<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
REMEDY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1999
The Annual Meeting of Stockholders of Remedy(R) Corporation (the "Company")
will be held at the Company's offices at 1505 Salado Drive, Mountain View, CA
94043 on Thursday, May 27, 1999, at 4:00 p.m., local time, for the following
purposes:
1. To elect five directors of the Board of Directors to serve until the
next Annual Meeting or until their successors have been duly elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1999; and
3. To approve an amendment to the Employee Stock Purchase Plan, including
an increase to the number of shares available, as set forth in the
accompanying proxy;
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on March 31, 1999 are entitled to notice of, and to vote at, the Annual
Meeting and at any adjournments or postponements thereof. A list of such
stockholders will be available for inspection at the Company's principal
executive offices located at 1505 Salado Drive, Mountain View, California 94043
during ordinary business hours for the ten-day period prior to the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/Lawrence L. Garlick
LAWRENCE L. GARLICK
Chairman of the Board and
Chief Executive Officer
Mountain View, California
April 19, 1999
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. YOU MAY
REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF YOU DECIDE TO
ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO
AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
<PAGE> 3
LOGO
1505 Salado Drive
Mountain View, California 94043
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 27, 1999
------------------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Remedy Corporation, a Delaware corporation ("Remedy" or the "Company"), for use
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Company's offices at 1505 Salado Drive, Mountain View, California 94043, on May
27, 1999, and at any adjournment or postponement of the Annual Meeting. These
proxy solicitation materials were first mailed on or about April 19, 1999 to all
stockholders entitled to vote at the Annual Meeting.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On March 31, 1999, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 28,656,249
shares of Common Stock outstanding. Each stockholder of record on March 31, 1999
is entitled to one vote for each share of Common Stock held by such stockholder
on such date. Shares of Common Stock may not be voted cumulatively. All votes
will be tabulated by the inspector of elections appointed for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the
Company's Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum.
VOTES REQUIRED
Proposal 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person or represented by proxy and entitled to
vote at the Annual Meeting. The five nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker non-votes
will not be counted towards a nominee's total. Stockholders may not cumulate
votes in the election of directors.
<PAGE> 4
Proposal 2. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999
requires the affirmative vote of a majority of those shares present, in person
or represented by proxy, and voted either affirmatively or negatively at the
Annual Meeting. Abstentions and broker non-votes will not be counted as having
been voted on the proposal.
Proposal 3. Approval of the adoption of the amendment to the Company's
Employee Stock Purchase Plan requires the affirmative vote of a majority of
those shares present in person or represented by proxy, and entitled to vote at
the Annual Meeting. Abstentions are not affirmative votes and, therefore, will
have the same effect as a vote against the proposal. Broker non-votes will not
be treated as entitled to vote on the matter and thus, will not affect the
outcome of the voting on the proposal.
PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your proxy
when properly completed. In the event no directions are specified, such proxies
will be voted FOR the Nominees of the Board of Directors (as set forth in
Proposal No. 1), FOR Proposal No. 2 and 3 and in the discretion of the proxy
holders as to other matters that may properly come before the Annual Meeting.
You may also revoke or change your proxy at any time before the Annual Meeting.
To do this, send a written notice of revocation or another signed proxy with a
later date to the Secretary of the Company at the Company's principal executive
offices before the beginning of the Annual Meeting. You may also automatically
revoke your proxy by attending the Annual Meeting and voting in person. All
shares represented by a valid proxy received prior to the Annual Meeting will be
voted.
SOLICITATION OF PROXIES
The cost of soliciting proxies, including the preparation, assembly,
printing, and mailing of this Proxy Statement, the proxy, and any additional
soliciting material furnished to stockholders will be borne by the Company. The
Company has retained the services of Corporate Investor Communications, Inc. to
assist in the solicitation of proxies, for which it will receive a fee from the
Company of approximately $4,500, plus out-of-pocket expenses. In addition, the
Company may reimburse brokerage houses and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. The Company will furnish copies of solicitation material to
such brokerage houses and other representatives. Proxies may also be solicited
by certain of the Company's directors, officers and employees, without
additional compensation, personally or by telephone, telecopy or telegram.
Except as described above, the Company does not presently intend to solicit
proxies other than by mail.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Company currently has authorized five directors. At the Annual Meeting,
five directors are to be elected to serve until the Company's next Annual
Meeting or until their successors are elected and qualified. The directors who
are being nominated for reelection to the Board of Directors (the "Nominees"),
their ages as of April 1, 1999, their positions and offices held with the
Company and certain biographical information are set forth below. Each Nominee
for election has agreed to serve if elected, and management has no reason to
believe that any Nominee will be unavailable to serve. In the event any Nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who may be designated by the present
Board of Directors to fill the vacancy. Unless otherwise instructed, the proxy
holders will vote the Proxies received by them FOR the Nominees named below. The
five Nominees receiving the
2
<PAGE> 5
highest number of affirmative votes of the shares represented and voting on this
proposal at the Annual Meeting will be elected directors of the Company.
<TABLE>
<CAPTION>
YEAR FIRST POSITIONS & OFFICES
NAME AGE ELECTED DIRECTOR HELD WITH THE COMPANY
---- --- ---------------- ---------------------
<S> <C> <C> <C>
Lawrence L. Garlick......... 50 1990 Chairman of the Board and Chief
Executive Officer
David A. Mahler............. 42 1990 Director. Former Vice President,
Business Development
Harvey C. Jones, 46 1994 Director
Jr.(1)(2).................
John F. Shoch(1)(2)......... 50 1991 Director
James R. Swartz(2).......... 56 1991 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Garlick co-founded the Company in November 1990. Since that time he has
served as Chairman of the Board and Chief Executive Officer of the Company. From
September 1984 to June 1990, Mr. Garlick was employed by Sun Microsystems, Inc.,
a manufacturer of computer workstations, most recently as Vice President of
Distributed Systems. Mr. Garlick holds B.S.E.E. and M.S.E.E. degrees in computer
engineering from Stanford University.
Mr. Mahler co-founded the Company in November 1990 and has been a director
of the Company since that time. In addition, from March 1995, until February
1999 Mr. Mahler served as Vice President, Business Development of the Company.
From December 1997 through March 1998, Mr. Mahler served as the acting Vice
President, Worldwide Sales of the Company. From November 1990 to June 1995, Mr.
