COULD HARM OUR COMPETITIVE POSITION AND REDUCE
OUR REVENUES.
If we experience significant product development delays, our position in the
market would be harmed, and our revenues could be substantially reduced, which
would adversely affect our operating results. We have experienced product
development delays in the past and may experience delays in the future. In
particular, we may experience product development delays associated with the
integration of recently acquired products and technologies. Delays may occur for
many reasons, including an inability to hire sufficient number of developers,
discovery of bugs and errors, or a failure of our current or future products to
conform to industry requirements.
ERRORS OR OTHER SOFTWARE BUGS IN OUR PRODUCTS COULD RESULT IN SIGNIFICANT
EXPENDITURES TO REMEDY OR CORRECT THE ERRORS OR BUGS.
If we are required to expend significant amounts to correct software bugs or
errors, our revenues could be harmed as a result of our inability to deliver the
product, and our operating results could be impaired as we incur additional
costs without offsetting revenues. Errors can be detected at any point in a
product's life cycle. We have experienced errors in the past that resulted in
delays in product shipment and increased costs. Discovery of errors could result
in any of the following:
- loss of or delay in revenues and loss of customers or market share;
- failure to achieve market acceptance;
- diversion of development resources and increased development expenses;
- increased service and warranty costs;
- legal actions by our customers; and
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- increased insurance costs.
WE COULD EXPERIENCE LOSSES AS A RESULT OF OUR STRATEGIC INVESTMENTS.
If our strategic investments in other companies are not successful, we could
incur losses. We have made and expect to continue to make minority investments
in companies with businesses or technologies that we consider to be
complementary with our business or technologies. These investments have
generally been made by issuing shares of our common stock or to a lesser extent
with cash. Many of these investments are in companies whose operations are not
yet sufficient to establish them as profitable concerns. Adverse changes in
market conditions or poor operating results of underlying investments could
result in our incurring losses or an inability to recover the carrying value of
its investments.
WE COULD BE COMPETITIVELY DISADVANTAGED IF WE WERE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY.
If we fail to adequately protect our proprietary rights, our competitors
could offer similar products relying on technologies developed by us,
potentially harming our competitive position and decreasing our revenues. We
attempt to protect our intellectual property rights by limiting access to the
distribution of our software, documentation, and other proprietary information
and by relying on a combination of copyright, trademark, and trade secret laws.
In addition, we enter into confidentiality agreements with our employees and
certain customers, vendors, and strategic partners. In some circumstances,
however, we may, if required by a business relationship, provide our licensees
with access to our data model and other proprietary information underlying our
licensed applications.
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. Policing unauthorized use of software
is difficult, and 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 other. If we are
required to pursue litigation to enforce our proprietary rights, we could incur
substantial costs, and management attention could be diverted, either of which
could adversely affect our revenues and operating results.
IF WE BECOME INVOLVED IN A PROTRACTED INTELLECTUAL PROPERTY DISPUTE, OR ONE
WITH A SIGNIFICANT DAMAGES AWARD, OR WHICH REQUIRES US TO CEASE SELLING OUR
PRODUCTS, WE COULD BE SUBJECT TO SIGNIFICANT LIABILITY AND THE TIME AND
ATTENTION OF OUR MANAGEMENT COULD BE DIVERTED.
In recent years, there has been significant litigation in the United States
involving intellectual property rights, including companies in the software
industry. Intellectual property claims against us and any resulting lawsuit, if
successful, could subject us to significant liability for damages and invalidate
what we currently believe are our proprietary rights. These lawsuits, regardless
of their success, would likely be time-consuming and expensive to resolve and
could divert management's time and attention. Any potential intellectual
property litigation could also force us to do one or more of the following:
- cease selling, incorporating, or using products or services that
incorporate the infringed intellectual property;
- obtain from the holder of the infringed intellectual property a license to
sell or use the relevant technology, which license may not be available on
acceptable terms, if at all; or
- redesign those products or services that incorporate the disputed
technology, which could result in substantial unanticipated development
expenses.
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If we are subject to a successful claim of infringement and we fail to
develop noninfringing technology or license the infringed technology on
acceptable terms and on a timely basis, our revenues could decline or our
expenses could increase.
We may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights or to determine the scope and validity of
our proprietary rights or the proprietary rights of competitors. These claims
could result in costly litigation and the diversion of technical and management
personnel's attention.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN
SIGNIFICANT COSTS.
