UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the
Securities Exchange Act of 1934 (Amendment
No. )
Filed
by
the Registrant ý
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
| ý |
Preliminary
Proxy Statement
|
| ¨ |
Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|
| ¨ |
Definitive
Proxy Statement
|
| ¨ |
Definitive
Additional Materials
|
| ¨ |
Soliciting
Material Pursuant to § 240.14a-11(c) or §
240.14a-12
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PEREGRINE
PHARMACEUTICALS, INC.
(Name
of Registrant as Specified In Its
Charter)
N/A
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
| ý |
No
fee required
|
| ¨ |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
|
| (1) |
Title
of each class of securities to which transaction
applies:
|
| (2) |
Aggregate
number of securities to which transaction
applies:
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
|
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(4)
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Proposed
maximum aggregate value of
transaction:
|
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(5)
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Total
fee paid:
|
| ¨ | Fee previously paid by written preliminary materials. |
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
|
| (1) |
Amount
previously paid:
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
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(3)
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Filing
Party:
|
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(4)
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Date
Filed:
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August
[ ], 2006
Dear
Stockholder:
You
are
cordially invited to attend our annual meeting of stockholders on Tuesday,
October 24, 2006, at 10:00 a.m. PDT at The Atrium Hotel in Irvine, California.
This
booklet includes the Notice of Annual Meeting and the Proxy Statement. The
Proxy
Statement describes the business to be transacted at the meeting and provides
other information about the company that you should know when you vote your
shares.
Your
vote
is very important. Instructions for voting appear on the proxy card or the
voting instruction form. Please review the instructions on the proxy card or
the
voting instruction form forwarded by your bank, broker or other holder of record
regarding each of these voting options.
In
addition to the formal business to be transacted, management will make a
presentation on developments during the past year and respond to comments and
questions of general interest to stockholders.
We
hope
you will be able to attend the meeting and we look forward to seeing you on
Tuesday, October 24th.
Sincerely
yours,
Steven
W.
King
President,
Chief Executive Officer and
Director
14272
Franklin Avenue ●
Tustin,
California 92780 ●
(714)
508-6000●
Fax
(714)
838-9433
14272
Franklin Avenue,
Tustin,
CA 92780
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
Notice
is
hereby given that the Annual Meeting of Stockholders will be held at The Atrium
Hotel, 18700 MacArthur Boulevard, Irvine, California 92612, on Tuesday, October
24, 2006 at 10:00 a.m. Pacific Daylight Time, for the following purposes as
set
forth in the accompanying Proxy Statement:
| · |
To
elect five directors to our Board of Directors,
each for a term of one-year;
|
| · |
To
ratify the Audit Committee’s appointment
of
Ernst & Young LLP as our independent registered public accounting
firm for
fiscal year 2007;
|
| · |
To
consider one stockholder proposal, if presented at the meeting;
and
|
| · |
To
transact such other business as may properly come before the meeting
or
any adjournment thereof.
|
Only
stockholders of record at the close of business on August 25, 2006 will be
entitled to vote at the meeting.
This
Proxy Statement and accompanying proxy card are being distributed on or about
September 8, 2006.
By
Order
of the Board of Directors,
Paul
J.
Lytle
Chief
Financial Officer and
Corporate
Secretary
August
[
], 2006
Tustin,
California
PLEASE
SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT THE
ANNUAL MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. PLEASE REFER TO THE
INSTRUCTIONS ON THE PROXY CARD OR THE INFORMATION FORWARDED BY YOUR BROKER,
BANK
OR OTHER HOLDER OF RECORD FOR SPECIFIC INSTRUCTIONS ON VOTING. EVEN IF YOU
HAVE
VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR
OTHER
NOMINEE AND YOU WISH TO VOTE IN PERSON AT THE MEETING, YOU MUST OBTAIN A LEGAL
PROXY ISSUED IN YOUR NAME FROM SUCH BROKER, BANK OR OTHER NOMINEE.
PROXY
STATEMENT
|
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING AND
VOTING
|
General
Information
Your
vote is very important.
For this
reason, the Board of Directors of Peregrine Pharmaceuticals, Inc., a Delaware
corporation (referred to as “we,” “us,” “our,” “Company,” or
“Peregrine”),
is
soliciting your proxy to vote your shares of Common Stock at the Annual Meeting
of Stockholders (the “Annual Meeting”), or at any continuation, postponement or
adjournment thereof, for the purposes discussed in this Proxy Statement and
in
the accompanying Notice of Annual Meeting and any business properly brought
before the Annual Meeting.
Why
am I receiving these materials?
Proxies
are solicited to give all stockholders of record an opportunity to vote on
matters properly presented at the Annual Meeting. This Proxy Statement is being
sent to all stockholders of record as of the close of business on August 25,
2006 in connection with the solicitation of proxies on behalf of the Board
of
Directors for use at the Annual Meeting of Stockholders on October 24, 2006.
We
intend to mail this Proxy Statement and accompanying proxy card on or about
September 8, 2006 to all stockholders entitled to vote at the Annual Meeting.
Our
Financial Information
The
Annual Report to Stockholders of the Company for the fiscal year ended
April 30, 2006, including audited consolidated financial statements, has
been mailed to the stockholders concurrently herewith, but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the
proxy
solicitation material.
Who
is eligible to vote?
Stockholders
of Peregrine, as recorded in our stock register at the close of business on
August 25, 2006, can vote at the Annual Meeting. Each share of Peregrine's
Common Stock is entitled to one vote. As of August 25, 2006, there were [______]
shares of our Common Stock outstanding and entitled to vote.
How
do I vote?
There
are
four ways to vote by proxy:
| (1) |
by
mail;
|
| (2) |
by
telephone;
|
| (3) |
via
the Internet; or
|
| (4) |
in
person at the Annual Meeting.
|
If
you
choose to vote by mail, mark your proxy card enclosed with the Proxy Statement,
date and sign it, and mail it in the postage-paid envelope. If you vote by
telephone or via the Internet, please do not return a signed proxy card. We
recommend you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the Annual Meeting. Please note, however, that if
your shares are held of record by a broker, bank, or other nominee and you
wish
to vote in person at the meeting, you must obtain a legal proxy issued in your
name from such broker, bank or other nominee.
Who
pays the cost of proxy solicitation?
Our
Board
of Directors is soliciting the enclosed proxy. We will make proxy solicitations
by electronic or regular mail and we will bear the costs of this solicitation.
We will request banks, brokerage houses, nominees and other fiduciaries
nominally holding shares of our Common Stock to forward the proxy soliciting
materials to the beneficial owners of such Common Stock and to obtain
authorization for the execution of proxies. We will, upon request, reimburse
such parties for their reasonable expenses in forwarding proxy materials to
the
beneficial owners. In the event we decide to hire a service to solicit proxies,
we would expect such service to cost less than $10,000 plus reasonable and
approved out-of-pocket expenses.
1
What
is a proxy?
Giving
us
your proxy means you authorize us to vote your shares at the meeting in the
manner you direct. You may vote for all, some or none of our director
candidates. You may also vote for or against the other proposals or abstain
from
voting.
How
do I specify how I want my shares voted?
If
you
are a registered stockholder, you can specify how you want your shares voted
on
each proposal by marking the appropriate boxes on the proxy card. Please review
the voting instructions on the proxy card and read the entire text of the
proposals and the positions of the Board of Directors in the Proxy Statement
prior to marking your vote.
If
your
proxy card is signed and returned without specifying a vote or an abstention
on
a proposal, it will be voted according to the recommendation of the Board of
Directors on that proposal. That recommendation is shown for each proposal
on
the proxy card.
How
do I vote if I am a beneficial stockholder?
If
you
are a beneficial stockholder, you have the right to direct your broker or
nominee on how to vote the shares. You should complete a Voting Instruction
Card
which your broker or nominee is obligated to provide you. If you wish to vote
in
person at the meeting, you must first obtain from the record holder a proxy
issued in your name.
What
are the Board of Directors’ voting recommendations?
For
the
reasons set forth in more detail later in the Proxy Statement, our Board of
Directors recommends that you vote:
FOR
| · |
the
election of our five directors;
|
| · |
the
ratification of the Audit Committee’s appointment of Ernst & Young LLP
as our independent registered public accounting firm for fiscal year
2007;
and
|
AGAINST
| · |
the
one stockholder proposal
|
Can
I revoke a proxy?
