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
PEREGRINE
PHARMACEUTICALS, INC.
(Name
of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
ý No
fee required
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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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:
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¨
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Fee
previously paid by written preliminary
materials.
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¨
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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.
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(1)
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Amount
previously paid:
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(2)
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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
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PRELIMINARY
SUBJECT
TO COMPLETION
August
[ ], 2007
Dear
Stockholder:
You
are
cordially invited to attend our annual meeting of stockholders on Monday,
October 22, 2007, at 10:00 a.m. PDT at the Marriott 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 look forward to seeing you on Monday,
October 22nd.
Very
truly yours,
Steven
W. King
President,
Chief Executive Officer
and
Director
14282
Franklin Avenue ● Tustin,
California 92780 ● (714)
508-6000● Fax (714)
838-9433
14282
Franklin Avenue ● Tustin,
California 92780
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
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Date:
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Monday,
October 22, 2007
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Time:
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10:00
a.m. Pacific Daylight Time
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Place:
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Marriott
Hotel in Irvine
18000
Von Karman Avenue
Irvine,
California 92612
Phone:
(949) 553-0100
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Items
of Business:
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1.
To elect five directors to our Board of Directors until the next
annual
meeting and until their successors are elected and qualified;
2.
To ratify the Audit Committee’s selection of Ernst & Young LLP as
our independent registered public accounting firm for our current
fiscal
year ending April 30, 2008;
3.
To approve an amendment to our restated certificate of incorporation,
as
amended, increasing the number of shares of common stock authorized
for
issuance thereunder from 250 million to 325 million shares;
4.
To consider two stockholder proposals, if presented at the meeting;
and
5.
To transact such other business as may properly come before the meeting
or
any adjournment thereof.
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Record
Date:
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You
are entitled to notice of, and to vote at the annual meeting and
any
adjournments of that meeting, if you were a stockholder of record
at the
close of business on August 24, 2007.
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Voting
by Proxy:
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Please
submit the enclosed proxy as soon as possible so that your shares
can be
voted at the annual meeting in accordance with your instructions.
For
specific instructions regarding voting, please refer to the Questions
and
Answers beginning on page 1 of the Proxy Statement and the
instructions on your proxy card.
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By
Order of the Board of
Directors,
Paul
J. Lytle
Chief
Financial Officer
and
Corporate
Secretary
Tustin,
California
August
[ ], 2007
This
Notice of Annual Meeting of Stockholders, Proxy Statement and accompanying
proxy
card
are
being distributed on or about September 10, 2007
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 24, 2007 in
connection with the solicitation of proxies on behalf of the Board of Directors
for use at the Annual Meeting of Stockholders on October 22, 2007. We
intend to commence mailing this Proxy Statement and accompanying proxy card
on
or about September 10, 2007 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, 2007, 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 24, 2007, can vote
at
the Annual Meeting. Each share of Peregrine's Common Stock is
entitled to one vote. As of August 24, 2007, there were [______]
shares of our Common Stock outstanding and entitled to vote.
How
do I vote?
There
are
four ways to vote by proxy:
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(1)
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by
mail;
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(2)
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by
telephone;
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(3)
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via
the Internet; or
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(4)
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in
person at the Annual Meeting.
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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
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·
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the
election of our five directors;
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the
ratification of the Audit Committee’s appointment of Ernst & Young LLP
as our independent registered public accounting firm for fiscal year
2008;
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the
approval of the amendment to our Certificate of Incorporation;
and
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AGAINST
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the two
stockholder proposals.
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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?
The
Board of 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 Proposal Number 3 to pass,
the affirmative vote of stockholders holding a majority of the outstanding
shares of our Common Stock is required to approve the amendment to our restated
certificate of incorporation, as amended. In order for the remaining
Company proposal and two stockholder proposals 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, 14282 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.
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PROPOSAL
NO. 1:
ELECTION
OF DIRECTORS
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The
first proposal on the agenda for
the Annual Meeting will be electing five directors to serve until the next
annual meeting or until their successors are elected. There are five
nominees for the five currently authorized seats on our Board of
Directors. 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
person nominated for election is currently serving as a director of Peregrine
and 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.
Information
with respect to the number of shares of common stock beneficially owned by
each
director as of August 15, 2007 appears under the heading “Security Ownership of
Certain Beneficial Owners, Directors and Management.” The name, age, years
of service on our Board of Directors, and principal occupation and business
experience of each director nominee is set forth below.
3
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Name
and Age
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Principal
Occupation and Business Experience
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Director
Since
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Carlton
M. Johnson
(age
47)
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Mr.
Johnson 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.
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1999
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Steven
W. King (age 43)
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Mr.
King has served as our President and Chief Executive Officer since
March
19, 2003. 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.
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2003
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David
H. Pohl (age 70)
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Mr.
Pohl currently serves as chairman of the board of Patriot Scientific
Corporation and has been a member of its board of directors since
April
2001. Mr. Pohl was President and CEO of Patriot Scientific from
June 2005 to June 2007. 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 Juris
Doctor degree in 1962 from the Ohio State University College of Law,
and
also holds a B.S. in Administrative Sciences from Ohio State.
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2004
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Eric
S. Swartz (age 51)
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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.
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1999
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4
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Name
and Age
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Principal
Occupation and Business Experience
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Director
Since
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Thomas
A. Waltz, M.D. , Chairman of the Board
(age
74)
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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.
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2004
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The
Board of Directors believes that approval of
the election of each nominee director named above is in our best interests
and
in the best interests of our stockholders and therefore recommends a vote
“FOR”
each nominee.
Our
Board of Directors strongly
believes in good corporate governance policies and practices. We expect to
continue to seek and implement those corporate governance practices that
we
believe will promote a high level of performance from our Board of Directors,
officers and employees. This section describes key corporate
governance guidelines and practices that our board has adopted. 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): (i) Code of Business
Conduct and Ethics, (ii) Charter of the Compensation Committee of the
Board of Directors, (iii) Charter of the Audit Committee of the Board
of Directors, and (iv) 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, 14282 Franklin Avenue, Tustin,
California 92780.
Board
of Directors
Our
business is managed under the
direction of our Board of Directors pursuant to the Delaware General Corporation
Law and our Bylaws. Our Board of Directors has responsibility for
establishing broad corporate policies and reviewing our overall
performance. Among the primary responsibilities of our Board of
Directors is the oversight of the management of our company. Our
directors remain informed of our business and management’s activities by
reviewing documents provided to them before each board meeting and by attending
presentations made by our Chief Executive Officer and other members of
management. Each incumbent director attended at least seventy-five
percent (75%) of the meetings of the Board and of the committees on which he
served during the fiscal year ended April 30, 2007. In addition,
members of the Board of Directors have access to our books, records and reports
and independent auditors and advisors. Members of our management
frequently interact with and are at all times available to our
directors.
Director
Independence
Under
applicable NASDAQ Marketplace rules, a director will only qualify as an
“independent director” if, in the opinion of our Board of Directors, that person
does not have a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director. 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.
5
Our
Audit, Compensation, and Nominating Committees are composed entirely of
independent directors as required by applicable SEC and NASDAQ rules, including
Rule 10A-3 under the Exchange Act. In addition, there are no
family relationships among any of the directors or executive officers of the
Company.
The
independent members of our Board of
Directors have a practice of meeting in executive sessions without the presence
of any members of Peregrine’s management. During fiscal year 2007,
the independent members of the Board of Directors met in four (4) executive
sessions during the fiscal year ended April 30, 2007.