If we are held liable for damages incurred as a result of our products, our
operating results could be significantly impaired. Our license agreements with
our customers typically contain provisions designed to limit exposure to
potential product liability claims. These limitations may not be effect under
the laws of some jurisdictions, however. Although we have not experienced any
product liability claims to date, the sale and support of our products entails
the risks of these claims.
CONTROL BY OUR OFFICERS AND DIRECTORS MAY LIMIT OUR STOCKHOLDERS' ABILITY TO
INFLUENCE MATTERS REQUIRING STOCKHOLDER APPROVAL AND COULD DELAY OR PREVENT A
CHANGE IN CONTROL, WHICH COULD PREVENT OUR STOCKHOLDERS FROM REALIZING A PREMIUM
IN THE MARKET PRICE OF THEIR COMMON STOCK.
The concentration of ownership of our common stock by our officers and
directors could delay or prevent our change in control or discourage a potential
acquiror from attempting to obtain control of us. This could cause the market
price of our common stock to fall or prevent the stockholders from realizing a
premium in the market price of our common stock in the event of an acquisition.
As of March 31, 2000, our officers and directors owned approximately 12,061,678
shares of common stock (including shares issuable upon exercise of options
exercisable within 60 days of March 31, 2000), representing approximately 11.0%
of our total shares outstanding. Assuming the issuance of approximately
30 million shares of our common stock in connection with our contemplated merger
with Harbinger Corporation, our officers and directors will own approximately
8.6% of our outstanding common stock (not including shares held by officers and
directors of Harbinger who will become officers and directors of Peregrine after
the merger).
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DISCOURAGE
POTENTIAL ACQUISITION BIDS FOR US AND MAY PREVENT CHANGES IN OUR MANAGEMENT THAT
OUR STOCKHOLDERS OTHERWISE WOULD APPROVE.
Some provisions of our charter documents eliminate the right of stockholders
to act by written consent without a meeting and impose specific procedures for
nominating directors and submitting proposals for consideration at a stockholder
meeting. These provisions are intended to increase the likelihood of continuity
and stability in the composition of our board of directors and the policies
established by the board of directors. These provisions also discourage some
types of transactions, which may involve an actual or threatened change of
control. These provisions are designed to reduce our vulnerability to an
unsolicited acquisition proposal. As a result, these provisions could discourage
potential acquisition proposals and could delay or prevent a change of control
transaction. These provisions are also intended to discourage common tactics
that may be used in proxy fights. As a result, they could have the effect of
discouraging third parties from making tender offers for our shares. These
provisions may prevent the market price of our common stock from reflecting the
effects of actual or rumored takeover attempts. These provisions may also
prevent changes in our management.
Our 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, preference, privileges, and restrictions of this preferred stock without
any further vote or action by our stockholders. The issuance of preferred stock
allows us to have flexibility in connection with possible acquisitions and for
other corporate purposes. The issuance of preferred stock, however, may delay or
prevent a change in control
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transaction. As a result, the market price of our common stock and other rights
of holders of our common stock may be adversely affected, including the loss of
voting control to others.
ADDITIONAL RISKS RELATING TO THE PROPOSED ACQUISITION OF HARBINGER
On April 5, 2000, we announced that we had signed a definitive merger
agreement with Harbinger Corporation, a provider of business-to-business
electronic commerce products and services. If the merger is completed, we will
issue 0.75 of a share of our common stock for each outstanding share of
Harbinger common stock and will assume all outstanding options and warrants to
acquire Harbinger common stock (the number and exercise price of which will be
adjusted based on the exchange ratio). We expect to issue approximately
35.6 million shares of our common stock in exchange for all the outstanding
equity securities of Harbinger. We expect the acquisition will be accounted for
using the purchase method of accounting and will be treated as a tax-free
reorganization. The definitive agreement has been approved by the boards of
directors of both Harbinger and Peregrine. Closing of the merger is subject to
approval by Peregrine's and Harbinger's stockholders, regulatory approvals, and
customary closing conditions.
In connection with the proposed merger, we expect to file a proxy statement
and Registration Statement on Form S-4 with the SEC, and Harbinger expects to
file a proxy statement with the SEC. We expect that Harbinger and Peregrine will
mail a Joint Proxy Statement/Prospectus to stockholders of Harbinger and
Peregrine containing additional information about the proposed merger. Investors
and security holders are urged to read the registration statement and the Joint
Proxy Statement/ Prospectus carefully when they are available. The registration
statement and the Joint proxy Statement/ Prospectus will contain important
information about Harbinger, Peregrine, the proposed merger, risks related to
the merger, the persons soliciting proxies relating to the proposed merger,
their interests in the proposed merger, and related matters.
