<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
[REMEDY LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 2000
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 Friday, May 26, 2000, 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, 2000;
3. To approve an amendment to the 1995 Stock Option/Stock Issuance plan,
including an increase to the number of shares available, as set forth in
the accompanying proxy; and
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, 2000 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 17, 2000
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
[REMEDY LOGO]
1505 Salado Drive
Mountain View, California 94043
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 26, 2000
------------------------
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
26, 2000, and at any adjournment or postponement of the Annual Meeting. These
proxy solicitation materials were first mailed on or about April 17, 2000 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, 2000, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 30,793,431
shares of Common Stock outstanding. Each stockholder of record on March 31, 2000
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, 2000
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 1995
Stock Option/Stock Issuance 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 $5,500, 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 six 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, 2000, 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
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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............. 51 1990 Chairman of the Board and
Chief Executive Officer
David A. Mahler................. 43 1990 Director
Sheri Anderson.................. 45 1999 Director
Harvey C. Jones, Jr.(1)(2)...... 47 1994 Director
John F. Shoch(1)(2)............. 51 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.
Ms. Anderson has been a director of the company since November 1999. Ms.
Anderson is the Senior Vice President and Chief Information Officer of Novell
Corporation. Prior to joining Novell in 1995, Ms. Anderson served as Senior Vice
President of Charles Schwab & Company's IS department. Ms. Anderson holds a B.A.
degree in economics from Stanford 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 Synopsys, Inc.,
Nvida Corp., Simplex Solutions, Molecular Applications Group, Crossbow
Technology, Tensilica and SteelEye Technology Inc. Mr. Jones holds a B.S. degree
in mathematics and computer science from Georgetown University and an 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 a
M.S. and a Ph.D. in computer science from Stanford University.
Mr. Swartz has elected not to stand for re-election.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1999, the Board of Directors held
5 meetings. For the fiscal year, each of the directors during the term of their
tenure attended or participated in at least 75% of the
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<PAGE> 6
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, 1999, 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, 1999, the Compensation Committee
held 6 meetings, and acted by written consent on 23 occasions. The Compensation
Committee currently consists of two directors, Messrs. Jones, and Shoch. 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, 2000, there were four
non-employee Board members eligible to participate in the Directors Option Plan.
Under the Directors Option Plan, 450,000 shares of Common Stock had been
reserved for option grants to the non-employee directors. 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 27, 1999
automatic grants of options to purchase 20,000 shares of Common Stock each were
made to 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
$19.375 per share. In connection with the 2000 Annual Meeting, Messrs. Jones,
Mahler, Shoch and Ms. Anderson 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.
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<PAGE> 7
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, 2000 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>
Lawrence L. Garlick(2)...................................... 2,963,299 9.6%
Chairman of the Board and
Chief Executive Officer
1505 Salado Drive
Mountain View, CA 94043
Capital Group Companies, Inc. .............................. 2,886,200 9.3%
333 South Hope Street, 55th Floor
Los Angeles, CA 90071
Richard P. Allocco(3)....................................... 58,001 *
Sheri Anderson(4)........................................... 20,000 *
Director
Michael L. Dionne(5)........................................ 64,583 *
Ron Fior(6)................................................. 22,497 *
Harvey C. Jones, Jr.(7)..................................... 160,000 *
Director
David A. Mahler(8).......................................... 936,947 3.0%
Director
Matthew R. Miller(9)........................................ 57,111 *
Gary Oliver(10)............................................. 27,291 *
John F. Shoch(11)........................................... 170,000 *
Director
All current directors and executive officers as a group (11
persons)(12).............................................. 4,504,414 14.6%
</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.
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<PAGE> 8
(2) Includes 390,599 shares subject to currently exercisable options or options
exercisable within 60 days.
(3) Includes 56,878 shares subject to currently exercisable options or options
exercisable within 60 days.
(4) Includes 20,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(5) Includes 64,583 shares subject to currently exercisable options or options
exercisable within 60 days.
(6) Includes 20,915 shares subject to currently exercisable options of options
exercisable within 60 days.
(7) Includes 130,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(8) Includes 10,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(9) Includes 57,111 shares subject to currently exercisable options or options
exercisable within 60 days.
(10) Includes 27,291 shares subject to currently exercisable options or options
exercisable within 60 days.