Committees
of Our Board of Directors
The
Board
of Directors has three standing committees: the Audit Committee, the
Compensation Committee, and the Nominating Committee. Each of the
three committees maintains a written charter approved by the Board of
Directors. The following is a summary of our three standing
committees:
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 four (4) meetings during the fiscal year ended April 30,
2007. The Committee has the authority to determine director and
executive compensation and may not delegate this authority. The
Committee’s members are currently Mr. Eric Swartz (chairman of the committee),
Mr. Carlton Johnson, Mr. David H. Pohl, and Dr. Thomas A. Waltz. Each
of these members is independent under NASDAQ listing standards currently in
effect.
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
five (5) times during the year ended April 30, 2007. 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 (chairman of the committee), 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 qualities and skills sought in
prospective members of the board will be determined by the independent
directors. Generally, director candidates must be qualified
individuals who, if added to the Board, would provide the mix of director
characteristics, experience, perspective and skills appropriate for the
Company. Criteria for selection of candidates will include, but not
be limited to: (i) business and financial acumen, as determined by the committee
in its discretion, (ii) qualities reflecting a proven record of accomplishment
and ability to work with others, (iii) knowledge of the Company’s industry, (iv)
relevant experience and knowledge of corporate governance practices, and (v)
expertise in an area relevant to the Company. The Nominating Committee met
two
(2) times during the year ended April 30, 2007. The Committee’s
members are Mr. David H. Pohl (chairman of the committee), Mr. Carlton M.
Johnson, Mr. Eric Swartz, and Dr. Thomas A. Waltz. Each of these
members is independent under NASDAQ listing standards currently in
effect.
Communicating
with the Board of Directors
Under
our Code of Business Conduct
and Ethics, we have established an Open Door Policy and Hotline for the
confidential, anonymous submission by our directors, officers and employees
of
concerns regarding violations or suspected violations of our Policy on Business
Conduct and Ethics, including matters relating to accounting and auditing
matters. In addition, the Audit Committee has established procedures
for the receipt, retention and treatment of communications received by us,
our
Board of Directors and the Audit Committee regarding accounting, internal
controls or auditing matters. Written communications from our
stockholders and employees may be sent to: Peregrine Pharmaceuticals, Inc.,
Attention: Audit Committee Chair, 14282 Franklin Avenue, Tustin, California
92780.
In
addition, 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: Board of Directors, Attention:
Corporate Secretary, Peregrine Pharmaceuticals, Inc., 14282 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.
Director
Attendance at Annual Meetings of Stockholders
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.
|
DIRECTOR
COMPENSATION
|
Members
of the Board of Directors who
are also our employees receive no additional compensation for serving as
directors. The following information outlines the compensation paid
to our Non-Employee Directors, including annual base retainer fees, meeting
attendance fees, and option awards for the fiscal year ended April 30,
2007:
|
Name
|
Fees
Earned or
Paid
in Cash ($) (1)
|
Option
Awards
($) (2)
|
All
Other
Compensation
($)
|
Total
($)
|
||||
|
Carlton
M. Johnson
|
$ 142,000
(3)
|
-
|
-
|
$ 142,000
|
||||
|
David
H. Pohl
|
$ 82,000
(4)
|
$62,455
|
-
|
$ 144,455
|
||||
|
Eric
S. Swartz
|
$ 82,000
(4)
|
-
|
-
|
$ 82,000
|
||||
|
Thomas
A. Waltz, M.D.
|
$ 82,000
(4)
|
$62,455
|
-
|
$ 144,455
|
|
(1)
|
In
fiscal year 2007, each non-employee director was eligible to
receive an
annual cash retainer fee of $60,000 per year and was eligible to
receive a fee of $2,000 for each Board meeting attended, whether
in-person
or telephonically. In addition, the chairman of the Audit
Committee was eligible to receive an additional annual cash retainer
fee
of $60,000. Each non-employee director is also eligible to
receive a fee of $2,000 for each additional Company meeting attended
in
excess of four hours in
length.
|
7
|
(2)
|
These
amounts reflect expense recognized by us in fiscal year 2007
for a portion
of the current and prior year option awards to directors. Reference
is
made to Note 3 “Stock-Based Compensation” in our Form 10-K for
the period ended April 30, 2007, filed with the SEC on July 11,
2007,
which identifies assumptions made in the valuation of option
awards in
accordance with FAS 123R. There were no options granted to
non-employee directors during fiscal year 2007.
As
of April 30, 2007, each non-employee director held the following
number of
shares of common stock underlying outstanding stock
options:
|
|
Director
|
Number
of Shares Underlying
Outstanding
Stock Options
|
||
|
Carlton
M. Johnson
|
1,050,000
|
||
|
David
H. Pohl
|
350,000
|
||
|
Eric
S. Swartz
|
700,000
|
||
|
Thomas
A. Waltz, M.D.
|
350,000
|
||
|
(3)
|
Includes
an annual base retainer of $60,000, an annual retainer of $60,000
for
Mr. Johnson’s role as chairman of the Audit Committee, and meeting
fees of $22,000.
|
|
(4)
|
Includes
an annual retainer of $60,000 and meeting fees of
$22,000.
|
|
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 current fiscal year ending April 30,
2008. 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 2008, subject
to
ratification by our stockholders. Ernst & Young LLP has served in
this capacity for each of the seven (7) years ended April 30, 2007, and has
reported on the Company's fiscal year 2007 consolidated financial
statements. During the seven (7) fiscal years ended April 30, 2007,
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 at 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, 2007 and 2006 by
Ernst & Young LLP, our independent registered public accounting
firm:
|
2007
|
2006
|
|||||||
|
Audit
Fees
|
$ |
339,000
|
$ |
343,000
|
||||
|
Audit
Related
|
-
|
-
|
||||||
|
Tax
Fees
|
22,000
|
18,000
|
||||||
|
All
Other Fees
|
2,000
|
1,000
|
||||||
|
Total
Fees
|
$ |
363,000
|
$ |
362,000
|
||||
Audit
Fees pertain to the audit of our
annual consolidated financial statements for fiscal year 2007 and 2006,
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.
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 2007 and 2006.
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.
Ernst
&
Young
LLP did not perform
any professional services with respect to information systems design and
implementation for the years ended April 30, 2007 and 2006. 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, 2007, 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, 2007, and consolidated statements of operations, cash flows
and
stockholders' equity for the fiscal year ended April 30,
2007.
|
9
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, 2007. 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 2008.
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.
|
PROPOSAL
NO. 3:
APPROVAL
OF AMENDMENT TO COMPANY'S CERTIFICATE OF
INCORPORATION
TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
|
Introduction
The
next proposal on the agenda for the
Annual Meeting will be to approve a proposed amendment to our Certificate of
Incorporation.
Our
Certificate of Incorporation, as
currently in effect, authorizes the issuance of up to 250 million shares of
Common Stock, par value $0.001 per share. On August 17, 2007,
the Board of Directors adopted a resolution to amend the Certificate of
Incorporation to increase the number of shares of Common Stock that we are
authorized to issue to 325 million shares, subject to stockholder approval
at
the 2007 Annual Meeting.
At
that time, the Board of Directors
declared the proposed amendment to be advisable and in the best interests of
the
Company and its stockholders and is accordingly submitting the proposed
amendment to be voted on by the stockholders.
Of
the 250 million shares of
Common Stock currently authorized, approximately 226.2 million shares are,
as of
August 15, 2007, issued and outstanding. In addition, as of that
date, approximately 16.5 million shares are reserved for issuance upon the
exercise of outstanding stock options and warrants and shares that are reserved
under our compensation plans for options yet to be granted.