To
revoke
your proxy if you are a stockholder of record, you must advise our Secretary
in
writing before the meeting, deliver a validly executed proxy with a later date
that we receive prior to the meeting, or attend the meeting and vote your shares
in person. You may revoke your proxy at any time before your shares are voted.
Attendance at the Annual Meeting will not, by itself, revoke a
proxy.
What
is a quorum?
In
order
to carry on the business of the meeting, we must have a quorum. This means
that
at least a majority of the outstanding shares eligible to vote must be present
at the meeting, either by proxy or in person. Abstentions and broker non-votes
are counted as present at the meeting for determining whether we have a quorum.
A broker non-vote occurs when a broker returns a proxy but does not vote on
a
particular proposal because the broker does not have discretionary voting power
for that particular item and has not received voting instructions from the
beneficial owner.
2
How
many votes are needed to have the proposals pass?
Directors
will be elected by a favorable vote of a plurality of the shares of Common
Stock
present and entitled to vote, in person or by proxy, at the Annual Meeting.
Accordingly, abstentions and broker non-votes as to the election of directors
will not be counted in determining which nominees received the largest number
of
votes cast.
In
order
for the remaining management proposal and one stockholder proposal to pass,
the
affirmative vote of a majority of the shares present in person or by proxy
and
entitled to vote at the Annual Meeting is required. Only proxies and ballots
indicating votes “FOR,” “AGAINST” or “ABSTAIN” on the proposals or providing the
designated proxies with the right to vote in their judgment and discretion
on
the proposals are counted to determine the number of shares present and entitled
to vote. Broker non-votes will have no effect on the result of the vote although
they will count toward the presence of a quorum. Abstentions as to the proposal
will have the same effect as votes against a proposal.
How
are the votes counted?
All
votes
will be tabulated by the inspector of election appointed for the Annual Meeting
who will separately tabulate affirmative and negative votes and abstentions.
Any
information that identifies a stockholder or the particular vote of a
stockholder is kept confidential.
What
is “Householding” of annual meeting materials?
Some
banks, brokers and other nominee record holders may be "householding" our proxy
statements and annual reports. This means that only one copy of our proxy
statement and annual report to stockholders may have been sent to multiple
stockholders in your household. We will promptly deliver a separate copy of
either document to you if you call or write us at our principal executive
offices, 14272 Franklin Avenue, Tustin, California, 92780, Attn: Investor
Relations, telephone: (714) 508-6000. If you want to receive separate
copies of the proxy statement or annual report to stockholders in the future,
or
if you are receiving multiple copies and would like to receive only one copy
per
household, you should contact your bank, broker, or other nominee record holder,
or you may contact us at the above address and telephone number.
3
|
SECURITY
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
AND
CERTAIN BENEFICIAL OWNERS
|
Share
Ownership
The
following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of August 14, 2006, by: (i) each entity or
person whom we know to own beneficially more than five percent (5%) of our
Common Stock; (ii) each director and director nominee; (iii) our Chief
Executive Officer and our other Named Executive Officers for the year ended
April 30, 2006; and (iv) all directors, director nominees, and Named
Executive Officers of the Company as a group. Unless otherwise noted below,
the
persons named in the table have sole voting and investment power with respect
to
all shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
|
Beneficial
Ownership of
Common
Stock
|
||||||||
|
Name
of Beneficial Owner
|
Number
of Shares
|
Percent
(A)
|
||||||
|
Carlton
M. Johnson
|
1,000,000
|
(B)
|
*
|
|||||
|
Steven
W. King
|
1,150,427
|
(B)(D)
|
*
|
|||||
|
David
H. Pohl
|
225,000
|
(B)
|
*
|
|||||
|
Eric
S. Swartz
|
3,269,505
|
(B)(C)
|
1.68%
|
|
||||
|
Thomas
A. Waltz, M.D.
|
225,000
|
(B)
|
*
|
|||||
|
F.
David King
|
5,000
|
(D)
|
*
|
|||||
|
Paul
J. Lytle
|
756,863
|
(B)(D)
|
*
|
|||||
|
All
directors, director nominees and executive officers as a group
(7 persons)
|
6,631,795
|
(B)(C)(D)
|
3.35%
|
|
||||
______
* Less
than
1% of the outstanding shares of our Common Stock.
|
(A)
|
Percent
of Common Stock computed on the basis of 193,796,708 shares outstanding
at
August 14, 2006, plus shares that could be acquired through the exercise
of stock options that will become exercisable within 60 days of August
14,
2006.
|
|
(B)
|
Includes
shares which the individuals shown above have the right to acquire
as of
August 14, 2006, or within 60 days thereafter, pursuant to
outstanding stock options as follows: Mr. Johnson - 1,000,000 shares;
Mr.
Steven King - 1,125,833 shares; Mr. Pohl - 225,000 shares; Mr. Swartz
-
700,000 shares; Dr. Waltz -
225,000 shares; and Mr. Lytle - 750,833 shares. Such shares are deemed
to
be outstanding in calculating the percentage ownership of such individual
(and the group), but are not deemed to be outstanding as to any other
person.
|
|
(C)
|
Includes
538,693 shares of Common Stock owned by Swartz Ventures, Inc. and
103,500
shares held in an Individual Retirement Account (“IRA”) for the benefit of
Mr. Swartz. Mr. Swartz has sole control over Swartz Ventures, Inc.
and his
IRA.
|
|
(D)
|
Includes
shares of common stock earned under the Company’s Stock Bonus Plan for
milestones achieved through August 14, 2006 as follows: Mr. Steven
W. King
- 7,594 shares; Mr. Paul J. Lytle - 6,030 shares; Mr. F. David King
-
5,000 shares.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires our executive officers and directors, and persons
who own more than 10% of a registered class of our equity securities (“Reporting
Persons”), to file reports of ownership and changes in ownership with the SEC
and with The NASDAQ Stock Market. Reporting Persons are required by SEC
regulations to furnish us with copies of all forms they file pursuant to
Section 16(a). Based solely on our review of the copies of such reports we
received, and written representations from certain Reporting Persons that no
other reports were required for those persons, to the best of our knowledge,
we
believe that during the year ended April 30, 2006, each of the Reporting Persons
met all applicable Section 16(a) filing requirements.
4
|
PROPOSAL
NO. 1:
ELECTION
OF DIRECTORS
|
The
first
proposal on the agenda for the Annual Meeting will be electing five incumbent
directors to serve until the next annual meeting or until their successors
are
elected. Unless authority to vote for directors has been withheld in the proxy,
the persons named in the enclosed proxy intend to vote at the Annual Meeting
FOR
the
election of the nominees presented below.
Under
Delaware law, the five nominees receiving the highest number of votes will
be
elected as directors at the Annual Meeting. As a result, proxies voted to
"Withhold Authority" and broker non-votes will have no practical
effect.
Each
of
the nominees is an incumbent director. Each of the nominees has consented to
serve as a director for the ensuing year. If any nominee becomes unavailable
to
serve for any reason before the election, then the enclosed proxy will be voted
for the election of such substitute nominee, if any, as shall be designated
by
the Board of Directors. The Board of Directors has no reason to believe that
any
of the nominees will become unavailable to serve. The following is biographical
information for each nominee to serve until the 2007 Annual Meeting of
Stockholders.
Carlton
M. Johnson,
age 46,
has served as a director since November 3, 1999. Mr. Johnson currently serves
as
in-house legal counsel for Roswell Capital Partners, LLC and has served as
in-house legal counsel for Equiplace Securities, LLC and Swartz Investments,
LLC
since 1996. Mr. Johnson has been an active member of the Alabama State Bar
since
1986, the Florida Bar since 1988, and the State Bar of Georgia since 1997.
He
has been a shareholder in the Florida AV-rated, Bar-registered firm of Smith,
Sauer, DeMaria & Johnson and Vice President and President-Elect of the 600
member Escambia-Santa Rosa Bar Association. He also served on the Florida Bar
Young Lawyers Division Board of Governors. Mr. Johnson earned his degree with
high honors in History/Political Science at Auburn University and his Juris
Doctor, also with high honors, at Samford University - Cumberland School of
Law.
Mr. Johnson also serves on the board of Patriot Scientific Corporation, a
publicly traded company.