WE MAY EXPERIENCE PROBLEMS INTEGRATING THE BUSINESSES OF PEREGRINE AND
HARBINGER. ANY INTEGRATION PROBLEMS COULD CAUSE US TO INCUR SUBSTANTIAL
UNANTICIPATED COSTS AND EXPENSES, WHICH WOULD HARM OUR OPERATING RESULTS.
If we fail to integrate our businesses successfully, we will incur
substantial costs, which will increase our expenses and reduce any earnings or
potentially result in losses, and we will fail to achieve the expected synergies
and cost reductions of the merger. In addition, integration problems could
divert management's attention from other business opportunities, which could
result in slower revenue growth than anticipated or in declines in revenue.
Integrating our business with Harbinger's business will be complex,
time-consuming, and expensive. It may disrupt both companies' businesses if not
completed in a timely and efficient manner. Peregrine and Harbinger are both
global companies with substantial operations throughout the world, and
integrating geographically separate and dispersed organizations may be
difficult. We have never attempted to integrate an acquisition of a company as
large as Harbinger.
Specific integration challenges faced by Peregrine and Harbinger include the
following:
- retaining existing customers and strategic partners;
- retaining and integrating management and other key employees of both
companies;
- combining product offerings and product lines effectively and quickly,
including technical integration by our respective engineering teams;
- integrating sales efforts so that customers can easily do business with
the combined company;
- transitioning multiple locations around the world to common systems,
including common information technology systems;
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- persuading employees that the business cultures of the two companies are
compatible;
- successfully developing and promoting a unified brand strategy and
marketing it to existing and prospective customers; and
- developing and maintaining uniform standards, controls, procedures, and
policies.
THE MERGER COULD IMPAIR EXISTING RELATIONSHIPS WITH SUPPLIERS, CUSTOMERS,
STRATEGIC PARTNERS, AND EMPLOYEES, WHICH COULD HAVE AN ADVERSE EFFECT ON OUR
INDIVIDUAL AND COMBINED BUSINESSES AND FINANCIAL RESULTS.
The public announcement of the merger could substantially impair important
business relationships of either company. Impairment of these business
relationships could reduce our revenues or increase our expenses, either of
which would harm our financial results. Specific examples of situations in which
we could experience problems include the following:
- suppliers, distributors, or customers of either Peregrine or Harbinger
could decide to cancel or terminate existing arrangements, or fail to
renew those arrangements, as a result of the merger;
- potential customers who are currently negotiating with Peregrine or
Harbinger with respect to the purchase or license of their products and
services may delay purchases, or defer or terminate negotiations, as a
result of uncertainty about the merger;
- customers of Harbinger who use our competitors' products could terminate
or delay orders with Harbinger because they question Harbinger's continued
commitment to provide products and enhancements, or to support products,
used in conjunction with products of our competitors;
- key employees of Harbinger, particularly those for whom vesting of options
or other benefits will accelerate as a result of the merger, may decide to
terminate their employment; and
- other current or prospective employees of Peregrine and Harbinger may
experience uncertainty about their future roles with the combined company,
which could adversely affect our ability to attract and retain key
management, sales, marketing, and technical personnel.
THE MERGER COULD RESULT IN SLOWER REVENUE GROWTH RATES FOR THE COMBINED
COMPANY THAN THOSE APPLICABLE TO PEREGRINE PRIOR TO THE MERGER, WHICH COULD
ADVERSELY AFFECT THE OPERATING RESULTS OF THE COMBINED COMPANY AND LEAD TO A
DECLINE IN ITS STOCK PRICE. HARBINGER'S REVENUES AND PROFITS COULD DECREASE AS
IT TRANSITIONS TO A BUSINESS MODEL THAT EMPHASIZES RECURRING SERVICES REVENUES.
We may not be able to maintain our recent revenue growth rates after the
merger, which could have an adverse effect on our operating results and could
lead to a decline in our stock price. Our revenues grew from $62 million in
fiscal 1998 to $138 million in fiscal 1999 and $253 million in fiscal 2000.
Harbinger has experienced substantially slower growth rates than we have in
recent periods, with revenues growing from $118 million in fiscal 1997 to
$135 million in fiscal 1998 to $156 million in fiscal 1999. Harbinger is
currently changing its business model by creating and supporting internet-based
trading solutions that assist companies to automate their procurement process
and by providing customers with the ability to use Harbinger's products on a
hosted subscription basis. If the merger does not create the product and
financial synergies management currently anticipates, and particularly if
Harbinger's business transition is not successful, the combined company's
revenue growth rates could be substantially lower than our recent growth rates.