Based
upon these issued and reserved shares of Common Stock, we currently have
approximately 7.3 million shares of Common Stock remaining available for
issuance in the future for other corporate purposes.
The
Certificate of Incorporation, as
currently in effect, also authorizes for issuance 5 million shares of preferred
stock, par value $0.001 per share, none of which are outstanding.
The
form of the proposed amendment is
attached hereto as Exhibit A (the "Amended Certificate").
Why
Are We Asking For Your Approval?
We
have
expended substantial funds on the development of our product candidates and
we
have incurred negative cash flows from operations for the majority of our years
since inception. Since inception, we have financed our operations
primarily through the sale of our Common Stock and issuance of convertible
debt
which was convertible into shares of Common Stock. Currently, we
expect negative cash flows from operations to continue until we are able to
generate sufficient revenue from the contract manufacturing services provided
by
Avid and/or from the sale and/or licensing of our products under
development.
10
The
Board of Directors is recommending
this increase in the authorized shares of Common Stock primarily to give us
the
flexibility to issue shares of Common Stock for future corporate needs, such
as
raising additional capital to fund primarily our clinical trial activities
and
for other general corporate purposes.
As
of August 15, 2007, we had
approximately 242.7 million shares of Common Stock issued and reserved for
issuance under all option and warrant agreements and shares reserved for
issuance, assuming all options and warrants are exercised on a cash basis,
calculated as follows:
|
Shares
of Common Stock issued and outstanding
|
226,210,617
|
|||
|
Shares
of Common Stock reserved for issuance under issued and outstanding
warrants
|
360,000
|
|||
|
Shares
of Common Stock reserved for issuance upon exercise of outstanding
options
or reserved for future option grants under our stock incentive
plans
|
16,122,180
|
|||
|
Total
shares outstanding and reserved
|
242,692,797
|
After
taking into consideration the
above shares outstanding and reserved for issuance and assuming no increase
in
the number of authorized shares, we would have approximately 7.3 million
unreserved shares of Common Stock available for issuance to raise additional
capital or in connection with strategic transactions.
If
the stockholders do not approve this
proposal to increase the number of authorized shares, we may not be able to
arrange the financing necessary to continue our existing operations beyond
the
next fiscal year or may be required to immediately hold a special stockholders
meeting to seek approval to increase the authorized number of shares of Common
Stock, which could cost the Company in excess of $125,000 in printing,
distribution, and mailing fees.
Does
The Company Plan On Issuing Additional Shares?
At
the present moment, we do not have
any plan, arrangement, commitment or understanding, whether written or oral,
to
issue any additional shares of Common Stock that would be authorized by the
proposed amendment.
Moving
forward, it is extremely
difficult for us to reasonably estimate our future revenue, expenses, required
funding, stock price, and thus, the number of shares that we may need to issue
in order to obtain any necessary funding, based on a number of uncertainties,
which include, but are not limited to:
|
|
·
|
The
uncertainty of the amount of revenue our contract manufacturing business,
Avid Bioservices, Inc., can generate beyond our current
customers;
|
|
|
·
|
The
uncertainty of all future research and development costs associated
with
each of our technologies due to the number of unknowns and uncertainties
associated with pre-clinical and clinical trial development; including
the
uncertainty of future clinical trial results, the uncertainty of
the
number of patients to be treated in any future clinical trial, the
uncertainty of protocol changes and modifications in the design of
our
clinical trial studies, among others, which may increase or decrease
our
future expenses;
|
|
|
·
|
The
uncertainty of future partnering or licensing revenue, including
potential
equity investments into the Company whereby the Company would possibly
issue stock directly to a strategic partner;
and
|
|
|
·
|
The
uncertainty of the Company's access to the capital markets and its
cost of
capital.
|
The
above uncertainties, including the
uncertainty of the market price of our Common Stock, will make it difficult
for
the Company to estimate the number of shares of Common Stock that may be issued
at any time. The Company has not entered into any arrangement for the issuance
of Common Stock other than those arrangements discussed in the Company's Annual
Report on Form 10-K as filed with the Securities and Exchange Commission on
July
11, 2007, or subsequent reports filed with the Commission under the Securities
Exchange Act of 1934, as amended.
11
If
the stockholders approve the
proposal, the Board of Directors would be able to issue these additional shares
of Common Stock at its discretion from time to time, subject to any rules or
listing requirements of the NASD or of any other then applicable securities
exchange rules, and subject to any other applicable rules and regulations in
the
case of any particular issuance or reservation for issuance that might require
the stockholders to approve such transaction. The newly authorized
shares of Common Stock would be issuable for any proper corporate purpose,
including future capital-raising transactions involving Common Stock,
convertible securities or other equity securities, stock dividends, establishing
strategic relationships, and current or future equity compensation
plans.
What
Are The Effects On Existing Stockholders?
The
increase in authorized Common Stock
will not have any immediate effect on the rights of existing
stockholders. However, the Board of Directors will have the authority
to issue authorized Common Stock without requiring future stockholder approval
of such issuances, except as may be required by applicable law. To
the extent that additional authorized shares are issued in the future, they
would decrease the existing stockholders' percentage equity ownership and voting
power and, depending on the price at which they are issued, may have a dilutive
effect on our earnings per share and book value per share.
When
Would The Amendment Be Effective?
If
the proposed amendment is adopted,
it will become effective upon the filing of a certificate of amendment to the
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
THE
BOARD RECOMMENDS THAT YOU
VOTE "FOR"
THE PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK.
A
stockholder has advised the Company
that he intends to introduce at the 2007 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
“Implementation
of Majority Voting for Directors Including Resignation Policy.
Proposal
Details
RESOLVED,
that the stockholders of Peregrine Pharmaceuticals (the Company) wish to
implement Majority Voting for Directors, including the implementation of a
director resignation provision for an unsuccessful incumbent
director.
This
is
to be accomplished through the following:
1. Amend
the Company’s bylaws to replace the last sentence of Article II – Meetings of
Stockholders, Section 7 – Voting, which currently states, “Elections of
directors need not be by ballot unless the Chairman of the meeting so directs
or
unless a stockholder demands election by ballot at the meeting and before the
voting begins”, with the following sentences:
“Directors
shall be elected by the vote of the majority of the shares represented in person
or by proxy at any meeting for the election of directors at which a quorum
is
present, provided that if the number of nominees exceeds the number of directors
to be elected (Contested Election), the directors shall be elected by the vote
of a plurality of the shares represented in person or by proxy at any such
meeting. In non-Contested Director Elections, a majority of votes
cast means that the number of votes ‘For’ a director’s election must exceed 50%
of the votes cast with respect to that director’s election. Votes
‘Against’ a director’s election will count as a vote cast, but ‘Abstentions’ and
‘broker non-votes’ will not count as a vote cast with respect to that director’s
election.”
12
2. In
order to ensure that the will of the majority of the stockholders is executed
for an unsuccessful incumbent director, the bylaws must also be amended to
add
the following sentence to Article III – Directors, Section 2 – Number and
Election of Directors, directly before the sentence which begins “Any director
may resign at any time…”:
“In
order for any incumbent director to
become a nominee of the Board of Directors for further service on the Board
of
Directors, such a person must submit an irrevocable resignation, which
resignation shall become effective upon (i) that person not receiving a majority
of the votes cast in an election that is not a Contested Election, and (ii)
acceptance by the Board of Directors of that resignation in accordance with
these bylaws.”