(11) Includes 85,000 shares subject to currently exercisable options or options
exercisable within 60 days.
(12) Includes all shares described in notes (2) - (11) above and 24,686
additional shares subject to currently exercisable options or options
exercisable within 60 days.
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, 1999.
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 1999 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.
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
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<PAGE> 9
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 1999, the minimum financial threshold was met of corporate
bookings of $209 million and earnings per share of $0.95, and discretionary
bonuses were paid based on 1999 performance that was exceptional in three
categories: revenue growth, bringing new products to market, and creating the
foundation for future growth.
Long-Term Incentive Compensation
During fiscal 1999, the Committee, in its discretion, made option grants to
Messrs. Garlick, Allocco, Davis, Dionne, Fior, Oliver 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.
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 23, 2000
for the period January 1 to December 31, 2000. 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 1999 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. For 1999, the
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<PAGE> 10
Chief Executive officer's performance incentive was based on the degree of
achievement of the corporate revenue goal of $209 million, and to a lesser
extent, earnings per share goal of $0.95. Each and every year, the annual
incentive plan is reevaluated with a new achievement threshold and new targets
for revenue growth, earnings per share and profitability. The option grant made
to the Chief Executive Officer during the 1999 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.
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 2000 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
in November, 1994 and the current members of the Compensation Committee are
Messrs. Jones, and Shoch. None of the members of the Compensation Committee was
at any time during the 1999 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.
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, 1999, 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
Standard and Poor's, a source believed to be reliable, but the Company is not
responsible for any errors or omissions in such information.
8
<PAGE> 11
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>
3/17/95 100 100 100
12/95 174 127 124
12/96 474 156 151
12/97 185 208 183
12/98 123 267 239
12/99 418 323 544
</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 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, 1999 exceeded $100,000 for services rendered in all
capacities to the Company during the last three fiscal years.
9
<PAGE> 12
<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.......................... 1999 $312,410 $154,000 60,000
Chairman of the Board and 1998 $235,000 $ 35,250 75,000
Chief Executive Officer 1997 $220,000 $ 13,200 60,000
Richard P. Allocco........................... 1999 $220,000 $105,600 40,000
Vice President and General Manager 1998 $167,435 $ 40,000 125,000
Of Worldwide Customer Services 1997 $ -- $ -- --
Michael Dionne............................... 1999 $247,275 $145,000 30,000
Senior Vice President, 1998 $188,462 $ 93,750 200,000
Worldwide Sales 1997 $ -- $ -- --
Ron Fior..................................... 1999 $210,000 $100,800 25,000
Vice President, Finance & Operations, 1998 $ 66,025 $ 16,000 100,000
Chief Financial Officer 1997 $ -- $ -- --
Matthew R. Miller............................ 1999 $230,000 $103,500 40,000
Vice President and General Manager 1998 $190,000 $ 38,000 150,000
Of Core Products 1997 $165,000 $ 85,375 30,000
Gary Oliver.................................. 1999 $162,500 $193,800(2) 85,000
Vice President and General Manager 1998 $ -- $ -- --
Of eBusiness Infrastructure Products 1997 $ -- $ -- --
</TABLE>
- ---------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Mr. Oliver commenced employment on March 1, 1999; includes $15,000 signing
bonus.
The following table sets forth further information regarding individual
grants of options for the Company's Common Stock during fiscal 1999 to the Named
Officers. Such grants were made pursuant to the Company's 1995 Stock
Option/Stock Issuance Plan. In accordance with the rules of the Securities and
Exchange Commission ("SEC"), the table sets forth the hypothetical gains or
"option spreads" that would exist for the options at the end of their respective
ten-year terms based on assumed annualized rates of compound stock price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises are
dependent on the future performance of the Company's Common Stock and overall
market conditions. There can be no assurance that the potential realizable
values shown in this table will be achieved.