Mahler served as Vice President, Marketing of the Company. From November 1990 to
March 1993, Mr. Mahler also served as Chief Financial Officer of the Company.
From November 1978 to October 1990, Mr. Mahler was employed by Hewlett-Packard
Company, a manufacturer of computers and related products, most recently as
product marketing manager. Mr. Mahler holds a B.S. degree in computer science
from Case Western Reserve University.
Mr. Jones has been a director of the Company since November 1994. Mr. Jones
served as the Chairman of the Board of Synopsys, Inc. ("Synopsys"), an
electronic design automation company, from January 1993 until February 1998. Mr.
Jones also served as Chief Executive Officer of Synopsys from December 1987
until January 1994 and as President of Synopsys from December 1987 until January
1993. Mr. Jones currently serves on the Board of Directors of Mercury
Interactive Corp., Synopsys, Inc., Nvida Corp., Simplex Solutions, Molecular
Applications Group, Crossbow Technology, Tensilica and Numerical Tech. Mr. Jones
holds a B.S. degree in mathematics and computer science from Georgetown
University and a M.S. degree in management from the Massachusetts Institute of
Technology.
Mr. Shoch has been a director of the Company since January 1991. Since
1985, Mr. Shoch has been a general partner at Asset Management Company, a
venture capital management firm. Mr. Shoch currently serves on the Board of
Directors of Conductus, Inc. Mr. Shoch holds a B.S. in political science and an
M.S. and a Ph.D. in computer science from Stanford University.
Mr. Swartz has been a director of the Company since January 1991. Mr.
Swartz has been managing partner of Accel Partners, a venture capital investment
firm, since September 1983. Mr. Swartz currently serves on the Board of
Directors of Netopia, Inc., Polycom, Inc., FVC.COM, Sentient Networks, Avici
Systems, Inc., Bright Tiger Tech., Cohera Corp., InGenuity Systems, 2Wire, Inc.,
Metratech Corp., and CallNet Communications. Mr. Swartz holds a B.A. in
engineering and applied science from Harvard University and a M.S. in industrial
administration from Carnegie-Mellon University.
3
<PAGE> 6
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1998, the Board of Directors held
6 meetings. For the fiscal year, each of the directors during the term of their
tenure attended or participated in at least 75% of the aggregate of (i) the
total number of meetings or actions by written consent of the Board of Directors
and (ii) the total number of meetings held by all Committees of the Board of
Directors on which each such director served. During such year the Board of
Directors had an Audit Committee and a Compensation Committee.
During the fiscal year ended December 31, 1997, the Audit Committee held 4
meetings. The Audit Committee currently consists of two directors, Messrs. Jones
and Shoch. The Audit Committee is primarily responsible for approving the
services performed by the Company's independent auditors and reviewing their
reports regarding the Company's accounting practices and systems of internal
accounting controls.
During the fiscal year ended December 31, 1998, the Compensation Committee
held 5 meetings, and acted by written consent on 25 occasions. The Compensation
Committee currently consists of three directors, Messrs. Jones, Shoch and
Swartz. The Compensation Committee is primarily responsible for reviewing and
approving the Company's general compensation policies and setting compensation
levels for the Company's executive officers and administering the Company's 1995
Stock Option/Stock Issuance Plan and the Company's Employee Stock Purchase Plan.
The Company currently has no standing Nominating Committee. Nominations for
election of directors at the Annual Meeting were made by the full Board of
Directors of the Company.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors. Non-employee Board members are eligible to receive
automatic option grants under the Company's 1995 Non-Employee Directors Stock
Option Plan (the "Directors Option Plan"). As of March 31, 1999, there were four
non-employee Board members eligible to participate in the Directors Option Plan.
Under the Directors Option Plan, options may be granted to the non-employee
members of the Board to purchase up to 450,000 shares of Common Stock. Each
individual who first is elected or appointed as a non-employee Board member will
receive an option grant to purchase 20,000 shares of Common Stock, provided such
individual had not previously been granted an option. In addition, at each
Annual Stockholders Meeting, beginning with the 1998 Annual Meeting, each
individual who has served as a non-employee Board member for at least six months
prior to such Annual Meeting will receive an additional option grant to purchase
10,000 shares of Common Stock and an additional option grant to purchase 5,000
shares of Common Stock for each committee assignment. The option price for each
option grant under the Directors Option Plan will be equal to the fair market
value per share of Common Stock on the automatic grant date and each automatic
option grant will be immediately exercisable for all of the option shares. The
shares purchasable under the option will be subject to repurchase at the
original exercise price in the event the optionee's Board service should cease
prior to vesting. Each grant shall vest in 48 equal monthly installments from
the grant date. The option will remain exercisable for a 6-month period
following the optionee's termination of service as a Board member for any reason
other than death and for a 12-month period following the optionee's termination
of service as a Board member due to death. The option shares will become fully
vested in the event of a Corporate Transaction or a Change in Control. The
option shares will become vested in the event of the optionee's cessation of
Board service by reason of death or disability as if he or she remained in
service through the next Annual Meeting. Upon the occurrence of a hostile tender
offer, the optionee will have a thirty (30) day period in which to surrender to
the Company each automatic option that has been in effect for at least six (6)
months in return for a cash distribution from the Company in an amount per
canceled option share (whether or not the optionee is otherwise vested in those
shares) equal to the excess of (i) the highest reported price per share of
Common Stock paid in the tender offer over (ii) the option exercise price
payable per share. Pursuant to the terms of the Directors Option Plan in effect
at that time, on May 28, 1998 automatic grants of options to purchase 20,000
shares of Common Stock each were made to
4
<PAGE> 7
Messrs. Jones and Shoch, and an automatic grant of options to purchase 15,000
shares of Common Stock was made to Mr. Swartz at an exercise price of $16.50 per
share. In connection with the 1999 Annual Meeting, Messrs. Jones, Mahler, Shoch
and Swartz will each receive automatic grants of options to purchase 10,000
shares of Common Stock, plus 5,000 shares for each committee on which such
individual serves.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1999 by (i) each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding shares of the Company's Common Stock, (ii) each of the Company's
directors and the executive officers named in the "Executive
Compensation -- Summary Compensation Table," and (iii) all current directors and
executive officers as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire shares (for example, upon exercise of an option) within 60 days of the
date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OWNERSHIP
---------------- --------- ----------
<S> <C> <C>
Capital Group Companies, Inc................................ 3,244,900 11.4%
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
Lawrence L. Garlick(2)...................................... 2,992,566 10.4%
Chairman of the Board and
Chief Executive Officer
1505 Salado Drive
Mountain View, CA 94043
FMR Corp, Inc............................................... 1,725,000 6.1%
82 Devonshire Street
Boston, MA 02109
David A. Mahler(3).......................................... 1,105,043 3.9%
Director
James R. Swartz(4).......................................... 151,126 *
Director
John F. Shoch(5)............................................ 150,000 *
Director
Harvey C. Jones, Jr(6)...................................... 140,000 *
Director
Matthew R. Miller(7)........................................ 54,505 *
Todd Basche(8).............................................. 47,379 *
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OWNERSHIP
---------------- --------- ----------
<S> <C> <C>
Michael L. Dionne(9)........................................ 46,250 *
Richard P. Allocco(10)...................................... 42,798 *
All current directors and executive officers................ 4,731,750 16.50%
as a group (11 persons)(11)
</TABLE>
- ---------------
* Less than one percent
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes 368,416 shares subject to currently exercisable options or options
exercisable within 60 days.