Why
Stockholder is Seeking Your Support and Approval
Currently,
Peregrine Pharmaceuticals uses a plurality voting standard for director
elections, which means that the nominee who receives the most votes will be
elected. Nearly all corporate director elections are uncontested; in
other words, there is only one candidate for each open seat. In
uncontested situations, a plurality voting standard ensures that a nominee
will
be elected even if holders of a majority of shares voting exercise their right
to withhold support from the nominee on the proxy card. Under
plurality voting, a nominee could be elected by a single share.
Please
vote ‘Yes’ in support of this proposal.”
Your
Directors’ Position
Your
Board does not believe that
electing directors under a different standard would result in a more effective
Board, nor does the proponent assert that our Board has not acted in the best
interest of its stockholders. We believe that implementation of a majority
voting system would unnecessarily complicate the election of directors and
likely have unintended and unforeseen consequences. Plurality voting
is the base standard under most state corporate laws, including Delaware which
applies to our Company. Plurality voting is understood by, and has
worked well for, our stockholders and is used by corporations that have been
identified as leaders in corporate governance reforms.
The
Board feels that implementation of
the proposal could unnecessarily increase our Company’s costs in connection with
its annual meetings. We may be required to take additional actions
such as conducting telephone solicitation campaigns, second mailings or other
vote-getting strategies to obtain the required vote to elect directors, all
of
which would result in increased spending for routine elections. Your
Board believes this would be a poor use of Company and stockholder
resources.
Under
the Company’s current plurality
voting system, a “withhold vote” campaign allows stockholders to express their
views in a way that does not affect our fundamental governance
structure. The proponent’s supporting statement does not address the
usefulness and the power of stockholders’ ability to withhold votes under the
plurality system.
It
is also important to note that there
is a highly visible public debate at present regarding the best standards.
There
are a number of other governance and regulatory developments underway that
may
further impact director elections and the nominating process, including the
adoption of changes to the broker discretionary voting rules in 2008 that will
reduce the total number of shares voted for directors; changes to the federal
proxy rules that will permit stockholders to make greater use of the Internet
to
conduct solicitations; and the reconsideration by the Securities and Exchange
Commission of new regulations that, if adopted, would permit stockholders
meeting certain eligibility criteria to use the Company’s proxy materials to
propose their own director candidates for election. In light of all
these developments, the Board believes that prudence and careful consideration
is the best course of action at this time. The Board will continue to
closely monitor and assess developments.
Your
Board believes that Peregrine
stockholders currently and rightfully have a meaningful role in the director
election process. Peregrine has in place robust corporate governance
processes. With the exception of our Chief Executive Officer, our Board is
comprised solely of independent directors, each of whom is elected by
stockholders annually. The Company’s corporate governance processes
have been designed to identify and propose director nominees who will serve
the
best interests of the Company and its stockholders.
13
The
Company’s stockholders have a
history of electing strong and independent Boards, not only by a plurality,
but
in fact by a substantial majority of votes cast. In Peregrine’s
history, no Board-nominated director has ever had a majority of votes withheld
in his election. In fact, each Board-nominated director has received
a substantial majority of “for” votes cast in his election.
Making
a change to the Company’s
current system of plurality voting is not necessary to give our stockholders
a
more meaningful role in the election of directors
process. Additionally, your Board believes that instituting a vote
requirement that potentially decreases democracy and increases costs and
uncertainty is not in furtherance of good corporate governance.
FOR
THE REASONS STATED ABOVE, THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE “AGAINST” ADOPTION OF
THIS
PROPOSAL.
A
stockholder has advised the Company that he intends to introduce at the 2007
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
“Require
Peregrine Pharmaceuticals (the Company) to nominate more candidates then [sic]
open seats on the Board of Directors for all elections of
Directors.
The
Proposal Details
Resolved,
that the shareholders urge the Board of Directors to take the necessary steps
to
nominate more candidates then open seats on the Board of Directors, including
if
necessary, the modification of Peregrine Pharmaceuticals’ Certificate of
Incorporation, By-laws, Charter of the Nominating Committee, and any other
appropriate document or policy. The names, biographical sketches, SEC-required
declarations and photographs of such candidates shall appear in the Company’s
proxy materials (or other required disclosures) to the same extent that such
information is required by law and is our Company’s current practice with the
single candidates it now proposes for each position.
The
minimum number of candidates to be nominated for each Election of Directors
will
be determined by multiplying the number of open board seats by 1.65 and rounding
up any fractional product to the next whole number.
Examples
|
Number
of
|
Number
of
|
|
|
Open
Board Seats
|
Calculation
|
Nominees
|
|
1
|
1
x
1.65 = 1.65
|
2
|
|
5
|
5
x
1.65 = 8.25
|
9
|
|
9
|
9
x
1.65 = 14.65
|
15
|
Why
Stockholder is Seeking Your Support and Approval
Stockholders
today are not given a ‘true’ option in regards to exercising their voting rights
in the election of directors. In the past, the Company presents only
one nominee to fill each open seat on the board of
Directors. Shareholders who oppose a candidate have no easy way to do
so unless they are willing to undertake the considerable expense of running
an
independent candidate for the board. The only other way to register
dissent about a given candidate is to withhold support for all nominees, but
that process does not affect the outcome of director elections and the Company’s
own proxy materials have stated that “proxies voted to ‘Withhold Authority’ and
broker non-votes will have no practical effect.” The current system
thus provides no readily effective way for shareholders to oppose a candidate
that has failed to attend board meetings; or serves on so many boards as to
be
unable to supervise our Company management diligently; or who serves as a
consultant to the Company that could compromise independence; or pose other
problems. As a result, while directors legally serve as the
shareholder agent in overseeing management, the Election of Directors at the
annual meeting is largely perfunctory. Even directors of near bankrupt Companies
have in the past enjoyed re-election with 90%+ pluralities. The
“real” selection comes through the nominating committee, a process too often
influenced, if not controlled, by the very management the board is expected
to
scrutinize critically.
Please
vote ‘Yes’ in support of this proposal."
14
Your
Directors’ Position
The
Board
strongly believes that its present nominating process is the most effective
way
of ensuring that highly qualified and dedicated individuals serve on Peregrine’s
Board. Each year, the Nominating Committee of the Board of Directors
performs the critical function of examining the composition of the Board and
whether to recommend any changes in its membership. In performing
these duties, the Nominating Committee, which consists solely of independent
directors, reviews the qualifications of existing board members and other
possible candidates in accordance with the criteria outlined in the Charter
of
the Nominating Committee of the Board of Directors (the
“Charter”). In accordance with the Charter, the Nominating Committee
considers the needs of the Board and Peregrine in light of the current mix
of
director skills and attributes. In recommending one nominee for each
open directorship position, the Nominating Committee considers many issues
and
factors in recommending only those individuals who the Committee believes
possess the necessary integrity, skills, and dedication to best serve the
stockholders of Peregrine. The Board believes that this process
ensures that only the individuals with the range of character, skills and
experience most appropriate for Peregrine serve on the Board.
Any
of
our stockholders may submit a written recommendation to our Secretary for
consideration by the Nominating Committee, by following the procedures outlined
in Exhibit A to the Charter. Also, any stockholder may vote for some
directors and withhold votes from others. Finally, a stockholder may
propose an alternate slate of directors if the stockholder complies with the
rules of the Securities and Exchange Commission relating to election
contests.
Approval
of this proposal, however, would place the Board in the unusual and difficult
position of having to recommend both the individual who it believes is the
best
qualified to serve as a director and a competing second candidate who may be
viewed less favorably by the Board.