Steven
W. King,
age 42,
was elected a director on October 14, 2003. Since March 19, 2003, Mr. King
has
served as our President and Chief Executive Officer after performing in
positions of increased responsibility at the Company. From August 2002 to such
date, Mr. King served as Chief Operating Officer of Peregrine. From February
2000 to August 2002, Mr. King served as our Vice President of Technology and
Product Development. Mr. King joined Peregrine in 1997 in the capacity of
Director of Research and Development. Mr. King was responsible for planning
and
launching our wholly owned contract manufacturing subsidiary, Avid Bioservices,
Inc., in 2002. Mr. King has served as the President of Avid since its inception.
Mr. King was previously employed at Vascular Targeting Technologies, Inc.,
(formerly known as Peregrine Pharmaceuticals, Inc.) a company we acquired in
1997, which held the rights to the Vascular Targeting Agent technology. Mr.
King
previously worked with Dr. Philip Thorpe, inventor of our
Anti-Phosphatidylserine (“Anti-PS”) Immunotherapeutic and VTA technology
platforms, at the University of Texas Southwestern Medical Center at Dallas
and
is a co-inventor on over 40 U.S. and foreign patents and patent applications
in
the Vascular Targeting Agent field. Mr. King received his Bachelors and Masters
degrees from Texas Tech. University in Cell and Molecular Biology.
David
H. Pohl,
age 69,
was elected a director on October 25, 2004. Mr. Pohl currently serves as the
President and CEO of Patriot Scientific Corporation, a position he has held
since June 2005, and has been a member of its board of directors since April
2001. Mr. Pohl also served as an officer of Patriot from January 2001 to March
2002. Mr. Pohl has been in the private practice of law counseling business
clients since 1997, and from 1995 to 1996 was Special Counsel to the Ohio
Attorney General. Previously, he was a senior attorney with a large U.S. law
firm, and held positions as a senior officer and general counsel in large
financial services corporations. Mr. Pohl earned a J.D. degree in 1962 from
the
Ohio State University College of Law, and also holds a B.S. in Administrative
Sciences from Ohio State.
Eric
S. Swartz,
age 50,
has served as a director since November 3, 1999. Mr. Swartz is the founder
and
President of Roswell Capital Partners, LLC. and was the founder and former
President of Equiplace Securities, LLC. and Swartz Investments, LLC., a company
he started in 1993. Prior to 1993, Mr. Swartz was a Vice President at Bear
Stearns & Co. specializing in foreign institutional equity investments in
U.S. securities. Prior to that, Mr. Swartz was a Vice President with Oppenheimer
& Co., where he was involved in overseas placements of equity and debt for
institutions in Germany, Austria, Switzerland, France, Australia, and New
Zealand. Mr. Swartz has approximately 20 years of experience in the securities
business.
5
Thomas
A. Waltz, M.D.,
age 73,
was elected a director on October 25, 2004 and appointed Chairman of the Board
on November 22, 2005. Dr. Waltz is a neurosurgeon and is Senior Consultant
in
Neurosurgery of the Scripps Clinic in La Jolla, California. Dr. Waltz was
Chairman and CEO of the Scripps Clinic from 1991 to 2000 and President of the
Scripps Clinic Medical Group from 1990 to 2000. During his tenure as CEO of
the
Scripps Clinic, he was responsible for an organization with 400 physicians,
1,200 employees and an operating budget of $350 million. In addition to his
current clinical practice, he is on the Board of The Doctors Company and the
Premera Blue Cross of Washington and Alaska. The Doctors Company is a mutual
insurance company with $1 billion in assets providing medical malpractice
insurance to physicians. Premera is a not-for-profit Blue Cross medical
insurance provider insuring more than 1 million enrollees in Washington, Alaska
and Oregon. Dr. Waltz received his undergraduate degree from the University
of
Cincinnati, his M.D. from Vanderbilt University, and his neurosurgical training
at Baylor College of Medicine in Houston. He also had training in Neurology
at
The National Hospital for Neurological Diseases in London, England and
Neuropathology at Oxford University.
Relationships
Among Directors or Executive Officers
There
are
no family relationships among any of the directors or executive officers of
the
Company.
Board
and Board Committee Matters
Our
business is managed under the direction of our Board of Directors pursuant
to
the Delaware General Corporation Law and our Bylaws. Our Board has
responsibility for establishing broad corporate policies and for the overall
performance of our Company. Our Board is kept advised of the Company’s business
through regular interaction with the Chief Executive Officer and other officers
of the Company and through reviewing materials provided to them and by
participating in Board and Board Committee meetings.
Independence. Our
Board of Directors has determined that each of the current directors, as well
as
those standing for re-election, are independent directors as defined by the
NASDAQ Marketplace Rules governing the independence of directors, except for
Steven W. King, our President and Chief Executive Officer.
Committees
of the Board.
The
Board of Directors has three standing committees: the Audit Committee, the
Compensation Committee, and the Nominating Committee. Each committee maintains
a
written charter approved by the Board of Directors. In addition, the Board
has
adopted a written Code of Business Conduct and Ethics. Copies of the following
corporate governance documents are posted on our website at www.peregrineinc.com
(this
website address is not intended to function as a hyperlink, and the information
contained on the Company’s website is not intended to be a part of this Proxy
Statement): (1) Code of Business Conduct and Ethics, (2) Charter of
the Compensation Committee of the Board of Directors, (3) Charter of the Audit
Committee of the Board of Directors, and (4) Charter of the Nominating
Committee of the Board of Directors. If you would like a printed copy of any
of
these corporate governance documents, please send your request to Peregrine
Pharmaceuticals, Inc., Attention: Corporate Secretary, 14272 Franklin Avenue,
Tustin, California 92780.
Compensation
Committee.
The
primary purposes of the Compensation Committee (the "Committee") of the Board
of
Directors is to: (i) establish the compensation policy of Peregrine
Pharmaceuticals, Inc. (the "Company"); (ii) ensure that the compensation of
the
Board of Directors, Chief Executive Officer and other corporate officers of
the
Company enables it to attract and retain high-quality leadership and is
consistent with such policy; (iii) review the performance and development of
the
Company’s Chief Executive Officer and other corporate officers in achieving
Company goals and objectives and to assure that senior executives of the Company
are compensated effectively in a manner consistent with the strategy of the
Company; and (iv) produce an annual report on executive compensation for
inclusion in the Company's proxy statements, in accordance with applicable
rules
and regulations. The Compensation Committee held 8 meetings during the fiscal
year ended April 30, 2006. The Committee’s members are currently Mr. Carlton
Johnson, Mr. David H. Pohl, Mr. Eric Swartz and Dr. Thomas A. Waltz. Each of
these members is independent under NASDAQ listing standards currently in effect.
6
Audit
Committee.
The
Audit Committee has the sole authority for the appointment, compensation and
oversight of the work of the independent auditors, and responsibility for
reviewing and discussing, prior to filing or issuance, with management and
the
independent auditors (when appropriate) the Company’s audited consolidated
financial statements included in its Annual Report on Form 10-K. The Audit
Committee carries out its responsibilities in accordance with the terms of
its
charter. The Audit Committee met 10 times during the year ended April 30, 2006.
The Audit Committee of our Board of Directors has determined that Mr. Carlton
M.
Johnson is an “audit committee financial expert” as defined by the Securities
and Exchange Commission (“SEC”) and is independent under the current listing
standards of NASDAQ. The Audit Committee meets the NASDAQ composition
requirements, including the requirements regarding financial literacy and
financial sophistication. The current Audit Committee members are Mr. Carlton
M.
Johnson, Mr. David H. Pohl, Mr. Eric Swartz, and Dr. Thomas A. Waltz. Each
of
these members is independent under NASDAQ listing standards currently in effect.
Nominating
Committee.
The
primary purpose of the Nominating Committee of the Board is to (i) make
recommendations to the Board regarding the size of the Board, (ii) make
recommendations to the Board regarding criteria for the selection of Director
nominees, (iii) identify and recommend to the Board for selection as Director
nominees individuals qualified to become members of the Board, including
stockholder recommendations, and (iv) recommend committee assignments to the
Board. The Nominating Committee met 2 times during the year ended April 30,
2006. The Committee’s members are Mr. Carlton M. Johnson, Mr. David H. Pohl, Mr.
Eric Swartz, and Dr. Thomas A. Waltz. Each of these members is independent
under
NASDAQ listing standards currently in effect.