Except for the limited stock appreciation rights described in Footnote (1)
below, which form part of certain option grants made to each Named Officer, no
stock appreciation rights were granted to such officers during the 1999 fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE($)(3) DATE 5%($) 10%($)
---- --------------- ------------ --------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lawrence L. Garlick...... 60,000 1.80% 14.13 03/26/09 532,988 1,350,697
Richard P. Allocco....... 40,000 1.20% 14.13 03/26/09 355,325 900,464
Michael Dionne........... 30,000 .90% 14.13 03/26/09 266,494 675,348
Ron Fior................. 25,000 .80% 14.13 03/26/09 222,078 562,790
Matthew R. Miller........ 40,000 1.20% 14.13 03/26/09 355,325 900,464
Gary Oliver.............. 85,000 2.60% 14.13 03/26/09 752,715 1,906,177
</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.
Allocco, Mr. Dionne, Mr. Fior and Mr. Miller with an expiration date of
10
<PAGE> 13
March 26, 2009 become exercisable in a series of equal monthly installments
over a period of 48 months. The stock option granted to Mr. Oliver for
85,000 shares becomes exercisable to the extent of 25% after one year from
3/1/99 and the remainder in a series of equal monthly installments over a
period of 36 months. 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 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.
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.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FY-END(#) AT FY-END($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE $(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence L. Garlick.... 0 0 407,790 105,210 14,975,744 2,907,854
Richard P. Allocco..... 14,600 393,288 51,857 98,543 1,598,840 3,077,660
Michael Dionne......... 30,000 770,845 42,500 157,500 1,182,813 4,497,813
Ron Fior............... 25,000 779,530 11,979 88,021 430,333 3,279,042
Matthew R. Miller...... 50,000 1,297,605 33,733 106,267 1,055,897 3,327,288
Gary Oliver............ 0 0 0 85,000 0 2,826,250
</TABLE>
- ---------------
(1) Market price less exercise price on date of exercise.
(2) Market value of underlying securities at fiscal year ended December 31, 1999
($47.375) 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.
11
<PAGE> 14
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, 2000. 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, 2000.
PROPOSAL NO. 3 -- AMENDMENT TO THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN
The Remedy Corporation 1995 Stock Option/Stock Issuance Plan (the "Option
Plan") was created in order to assist the Company in the recruitment, retention
and motivation of key employees who are experienced, highly qualified and in a
position to make material contributions to the Company's success. The limited
numbers of skilled and experienced employees in this industry are in demand by a
growing number of employers. The Company believes that stock options are
critical in attracting and retaining these key contributors.
The stockholders are being asked to vote on a proposal to approve an
amendment to the Option Plan to provide for an increase in the share reserve in
2001. The proxy holders intend to vote all proxies received by them FOR the
Amendment to the Option Plan.
The Option Plan was adopted on January 17, 1995, approved by the
stockholders on February 21, 1995, to become effective on March 17, 1995 as a
successor to the 1991 Stock Option and Restricted Stock Plan ("Predecessor
Plan"). The Board and the stockholders approved an amendment to the Option Plan
on May 21, 1997 and again on May 28, 1998 to provide for automatic annual
increases in the share reserve in 1997, 1998, 1999 and 2000 and to make certain
other changes. The Board of Directors believes that option grants and the stock
issuances under the Option Plan play an important role in the Company's efforts
to attract, employ and retain employees, directors, and consultants of
outstanding ability. The principal terms and provisions of the Option Plan are
summarized below. The summary, however, is not intended to be a complete
description of all the terms of the Option Plan. A copy of the Option Plan will
be furnished by the Company to any stockholder upon written request to the
Secretary of the Company at the executive offices in Mountain View, California.
Structure. The Option Plan is divided into (i) the Option Grant Program
under which eligible persons may, at the discretion of the Committee, be granted
options to purchase shares of Common Stock at an exercise price not less than
85% of their fair market value on the grant date and (ii) the Stock Issuance
Program, under which such persons may, in the Committee's discretion, be issued
shares of Common Stock directly through the purchase of such shares at a price
not less than eighty-five percent (85%) of their fair market value at the time
of their issuance or as a bonus tied to the performance of services.
Administration. The Compensation Committee of the Board, which is comprised
of two (2) or more Board members, administers the Option Plan. Committee members
serve for such period of time as the Board may determine. No Board member may
serve on the Committee if he or she has received an option grant or
12
<PAGE> 15
stock award under the Option Plan or under any other stock plan of the Company
or its parent or subsidiary corporations within the twelve (12) month period
preceding his or her appointment to the Committee, other than grants under the
Company's 1995 Non-Employee Directors Stock Option Plan. The Option Plan may
also be administered with respect to optionees who are not executive officers
subject to the short-swing profit rules of Federal securities laws by the Board
or a secondary committee comprised of one or more Board members.