(3) Includes 209,811 shares subject to currently exercisable options or options
exercisable within 60 days
(4) Includes 21,856 shares held by the Swartz Family Partnership, of which Mr.
Swartz is the general partner. Includes 60,000 shares subject to currently
exercisable options or options exercisable within 60 days.
(5) Includes 65,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(6) Includes 110,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(7) Includes 54,505 shares subject to currently exercisable options or options
exercisable within 60 days.
(8) Includes 47,083 shares subject to currently exercisable options or options
exercisable within 60 days.
(9) Includes 46,250 shares subject to currently exercisable options or options
exercisable within 60 days.
(10) Includes 42,395 shares subject to currently exercisable options or options
exercisable within 60 days.
(11) Includes all shares described in notes (2)-(10) above and an 2,083
additional shares subject to currently exercisable options or options.
COMPENSATION COMMITTEE REPORT
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Board of
Directors, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for the year ended December 31, 1998.
Purpose of the Compensation Committee
The Compensation Committee (the "Committee") of the Remedy Corporation
Board of Directors has the exclusive authority to establish the level of base
salary payable to the Chief Executive Officer and other executive officers of
the Company and to administer the Company's 1995 Stock Option/Stock Issuance
Plan, under which grants may be made to such officers and other key employees,
and the Employee Stock Purchase Plan. In addition, the Committee has the
responsibility for approving the individual bonus programs to be in effect for
the Chief Executive Officer and other executive officers and certain other key
employees each fiscal year. The Committee is comprised entirely of outside
directors who have never served as officers of the Company.
For the 1998 fiscal year, the process utilized by the Committee in
determining executive officer compensation levels was based upon the Committee's
subjective judgment. Among the factors considered by the Committee were the
recommendations of the Chief Executive Officer with respect to the compensation
of the Company's executive officers. However, the Committee made the final
compensation decisions concerning such officers.
6
<PAGE> 9
General Compensation Policy
The Committee's fundamental policy is to offer the Company's executive
officers competitive compensation opportunities based upon increasing
stockholder value and individual performance against defined objectives. It is
the Committee's objective to have compensation be highly competitive with
comparable talent at comparable public software companies (the "Peer
Companies"). Compensation should include a meaningful equity in the Company,
which strengthens the mutuality of interests between the executive officers and
the stockholders. Each executive officer's compensation package will generally
comprise three elements: (i) base salary, (ii) cash incentive bonuses, and (iii)
long-term stock-based incentive awards.
In preparing the performance graph for this Proxy Statement, the Company
has selected the Hambrecht and Quist Software Index for the peer group
comparisons. The companies included in the H&Q Index will not necessarily be the
same as the Peer Companies to be used by the Company as a reference in setting
compensation levels in future years, as compensation information for one or more
of such companies may not be available or the constituent members of the
Hambrecht and Quist Software Index may not be competitive with the Company for
executive talent. In addition, certain companies may be included in the Peer
Companies, even though they are not included in the H&Q Index, to the extent the
Company competes for executive talent with those companies.
Base Salary
The base salary for each executive officer is set on the basis of personal
performance and a review of comparable positions at the Peer Companies. The
level of base salary set for such executive officers to date has been comparable
to the average of the surveyed compensation data for the Peer Companies.
Annual Incentive Compensation
Each year the Committee will establish a set of objectives for each
executive officer, some based on Company performance and some based on
achievement of individual objectives. At the end of the fiscal year, the
Committee evaluates the objectives to determine whether the specified objectives
were met and they determine whether extraordinary accomplishments should be
considered in determining the bonus award. If the company fails to meet a
minimum threshold of financial performance set yearly in the Executive
Compensation Plan, all bonuses become discretionary based on extraordinary
accomplishments. For 1998, the minimum financial threshold was not met, and
discretionary bonuses were paid based on 1998 performance that was exceptional
in three categories: revenue growth, bringing new products to market, and
creating the foundation for future growth. For the 1998 fiscal year, no officer
received all of their targeted bonus.
Long-Term Incentive Compensation
During fiscal 1998, the Committee, in its discretion, made option grants to
Messrs. Garlick, Allocco, Basche, Dionne, Fior, Mahler and Miller under the 1995
Stock Option/Stock Issuance Plan. Generally, the size of each grant was set at a
level that the Committee deemed appropriate to create a meaningful opportunity
for stock ownership based upon the individual's potential for increasing
long-term shareholder value, the individual's current position with the Company,
option grants awarded to individuals in comparable positions in comparable
public software companies, and the number of unvested options held by the
individual at the time of the new grant. The relative weight given to each of
these factors varied from individual to individual at the Committee's
discretion.