In particular, if we and Harbinger experience integration problems, our
management's attention could be diverted from our existing core business and
lead to slower revenue growth rates for that business. Even if the merger is not
completed, our management does not believe that our historical growth rates can
necessarily be maintained. A more detailed discussion of our business and
associated risks is contained under the caption "Risks related to Peregrine."
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HARBINGER AND SOME OF ITS CURRENT AND FORMER OFFICERS AND DIRECTORS ARE
DEFENDANTS IN SHAREHOLDER LITIGATION FOR WHICH HARBINGER IS NOT INSURED. THE
OUTCOME OF THIS LITIGATION, IF DETERMINED ADVERSELY TO HARBINGER, COULD HAVE AN
ADVERSE EFFECT ON THE COMBINED COMPANY'S FINANCIAL CONDITION AFTER THE MERGER.
If outstanding shareholder litigation against Harbinger were decided
adversely to Harbinger, or Harbinger were required to settle this litigation for
a substantial sum, our financial condition as a combined company after the
merger could be materially and adversely affected. In September 1999, a
complaint was filed against Harbinger and some of its current and former
officers and directors in the United States District Court for the Northern
District of Georgia. The complaint alleges causes of action for
misrepresentation and violations of federal securities laws. An amended
complaint was filed in March 2000, alleging additional causes of action,
including allegations relating to accounting improprieties. The complaints
relate to actions by Harbinger during the period from February 1998 to
October 1998. Harbinger did not maintain directors' and officers' liability
insurance during this period. As a result, Harbinger is not insured with respect
to any potential liability of Harbinger or any officer or director of Harbinger.
Harbinger is, however, obligated under agreements with each of its officers and
directors to indemnify them for the costs incurred in connection with defending
themselves against this litigation and is obligated to indemnify them to the
maximum extent permitted under applicable law if they are held liable.
The pending litigation is still in the early stages. As a result, we are
unable to estimate the damages, or range of damages, that Harbinger or the
combined company might incur in connection with this litigation. In addition,
defending the litigation will involve substantial direct expenses and will
likely result in a diversion of management's time and attention away from
business operations, which could have an adverse effect on the results of
operations of Harbinger or the combined company.
OUR REPORTED FINANCIAL RESULTS WILL SUFFER AS A RESULT OF PURCHASE
ACCOUNTING TREATMENT OF THE MERGER AND THE AMORTIZATION OF GOODWILL AND OTHER
INTANGIBLE ASSETS.
Purchase accounting treatment of the merger will result in a net loss for us
for the foreseeable future, which could have a material and adverse effect on
the market price of our common stock. Under purchase accounting, we will record
the following as an asset on its balance sheet:
- the fair value of the consideration given for Harbinger's outstanding
common stock;
- the fair value of the consideration given for outstanding options and
warrants to purchase Harbinger common stock, which we will assume in
connection with the merger; and
- merger-related direct transaction costs, including the fees of our legal,
accounting, and financial advisors.
We will allocate these costs to individual Harbinger assets acquired and
liabilities assumed. These assets and liabilities will include various
identifiable intangible assets such as acquired technology, acquired trademarks
and tradenames, and acquired workforce. Intangible assets, including goodwill,
will be amortized over a five year period. In addition, we will allocate a
portion of the purchase price for acquiring Harbinger to in-process research and
development. In-process research and development, which is currently estimated
at $66.1 million for Harbinger, will be expensed in the quarter in which the
merger is completed.
The amount of purchase cost allocated to goodwill and other intangibles is
estimated to be approximately $1.3 billion. If goodwill and other intangible
assets were amortized in equal annual amounts following completion of the
merger, the accounting charge attributable to these items would be approximately
$250.0 million per fiscal year.
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OUR STOCKHOLDERS MAY NOT REALIZE A BENEFIT FROM THE MERGER COMMENSURATE WITH
THE OWNERSHIP DILUTION THEY WILL EXPERIENCE IN CONNECTION WITH THE MERGER.
If the combined company is unable to realize the strategic and financial
benefits currently anticipated from the merger, our stockholders will have
experienced substantial dilution of their ownership interest without receiving
any commensurate benefit. In connection with the merger, we anticipate that we
will issue approximately 35.6 million shares of our common stock (including
options being assumed), representing approximately 32.5% of our outstanding
common stock prior to the merger.