In
addition, the proposal, if effectuated, would likely deter many individuals
with
superior qualifications from seeking or accepting nomination to the
Board. It is neither practical nor fair for the Board to ask these
candidates to set aside their time and potential other opportunities to compete
in a politicized contest in which they could not be assured of having the
recommendation and full support of the entire Board. Finally, the
ambiguity created by having to nominate two directors for each position could
result in a Board that together lacks diversity or lacks certain skills and
levels of experience. More significantly, the Board will be unable to
ensure that one of the candidates elected will qualify as an “audit committee
financial expert” and whether two others will satisfy the financial
sophistication requirement as required by SEC and/or NASDAQ rules and
regulations.
The
Board
believes that Peregrine should continue to follow the present nominating
process, which complies with law and is used by virtually all public
companies. The procedure advocated in the Proposal would not be an
efficient or effective means of selecting the best directors for
Peregrine. Accordingly, the Board unanimously believes the Proposal
is not in the best interest of Peregrine and its stockholders.
FOR
THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “AGAINST” ADOPTION OF
THIS
PROPOSAL.
15
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT
|
Share
Ownership
The
following table sets forth certain
information regarding the beneficial ownership of our Common Stock as of August
15, 2007, by: (i) each stockholder known to us to beneficially own more
than 5% of our Common Stock; (ii) each director and director nominee;
(iii) our Chief Executive Officer, Chief Financial Officer, and our other
Named Executive Officer for the year ended April 30, 2007; and (iv) all
directors, director nominees, and Named Executive Officers of the Company as
a
group. In general, “Beneficial Ownership” refers to shares that an
individual or entity has the power to vote or dispose of, and any rights to
acquire Common Stock that are currently exercisable or will become exercisable
within 60 days of August 15, 2007. Unless otherwise indicated,
each person named below holds sole investment and voting power, other than
the
powers that may be shared with the person’s spouse under applicable
law.
|
Beneficial
Ownership of
Common
Stock
|
|||||||||
|
Name
of Beneficial Owner (a)
|
Number
of Shares
|
Percent
(b)
|
|||||||
|
Carlton
M. Johnson
|
1,000,000
|
(c) |
*
|
||||||
|
Steven
W. King
|
1,180,803
|
(c) |
*
|
||||||
|
David
H. Pohl
|
350,000
|
(c) |
*
|
||||||
|
Eric
S. Swartz
|
3,269,505
|
(c)(d) |
1.44%
|
||||||
|
Thomas
A. Waltz, M.D.
|
352,500
|
(c) |
*
|
||||||
|
F.
David King
|
75,000
|
(c) |
*
|
||||||
|
Paul
J. Lytle
|
780,981
|
(c) |
*
|
||||||
|
All
directors, director nominees and executive officers as a group
(7 persons)
|
7,008,789
|
(c)(d) |
3.04%
|
||||||
* Less
than 1% of the outstanding shares of our Common Stock.
|
|
(a)
|
The
address of all of our executive officers and directors is in c/o
Peregrine
Pharmaceuticals, Inc., 14282 Franklin Avenue, Tustin, California,
92780.
|
|
|
(b)
|
Percent
of Common Stock computed on the basis of 226,210,617 shares outstanding
at
August 15, 2007, plus shares that could be acquired through the exercise
of stock options that will become exercisable within 60 days of August
15,
2007.
|
|
|
(c)
|
Includes
shares which the individuals shown above have the right to acquire
as of
August 15, 2007, or within 60 days thereafter, pursuant to
outstanding stock options as follows: Mr. Johnson – 1,000,000 shares; Mr.
Steven King – 1,110,833 shares; Mr. Pohl – 350,000 shares; Mr. Swartz –
700,000 shares; Dr. Waltz – 350,000 shares; Mr. F. David King – 50,000;
and Mr. Lytle – 720,833 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.
|
|
|
(d)
|
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.
|
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, 2007, each of the
Reporting Persons met all applicable Section 16(a) filing
requirements.
16
|
COMPENSATION
DISCUSSION AND
ANALYSIS
|
Executive
compensation programs affect all employees by setting general levels of
compensation and helping to create an environment of goals, rewards and
expectations. Because we believe the performance of every employee is
important to our success, we are mindful of the effect executive compensation
and incentive programs have on all of our employees.
Our Compensation
Committee (the “Committee”) continuously evaluates the performance, and no
less frequently than annually, determines or modifies the compensation of
our
Chief Executive Officer (“CEO”) and our other executive officers 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. In addition,
we currently do not fund retirement programs, company cars or other expensive
perquisites for our executives.
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 our 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.
|
The
Chief Executive Officer, who
attends most meetings of the Compensation Committee, assists the Committee
in
determining the compensation of all other executive officers by, among other
things:
|
|
·
|
Setting
the base salaries of the other executive officers within limits
established by the Committee;
|
|
|
·
|
Establishing
annual individual performance objectives for the other executive
officers
and evaluating their performance against such objectives (the Committee
reviews these performance
evaluations); and
|
|
|
·
|
Making
recommendations, from time to time, for special stock option grants
(e.g.,
for motivational or retention purposes) to other executive
officers.
|
The
other executive officers do not
have a roleindetermining their own compensation, other than discussing their
annual individual performance objectives with the President and Chief Executive
Officer.
Review
of Management’s Actual Performance Compared to Pre-Determined
Goals
The
Compensation Committee believes
that a portion of an executive’s compensation should be tied to the attainment
of specific pre-determined Company goals. In February 2006, the
Compensation Committee adopted a stock bonus plan (the “Stock Bonus Plan”) to
promote the interests of the Company and our stockholders by providing financial
rewards that were closely aligned with the interest of the stockholders through
the issuance of bonuses in the form of shares of common stock of the
Company. 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, were participants
in the Stock Bonus Plan. Our focus in establishing the Stock Bonus
Plan was to set what we thought were aggressive research and clinical milestones
(“Performance Goals”) in order to focus the Company on advancing our product
development efforts. The terms of the Stock Bonus Plan were approved by
the Compensation Committee on February 13, 2006 and the Stock Bonus Plan
remained in effect through the fourth quarter of our fiscal year ending April
30, 2007. A series of company Performance Goals had been
established, with each Performance Goal having a specific targeted attainment
date (the “Target Date”). Up to 1,737,166 shares of our common stock
were reserved for issuance under the Stock Bonus Plan upon the achievement
of
all Performance Goals by their respective Target Dates.
17
The
number of Bonus Shares that each
individual participant was eligible to receive was capped at a certain
percentage of the individual’s base salary (the “Individual Bonus Share Pool”),
with the percentage depending on the individual’s expected level of contribution
towards the timely attainment of the Performance Goals.
Under
the Stock Bonus Plan, a total of
four (4) Performance Goals were attained by their respective Target Dates,
of
which, three (3) Performance Goals were attained by their respective Target
Dates during fiscal year 2007. This resulted in the issuance of a total of
249,326 shares of our Common Stock in fiscal year 2007, of which 83,806 were
issued to the participating Named Executive Officers.
We
were very pleased with the efforts
put forth by the participants, including the three Named Executive Officers
that
participated in the Stock Bonus Plan. Through the efforts of the
participants in connection with the research and clinical programs around which
the Performance Goals were based, we were able to identify opportunities (such
as the initiation of clinical trials in India) that we believe helped us
accelerate and increase the potential value of our technologies.