The Committee (or Board or secondary committee to the extent acting as plan
administrator) has full authority (subject to the express provisions of the
Option Plan) to determine the eligible individuals who are to receive grants
under the Option Plan, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable, the
maximum term for which the option is to remain outstanding, whether the granted
option will be an incentive stock option ("Incentive Option") that satisfies the
requirements of Code section 422 or a non-statutory option not intended to meet
such requirements, and the remaining provisions of the option grant.
Eligibility. Employees (including officers), consultants and independent
contractors who render services to the Company or its subsidiary corporations
(whether now existing or subsequently established) and non-employee members of
the board of directors of any parent or subsidiary corporation are eligible to
receive option grants or stock issuances under the Option Plan. Non-employee
members of the Board are eligible solely for automatic grants under the 1995
Non-Employee Directors Stock Option Plan.
As of April 1, 2000, approximately 1,065 persons (including seven
officers)were eligible to participate in the Option Plan.
Securities Subject to Option Plan. The maximum number of shares of Common
Stock that may be issued over the term of the Option Plan is 19,410,749 shares.
This reserve includes an increase of 2,959,848 shares of Common Stock on January
1, 1996 pursuant to a 5% automatic increase approved by the stockholders upon
adoption of the Option Plan. On January 1, 1997 and January 1, 1998, 1,553,932
and 3,068,643 shares of Common Stock were added respectively to the pool
pursuant to a 10% automatic increase approved by the stockholders at the last
Annual Meeting. On January 1, 1999 and January 1, 2000, 1,751,925 and 1,940,400
shares of Common Stock were added respectively. The amendment to the Option Plan
that is the subject of this Proposal No. 3 provides for a 4.75% increase.
Therefore, assuming that the stockholders approve the amendment, the number of
shares of Common Stock available for issuance under the Option Plan would
automatically increase on the first trading day of the 2001 by an amount equal
to four and three quarters percent (4.75%) of the shares of Common Stock and
Common Stock equivalents outstanding on December 31, 2000; the increase may not
exceed 4,000,000 shares.
No one person participating in the Option Plan may receive options and
direct stock issuances for more than 1,200,000 shares of Common Stock per
calendar year.
Should an option expire or terminate for any reason prior to exercise in
full, including options incorporated from the Predecessor Plan, the shares
subject to the portion of the option not so exercised will be available for
subsequent option grants under the Option Plan.
OPTION GRANT PROGRAM
Price and Exercisability. The option exercise price per share in the case
of an Incentive Option may not be less than one hundred percent (100%) of the
fair market value of the Common Stock on the grant date and, in the case of a
non-statutory option, eighty-five percent (85%) of the fair market value of the
Common Stock on the grant date. Options granted under the Option Grant Program
become exercisable at such time or times and during such period as the Committee
may determine and set forth in the instrument evidencing the option grant.
The exercise price may be paid in cash, by check made payable to the
Company or in shares of Common Stock. Options may also be exercised through a
same-day sale program, pursuant to which a designated brokerage firm is to
effect the immediate sale of the shares purchased under the option and pay over
to the Company, out of the sale proceeds on the settlement date, sufficient
funds to cover the exercise price for the
13
<PAGE> 16
purchased shares plus all applicable withholding taxes. The Committee may also
assist any optionee (including an officer or director) in the exercise of his or
her outstanding options by (a) authorizing a Company loan to the optionee or (b)
permitting the optionee to pay the exercise price in installments over a period
of years. The terms and conditions of any such loan or installment payment will
be established by the Committee in its sole discretion.
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price and
become a holder of record of the shares. Options are not assignable or
transferable other than by will or the laws of descent and distribution, and
during the optionee's lifetime, the option may be exercised only by the
optionee.
Termination of Service. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated
post-service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally during such limited period be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The Committee has complete discretion to
extend the period following the optionee's cessation of service during which his
or her outstanding options may be exercised and/or to accelerate the
exercisability of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more
options may be subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service prior to vesting
in such shares. The Committee has complete discretion in establishing the
vesting schedule to be in effect for any such unvested shares and may cancel the
Company's outstanding repurchase rights with respect to those shares at anytime,
thereby accelerating the vesting of the shares subject to the canceled rights.