FAILURE TO COMPLETE THE MERGER COULD HAVE A NEGATIVE IMPACT ON OUR STOCK
PRICE AS WELL AS A NEGATIVE IMPACT ON OUR BUSINESSES AND FINANCIAL RESULTS.
If the merger is not completed for any reason, we may be subject to a number
of material risks, including the following:
- the price of our common stock may decline to the extent that the relevant
current market price reflects a market assumption that the merger will be
completed. Our stock price may also decline because of uncertainty
concerning our stand-alone prospects; and
- some costs related to the merger, such as legal, accounting, financial
advisory, and financial printing fees must be paid even if the merger is
not completed.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the selling
stockholders. The selling stockholders will receive all net proceeds from the
sale of our common stock under this prospectus.
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SELLING STOCKHOLDERS
The following table sets forth information with respect to the number of
shares of common stock owned by the selling stockholders named below and as
adjusted to give effect to the sale of the shares offered hereby. The
information in the table below is current as of the date of this prospectus. The
shares are being registered to permit public secondary trading of the shares,
and the selling stockholders may offer the shares for resale from time to time.
The selling stockholders acquired the shares being offered in connection
with our acquisition of Barnhill Management Group, Inc. In the acquisition, the
shares of common stock were issued pursuant to an exemption from the
registration requirements of the Securities Act. In connection with the
acquisition, we agreed to register the shares of our common stock received by
the former shareholders of Barnhill pursuant to the registration statement of
which this prospectus is a part. None of the selling stockholders owns or will
own after the offering more than 1% of our outstanding common stock.
Shares of common stock subject to options that are currently exercisable or
exercisable within 60 days of March 31, 2000 are treated as outstanding and
beneficially owned by the person holding the options and are listed under the
"Shares Underlying Options" column below.
The shares offered by this prospectus may be offered from time to time by
the selling stockholders named below:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING
---------------------- ----------------------
SHARES OF SHARES NUMBER SHARES OF SHARES OF
COMMON UNDERLYING OF SHARES COMMON UNDERLYING
SELLING STOCKHOLDERS STOCK OPTIONS OFFERED STOCK OPTIONS
- -------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Michael D. Whitt............................ 173,911 -- 149,110 24,801 --
Michael L. Thomas........................... 7,150 -- 6,131 1,019 --
William H. Moore............................ 7,150 -- 6,131 1,019 --
Ronald W. Badgely........................... 1,747 -- 1,498 249 --
Jeffrey Gibson.............................. 454 31 259 64 31
John Rogers................................. 302 -- 390 43 --
Howard Ledbetter............................ 252 31 217 35 31
Edward Copes................................ 201 394 173 28 394
Deborah Krieger............................. 100 31 86 14 31
</TABLE>
- ------------------------
(1) The number of shares beneficially owned include shares issued in connection
with our acquisition of Barnhill but which are currently held in escrow
pursuant to the terms of the acquisition agreement to indemnify Peregrine
for losses arising out of any inaccuracy, breach or failure to comply with
the representations and warranties made or delivered by Barnhill in
connection with the acquisition. These escrow shares will remain subject to
the escrow provisions until April 2001 and will not be sold in this
offering.
PLAN OF DISTRIBUTION
We will not receive any proceeds from the sale of the shares. The shares may
be sold or distributed from time to time by the selling stockholders, or by
pledgees, donees, transferees of, or other successors in interest directly to
one or more purchasers (including pledgees) or through brokers, dealers or
underwriters who may act solely as agents or may acquire shares as principals,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The distribution of the shares may be effected in one or more
transactions that may take place through the Nasdaq National Market, including
block trades or ordinary broker's transactions, or through privately negotiated
transactions, or through a
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combination of any such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the selling stockholder in connection with such
sales.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of shares in the course of hedging the positions they assume with the
selling stockholders. The selling stockholders or their successors in interest
may also enter into option or other transactions with the broker-dealers that
require the delivery by such broker-dealers of the shares, which shares may be
resold thereafter pursuant to this prospectus.
The aggregate proceeds to the selling stockholders from the sale of the
shares will be the purchase price of the common stock sold less the aggregate
agents' commissions, if any, and other expenses of issuance and distribution not
borne by us. The selling stockholders and any dealers or agents that participate
in the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the shares by them
and any commissions received by any such dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
To the extent required, the specific shares of common stock to be sold, the
name of the selling stockholders, purchase price, public offering price, the
names of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to a particular offering will be set forth in an
accompanying prospectus supplement.