The grants are designed to align the interests of the executive officer
with those of the stockholders and provide each individual with a significant
incentive to manage the Company from the perspective of an owner with an equity
stake in the business. Each grant allows the officer to acquire shares of the
Company's Common Stock at a fixed price per share (the market price on the grant
date) over a specified period of time. The option generally vests in periodic
installments over a four-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option will provide a
return to the executive officer only if he or she remains in the Company's
employ, and then only if the market price of the Company's Common Stock
appreciates over the option term.
7
<PAGE> 10
OPTION EXCHANGE
On February 4, 1998, the Compensation Committee of the Board of Directors
approved a plan pursuant to which certain officers and employees were allowed to
exchange options with exercise prices in excess of the then current fair market
value for new options having exercise prices equal to $16.75, the then current
fair market value of the Common Stock. Certain employees and executive officers
exchanged their options. The Board of Directors were not eligible to participate
in this program. Each new option that replaces an option outstanding for at
least 12 months shall vest in equal monthly installments over the period
remaining under the original option plus an additional 12 months, not to exceed
48 months. Each new option that replaces an option outstanding for less than 12
months shall vest 25% at the end of 12 months from the grant date of February 4,
1998 and 1/48th per month thereafter.
Stock options are intended to provide incentives to the Company's officers
and employees. The Compensation Committee believes that such equity incentives
are a significant factor in the Company's ability to attract, retain and
motivate key employees who are critical to the Company's long-term success. The
Compensation Committee further believes that, at their original exercise prices,
the disparity between the exercise price of these options and the then market
prices for the Common Stock did not provide meaningful incentives to the
employees holding the options. A review of other companies in the software
industry indicates that some of these companies have been confronted with this
problem and have made similar adjustments in option prices to motivate their
employees.
The Compensation Committee approved the repricing of options as a means of
ensuring that optionees will continue to have meaningful equity incentives to
work toward the Company's success. The adjustment was deemed by the Compensation
Committee to be in the best interests of the Company and its stockholders.
CEO Compensation
The annual base salary for Mr. Garlick, the Company's Chairman of the Board
and Chief Executive Officer, was established by the Committee on March 24, 1998,
for the period January 1 to December 31, 1998. The Committee's decision was made
primarily on the basis of the Committee's subjective evaluation of Mr. Garlick's
personal performance of his duties as measured by the company's performance. Mr.
Garlick's base salary is below the 50th percentile of the surveyed data for the
Peer Companies.
The remaining cash components of the Chief Executive Officer's 1998 fiscal
year incentive compensation were entirely dependent upon financial performance
and a measure of individual objectives and provided no dollar guarantees. The
bonus paid to the Chief Executive Officer for the fiscal year was based on the
same incentive plan as for all other officers. Specifically, a target incentive
was established at the beginning of the year using an agreed-upon formula based
on Company performance and individual objectives. Since the minimum threshold of
achievement of company financial goals were not exceeded, his bonus was
discretionary, and based on the Compensation Committee's view of his impact on
increasing revenue growth, bringing new products to market, and creating the
foundation for future growth. The option grant made to the Chief Executive
Officer during the 1998 fiscal year was based upon his potential for increasing
long-term shareholder value and intended to place a significant portion of his
total compensation at risk. His options will have no value unless there is
appreciation in the value of the Company's Common Stock over the option term.
8
<PAGE> 11
Tax Limitation
Under the federal tax laws, a publicly held company such as Remedy
Corporation will not be allowed a federal income tax deduction for compensation
paid to certain executive officers to the extent that compensation exceeds $1
million per officer in any year. It is not expected that the compensation to be
paid to the Company's executive officers for the 1999 fiscal year will exceed
the $1 million limit per officer. In order to qualify option grants under the
Company's 1995 Stock Option/Stock Issuance Plan for an exemption available to
performance-based compensation, the stockholders have approved certain
provisions of the Plan, including a limit on the maximum number of shares of
Common Stock for which any one participant may be granted stock options each
calendar year over the term of the Plan. Accordingly, any compensation deemed
paid to an executive officer when he exercises an outstanding option under the
1995 Stock Option/Stock Issuance Plan with an exercise price equal to the fair
market value of the option shares on the grant date will qualify as
performance-based compensation that will not be subject to the $1 million
limitation.
COMPENSATION COMMITTEE
Harvey C. Jones, Jr.
John F. Shoch
James R. Swartz
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
in November, 1994 and the members of the Compensation Committee are Messrs.
Jones, Shoch and Swartz. None of the members of the Compensation Committee was
at any time during the 1998 fiscal year or at any other time an officer or
employee of the Company. No executive officer of the Company serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between March 17, 1995 (the date the Company's
Common Stock commenced public trading) and December 31, 1998, with the
cumulative total return of (i) the S&P 500 Index and (ii) the Hambrecht & Quist
Software Index, over the same period. This graph assumes the investment of
$100.00 on March 17, 1995 in the Company's Common Stock, the S&P 500 Index and
the Hambrecht & Quist Software Index, and assumes the reinvestment of dividends,
if any.