Components
of Our Executive Compensation Program
We
do not have any formal or informal
policy or target for allocating compensation between long-term and short-term
compensation or between cash and non-cash compensation. Instead, the
Committee, after reviewing information gathered from an outside compensation
database, determines subjectively what it believes to be the appropriate level
and mix of the various compensation components.
The
primary elements of our executive
compensation program are:
|
·
|
base
salary;
|
|
·
|
annual
incentive bonus such as the stock bonus
plan;
|
|
·
|
stock
option awards; and
|
|
·
|
severance,
change in control and other
benefits.
|
Base
Salary
Base
salary is used to recognize the
experience, skills, knowledge and responsibilities required of all our
employees, including our executives. When establishing base salaries
for fiscal year 2007, the Committee considered various data regarding the
base
salaries of executive officers in comparable positions at other biotechnology
companies. Additional factors included, but were not limited to,
company size, market capitalization, stage of development of a company's
products and geographic location. The Committee also considered the
individual experience level and actual performance of each executive officer
in
light of Peregrine’s needs and objectives. The Committee did not
retain the services of a compensation consultant because it felt that
compensation levels were well within the range of comparable companies in
the
geographical area, and therefore did not feel the additional cost was
justifiable.
Base
salaries are reviewed at least
annually by our committee, and may be adjusted to realign salaries with market
levels after taking into account individual responsibilities, performance
and
experience, subject to minimum salary requirements set forth in applicable
employment agreements. Base salaries may be increased for merit
reasons, based on the executive’s success in meeting or exceeding individual
performance objectives as well as our combined success in meeting corporate
goals, including research and clinical milestones. An
executive’s base salary is also evaluated by reviewing the executive’s other
compensation components to ensure that the executive’s total compensation is in
line with our overall compensation philosophy as discussed
above. From May 3, 2004 to May 6, 2006, Mr. King’s annual salary
remained unchanged at $303,750 per year. On May 7, 2006, the Board of
Directors increased our chief executive officer’s annual base salary by $50,000
to $353,750 per year. This increase was
based upon the performance and accomplishments over the prior two years in
addition to a competitive analysis adjustment based on market level
salaries.
18
Annual
Incentive Bonus
The
Committee believes that a necessary
component our executive compensation program is an annual incentive bonus.
Annual incentive bonuses are typically tied to the attainment of corporate
goals
as well as individual performance goals. In prior years, executives earned
cash bonuses for the attainment of certain agreed product development
accomplishments. As discussed above, during fiscal year 2006, the
Committee approved an incentive stock bonus plan. The stock bonus plan
expired in fiscal year 2007. Currently, we do not have any formal
incentive bonus program in place for fiscal year 2008, however, the Committee
is
in the process of developing a program that will reward executives for the
attainment of to be determined corporate goals that actually create shareholder
value.
Stock
awards to our executive officers
are periodically granted by the Board of Directors at their
discretion. The grant date of annual and other grants is either on
the date the committee approves the grants or on a pre-selected later date,
such
as a future hire date. The Board of Directors has not granted any
stock options to any Named Executive Officers since October 2003 other than
a
new hire grant to Mr. David King on October 24, 2005, which grant was in
accordance with the Company’s option granting policies.
Severance,
Change-in-Control, and Other Benefits
Steven
W. King is subject to an
employment agreement with us dated March 19, 2003, pursuant to which he is
employed as our President and Chief Executive Officer. The agreement
provides for an initial annual base salary of $270,000 and the grant of a stock
option to purchase up to 200,000 shares of Common Stock, which option vested
monthly over a period of 24 months. 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 increased two years later to $353,750 effective May
7,
2006.
In
addition, we maintain broad-based
benefits that are provided to all employees, including health, dental, and
vision insurance, life and disability insurance and a 401(k)
plan. Under the 401(k) plan, executive officers are allowed to
contribute on the same basis as other employees of the Company as determined
by
IRS regulations. To date, we have not made any matching employee
contributions to the 401(k) plan. In addition, executive officers are
eligible to participate in the same employee benefit plans as all other
employees. The cost of health and dental insurance was 100% covered
by the Company for executive officers during fiscal year 2007. In
addition, all employees, including executive officers, receive $50,000 in
term-life insurance, long-term disability benefits, monthly dues for a health
club membership, and vision insurance at no cost to the employee. We
also provide all employees, including executive officers, the option to make
pre-tax payroll deductions up to $2,500 per year under a flexible spending
account plan that can be utilized for out-of-pocket medical, dental and other
allowable expenses. The Company also provides paid-time-off benefits
to cover vacation and sick time and annually determined Company
holidays.
The
Compensation Committee believes
Peregrine’s compensation programs are designed and administered in a manner
consistent with its compensation philosophy and objectives. We monitor
these programs in recognition of the dynamic marketplace in which Peregrine
competes for talent. Peregrine intends to continue to emphasize
pay-for-performance and equity-based incentive programs that reward executives
for actual results and that are consistent with stockholder
interests.
19
|
EXECUTIVE
COMPENSATION
|
Executive
Officers
The
following table lists the executive officers of the Company as of April 30,
2007:
|
Name
|
Age
|
Position
|
||
|
Steven
W. King
|
43
|
President
and Chief Executive Officer, Director
|
||
|
F.
David King
|
51
|
Vice
President of Business Development
|
||
|
Paul
J. Lytle
|
39
|
Chief
Financial Officer and Corporate
Secretary
|
Steven
W.
King has served as our President and Chief Executive Officer since March 19,
2003. 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
Immunotherapeutic and Vascular Targeting Agent 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.
F.
David
King has served as Vice President of Business Development since October 2005,
has over 20 years of commercial experience in the biopharmaceutical industry,
including sales, marketing and extensive business development experience.
His expertise in this area has led to the completion of significant
corporate partnering deals with industry partners. He has identified,
negotiated and closed a wide range of transactions including out-license,
in-license, co-promotion and joint development and marketing agreements.
Mr. King has an extensive network of contacts at biopharmaceutical
companies in North America, Europe and Asia. Mr. King was formerly
employed with Medinox, Inc., in San Diego, where he served as Vice President,
Corporate Development. Previously, Mr. King held several executive and
management level positions at various pharmaceutical companies, including Maxim
Pharmaceuticals, DepoTech Corporation (now SkyePharma Ltd.), and Glaxo Inc.
(now
GlaxoSmithKline). He began his pharmaceutical industry career in sales and
marketing for Stuart Pharmaceuticals (now AstraZeneca). Mr. King holds a
bachelor's degree in Business Administration from Goshen College in Goshen,
Indiana.
Paul
J.
Lytle has served as Chief Financial Officer since August 2002. Mr. Lytle
oversees various functions, including finance and accounting, financial
reporting, Corporate Governance, investor relations, human resources and
information technology. Mr. Lytle started with Peregrine in March
1997 as Corporate Controller and has held positions of increasing responsibility
at the company. Mr. Lytle was promoted to Vice President of
Finance and Accounting and was elected as the company's Corporate Secretary
in
2000. Prior to joining Peregrine, Mr. Lytle worked for Deloitte &
Touche LLP. Mr. Lytle holds a BS in Business Administration from the
California State University at Long Beach and is a certified public accountant
in the State of California and a member of the American Institute of Certified
Public Accountants.
Compensation
Summary
The
following table contains
information with respect to the compensation for the fiscal year ended April
30,
2007 of our Chief Executive Officer, Chief Financial Officer, up to three most
highly compensated executive officers serving as executive officers at the
end
of the last completed fiscal year other than the Chief Executive Officer and
Chief Financial Officer, and up to two additional executive officers who would
have been one of our three most highly compensated executive officers, but
who
was not serving as an executive officer at the end of the last completed fiscal
year. We refer to the executive officers identified in this table as our “Named
Executive Officers.”