We have agreed to bear certain expenses of registration of the common stock
under the federal and state securities laws and of any offering and sale
hereunder not including certain expenses, such as commissions of dealers or
agents, and fees attributable to the sale of the shares. We have agreed to
indemnify the selling stockholders against certain liabilities, including
certain potential liabilities under the Securities Act. The selling stockholders
have also agreed to indemnify us against certain liabilities, including certain
potential liabilities under the Securities Act.
Any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or all
of the shares of common stock offered by them under this prospectus.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon for Peregrine by Holme Roberts & Owen, LLP, Denver, Colorado.
EXPERTS
The audited consolidated financial statements of Peregrine as of March 31,
2000 and 1999 and for each of the three years in the period ended March 31,
2000, incorporated by reference in this prospectus and the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
19
<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 us 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........................................ $ 926
Nasdaq National Market listing fee.......................... $ 4,000
Printing expenses........................................... $10,000
Legal fees and expenses..................................... $ 5,000
Accounting fees and expenses................................ $10,000
Miscellaneous expenses...................................... $10,074
-------
Total..................................................... $40,000
=======
</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 our Amended and Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permitted under
Delaware law.
Article VI of our 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.
We have entered into indemnification agreements with our directors and
executive officers, in addition to the indemnification provided for in our
Bylaws, and we intend to enter into indemnification agreements with any new
directors and executive officers in the future.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling us
pursuant to the foregoing provisions, we have 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.
The Declaration of Registration Rights dated March 30, 2000, entered into by
us in connection with our acquisition of all of the outstanding shares of
Barnhill common stock, provides that we will indemnify the selling stockholders
against certain liabilities, including liabilities under the Securities Act.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees, or other agents in which indemnification is
being sought, nor are we aware of any threatened litigation that may result in a
claim for indemnification by any of our directors, officers, employees or other
agents.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
4.1 Declaration of Registration Rights dated March 30, 2000, of
Peregrine
5.1 Opinion of Holme Roberts & Owen LLP
23.1 Consent of Arthur Anderson LLP, Independent Public
Accountants
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit
5.1)
24.1 Power of Attorney (reference is made to the signature page
of this Registration Statement)
</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 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.
II-2
<PAGE>
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 9th day of
May, 2000.
<TABLE>
<S> <C> <C>
PEREGRINE SYSTEMS, INC.
By: /s/ DAVID A. FARLEY
-----------------------------------------
David A. Farley
SENIOR VICE PRESIDENT, FINANCE AND
ADMINISTRATION AND 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 May 9, 2000
Stephen P. Gardner Officer) and Director
Senior Vice President,
Finance and
/s/ DAVID A. FARLEY Administration and Chief
------------------------------------------- Financial Officer May 9, 2000
David A. Farley (Principal Financial
Officer) and Director
Vice President Finance, and
/s/ MATHEW C. GLESS Chief Accounting Officer
------------------------------------------- (Principal Accounting May 9, 2000
Mathew C. Gless Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN J. MOORES
------------------------------------------- Chairman of the Board of May 9, 2000
John J. Moores Directors
/s/ CHRISTOPHER A. COLE
------------------------------------------- Director May 9, 2000
Christopher A. Cole
/s/ RICHARD A. HOSLEY, II
------------------------------------------- Director May 9, 2000
Richard A. Hosley, II
/s/ CHARLES E. NOELL, III
------------------------------------------- Director May 9, 2000
Charles E. Noell, III
/s/ NORRIS VAN DEN BERG
------------------------------------------- Director May 9, 2000
Norris Van Den Berg
/s/ THOMAS G. WATROUS, SR.
------------------------------------------- Director May 9, 2000
Thomas G. Watrous, Sr.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
4.1 Declaration of Registration Rights dated March 30, 2000, of
Peregrine
5.1 Opinion of Holme Roberts & Owen LLP
23.1 Consent of Arthur Anderson LLP, Independent Public
Accountants
23.2 Consent of Holme Roberts & Owen LLP (included in Exhibit
5.1)
24.1 Power of Attorney (reference is made to the signature page
of this Registration Statement)
</TABLE>
<PAGE>
EXHIBIT 4.1
PEREGRINE SYSTEMS, INC.
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of
March 30, 2000, by Peregrine Systems, Inc., a Delaware corporation ("Parent"),
for the benefit of shareholders of Barnhill Management Group, Inc., a Nevada
corporation (the "Company"), acquiring shares of Parent Common pursuant to that
Agreement and Plan of Reorganization dated as of March 24, 2000 (the
"Reorganization Agreement"), among Parent, Company and Barnhill Acquisition
Corporation, a Nevada corporation and wholly-owned subsidiary of Parent ("Merger
Sub").