The comparisons shown in the graph below are based upon historical data and
the Company cautions that the stock price performance shown in the graph below
is not indicative of, nor intended to forecast, the potential future performance
of the Company's Common Stock. Information used in the graph was obtained from
Research Data Group, a source believed to be reliable, but the Company is not
responsible for any errors or omissions in such information.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG REMEDY CORPORATION,
THE S&P 500 INDEX AND THE HAMBRECHT & QUIST SOFTWARE INDEX
<TABLE>
<CAPTION>
REMEDY HAMBRECHT & QUIST
CORPORATION S & P 500 COMPUTER SOFTWARE
----------- --------- -----------------
<S> <C> <C> <C>
'3/17/95' 100.00 100.00 100.00
'12/95' 174.00 127.00 124.00
'12/96' 474.00 156.00 151.00
'12/97' 185.00 208.00 183.00
'12/98' 123.00 267.00 239.00
</TABLE>
The Company effected its initial public offering on March 16, 1995 at a per
share price of $7.67 (as adjusted to reflect the March 1996 and October 1996
stock dividends). The graph above commences with the first trading day closing
price ($11.33) (as adjusted to reflect the March 1996 and October 1996 stock
dividends). Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this Proxy Statement or future filings made by the Company under
those statutes, the
10
<PAGE> 13
Compensation Committee Report and Stock Performance Graph are not deemed filed
with the Securities and Exchange Commission and shall not be deemed incorporated
by reference into any of those prior filings or into any future filings made by
the Company under those statutes.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the other five most highly compensated
executive officers (the "Named Officers") whose compensation for the fiscal year
ended December 31, 1998 exceeded $100,000 for services rendered in all
capacities to the Company during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------
----------------------------- SECURITIES
NAME AND PRESENT PRINCIPAL POSITION YEAR SALARY(1) BONUS UNDERLYING OPTIONS
----------------------------------- ---- --------- -------- ------------------
<S> <C> <C> <C> <C>
Lawrence L. Garlick.......................... 1998 $235,000 $ 35,250 75,000
Chairman of the Board and 1997 $220,000 $ 13,200 60,000
Chief Executive Officer 1996 $192,000 $181,250 75,000
Richard P. Allocco........................... 1998 $167,435 $ 40,000 125,000
Vice President and General Manager 1997 $ -- $ -- --
Global Professional Services and 1996 $ -- $ -- --
Customer Relationship Management Strategic
Marketing Unit
Todd Basche.................................. 1998 $210,000 $ 37,800 140,000
Vice President and General Manager 1997 $155,000 $119,625 100,000
Employee Workplace Automation 1996 $ -- $ -- --
Strategic Marketing Unit
Michael L. Dionne............................ 1998 $188,462 $ 93,750(2) 200,000
Senior Vice President, 1997 $ -- $ -- --
Worldwide Sales............................ 1996 $ -- $ -- --
David A. Mahler.............................. 1998 $185,000 $ 0 40,000
Former Vice President, 1997 $170,000 $ 32,300 37,500
Business Development, Director 1996 $155,000 $106,875 45,000
Matthew R. Miller............................ 1998 $190,000 $ 38,000 150,000
Vice President, Marketing and 1997 $165,000 $ 85,375 30,000
General Manager Core Products Unit 1996 $ 65,994 $ 84,546 100,000
</TABLE>
- ---------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Mr. Dionne commenced employment on March 30, 1998; includes $75,000 signing
bonus.
11
<PAGE> 14
The following table sets forth further information regarding individual
grants of options for the Company's Common Stock during fiscal 1998 to the Named
Officers. Such grants were made pursuant to the Company's 1995 Stock
Option/Stock Issuance Plan. In accordance with the rules of the Securities and
Exchange Commission ("SEC"), the table sets forth the hypothetical gains or
"option spreads" that would exist for the options at the end of their respective
ten-year terms based on assumed annualized rates of compound stock price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises are
dependent on the future performance of the Company's Common Stock and overall
market conditions. There can be no assurance that the potential realizable
values shown in this table will be achieved.
Except for the limited stock appreciation rights described in Footnote (1)
below, which form part of certain option grants made to each Named Officer, no
stock appreciation rights were granted to such officers during the 1998 fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE($)(3) DATE 5%($) 10%($)
---- --------------- ------------ --------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lawrence L. Garlick..... 75,000 1.01% 17.06 03/09/08 804,789 2,039,492
Richard P. Allocco...... 125,000 1.68% 17.06 03/09/08 1,341,314 3,399,154
Todd Basche............. 100,000 1.34% 16.75 02/04/08 1,053,399 2,669,519
Todd Basche............. 40,000 .54% 17.06 03/09/08 429,221 1,087,729
Michael Dionne.......... 150,000 2.01% 19.63 03/31/08 1,851,309 4,691,579
Michael Dionne.......... 50,000 .67% 19.63 03/31/08 617,103 1,563,860
David A. Mahler......... 40,000 .54% 17.06 03/09/08 429,221 1,087,729
Matthew R. Miller....... 100,000 1.34% 16.75 02/04/08 1,053,399 2,669,519
Matthew R. Miller....... 50,000 .67% 17.06 03/09/08 536,526 1,359,662
</TABLE>
- ---------------
(1) Each of the options listed in the table was granted 10 years prior to the
expiration date listed above. The options granted to Mr. Garlick, Mr.
Basche, Mr. Mahler and Mr. Miller with an expiration date of March 9, 2008
become exercisable in a series of equal monthly installments over a period
of 48 months. The stock option granted to Mr. Allocco and the stock option
granted to Mr. Dionne for 150,000 shares become exercisable to the extent of
25% after one year from the vesting commencement date and the remainder in a
series of equal monthly installments over a period of 36 months. The option
granted to Mr. Dionne for 50,000 shares will become exercisable on March 30,
2002. The stock options granted to Mr. Miller become exercisable in a series
of monthly installments ranging from 42 to 48 months. Certain options
include a limited stock appreciation right that will result in the
cancellation of that option, to the extent exercisable for one or more
option shares, upon the successful completion of a hostile tender offer for
more than 50% of the Company's outstanding voting stock. In return for the
canceled option, the optionee will receive a cash distribution per canceled
option share equal to the excess of (i) the highest price per share of
Common Stock paid in such tender offer over (ii) the exercise price payable
per share under the canceled option. The plan administrator has the
discretionary authority to reprice the options through the cancellation of
those options and the grant of replacement options with an exercise price
based on the fair market value of the option shares on the regrant date. The
options have a maximum term of 10 years measured from the option grant date,
subject to earlier termination in the event of the optionee's cessation of
service with the Company. Under each of the options, the option shares will
vest upon an acquisition of the Company by merger or asset sale, unless the
acquiring entity or its parent corporation assumes the outstanding options.
Any options which are assumed or replaced in the transaction and do not
otherwise accelerate at that time shall automatically accelerate (and any
unvested
12
<PAGE> 15
option shares which do not otherwise vest at that time shall automatically
vest) in the event the optionee's service terminates by reason of an
involuntary or constructive termination within 18 months following the
transaction.