20
Fiscal
Year 2007 Summary Compensation Table
|
Name
and Principal
Position
|
Fiscal
Year
|
Salary
($)
(1)
|
Bonus
($)
|
Stock
Awards
($)
(3)
|
Option
Awards($) (4)
|
Non-Equity
Incentive Plan Compensation ($)
|
All
Other Compensation ($) (5)
|
Total
($)
|
||||||||
|
Steven
W. King, President and
Chief Executive Officer
|
2007
|
373,588
(2)
|
-
|
46,931
|
-
|
-
|
16,200
|
436,719
|
||||||||
|
F.
David King, Vice
President, Business Development
|
2007
|
210,000
|
-
|
30,900
|
40,577
|
-
|
10,340
|
291,817
|
||||||||
|
Paul
J. Lytle, Chief
Financial Officer and Corporate Secretary
|
2007
|
293,402
(2)
|
-
|
37,263
|
-
|
-
|
16,102
|
346,767
|
|
(1)
|
Salary
information is reported as of the last payroll paid prior to or
immediately after April 30th of each fiscal
year.
|
|
(2)
|
Includes
the advancement of earned and accrued paid-time-off benefits (earned
and
accrued vacation benefits) in the amount of $21,761 for Mr. Steven
King
and $18,561 for Mr. Paul Lytle, to cover federal and state income
taxes
that were due upon the receipt of shares of common stock received
under
the Company’s Stock Bonus Plan.
|
|
(3)
|
Represents
the non-cash dollar amount recognized for financial statement reporting
purposes for the fair market value of shares of common stock earned
under
the Company’s Stock Bonus Plan for milestones achieved during fiscal year
2007 as follows: Mr. Steven W. King – 34,173 shares; Mr. F.
David King – 22,500 shares; and Mr. Paul J. Lytle – 27,133
shares.
|
|
(4)
|
Amount
reflects expense recognized by us in fiscal year 2007 for a portion
of the
current and prior year option awards to the Named Executive
Officer. Reference is made to Note 3 “Stock-Based
Compensation” in our Form 10-K for the period ended April 30, 2007,
filed with the SEC on July 11, 2007, which identifies assumptions
made in
the valuation of option awards in accordance with
FAS 123R.
|
|
(5)
|
Amounts
shown in this column reflect the cost of benefits paid on behalf
of the
Named Executive Officer for health, dental, and vision benefits in
addition to premiums paid for long-term disability and $50,000 in
coverage
for term life insurance.
|
Grants
of Plan-Based Awards
|
Name
and Principal Position
|
Grant
Date
|
All
Other Stock Awards: Number of
Shares of Stock (1)
|
Grant
Date Fair Value of Stock Awards (2)
|
|||||||
|
Steven
W. King,
President
and Chief Executive
Officer
|
6/7/06
10/24/06
11/17/06
|
3,797
15,188
15,188
|
$6,531
$20,504
$19,896
|
|||||||
|
F.
David King,
Vice
President, Business
Development
|
6/7/06
10/24/06
11/17/06
|
2,500
10,000
10,000
|
|
$4,300
$13,500
$13,100
|
||||||
|
Paul
J. Lytle,
Chief
Financial Officer and
Corporate Secretary
|
6/7/06
10/24/06
11/17/06
|
3,015
12,059
12,059
|
$5,186
$16,280
$15,797
|
|||||||
|
(1)
|
Represents
shares of common stock issued pursuant to the Company’s Stock Bonus Plan
for milestones achieved during fiscal year
2007.
|
|
(2)
|
Represents
the non-cash dollar amount recognized for financial statement reporting
purposes for the fair market value of shares of common stock earned
under
the Company’s Stock Bonus Plan for milestones achieved during fiscal year
2007.
|
21
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows information
regarding unexercised stock options held by our Named Executive Officers as
of
fiscal year ended April 30, 2007:
Outstanding
Equity Awards at Fiscal Year-End
|
Name
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
(1)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|||||
|
Steven
W. King
|
15,000
|
-
|
$0.60
|
6/11/2007
|
|||||
|
22,500
|
-
|
$1.59
|
5/27/2008
|
||||||
|
130,000
|
-
|
$1.06
|
5/3/2009
|
||||||
|
258,333
|
-
|
$0.34
|
12/22/2009
|
||||||
|
150,000
|
-
|
$1.28
|
5/7/2011
|
||||||
|
200,000
|
-
|
$0.55
|
3/19/2013
|
||||||
|
350,000
|
-
|
$2.20
|
10/21/2013
|
||||||
|
|
|||||||||
|
F.
David King
|
50,000
|
150,000
|
$1.05
|
10/24/2015
|
|||||
|
|
|||||||||
|
Paul
J. Lytle
|
30,000
|
-
|
$0.60
|
6/11/2007
|
|||||
|
22,500
|
-
|
$1.59
|
5/27/2008
|
||||||
|
130,000
|
-
|
$1.06
|
5/3/2009
|
||||||
|
133,333
|
-
|
$0.34
|
12/22/2009
|
||||||
|
135,000
|
-
|
$1.28
|
5/7/2011
|
||||||
|
300,000
|
-
|
$2.20
|
10/21/2013
|
||||||
|
(1)
|
Options
generally vest in 4 equal annual installments beginning one year
from the
date of grant. Of the remaining 150,000 unvested options for
Mr. F. David King, 50,000 options will vest on each of the following
dates: October 24, 2007, October 24, 2008, and October 24,
2009.
|
During
fiscal year 2007, there were no stock options exercised by the Named Executive
Officers.
Potential
Payments Upon Termination or Change in Control
The
tables below set forth the
potential payments to our Named Executive Officers assuming a termination event
or a change in control event occurred as of April 30, 2007:
POTENTIAL
TERMINATION AND CHANGE IN CONTROL PAYMENTS
|
Name
Executive Officer
|
Salary
&
Bonus ($)
|
Acceleration
of Vesting of Equity Awards (2)
|
Other
Payments
($)
|
Total
($)
|
||||
|
Steven
W. King (1)
|
176,875
|
-
|
8,796
|
185,671
|
||||
|
F.
David King
|
-
|
-
|
-
|
-
|
||||
|
Paul
J. Lytle
|
-
|
-
|
-
|
-
|
|
(1)
|
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.
|
|
(2)
|
All
equity awards vest and become immediately exercisable in full upon
a
change in control event. As of April 30, 2007, all stock
options granted to Mr. Steven King and Mr. Paul Lytle had previously
vested in full in accordance with the original term of the option
award. As of April 30, 2007, 150,000 unvested stock options
granted to Mr. F. David King would become immediately exercisable
upon a
change in control event.
|
Compensation
Committee Interlocks and Insider Participation
The
following non-employee directors
currently serve on the Compensation Committee of the Board of
Directors: Mr. Eric S. Swartz (chairman of the committee), Mr.
Carlton M. Johnson, Mr. David H. Pohl, 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.
The
Report of the Compensation Committee of the Board of Directors 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
(the “Securities Act”) or under the Securities Exchange Act of 1934 (the
“Exchange Act”), except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
The
Compensation Committee of our Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Eric
S. Swartz, Chairman of the Compensation Committee
Carlton
M. Johnson
David
H. Pohl
Thomas
A. Waltz, M.D.
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.
The
2002
Plan is a broad-based non-qualified stock option 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.