1. DEFINITIONS. As used in this Declaration:
(a) "Effective Time" means the time of acceptance by the
Nevada Secretary of State of the Articles of Merger.
(b) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(c) "Holder" means: (i) a stockholder of the Company to whom
shares of Parent Common are issued at the Closing pursuant to the Reorganization
Agreement, or (ii) the Escrow Agent (as defined in the Reorganization
Agreement). A Holder shall not include any holder of a warrant or other right to
acquire Company Capital Stock which is not exercised on or before the Effective
Time.
(d) "Registrable Securities" means for each Holder the number
of shares of Parent Common issued to such Holder pursuant to the Reorganization
Agreement, in each case rounded to the nearest integral amount, and for all
Holders the sum of the Registrable Securities held by them; provided however,
that such shares of Parent Common shall cease to be Registrable Securities at
such time as (i) they have been registered for resale pursuant to a prospectus
included in a Registration Statement on Form S-8 under the Securities Act or
(ii) they are otherwise available for resale under Rule 144 of the Securities
Act within a period of 180 days.
(e) "Securities Act" means the Securities Act of 1933, as
amended.
(f) "SEC" means the United States Securities and Exchange
Commission.
Terms not otherwise defined herein have the meanings given to them in the
Reorganization Agreement.
2. HOLDER REGISTRATION.
(a) Parent shall use commercially reasonable efforts to cause
the Registrable Securities held by each Holder to be registered under the
Securities Act so as to permit the sale
1
<PAGE>
thereof, and in connection therewith shall prepare and file with the SEC within
thirty (30) days following the Effective Time a registration statement in such
form as is then available under the Securities Act covering the Registrable
Securities; provided however, that each Holder shall provide all such
information and materials and take all such action as may be required in order
to permit Parent to comply with all applicable requirements of the Securities
Act, the Exchange Act, and of 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 Parent pursuant
to this Declaration to register the Registrable Securities held by each such
Holder. The offerings made pursuant to such registration shall not be
underwritten.
(b) Parent 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 commercially reasonable efforts to cause
such registration statement to become effective as promptly as practicable after
filing and to keep such registration statement effective until the sooner to
occur of (A) the date on which all Registrable Securities included within such
registration statement have been sold or (B) the expiration of sixty (60) 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 Parent shall be required under the provisions
hereof to cause the registration statement to remain effective; (iv) use
commercially reasonable 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 Parent 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), 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 REGISTRATION.
(a) Parent may determine to provide for the firmly
underwritten sale of Parent Common Stock for its own account and/or the account
of other shareholders, and in connection with such determination, file with the
SEC a registration statement to register such Common Stock (an "Underwritten
Sale"). In the event of such determination, and where such determination occurs
(as evidenced by an organizational meeting for the purpose of the Underwritten
Sale) prior to eleven (11) months after the date of this Agreement, Parent will
promptly give to each Holder written notice thereof, and will include in the
Underwritten Sale
2
<PAGE>
(and any related qualification under blue sky laws or other related compliance)
all the Registrable Securities specified by the Holders to Parent in writing
within ten (10) days following receipt of Parent's notice, subject, however, to
the marketing limitation set forth in this Section 3. An Underwritten Sale,
including the form of underwriting agreement to be entered into by Parent, the
underwriter(s) and any selling shareholders, shall be on customary terms. The
underwriter(s) for an Underwritten Sale shall be selected by Parent in its sole
discretion. If a Holder participates in an Underwritten Sale of any Registrable
Securities pursuant to this Section 3, such Holder's rights under Section 2
shall terminate.
(b) The right of any Holder to registration pursuant to this
Section 3 shall be conditioned upon such Holder's participation in the
Underwritten Sale and the inclusion of Registrable Securities in the
Underwritten Sale to the extent provided herein. All Holders shall (together
with Parent and the other holders distributing their securities through the
Underwritten Sale) enter into an underwriting agreement in customary form with
the managing underwriter. Notwithstanding any other provision of this Section 3,
if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit or eliminate the Registrable Securities to be included in such
registration allocated among the Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities requested to be
included by such Holders in accordance with Section 3(a) above. To facilitate
the allocation of shares in accordance with the above provision, Parent or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares. If any Holder disapproves of the terms of the Underwritten
Sale, he or she may elect to withdraw therefrom by written notice to Parent and
the managing underwriter.