(2) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
(3) The exercise price for each option may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
SECURITIES LENGTH OF
UNDERLYING ORIGINAL OPTION
NUMBER OF MARKET PRICE OF EXERCISE PRICE TERM REMAINING
OPTIONS/SARS STOCK AT TIME OF AT TIME OF AT DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- ------ ------------ ---------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence Garlick......... -- -- -- -- -- --
Richard Allocco.......... -- -- -- -- -- --
Todd Basche.............. 2/4/98 100,000 16.750 39.375 16.750 115 months
Eric Bergan.............. 2/4/98 22,500 16.750 40.000 16.750 108 months
Eric Bergan.............. 2/4/98 11,250 16.750 39.375 16.750 115 months
Bernard R. Cote.......... 2/4/98 30,000 16.750 40.000 16.750 108 months
Bernard R. Cote.......... 2/4/98 15,000 16.750 39.375 16.750 115 months
George A. de Urioste..... 2/4/98 25,000 16.750 40.000 16.750 108 months
George A. de Urioste..... 2/4/98 12,500 16.750 39.375 16.750 115 months
Michael Dionne........... -- -- -- -- -- --
Ron J. Fior.............. -- -- -- -- -- --
David Mahler............. -- -- -- -- -- --
Matthew R. Miller........ 2/4/98 70,000 16.750 32.250 16.750 102 months
Matthew R. Miller........ 2/4/98 20,000 16.750 40.000 16.750 108 months
Matthew R. Miller........ 2/4/98 10,000 16.750 39.375 16.750 115 months
</TABLE>
13
<PAGE> 16
The following table sets forth, for each of the Named Officers, the number
of shares acquired on exercise and the year-end value of unexercised options. No
stock options or stock appreciation rights were exercised during such fiscal
year by the Named Officers, and except for the limited stock appreciation rights
described in footnote (1) to the Option Grant Table that form part of the
outstanding stock options held by those officers, no stock appreciation rights
were outstanding at the end of that fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)(1)
---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lawrence L. Garlick.............. 340,289 112,711 2,818,386 7,087
Richard P. Allocco............... 0 125,000 0 0
Todd Basche...................... 9,166 130,834 0 0
Michael Dionne................... 0 200,000 0 0
David A. Mahler.................. 205,019 64,481 1,773,143 3,919
Matthew R. Miller................ 34.461 115.539 0 0
</TABLE>
- ---------------
(1) Market value of underlying securities at fiscal year ended December 31, 1998
($13.94) minus the exercise price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
None of the Company's executive officers have employment or severance
agreements with the Company, and their employment may be terminated at any time
at the discretion of the Board of Directors.
The Compensation Committee has the authority under the 1995 Stock
Option/Stock Issuance Plan to provide for the acceleration of options and the
vesting of the shares of Common Stock subject to the outstanding options held by
the Chief Executive Officer and the Company's other executive officers under
that Plan.
PROPOSAL NO. 2 -- RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
independent auditors, to audit the financial statements of the Company for the
fiscal year ending December 31, 1999. Ernst & Young LLP has audited the
Company's financial statements since the fiscal year ended December 31, 1992.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the appointment is ratified,
the Board of Directors in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he desires to
do so, and will be available to respond to appropriate questions. In the event
the stockholders fail to ratify the appointment, the Board of Directors will
reconsider its selection.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1999.
14
<PAGE> 17
PROPOSAL NO. 3 -- AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The stockholders are being asked to approve an amendment to the Remedy
Corporation Employee Stock Purchase Plan (the "Purchase Plan") to increase the
number of shares issuable thereunder by 1,359,269 shares, which represents 4.5%
of outstanding Common Stock and Common Stock equivalents as of March 31, 1999.
The Board approved the amendment to the Purchase Plan, which is the subject of
this Proposal No. 3, on March 17, 1999. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to meet the requirements
of an "employee stock purchase plan" as defined in Section 423 of the Internal
Revenue Code (the "Code"). If the amendment to the Purchase Plan is not approved
by the stockholders, the Purchase Plan will continue in effect in accordance
with its current terms.
The Purchase Plan was adopted by the Board on January 17, 1995 and approved
by the stockholders on February 21, 1995. On May 21, 1996, the stockholders
approved an amendment to the Purchase Plan to (a) provide for concurrent
offering periods; (b) permit contributions of up to 20% of eligible
compensation; (c) increase the maximum semi-annual dollar contribution from
$7,500 to $10,000; and (d) expand eligible compensation to include all cash
compensation. On February 15, 1996 the Purchase Plan was amended to provide a
common share pool with the International Plan. On May 28, 1998, the stockholders
approved an amendment to the Purchase Plan to increase the number of shares
issuable by 920,593 shares. The following summary of certain Purchase Plan
provisions is qualified, in its entirety, by reference to the Purchase Plan.
Copies of the Purchase Plan document may be obtained by a stockholder upon
written request to the Secretary of the Company at the executive offices in
Mountain View, California.
In addition to the Purchase Plan, the Company maintains the International
Employee Stock Purchase Plan ("International Plan") pursuant to which eligible
non-U.S. citizens and U.S. citizens working abroad who are not paid in U.S.
currency, and who are employed by the Company or any participating subsidiary or
parent corporation on a regularly-scheduled basis of more than twenty (20) hours
per week for more than five (5) months per calendar year may purchase Common
Stock pursuant to payroll deductions.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively,
"Participating Companies") an opportunity to participate in the ownership of the
Company by purchasing Common Stock of the Company through payroll deductions. In
addition, as of November 2, 1998, Remedy Gmbh, Remedy Sarl, Remedy Pte. Ltd.,
Remedy UK, Ltd., Remedy Canada, Ltd., Remedy KK and Remedy International Ltd.,
participate in the International Plan.
The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity to
purchase shares of Common Stock at a favorable price. The Company believes that
the stockholders will correspondingly benefit from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Purchase Plan.
Administration. The Purchase Plan is administered by the Compensation
Committee of the Board (the "Committee") and may be administered by the Board.
All costs and expenses incurred in plan administration will be paid by the
Company without charge to participants. All cash proceeds received by the
Company from payroll deductions under the Purchase Plan shall be credited to a
non-interest bearing book account.
Shares and Terms. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum number
of shares of Common Stock that may be issued in the aggregate under the Purchase
Plan and the International Plan is 2,120,593, not including the 1,359,269 shares
which is the subject of this Proposal No. 3. Common Stock subject to a
terminated purchase rights shall be available for purchase pursuant to purchase
rights subsequently granted.