Executive
Sessions.
The
Board of Directors has a practice of meetings in executive
sessions without the presence of any members of Peregrine’s management. The
independent members of the Board of Directors meet in executive
sessions at least twice a year.
Director
Compensation. Directors
who are also our employees receive no additional compensation for serving as
directors. Our independent directors who are not employees of Peregrine receive
compensation for their services as directors in the form of an annual retainer
of $60,000, payable in monthly installments of $5,000, a fee of $2,000 for
each
Board meeting attended, whether in-person or telephonically, stock options,
and
reimbursement for travel expenses. In addition, each non-employee director
was
also paid $2,000 for each additional company meeting attended in excess of
four
hours in length. Effective June 1, 2005, Mr. Johnson’s annual retainer was
increased to $120,000, payable in monthly installments of $10,000, for his
increased responsibilities as the Chairman of the Audit Committee and his
increased time committed to the Company as required under the Sarbanes-Oxley
Act
of 2002.
In
addition to the cash compensation, each director has previously received
non-cash compensation in the form of stock options, which have been granted
at
an exercise price equal to the fair market value of our common stock on the
date
of grant. There were no options granted to non-employee directors during fiscal
year 2006.
Attendance
at the Annual Meeting
We
have
no policy requiring directors to attend annual meetings of stockholders, but
directors are encouraged to attend our annual meetings at which they stand
for
re-election.
THE
BOARD RECOMMENDS A VOTE “FOR”
EACH NAMED NOMINEE.
7
|
PROPOSAL
NO. 2:
RATIFY
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
The
next
proposal on the agenda for the Annual Meeting will be ratifying the Board's
appointment of Ernst & Young LLP as the Company's independent registered
public accounting firm for fiscal year 2007. Our Board of Directors, upon the
recommendation of its Audit Committee, has ratified the selection of Ernst
&
Young LLP as our independent registered public accounting firm for fiscal year
2007, subject to ratification by our stockholders. Ernst & Young LLP has
served in this capacity for each of the six (6) years ended April 30, 2006,
and
has reported on the Company's fiscal year 2006 consolidated financial
statements. During the six (6) fiscal years ended April 30, 2006, there were
no
disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. The Audit Committee recommended to the Board that Ernst
& Young LLP be re-appointed for fiscal year 2007.
Representatives
of Ernst & Young LLP are expected to be present at the meeting with the
opportunity to make a statement if they desire to do so and are expected to
be
available to respond to appropriate questions.
Stockholder
ratification of the selection of Ernst & Young LLP as the Company’s
independent auditors is not required by the Bylaws or otherwise. However, the
Board is submitting the selection of Ernst & Young LLP to the
stockholders for ratification as a matter of corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
Audit
Committee in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the best interests of the Company
and
its stockholders.
THE
BOARD RECOMMENDS THAT YOU VOTE “FOR”
THE RATIFICATION OF ERNST & YOUNG LLP.
Independent
Registered Public Accounting Firm Fees
The
following summarizes aggregate fees billed to the Company for the fiscal years
ended April 30, 2006 and 2005 by Ernst & Young LLP, our independent
registered public accounting firm:
|
2006
|
2005
|
||||||
|
Audit
Fees
|
$
|
343,000
|
$
|
388,000
|
|||
|
Audit
Related
|
- |
-
|
|||||
|
Tax
Fees
|
18,000
|
17,000
|
|||||
|
All
Other Fees
|
1,000
|
1,000
|
|||||
|
Total
Fees
|
$
|
362,000
|
$
|
406,000
|
|||
Audit
Fees pertain to the audit of our annual consolidated financial statements for
fiscal year 2006 and 2005, including attestation services relating to the report
on our internal controls in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002, and timely reviews of our quarterly consolidated financial
statements, consents, and review of documents filed with the Securities and
Exchange Commission (“SEC”), including registration statements on Form S-3 and
Form S-8.
Tax
Fees
relate to tax compliance services rendered in the preparation of our tax
returns.
All
Other
Fees are attributable to the Company’s subscription to an Ernst & Young LLP
online service used for accounting research purposes for fiscal year 2006 and
2005.
Pre-Approval
Policy for Services Provided by our Independent Registered Public Accounting
Firm
The
Audit
Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by our independent registered public accounting
firm
consistent with applicable SEC rules. From and after the effective date of
the
SEC rule requiring Audit Committee pre-approval of all audit and permissible
non-audit services provided by an independent registered public accounting
firm,
the Audit Committee has pre-approved all audit and permissible non-audit
services provided by Ernst & Young LLP.
8
Ernst
& Young LLP did not perform any professional services with respect to
information systems design and implementation for the years ended April 30,
2006
and 2005. The Audit Committee has considered whether the Audit, Tax and All
Other services provided by Ernst & Young LLP are compatible with maintaining
that firm’s independence.
Report
of the Audit Committee of the Board of Directors(*)
Each
year, the Board of Directors appoints an Audit Committee to review the Company's
financial matters. We operate pursuant to a written Audit Committee Charter
adopted by the Board of Directors. In accordance with the Audit Committee
Charter, we must meet the independence requirements and other criteria set
by
the NASDAQ Marketplace Rules as currently in effect. As part of our oversight
of
our Company’s financial statements, we review and discuss with both management
and Ernst & Young LLP all annual and quarterly financial statements prior to
their issuance. In addition, our responsibilities include recommending to the
Board an accounting firm to be hired as the Company's independent registered
public accounting firm. We are also responsible for recommending to the Board
that the Company's financial statements be included in its Annual Report. We
have taken the following steps in making our recommendation that the Company's
financial statements be included in its Annual Report:
| 1. |
The
Audit Committee discussed with Ernst & Young LLP, the Company's
independent registered public accounting firm, for fiscal year ended
April
30, 2006, those matters required to be discussed by Statement on
Auditing
Standards No. 61, including information regarding the scope and results
of
the audit. These communications and discussions are intended to assist
the
Audit Committee in overseeing the financial reporting and disclosure
process.
|
| 2. |
The
Audit Committee discussed with Ernst & Young LLP its independence and
received from Ernst & Young LLP a letter concerning independence as
required under applicable independence standards for auditors of
public
companies. This discussion and disclosure helped the Audit Committee
in
evaluating such independence.
|
| 3. |
The
Audit Committee reviewed and discussed with the Company's management
and
Ernst & Young LLP, the Company's audited consolidated balance sheet at
April 30, 2006, and consolidated statements of operations, cash flows
and
stockholders' equity for the fiscal year ended April 30, 2006.
|
Based
on
the reviews and discussions explained above, the Audit Committee recommended
to
the Board that the Company's financial statements be included in its annual
report for its fiscal year ended April 30, 2006. The Audit Committee also
recommended to the Board the selection of Ernst & Young LLP to serve as the
Company’s independent registered public accounting firm for fiscal year
2007.
THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Carlton
M. Johnson, Chairman
of the Audit Committee
David
H. Pohl
Eric
S. Swartz
Thomas
A. Waltz, M.D.
__________________
*
The
report of the Audit Committee shall not be deemed incorporated by reference
by
any general statement incorporating by reference this Proxy Statement into
any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
9
|
PROPOSAL
NO. 3:
STOCKHOLDER
PROPOSAL
|
A
stockholder has advised the Company that he intends to introduce at the 2006
Annual Meeting the following proposal. The name and address of and the number
of
shares owned by the proponent will be provided upon oral or written request
to
the Secretary of the Company.
Stockholder
Proposal
“This
proposal requests that the Board of Directors control the ever increasing pay
to
the Directors and Executive Officers of Peregrine Pharmaceuticals until the
activities of these individuals generates meaningful increased value for the
shareholders of this company.