4. SUSPENSION OF PROSPECTUS. Under any registration statement filed
pursuant to Section 2 hereof, Parent may restrict disposition of Registrable
Securities, and a Holder will not be able to dispose of such Registrable
Securities, if Parent shall have delivered a notice in writing to such Holder
stating that a delay in the disposition of such Registrable Securities is
necessary because Parent, in its reasonable judgment, has determined that such
sales would require public disclosure by Parent of material nonpublic
information that is not included in such registration statement. In the event of
the delivery of the notice described above by Parent, Parent shall use its best
efforts to amend such registration statement and/or amend or supplement the
related prospectus if necessary and to take all other actions necessary to allow
the proposed sale to take place as promptly as possible, subject, however, to
the right of Parent 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. Such right to delay sales of Registrable Securities shall
not exceed one hundred twenty (120) days in the aggregate and no longer than
sixty (60) days as to any single delay. Any such delay shall result in a
corresponding extension of the period of time that Parent 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 reasonable fees and disbursements of Parent's outside
counsel and independent accountants shall be paid: (i) in respect of a
registration under
3
<PAGE>
Section 2, one-half by Parent and one-half by the holders in the proportion of
the Registrable Securities included in such registration; and (ii) in respect of
an Underwritten Sale under Section 3, by Parent. Underwriting discounts and
commissions and fees and disbursements of counsel for the Holders shall be paid
by the Holders.
6. INDEMNIFICATION. In the event of any offering registered pursuant to
this Declaration:
(a) Parent will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Declaration, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, 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 Parent of any rule or regulation promulgated under the Securities
Act, or state securities laws, or common law, applicable to Parent in connection
with any such registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors and partners and such Holder's
legal counsel and independent accountants, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
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 Parent will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based in any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to Parent in an instrument duly executed by such Holder or underwriter
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 Parent, each of its
directors and officers and its legal counsel and independent accountants, each
underwriter, if any, of Parent's securities covered by such a registration
statement, each person who controls Parent or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each of
its officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, 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 Parent, such Holders, such directors, officers,
legal counsel, independent accountants, underwriters or control persons for
4
<PAGE>
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 Parent 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 to the gross proceeds before expenses and
commissions to each such Holder of Registrable Securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section
6 (the "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) The obligations of Parent and each Holder under this
Section 6 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Declaration and otherwise.
(e) Notwithstanding the foregoing, to the extent the
provisions of this Section 6 are inconsistent with or conflict with the terms of
any underwriting, 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.
(f) If the indemnification provided for in this Section 6 from
the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect to any losses, claims, damages, liabilities or expenses referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the statements or omissions which
result in such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by
5
<PAGE>
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such Indemnifying Party or Indemnified Party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 6(c), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action, suit, proceeding or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6 (f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person or entity 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.
7. REPORTS UNDER EXCHANGE ACT. Parent agrees to:
(a) use its commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of Parent under
the Securities Act and the Exchange Act; and
(b) furnish to each Holder, forthwith upon request (i) a
written statement by Parent that it has complied with the reporting requirements
of the Securities Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), and (ii) a copy of the most recent annual and quarterly report of
Parent.
8. ASSIGNMENT. The rights to cause Parent to register Registrable
Securities pursuant to this Declaration may not be assigned by a Holder without
the prior written consent of Parent.
9. AMENDMENT OF REGISTRATION RIGHTS. Holders of a majority of the
Registrable Securities from time to time outstanding may, with the consent of
Parent, amend the registration rights granted hereunder.
10. THIRD PARTY BENEFICIARIES. It is intended that the shareholders of
the Company shall be third party beneficiaries to this Declaration.
PEREGRINE SYSTEMS, INC.
By: /s/ Richard T. Nelson
---------------------
Name: Richard T. Nelson
Title: Vice President
6
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF HOLME ROBERTS & OWEN LLP]
May 10, 2000
Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, CA 92130
RE: PEREGRINE SYSTEMS, INC. (the "Company")
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 May 10, 2000 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 163,995 shares of your common stock (the
"Shares"), all of which are authorized and have been previously issued in
connection with Company's conversion of the issued share capital of Barnhill
Management Group, Inc.("Barnhill") into shares of the Company's Common Stock
pursuant to the merger of Barnhill with a wholly-owned subsidiary of the company
known as Barnhill Acquisition Corporation (the "Barnhill Acquisition"). 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/ HOLME ROBERTS & OWEN LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
April 25, 2000 included in Peregrine Systems, Inc. Form 10-K for the year
ended March 31, 2000 and to all references to our Firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
San Diego, California,
May 9, 2000