Adjustments. If any change in the Common Stock occurs (through
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration), appropriate adjustments shall
be made by the Company to the class and maximum number of shares subject to the
Purchase Plan, to the class and maximum number of shares purchasable by each
participant on any one purchase date, and the class and
15
<PAGE> 18
number of shares and purchase price per share subject to outstanding purchase
rights in order to prevent the dilution or enlargement of benefits thereunder.
Eligibility. Generally, any individual who is customarily employed by a
Participating Company more than 20 hours per week and for more than five months
per calendar year is eligible to participate in the Purchase Plan. Approximately
808 employees (including six executive officers) were eligible to participate in
the Purchase Plan as of March 31, 1999.
Offering Periods. The Purchase Plan is implemented by offering periods that
generally have a duration of twenty-four months; each offering period is
comprised of a series of one or more successive purchase periods, which
generally have a duration of six (6) months. Offering periods are concurrent and
successive and, accordingly, a new offering period commences every six months
and runs concurrently with each prior offering period. The Committee in its
discretion may vary the beginning date and ending date of the offering periods,
provided no offering period shall exceed twenty-four (24) months in length, and
may vary the duration of an offering period or purchase period. Generally,
purchase periods start on the first business day in each of May and November and
end, respectively, on the last business day of October of the same year and
April of the following year. A new offering period will begin on May 3, 1999 and
will end on April 30, 2000.
The participant will have a separate purchase right for each offering
period in which he or she participates. The purchase right will be granted on
the first day of the offering period and will be automatically exercised in
successive installments on the last day of each purchase period within the
offering period.
Purchase Price. The purchase price per share under the Purchase Plan is 85%
of the lower of (i) the fair market value of a share of Common Stock on the
first day of the applicable offering period or, if later, the participant's
entry date into the offering period, or (ii) the fair market value of a share of
Common Stock on the purchase date. Generally, the fair market value of the
Common Stock on a given date is the closing sale price of the Common Stock, as
reported on the Nasdaq National Market System. The market value of the Common
Stock as reported on the Nasdaq Stock Market as of March 31, 1999, was $14.00
per share.
Limitations. The plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following:
1. No purchase right shall be granted to any person who immediately
thereafter would own, directly or indirectly, stock or hold outstanding
options or rights to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of
the Company or any of its parent or subsidiary corporations.
2. In no event shall a participant be permitted to purchase more than 3,000
shares on any one purchase date.
3. The right to purchase Common Stock under the Purchase Plan (or any other
employee stock purchase plan that the Company or any of its subsidiaries
may establish) in an offering intended to qualify under Section 423 of
the Code may not accrue at a rate that exceeds $25,000 in fair market
value of such Common Stock (determined at the time such purchase right
is granted) for any calendar year in which such purchase right is
outstanding.
4. In no event may a participant's payroll deductions for a semi-annual
purchase period exceed $10,000.
The purchase right shall be exercisable only by the participant during the
participant's lifetime and shall not be assignable or transferable by the
participant.
Payment of Purchase Price; Payroll Deductions. Payment for shares by
participants shall be by accumulation of after-tax payroll deductions during the
purchase period. The deductions may not exceed 20% of a participant's cash
compensation paid during a purchase period. Cash compensation for this purpose
will include elective contributions that are not includable in income under Code
Sections 125 or 401(k) and all bonuses, overtime, commissions, and other amounts
to the extent paid in cash.
16
<PAGE> 19
The participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to the purchase date by the applicable purchase price (subject to the
"Limitations" section). No fractional shares shall be purchased. Any payroll
deductions accumulated in a participant's account that are not sufficient to
purchase a full share will be retained in the participant's account for the
subsequent purchase period. No interest shall accrue on the payroll deductions
of a participant in the Purchase Plan.
Termination and Change to Payroll Deductions. A purchase right shall
terminate at the end of the offering period or earlier if (i) the participant
terminates employment and any payroll deductions that the participant may have
made with respect to a terminated purchase right will be refunded or (ii) the
participant elects to withdraw from the Purchase Plan. Any payroll deductions
that the participant may have made with respect to a terminated purchase right
under clause (ii) will be refunded unless the participant elects to have the
funds applied to the purchase of shares on the next purchase date. A participant
may decrease his or her deductions during a purchase period as permitted by the
Committee.
Amendment and Termination. The Purchase Plan shall continue in effect until
the earlier of (i) the last business day in December, 2004, (ii) the date on
which all shares available for issuance under the Purchase Plan shall have been
issued or (iii) a Corporate Transaction, unless the Purchase Plan is earlier
terminated by the Board in its discretion.
The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan. The approval of the stockholders will be obtained to the extent required
by applicable law. Prior to the amendment that is the subject of this Proposal
No. 3, the Board could not amend the Purchase Plan without stockholder approval
if the amendment would (i) alter the purchase price formula so as to reduce the
purchase price payable for shares under the Purchase Plan, (ii) materially
increase the number of shares issuable under the Purchase Plan or the maximum
number of shares purchasable per participant, or (iii) materially increase the
benefits accruing to participants under the Purchase Plan or materially modify
the eligibility requirements.
In addition, the Company has specifically reserved the right, exercisable
in the sole discretion of the Board, to terminate the Purchase Plan immediately
following any six-month purchase period. If such right is exercised by the
Board, then the Purchase Plan will terminate in its entirety and no further
purchase rights will be granted or exercised, and no further payroll deductions
shall thereafter be collected under the Purchase Plan.
Corporate Transaction. In the event of (i) a merger or consolidation in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction or (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company (a "Corporate Transaction"), each purchase right
under the Purchase Plan will automatically be exercised immediately before
consummation of the Corporate Transaction as if such date were the last purchase
date of the offering period. The purchase price per share shall be equal to
eighty-five percent (85%) of the lower of the fair market value per share of
Common Stock on the start date of the offering period (or on the participant's
entry date, if later) or the fair market value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. Any
payroll deductions not applied to such purchase shall be promptly refunded to
the participant.
The grant of purchase rights under the Purchase Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
Proration of Purchase Rights. If the total number of shares of Common Stock
for which purchase rights are to be granted on any date exceeds the number of
shares then remaining available under the Purchase Plan, the Committee shall
make a pro rata allocation of the shares remaining.