The
Proposal Details
Request
that the Board of Directors consider implementing the following cost control
measures until some time in the future that the Company achieves and maintains
a
market capitalization of $800,000,000 for 90 consecutive calendar days or
reaches a market capitalization of $1,000,000,000 for 5 consecutive calendar
days, based upon the number of shares outstanding and official closing stock
price on each day:
| 1. |
Roll
back and freeze all base compensation of the Directors and Executive
Officers of Peregrine Pharmaceuticals to the levels detailed in the
Company’s 2005 proxy materials, dated August 29th, 2005.
|
| 2. |
Eliminate
all future incentive or bonus compensation of the Directors and Executive
Officers of Peregrine
Pharmaceuticals.
|
Why
Stockholder is Asking for Your Approval
The
Company’s Officers and Board of Directors have for years received generous
compensation packages, yet the long term stockholders of this Company have
not
seen meaningful returns on their investments. This stockholder believes that
until those running this Company can provide the stockholders with meaningful
appreciation of their investment, they should financially share in the burden
resulting from their own inability to advance the Company and make it
profitable. Although this proposal can not force the Company to implement these
cost control measures, this stockholder is asking all stockholders of the
Company to vote for this proposal to voice their displeasure for the constant
equity dilution that stockholder’s endure while the Directors and Officers
continue to receive increased salaries and bonuses.”
Your
Directors’ Position
The
Proposal's requirements, if adopted, would adversely affect Peregrine’s ability
to attract and retain qualified executives and directors. The Compensation
Committee of the Board of Directors philosophy and policies on executive
compensation are set forth in detail in the Report of the Compensation Committee
below. As indicated in that Report, the Company believes that a balanced
approach to executive compensation, involving base salaries, discretionary
cash
and non-cash bonuses and periodic grants of stock options, best serves the
interests of the Company by promoting efforts to advance both the short-term
and
long-term interests of stockholders. We use compensation packages, including
base compensation and bonus plans to attract and retain qualified employees,
executive officers and directors. In the competitive job market where we have
to
compete against both established companies with more traditional compensation
programs and start-up companies with compensation programs that are primarily
stock-based, we have to strike a balance between salary compensation and stock
option incentives. In so doing, we also seek to align employee financial
interests, including those of executive officers and directors, with long-term
stockholder value and believe that the incentive component of an executive
officer's compensation should be closely tied to performance milestones.
This
Proposal could place us at a disadvantage when competing for executive talent,
as we believe that few, if any, of our competitors use such a methodology.
We
operate in a very competitive industry, and need the ability to competitively
compensate our executive officers in order to retain them. If this Proposal
is
implemented, we would be at risk of losing key executives to competitors who
could offer such executives better compensation packages. Companies in our
industry are always looking for talented executives. Therefore, the Proposal's
requirements, if adopted, would adversely affect Peregrine’s ability to retain
qualified executives.
10
In
addition, the proposal may contravene Section 141(a) of the Delaware
General Corporate Law (“DGCL”) which states that the “business and affairs of
every corporation organized under this chapter shall be managed by or under
the
direction of a board of directors, except as may be otherwise provided in this
chapter or in its certificate of incorporation.” Section 122(5) of the DGCL
authorizes corporations to provide their officers with suitable compensation.
Additionally, Section 122(15) of the DGCL authorizes corporations to
establish and carry out stock option plans for directors, officers and
employees. These powers are generally within the sole authority of a
corporation’s board or committees established by the Board, and the exercise of
these powers is protected by the presumption of the business judgment rule.
The
Compensation Committee of the Board of Directors, which is comprised solely
of
independent directors, reviews and approves the compensation of Peregrine's
executive officers. The Compensation Committee of the Board of Directors
currently has flexibility to fashion compensation awards in the manner it
believes to be necessary to attract and retain the executives essential to
the
Company's future success. The Board believes that restricting this flexibility
is not in the best interests of stockholders. The Company does not believe
that
an additional review of executive compensation policies, beyond the continuing
monitoring by the Compensation Committee, would serve a useful purpose. To
implement the Proposal, the Company’s compensation committee and board of
directors would be forced to approve new compensation terms and amend existing
compensation packages and option programs, regardless of whether the
compensation committee or the Board of Directors concludes that such action
is
appropriate or in the Company’s best interest. If adopted, the Proposal would
limit the ability of the Company’s Board of Directors to exercise its business
judgment as it pertains to matters of employee compensation by restricting
the
Board’s discretion with respect to setting base salaries, bonuses and
stock-based compensation.
THE
BOARD RECOMMENDS THAT YOU VOTE “AGAINST”
THIS STOCKHOLDER PROPOSAL.
11
|
EXECUTIVE
COMPENSATION AND RELATED
MATTERS
|
Compensation
of Executive Officers
Summary
Compensation Table.
The
following table contains information concerning the compensation awarded,
paid
to, or earned by the Named Executive Officers for all services rendered in
all
capacities to the Company for the years ended April 30, 2006, 2005 and 2004.
Named Executive Officers includes (i) all individuals serving as the Chief
Executive Officer during fiscal year 2006, (ii) up to four other most highly
compensated executive officers (based on salary plus bonus for fiscal year
2006)
who were serving as executive officers at the end of fiscal 2006 and (iii)
up to
two individuals who would have been included in this table under clause (ii)
above except for the fact that they were not serving as executive officers
at
the end of fiscal year 2006.
SUMMARY
COMPENSATION TABLE
|
Annual
Compensation
|
Long-Term
Compensation
Award
|
|||||||||||||||||
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
(1)
|
Bonus
|
Securities
Underlying
Options
|
Other
Compensation
|
|||||||||||||
|
Steven
W. King
President
and
Chief
Executive Officer
|
2006
2005
2004
|
|
$
303,750
$
303,101
$
294,548
|
(3)
|
$
$
$
|
5,809
136,688
115,000
|
(6)
|
-
-
350,000
|
-
-
-
|
(2)
(2)
(2)
|
|
|||||||
|
Paul
J. Lytle
Chief
Financial Officer and
Corporate
Secretary
|
2006
2005
2004
|
|
$
241,188
$
240,915
$
239,124
|
(4)
|
$
$
$
|
4,613
108,535
81,176
|
(6) |
-
-
300,000
|
-
-
-
|
(2)
(2)
(2)
|
|
|||||||
|
F.
David King
Vice
President,
Business
Development
|
2006
|
|
$
105,000
|
(5) |
$
|
3,825
|
(6) |
|
200,000
|
-
|
(2)
|
|
||||||
____________________
| (1) |
Salary
information is reported as of the last payroll paid prior to or
immediately after April 30th of each fiscal
year.
|
| (2) |
Amounts
were not significant enough to meet the disclosure
requirements.
|
| (3) |
Includes
a one-time retroactive pay adjustment of $24,548 related to a previous
year when Mr. King accepted a pay decrease due to the financial
conditions
of the Company at that time.
|
| (4) |
Includes
a one-time retroactive pay adjustment of $23,893 related to a previous
year when Mr. Lytle accepted a pay decrease due to the financial
conditions of the Company at that
time.
|
| (5) |
Represents
annual compensation since October 24, 2005, his date of
hire.
|
| (6) |
Represents
the fair value of shares of common stock earned under the Company’s Stock
Bonus Plan for a milestone achieved during fiscal year 2006 as
follows:
Mr. Steven W. King - 3,797 shares; Mr. Paul J. Lytle - 3,015 shares;
Mr.
F. David King - 2,500 shares.
|
Stock
Option Grants.
The
following table sets forth information concerning individual grants of stock
options approved by our Compensation Committee during the fiscal year ended
April 30, 2006, to each of the Named Executive Officers:
OPTION
GRANTS IN FISCAL YEAR 2006
|
Named
Executive
|
Grant
|
Number
of
Securities
Underlying
|
Percent
Total
Options
Granted
to
All
Employees in
|
Exercise
Price
(per
share)
|
Expiration
|
Potential
Realizable
Value
at Assumed
Annual
Rates of Stock
Appreciation
for Option
Term
(3)
|
||||||||||||||||
|
Officer
|
Date
|
Options
Granted
|
Fiscal
Year (1)
|
(2)
|
Date
|
5%
|
10%
|
|||||||||||||||
|
F.
David King
|
10/24/2005
|
200,000
|
(4)
|
17.72%
|
|
$
|
1.05
|
10/24/2015
|
$
|
132,068
|
$
|
334,686
|
||||||||||
____________________
|
(1)
|
Options
to purchase an aggregate of 1,128,481 shares were granted to
all employees
and consultants during the fiscal year ended April 30, 2006,
including the Named Executive Officers, under our 1996 Stock
Incentive
Plan, our 2003 Stock Incentive Plan, and our 2005 Stock Incentive
Plan.