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, 2007, 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.
The
following table sets forth certain
information as of April 30, 2007 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, 2007:
|
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
|
9,494,788
|
$1.56
|
4,408,683
|
|||||
|
Equity
compensation plans not approved by stockholders
|
2,043,158
|
$1.42
|
242,726
|
|||||
|
11,537,946
|
$1.54
|
4,651,409
|
||||||
23
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, 2002 through April 30,
2007. 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, 2002
The
underlying data for the foregoing graph is as follows:
|
April
30,
2002
|
April
30,
2003
|
April
30,
2004
|
April
30,
2005
|
April
30,
2006
|
April
30,
2007
|
|||||||||||||||||||
|
Peregrine
Pharmaceuticals, Inc.
|
$ |
100.00
|
$ |
34.71
|
$ |
98.24
|
$ |
71.18
|
$ |
81.76
|
$ |
58.82
|
||||||||||||
|
Nasdaq
Pharmaceutical Index
|
$ |
100.00
|
$ |
97.66
|
$ |
124.95
|
$ |
111.62
|
$ |
136.70
|
$ |
146.67
|
||||||||||||
|
Nasdaq
Market Index (U.S.)
|
$ |
100.00
|
$ |
87.32
|
$ |
114.24
|
$ |
114.61
|
$ |
139.16
|
$ |
151.80
|
||||||||||||
‡ 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 2008 Proxy Statement, your proposal must be received by the Company no
later than May 13, 2008, 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
2008 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 2008 Annual
Meeting.
24
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 as 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, 14282 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).
Other
Matters
Neither
the Board of Directors nor the management knows of no other business to be
presented at the Annual Meeting, but if other matters do properly come before
the Annual Meeting, it is intended that the persons named on the proxy card
will
vote on those matters in accordance with their best judgment.
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, 14282 Franklin
Avenue, Tustin, California 92780. 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
[ ], 2007
25
EXHIBIT
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
OF
PEREGRINE
PHARMACEUTICALS, INC.,
A
DELAWARE CORPORATION
PEREGRINE
PHARMACEUTICALS, INC., a
Delaware corporation organized and existing under and by virtue of the Delaware
General Corporation Law (hereinafter referred to as the "Corporation"), hereby
certifies as follows:
1. That
at a meeting of the
Board of Directors of the Corporation resolutions were duly adopted setting
forth a proposed amendment of the Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable and directing said
amendment to be submitted to the stockholders of the Corporation at a special
meeting. The resolutions setting forth the proposed amendment is as
follows:
“RESOLVED,
that the Certificate of
Incorporation be amended by changing the first sentence of ARTICLE 4 so that
it
shall read as follows:
|
|
“The
total number of shares of all classes of stock which the Corporation
shall
have authority to issue is 330,000,000, of which (i) 325,000,000
shares
shall be designated “Common Stock” and shall have a par value of $0.001
per share; and (ii) 5,000,000 shares shall be designated “Preferred Stock”
and shall have a par value of $0.001 per
share.”
|
2. That
thereafter, pursuant
to resolution of the Board of Directors, an Annual Meeting of the stockholders
of the Corporation was duly called and held, upon notice in accordance with
Section 222 of the Delaware General Corporation Law, at which Annual Meeting
the
necessary number of shares as required by statute were voted in favor of the
amendment.
3. That
said amendment was
duly adopted in accordance with the provisions of Section 242 of the Delaware
General Corporation Law of the State of Delaware.
IN
WITNESS WHEREOF, the Corporation has
caused this Certificate of Amendment to be executed by Steven W. King, its
President & CEO, and attested to by Paul J. Lytle, its Secretary, this [__]
day of October, 2007.
PEREGRINE
PHARMACEUTICALS,
INC,
a
Delaware corporation
By:________________________________
Steven
W. King, President &
CEO
ATTEST:
__________________________________________
Paul
J.
Lytle, Secretary
 14282
FRANKLIN AVE.
TUSTIN,
CA 92780
|
YOUR
VOTE IS IMPORTANT!
PLEASE
VOTE
VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day
before
the cut-off date or meeting date. Have your proxy card in hand
when you
access the web site and follow the instructions to obtain your
records and
to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If
you would like to reduce the costs incurred by PEREGRINE PHARMACEUTICALS,
INC. in mailing proxy materials, you can consent to receiving all
future
proxy statements, proxy cards and annual reports electronically
via e-mail
or the Internet. To sign up for electronic delivery, please follow
the
instructions above to vote using the Internet and, when prompted,
indicate
that you agree to receive or access shareholder communications
electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up
until
11:59 P.M. Eastern Time the day before the cut-off date or meeting
date.
Have your proxy card in hand when you call and then follow the
instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid
envelope
we have provided or return it to PEREGRINE PHARMACEUTICALS, INC.,
c/o
Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
PERPH1 KEEP
THIS PORTION FOR YOUR RECORDS
|
DETACH
AND RETURN THIS PORTION ONLY
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
PEREGRINE
PHARMACEUTICALS, INC.
IF
NOT OTHERWISE MARKED, THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED
AS
FOLLOWS: "FOR" ITEMS 1, 2, and 3 AND "AGAINST" ITEMS 4 AND
5.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL" NOMINEES IN ITEM
1.
ITEM
1. Election of Directors.
|
Nominees:
1) Carlton
M. Johnson
2) Steven
W. King
3) David
H. Pohl
4)
Eric S. Swartz
5)
Thomas A. Waltz, M.D.
|
For
All Withhold
All For All
Except
o
o
o
To
withhold authority to vote for any individual nominee(s), mark
“For All
Except”
and
write the number(s) of the nominee(s) on the line below.
_______________________________________________________________
|
|
THE
BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 2 AND
3.
|
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 2008.
|
o
o
o
|
|
ITEM
3. Approve an amendment to our restated
certificate of incorporation, as amended, increasing the
number of
authorized shares by 75 million.
|
o
o
o
|
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEMS 4
AND
5.
|
|
|
ITEM
4. Shareholder Proposal: Implementation of
Majority Voting for Directors Including Resignation
Policy.
|
o
o
o
|
|
ITEM
5. Shareholder Proposal: Nominate more
candidates than open seats on the Board of Directors
for all
elections.
|
o
o
o
|
For
address changes and/or comments, please check this box and write them on
the
back where indicated. o
Please
indicate if you plan to attend this meeting.
Yes o
No o
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 title as such. By my signature below, I confer
to the named proxies discretionary authority
on any other
business that may properly come before the Annual Meeting
or
any adjournment or postponement of the Annual
Meeting.
| Signature [PLEASE SIGN WITHIN BOX] Date | Signature (Joint Owners) Date |
This
Proxy is Solicited on Behalf of the Board of Directors
For
the 2007 Annual Meeting of Stockholders
To
Be Held Monday, October 22, 2007, 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
22, 2007 and at any adjournment or postponement thereof, with all the power
which the undersigned would possess if personally
present and to vote, as specified on the reverse side, all shares of Common
Stock which the undersigned may be entitled to vote
at
said meeting.
IF
NO
OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS FORM, THIS PROXY
WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTOR
LISTED IN ITEM 1 AND FOR ITEMS 2 AND 3 AND AGAINST ITEMS 4 AND 5 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT AND IN THE DISCRETION OF THE PERSONS NAMED ABOVE IN ANY OTHER
MATTER
WHICH MAY PROPERLY COME
BEFORE THE ANNUAL MEETING. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY
WILL BE VOTED IN ACCORDANCE WITH
THOSE INSTRUCTIONS.