Federal Income Tax Consequences. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.
17
<PAGE> 20
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Under a plan which so qualifies, no taxable
income will be reportable by a participant, and no deductions will be allowable
to the Company, by reason of the grant or exercise of the purchase rights issued
thereunder. A participant will, however, recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of
disposition.
A sale or other disposition of the purchased shares will be a disqualifying
disposition if made before the later of two years after the start of the
offering period in which such shares were acquired or one year after the shares
are purchased. If the participant makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the amount by
which the fair market value of such shares on the date of purchase exceeded the
purchase price, and the participant will be required to satisfy the employment
and income tax withholding requirements applicable to such income. In no other
instance will the Company be allowed a deduction with respect to the
participant's disposition of the purchased shares.
Any additional gain or loss recognized upon the disposition of the shares
will be a capital gain, which will be long-term if the shares have been held for
more than one (1) year following the date of purchase under the Purchase Plan.
The foregoing is only a summary of the federal income taxation consequences
to the participant and the Company with respect to the shares purchased under
the Purchase Plan. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any city, state
or foreign country in which the participant may reside.
New Purchase Plan Benefits. Since purchase rights are subject to
discretion, including an employee's decision not to participate in the Purchase
Plan, awards under the Purchase Plan for the current fiscal year are not
determinable. However, in the purchase period that ended on October 30, 1998
each of the Named Officers purchased the following number of shares of Common
Stock at a purchase price of $7.44 per share: Mr. Garlick: 0; Mr. Allocco: 403;
Mr. Basche: 141; Mr. Dionne: 0; Mr. Mahler: 1104; Mr. Miller: 0; and all
executive officers as a group (8 persons) purchased 1,648 shares. In addition,
each of the Named Officers, other than Mr. Garlick, Mr. Mahler and Mr. Miller
have the right to purchase a maximum of 3,000 shares of Common Stock at a price
that will not exceed $9.9875 per share on each of the April 30, 1999, October
31, 1999 and April 28, 2000 purchase dates.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
18
<PAGE> 21
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their 1998 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for the 1998 fiscal year, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than ten-percent stockholders, except Mr. Dionne who filed late one
Initial Statement of Beneficial Ownership of Securities (Form 3).
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S REPORT ON FORM 10-K FOR FISCAL YEAR 1998, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULES, AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO REMEDY
CORPORATION, 1505 SALADO DRIVE, MOUNTAIN VIEW, CALIFORNIA 94043, ATTN: INVESTOR
RELATIONS.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 2000 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company no later than
December 20, 1999 and satisfy the conditions established by the Securities and
Exchange Commission for stockholder proposals to be included in the company's
proxy statement for that meeting. Pursuant to new amendments to Rule 14a-4(c) of
the Securities Exchange Act of 1934, as amended, a stockholder proposal intended
to be presented at the 2000 Annual meeting of stockholders of the company must
be received by the Company at its offices not later than March 3, 2000. Such
stockholder proposals should be addressed to Remedy Corporation, 1505 Salado
Drive, Mountain View, California 94043, Attn: Investor Relations.
OTHER MATTERS
The Board knows of no other matters to be presented for stockholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/Lawrence L. Garlick
LAWRENCE L. GARLICK
Chairman of the Board and
Chief Executive Officer
Mountain View, California
April 19, 1999
19
<PAGE> 22
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL
MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR
PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
20
<PAGE> 23
PROXY PROXY
REMEDY CORPORATION
1505 SALADO DRIVE, MOUNTAIN VIEW, CA 94043
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF REMEDY CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999
The undersigned holder of Common Stock, par value $.00005, of Remedy
Corporation (the "Company") hereby appoints Lawrence L. Garlick and Ron J. Fior,
or either of them, with full power of substitution in each, as proxies to cast
all votes as specified in this Proxy and all Common Stock of the Company that
the undersigned stockholder would be entitled to cast if personally present at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, May 27th, 1999 at 4:00 PM local time, at 1505 Salado Drive, Mountain
View, CA 94043, and at any adjournments or postponements of the Annual Meeting,
upon the following matters. The undersigned stockholder hereby revokes any proxy
or proxies heretofore.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTORS AND FOR PROPOSALS 2 AND 3 AND IN
ACCORDANCE WITH THE DETERMINATION OF THE PROXY HOLDER AS TO OTHER MATTERS. THE
UNDERSIGNED STOCKHOLDER MAY REVOKE THIS PROXY AT ANY TIME BEFORE IT IS VOTED BY
DELIVERING TO THE CORPORATE SECRETARY OF THE COMPANY EITHER A WRITTEN REVOCATION
OF THE PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY APPEARING AT
THE ANNUAL MEETING AND VOTING IN PERSON. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ELECTIONS OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND
RETURN ALL CARDS IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 24
REMEDY CORPORATION
[x] PLEASE MARK VOTES AS IN THIS EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1. To elect the following directors to serve for a term 2. To ratify the appointment of FOR AGAINST ABSTAIN
ending upon the 2000 Annual Meeting of Stockholders or Ernst & Young, LLP as the [ ] [ ] [ ]
until their successors are elected and qualified: Company's independent auditors
for the fiscal year ending
December 31, 1999.
NOMINEES: Lawrence L. Garlick, David A. Mahler, Harvey L. 3. To approve an amendment to the FOR AGAINST ABSTAIN
Jones, Jr., John F. Shoch and James R. Swartz. Company's Employee Stock [ ] [ ] [ ]
Purchase Plan, including an
FOR WITHHELD For all nominees, except for increase to the number of
[ ] [ ] nominees written below. shares available, as set forth
[ ] ________________________ in the accompanying proxy.
Nominee exception(s).
</TABLE>
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
Signature:___________________ Signature (if held jointly):______________________
Date:_______,_99__
Please date and sign exactly as your name(s) is (are) shown on the share
certificates to which the Proxy applies. When signing as executor,
administrator, trustee, guardian, attorney-in fact or other fiduciary please
give full title as such. When signing as a joint-tenant, both should sign. When
signing as corporation, please sign in full corporate name by President or other
authorized officer. If you sign for a partnership, please sign in partnership
name by an authorized person.