Other than the above grant, no other options were granted to
the Named
Executive Officers during fiscal year
2006.
|
|
(2)
|
Options
are granted at an exercise price at least equal to the fair
market value
of our Common Stock on the date of grant. Fair market value
is the closing
price of our Common Stock on the date of grant as reported
by The NASDAQ
Stock Market.
|
|
(3)
|
These
columns show the possible gains the Named Executive Officer could
realize
if our Common Stock on the date of grant appreciates at a rate
of 5% or
10% over the ten-year term of the option. The assumed 5% and
10% annual
rates of appreciation over the term of the options are set forth
in
accordance with the rules and regulations of the Securities and
Exchange
Commission and are not our predictions. The potential realizable
value is
calculated by assuming that the stock price on the date of grant
appreciates at the indicated rate, compounded annually, for the
entire
term of the option and that the option is exercised and the stock
sold on
the last day of its term at this appreciated stock price. No
valuation
method can accurately predict future stock prices or option values
because
there are too many unknown factors. No gain to the optionee is
possible
unless the stock price increases over the option term. If the
stock price
appreciates, then such a gain in stock price would benefit all
stockholders.
|
|
(4)
|
Of
the total options granted, 50,000 options vest annually over
4 years
beginning October 24, 2006.
|
12
Aggregated
Option Exercises and Fiscal Year-End Values. The
following table sets forth information (on an aggregated basis) concerning
each
exercise of stock options during the year ended April 30, 2006, by each of
the
Named Executive Officers and the final fiscal year-end value of unexercised
options:
AGGREGATE
OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUES
|
Named
|
No.
of Shares Acquired
on
|
Value
|
Number
of
Securities
Underlying
Unexercised
Options
at
April 30, 2006
|
Value
of Unexercised
In-the-Money
Options at
April 30,
2006 (2)
|
|||||||||||||||
|
Executive
Officer
|
Exercise
|
Realized
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||
|
Steven
W. King
|
15,000
|
$
|
5,400
|
(1)
|
1,125,833
|
-
|
$
|
510,175
|
$
|
-
|
|||||||||
|
Paul
J. Lytle
|
-
|
|
$
|
-
|
750,833
|
-
|
$
|
221,125
|
$
|
-
|
|||||||||
|
F.
David King
|
-
|
$
|
-
|
-
|
200,000
|
$
|
-
|
$
|
68,000
|
||||||||||
____________________
| (1) |
The
value realized upon the exercise of stock options would
represent the
difference between the exercise price of the stock option
and the fair
market value of the shares, multiplied by the number of
options exercised
on the date of exercise. Mr. King currently holds the 15,000
shares of
common stock exercised under this stock option
agreement.
|
| (2) |
The
value of “In-the-Money Options” represents the positive spread between the
exercise price of the option and the fair market value of the underlying
shares based on the closing stock price of our Common Stock on
April 28,
2006, which was $1.39 per share. "In-the-Money Options" include
only those
options where the fair market value of the stock is higher than
the
exercise price of the option on the date specified. The actual
value, if
any, a Named Executive Officer realizes on the exercise of options
will
depend on the fair market value of our Common Stock at the time
of
exercise.
|
Employment
Agreement and Change-in-Control Arrangements
Steven
W.
King is subject to an employment agreement with us dated March 19, 2003,
pursuant to which he was employed as our President and Chief Executive Officer.
The agreement provides for an initial annual base salary of $270,000 and
a stock
option to purchase up to 200,000 shares of Common Stock, which option vests
monthly over 24 monthly periods. The agreement provides that Mr. King shall
serve as President and Chief Executive Officer for a minimum of six months.
Thereafter, Mr. King may terminate his employment upon 90 days notice. Upon
such
termination, Mr. King shall receive six months’ base salary as severance. We may
terminate Mr. King’s employment at any time for “cause” (as defined in the
agreement). If Mr. King’s employment is terminated by us for any reason other
than “cause”, or within 90 days following a “Change in Control” (as defined in
the agreement), Mr. King shall receive six months’ base salary as severance,
benefit continuation for six months, and two years to exercise any vested
options. Mr. King’s annual base salary was increased to $303,750 effective May
3, 2004 and remained unchanged during fiscal year 2005 and fiscal year
2006.
Equity
Compensation Plan Information
We
maintain four equity compensation plans, the 1996 Plan, the 2002 Plan, the
2003
Plan, and the 2005 Plan. The 1996, 2003 and 2005 Plans were approved by our
stockholders while the 2002 Plan was not submitted for stockholder approval.
Equity
Compensation Plans Approved by Stockholders
We
have
three incentive stock option plans with outstanding options as of April 30,
2006: the 1996 Plan, the 2003 Plan, and the 2005 Plan. The plans provide
for the
granting of options to purchase shares of our common stock at prices not
less
than the fair market value of our common stock at the date of grant and
generally expire ten years after the date of grant.
13
The
1996
Plan originally provided for the issuance of options to purchase up to 4,000,000
shares of our common stock. The number of shares for which options may be
granted under the 1996 Plan automatically increases for all subsequent common
stock issuances by us in an amount equal to 20% of such subsequent issuances
up
to a maximum of 10,000,000 options as long as the total shares allocated
to the
1996 Plan do not exceed 20% of our authorized stock. As a result of issuances
of
our common stock subsequent to the adoption of the 1996 Plan, the number
of
shares for which options may be granted has increased to 10,000,000. Options
granted generally vest over a period of four years with a maximum term of
ten
years. As of April 30, 2006, options to purchase 4,321,328 shares of our
common
stock were outstanding under the 1996 Plan and 56,437 options were available
for
grant under the 1996 Plan.
During
October 2003, our stockholders approved the 2003 Stock Incentive Plan (“2003
Plan”) for the granting of stock options to purchase up to 5,000,000 shares of
the Company’s common stock. The 2003 Plan provides for the granting of options
to purchase shares of our common stock at prices not less than the fair market
value of the stock at the date of grant and which generally expire ten years
after the date of grant. As of April 30, 2006, options to purchase 4,745,508
shares of our common stock were outstanding under the 2003 Plan and 254,492
options were available for grant under the 2003 Plan.
During
October 2005, our stockholders approved the 2005 Stock Incentive Plan (“2005
Plan”) which provides for the granting of stock options to purchase shares of
our common stock at prices not less than the fair market value of our common
stock on the date of grant or for the direct issuance of stock as a bonus
for
services rendered. The 2005 Plan provides for the issuance of up to 5,000,000
shares of common stock. Options granted under the 2005 Plan generally expire
ten
years after the date of grant. As of April 30, 2006, there were no options
outstanding to purchase shares of our common stock under the 2005 Plan and
4,971,048 options were available for grant under the 2005 Plan. In addition,
during February 2006, the Compensation Committee of the Board of Directors
approved a Stock Bonus Plan that would reward key employees and consultants
in
shares of the Company’s common stock, which shares would be issued under our
2005 Plan. The total options available for grant of 4,971,048 under the 2005
Plan excludes shares of our common stock reserved for under our Stock Bonus
Plan
due to the uncertainty of achieving the performance milestones that are required
to be achieved before shares of common stock are issued under the Stock Bonus
Plan. In the event that all remaining milestones are achieved under the Stock
Bonus Plan, we would issue up to 1,302,033 additional shares of common stock
under the 2005 Plan during fiscal year 2007 for the achievement of such
performance milestones. The number of shares that would be issued to each
of our
Named Executive Officers if all remaining performance milestones are attained
during fiscal year 2007 is as follows: Mr. Steven W. King - 178,458 shares;
Mr.
Paul J. Lytle - 141,695 shares; and Mr. F. David King - 117,500
shares.
Equity
Compensation Plans Not Approved by Stockholders
During
June 2002, we adopted a broad-based non-qualified stock option plan (“2002
Plan”) for the issuance of up to 3,000,000 options. The 2002 Plan provides for
the granting of options to purchase shares of our common stock at prices
not
less than the fair market value of our common stock at the date of grant
and
generally expire ten years after the date of grant. As of April 30 2006,
options
to purchase 2,058,779 shares of our common stock were outstanding under the
2002
Plan and 64,441 options were available for grant under the 2002 Plan.
In
addition to the 2002 Plan, during 1999, we granted non-qualified options,
which
are not part of any compensation plan, to purchase up to an aggregate of
1,500,000 shares of our common stock. As of April 30, 2006, options to purchase
181,664 shares of our common stock were outstanding. The resale of the
underlying shares of common stock is registered on a registration statement
on
Form S-3.
14
The
following table sets forth certain information as of April 30, 2006 concerning
our Common Stock that may be issued upon the exercise of options or pursuant
to
purchases of stock under all of our equity compensation plans approved by
stockholders and equity compensation plans not approved by stockholders in
effect as of April 30, 2006:
|
Plan
Category
|
(a)
Number of Securities
to be
Issued
Upon the Exercise of Outstanding Options
|
(b)
Weighted-Average
Exercise
Price of
Outstanding
Options
|
(c)
Number
of Shares Remaining
Available
for Future Issuance
Under
Equity Compensation
Plans
(Excluding Securities
Reflected
in Column (a))
|
|||
|
Equity
compensation plans
approved
by stockholders
|
9,066,836
|
$
1.59
|
5,281,977
|
|||
|
Equity
compensation plans not
approved
by stockholders
|
2,240,443
|
$
1.42
|
64,441
|
|||
|
11,307,279
|
$
1.56
|
5,346,418
|
Report
of the Compensation Committee of the Board of Directors on Executive
Compensation(†)
The
Compensation Committee of the Board of Directors (the “Committee”) is
responsible for administering Peregrine’s executive compensation program. In
this regard, the role of the Committee is to oversee our compensation programs
and policies applicable to all employees, to review and approve all decisions
regarding executive officers’ compensation and to administer our equity
incentive plans (including reviewing and approving stock option grants).
The
Committee’s charter reflects these various responsibilities. The Committee
regularly reports to the Board of Directors on its actions and
recommendations.
The
Committee presently is composed of four members who
are
not current or former employees of Peregrine. The Board has determined that
each
member is independent under the current listing standards of the NASDAQ
Marketplace Rules.
The
Committee has furnished the following report on executive compensation for
the
fiscal year ended April 30, 2006:
Compensation
Philosophy and Policies
The
Committee annually evaluates the performance and determines the compensation
of
the Chief Executive Officer (“CEO”) and the other executive officers of the
Company based upon a number of factors, including our attainment of certain
corporate goals and clinical milestones approved by the Committee, individual
performance and contribution towards the attainment of our corporate goals,
levels of responsibility and experience, and breadth of knowledge.
The
employment market for personnel and executives with experience in the
biotechnology and pharmaceutical industry in Southern California is very
competitive because there are many pharmaceutical, biotechnology and medical
device companies in that region. The majority of our competitors in this
geographic area have more resources than we do which makes it more difficult
for
us to hire and retain key personnel. As a result, the Committee must establish
compensation packages that will enable the Company to be competitive with
the
local market.
Given
the
competitive environment in which we operate, the compensation philosophy
of the
Committee with respect to executive officers, including the CEO,
is:
• to
maintain an overall compensation structure designed to attract, retain and
motivate executives of outstanding ability who are critical to our long-term
success by providing appropriate levels of risk and reward, in proportion
to
individual contribution and performance,
• to
establish appropriate incentives to further the Company’s long-term strategic
plan and to hold executives accountable, through their compensation, for
their
individual and corporate performance; and
• to
align
the interests of executives with those of the stockholders.
15
Components
of Compensation
Each
executive officer's compensation package is reviewed annually and is comprised
of some or all of the following components: base salary, cash and non-cash
bonus
awards, and stock options. In addition to these components, executive officers
generally are eligible to participate in employee benefit programs generally
available to all of our other employees.
Base
Salary
In
setting the base salary levels for each executive officer, the Committee
considers various data regarding the base salaries of executive officers
in
comparable positions at other biotechnology companies. Additional factors
may
include, but are not limited to, company size, stage of development of a
company's products and geographic location. The Committee also considers
the
individual experience level and actual performance of each executive officer
in
light of Peregrine’s needs and objectives.
Bonus
Awards
As
part
of the Committee’s compensation process, annual bonuses have been, and are
expected to continue to be, based on the attainment of annual milestones
and
accomplishments identified by the Board of Directors and are granted at the
discretion of the Committee. During February 2006, the Compensation Committee
of
the Board of Directors adopted a Stock Bonus Plan to promote the interests
of
the Company and its stockholders by providing non-cash financial rewards
to key
employees and consultants upon achievement of various research and clinical
goals (“Performance Goals”). The Plan will remain effective through fiscal year
ending April 30, 2007. Our Chief Executive Officer, Chief Financial Officer,
and
Vice President of Business Development, as well as sixteen other vice
presidents, director-level and key employees and consultants, are participants
in the Stock Bonus Plan. As of April 30, 2006, up to 1,302,033 shares of
common
stock could be earned under the Stock Bonus Plan upon the achievement of
all
remaining Performance Goals by the pre-established target date.
During
fiscal year 2006, our President and Chief Executive Officer, our Chief Financial
Officer, and our Vice President of Business Development (“Named Executive
Officers”) earned 3,797 shares, 3,015 shares, and 2,500 shares, respectively,
upon the attainment of a Performance Goal. The number of shares that would
be
issued to each of our Named Executive Officers if all remaining performance
milestones are attained during fiscal year 2007 is as follows: President
and
Chief Executive Officer - 178,458 shares; Chief Financial Officer - 141,695
shares; and Vice President of Business Development - 117,500
shares.
The
Committee believes the various research and clinical accomplishments during
fiscal year 2006 and the Performance Goals established for fiscal year 2007
represent significant milestones that promote the interests of the Company
and
its stockholders.
Stock
Option Plans
We
periodically grant stock options to our employees, including our senior
executive officers. Each stock option permits the option holder, for a period
of
ten years, to purchase one share of our stock at an exercise price equal
to the
closing stock price on the date of the grant. Stock options have value only
to
the extent the price of our stock on the date of exercise exceeds the exercise
price. Stock options are intended as incentive and motivation for our executive
officers and other employees, as well as to align the interest of those officers
and other employees more closely with those of our stockholders in achieving
corporate objectives.
Benefits
The
benefits we offer to our employees serve a different purpose than do the
other
elements of total compensation. Such benefits are designed to provide a safety
net of protection against the adverse financial effects that can result from
illness, disability or death and to provide a reasonable level of insurance
coverage for any medical, dental and vision problems that may be experienced
by
the Company’s employees, as well as preventative care, at a reduced expense to
the Company’s employees. Benefits offered to executive officers are largely the
same as those that are offered to the general employee population.
16
Compensation
of the Chief Executive Officer
Effective
as of May 3, 2004, Mr. King's annual base salary was increased to $303,750
and
remained unchanged during fiscal year 2005 and fiscal year 2006. The Committee
determined Mr. King's base salary in accordance with the criteria outlined
above, its evaluation of Peregrine's overall performance, as well as Mr.
King's
individual performance. Mr. King did not receive a stock option grant during
fiscal year 2006. Based on its evaluation of Mr. King's performance, the
Committee believes that Mr. King's compensation level is appropriate and
in line
with his peers in the industry.
The
undersigned members of the Compensation Committee of the Board of Directors
provide this report on executive compensation for fiscal year 2006.
THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Carlton
M. Johnson
David
H. Pohl
Eric
S. Swartz
Thomas
A. Waltz, M.D.
____________________
†
The
material in this report is not soliciting material, is not deemed filed with
the
SEC, and is not incorporated by reference in any filing of the Company under
the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), whether made before or
after the date of this Proxy Statement and irrespective of any general
incorporation language in such filing.
Compensation
Committee Interlocks and Insider Participation
The
following non-employee directors currently serve on the Compensation Committee
of the Board of Directors: Mr. Carlton M. Johnson, Mr. David H. Pohl, Mr.
Eric
S. Swartz, and Dr. Thomas A. Waltz. There are no interlocks of executive
officers or directors of the Company serving on the compensation committee
or
equivalent committee of another entity, which has any director or executive
officer serving on the Compensation Committee, other committees or the Board
of
Directors of the Company.
17
Comparison
of Stockholder Return (‡)
The
following graph shows a comparison of cumulative total returns for the Company,
Nasdaq Market Index and a Nasdaq Peer group for the period beginning
April 30, 2001 through April 30, 2006. The total cumulative return on
investment shown for the Company, the Nasdaq Market Index and the Nasdaq
Pharmaceutical Index (Peer Companies Group Index) are based on the assumptions
that on April 30, 2001, $100 was invested in the common stock of each Index
and
that all dividends were reinvested. The Nasdaq Market Index and the Nasdaq
Pharmaceutical Index were prepared by The Center for Research in Security
Prices.
COMPARISON
OF FIVE-YEAR CUMULATIVE TOTAL RETURN
VALUE
OF INVESTMENT OF $100 ON APRIL 30, 2001
The
underlying data for the foregoing graph is as follows:
|
April
30,
2001
|
April
30,
2002
|
April
30,
2003
|
April
30,
2004
|
April
30,
2005
|
April
30,
2006
|
||||||||||||||
|
Peregrine
Pharmaceuticals, Inc.
|
$
|
100.00
|
$
|
125.93
|
$
|
43.70
|
$
|
123.70
|
$
|
89.63
|
$
|
102.96
|
|||||||
|
Nasdaq
Pharmaceutical Index
|
$
|
100.00
|
$
|
80.90
|
$
|
79.01
|
$
|
101.08
|
$
|
90.29
|
$
|
110.60
|
|||||||
|
Nasdaq
Market Index (U.S.)
|
$
|
100.00
|
$
|
80.41
|
$
|
70.22
|
$
|
91.86
|
$
|
92.16
|
$
|
111.92
|
|||||||
____________________
‡
The
performance graph and the underlying data is not soliciting material, and
is not
incorporated into any past or future filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
including this Proxy Statement, in whole or in part.
|
OTHER
MATTERS
|
Stockholder
Proposals and Nominations
Pursuant
to Rule 14a-8 under the Exchange Act, stockholders may present proper
proposals for inclusion in the Company’s proxy statement and for consideration
at the Company’s next annual meeting of stockholders. To be eligible for
inclusion in the Company’s 2006 Proxy Statement, your proposal must be received
by the Company no later than May 11, 2007, and must otherwise comply with
Rule 14a-8. While the Board will consider stockholder proposals, the
Company reserves the right to omit from the Company’s proxy statement
stockholder proposals that it is not required to include under the Exchange
Act,
including Rule 14a-8.
In
addition, the Company’s Nominating Charter contains an advance notice provision
with respect to matters to be brought at an annual meeting of stockholders,
including nominations, and not included in the Company’s Proxy Statement. If you
would like to nominate a director or bring any other business before the
stockholders at the 2007 Annual Meeting, you must comply with the procedures
contained in the Company’s Nominating Charter of the Board of Directors and you
must notify the Company in writing and such notice must be delivered to or
received by the Secretary no later than 90 days prior to the 2007 Annual
Meeting.
18
The
Nominating Charter of the Board of Directors provides that nominations may
be
made by the Board, by a committee appointed by the Board or any stockholder
entitled to vote in the election of directors generally. Stockholders must
provide actual written notice of their intent to make nomination(s) to the
Secretary of the Company no later than 90 days prior to the relevant annual
meeting. Each notice must set forth (i) the name and address of the
stockholder who intends to make the nomination(s) and the person(s) to be
nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person(s) specified
in the
notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person(s) (naming such person(s))
pursuant to which the nomination(s) are to be made by the stockholder;
(iv) such other information regarding each nominee as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the
SEC
had the nominee been nominated, or intended to be nominated, by the Board;
and
(v) the consent of each nominee to serve as a director of the Company if so
elected. Any candidates recommended by stockholders for nomination to the
Board
will be evaluated in the same manner that nominees suggested by Board members,
management or other parties.
You
may
write to the Secretary of the Company at the Company’s principal executive
office, 14272 Franklin Avenue, Tustin, California 92780, to deliver the notices
discussed above and for a copy of the relevant Nominating Charter of the
Board
of Directors regarding the requirements for making stockholder proposals
and
nominating director candidates. In addition, the Nominating Charter of the
Board
of Directors can also be found on our website at www.peregrineinc.com
(this
website address is not intended to function as a hyperlink, and the information
contained on the Company’s website is not intended to be a part of this Proxy
Statement).
Communication
with the Board of Directors
The
Company’s annual meeting of stockholders provides an opportunity each year for
stockholders to ask questions of or otherwise communicate directly with members
of the Board on appropriate matters. In addition, stockholders may communicate
in writing with any particular director, or the directors as a group, by
sending
such written communication to the Secretary of the Company at the Company’s
principal executive office, 14272 Franklin Avenue, Tustin, California 92780.
Copies of written communications received at such address will be provided
to
the Board or the relevant director unless such communications are considered,
in
the reasonable judgment of the Secretary, to be inappropriate for submission
to
the intended recipient(s). Examples of stockholder communications that would
be
considered inappropriate for submission to the Board include, without
limitation, customer complaints, solicitations, communications that do not
relate directly or indirectly to the Company’s business or communications that
relate to improper or irrelevant topics.
Annual
Report on Form 10-K
A
copy of
the Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission (exclusive of Exhibits), will be furnished by first class
mail, within one business day of receipt of request, without charge to any
person from whom the accompanying proxy is solicited upon written request
to
Peregrine Pharmaceuticals, Inc., Attention: Corporate Secretary, 14272 Franklin
Avenue, Tustin, California 92780-7017. If Exhibit copies are requested, a
copying charge of $.20 per page will be made. In addition, all of the Company’s
public filings, including the Annual Report on Form 10-K, can be found on
our
website at www.peregrineinc.com
(this
website address is not intended to function as a hyperlink, and the information
contained on the Company’s website is not intended to be a part of this Proxy
Statement).
| By Order of the Board of Directors | |
| Paul J. Lytle | |
| Chief Financial Officer and | |
| Corporate Secretary |
August
[
], 2006
19
This
Proxy is Solicited on Behalf of the Board of Directors
2006
Annual Meeting of Stockholders
To
Be Held Tuesday, October 24, 2006, at 10 a.m. PDT
The
undersigned hereby appoints Steven W. King and Paul J. Lytle, or any one
or all
of them, with full power of substitution, attorneys and proxies to represent
the
undersigned at the annual meeting of stockholders of PEREGRINE PHARMACEUTICALS,
INC. to be held on October 24, 2006 and at any adjournment thereof, with
all the
power which the undersigned would possess if personally present and to vote,
as
specified below, all shares of Common Stock which the undersigned may be
entitled to vote at said meeting.
|
IF
NOT OTHERWISE MARKED, THE SHARES REPRESENTED BY THIS PROXY SHALL
BE VOTED
AS FOLLOWS:
"FOR"
ITEMS 1 and 2 AND “AGAINST”
ITEM 3.
|
PLEASE
MARK VOTES
AS
SHOWN IN THIS EXAMPLE: ý
|
|||||
|
FOR
ALL
|
WITHHOLD
ALL
|
FOR
ALL
EXCEPT
|
||||
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR
ALL”
NOMINEES IN ITEM 1.
|
||||||
|
ITEM
1.
Election of Directors.
Nominees:
[01]
Carlton M. Johnson; [02]
Steven W. King;
[03]
David H. Pohl; [04]
Eric S. Swartz; [05]
Thomas A. Waltz, M.D.
|
¨
|
¨
|
¨
|
To
withhold authority to vote for any one or more individual nominee(s),
mark
“FOR ALL EXCEPT” and write that nominee(s) number(s) on the line
below:
|
||
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
ITEM 2.
|
FOR
|
AGAINST
|
ABSTAIN
|
|||
|
ITEM
2.
Ratify the Audit Committee’s selection of Ernst & Young LLP as
our independent registered public accounting firm for
fiscal year 2007.
|
¨
|
¨
|
¨
|
|||
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST”
ITEM 3.
|
||||||
|
ITEM
3.
Recommend to the Board of Directors to Temporarily Rollback/Freeze
the
Compensation of All Directors and Executive Officers of the Company
in
Order to Control Costs.
|
¨
|
¨
|
¨
|
|||
|
ý
FOR NEW
ADDRESS:
¨
Please
write in your new address ð
|
|
|||||
|
Signature
_______________________
|
Date
______________
|
Signature
_______________________
|
Date
______________
|
|||
|
NOTE:
Please sign as name appears on this proxy. Joint owners should
each sign.
When signing as attorney, executor, administrator, trustee or
guardian,
please give full titles as
such.
|
||||||
YOUR
VOTE IS IMPORTANT!
PLEASE
VOTE