Limited Stock Appreciation Rights. One or more officers of the Company
subject to the short-swing profit restrictions of the Federal securities laws
may, at the discretion of the Committee, be granted limited stock appreciation
rights in connection with their option grants under the Option Plan. Any option
with such a limited stock appreciation right in effect for at least six (6)
months will automatically be canceled, to the extent exercisable for one or more
vested option shares, upon the successful completion of a hostile tender offer
for more than 50% of the Company's outstanding voting stock. In return, the
officer will be entitled to a cash distribution from the Company in an amount
per canceled option share equal to the excess of (i) the highest price per share
of Common Stock paid in the tender offer over (ii) the option exercise price.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per share
not less than eighty-five percent (85%) of fair market value, payable in cash or
through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Committee will, however, have the discretionary authority
at any time to accelerate the vesting of any and all unvested shares outstanding
under the Option Plan.
GENERAL PROVISIONS
Acceleration of Options/Termination of Repurchase Rights. Upon the
occurrence of either of the following transactions (a "Corporate Transaction"):
(i) the sale, transfer, or other disposition of all or substantially all of
the Company's assets in complete liquidation or dissolution of the
Company, or
14
<PAGE> 17
(ii) 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 immediately prior to such
transaction,
each outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option. However, an outstanding option
shall not accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent) or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation (or parent), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation that preserves the spread existing on the unvested option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option, or (iii)
the acceleration of such option is subject to other limitations imposed by the
Committee at the time of the option grant. Immediately following the
consummation of the Corporate Transaction, all outstanding options will
terminate and cease to be exercisable, except to the extent assumed by the
successor corporation.
Also upon a Corporate Transaction, the Company's outstanding repurchase
rights will terminate automatically unless assigned to the successor
corporation.
Any options that are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time shall automatically accelerate (and any
of the Company's outstanding repurchase rights that do not otherwise terminate
at the time of the Corporate Transaction shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary termination within eighteen (18) months following the
effective date of such Corporate Transaction. Any options so accelerated shall
remain exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the involuntary termination.
Upon the occurrence of the following transactions ("Change in Control"):
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) acquires beneficial ownership
of more than fifty percent (50%) of the Company's outstanding voting
stock without the Board's recommendation, or
(ii) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases by reason of a proxy contest, to be comprised of
individuals who (a) have been Board members continuously since the
beginning of such period or (b) have been elected or nominated for
selection as Board members by the continuing Board members,
the Committee has the discretion to accelerate outstanding options and terminate
the Company's outstanding repurchase rights. The Committee also has the
discretion to terminate the Company's outstanding repurchase rights upon the
subsequent termination of the optionee's service within a specified period
following the Change in Control.
The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other efforts
to gain control of the Company.
Valuation. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Common Stock on any relevant date will be the closing price per share of Common
Stock on that date, as such price is reported on the NASDAQ National Market
System. The closing price of the Common Stock on March 31,2000 was $42.125 per
share.
Changes in Capitalization. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, 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
15
<PAGE> 18
adjustments will be made to (i) the maximum number and/or class of securities
issuable under the Option Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted options and direct stock
issuances per calendar year, (iii) the maximum number and/or class of securities
for which the share reserve is to increase automatically each year, and (iv) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits
thereunder.
Each outstanding option that is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities that would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
Option Plan Amendments. The Board may amend or modify the Option Plan in
any and all respects whatsoever. The approval of the stockholders will be
obtained to the extent required by applicable law.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on April 30, 2005. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of April 1, 2000, options covering 9,043,254 shares were outstanding
under the Option Plan, 3,950,165 shares remained available for future option
grant and 6,417,329 shares have been issued under the Option Plan. The
expiration dates for all such options range from September 18, 2001 to March 31,
2010.
No options have been granted on the basis of the proposed share increase.
Because the Option Plan is discretionary, benefits to be received by individual
optionees are not determinable. The table below shows, as to each of the
executive officers named in the Summary Compensation Table and the various
indicated individuals and groups, (i) the number of shares of Common Stock for
which options have been granted under the Option Plan for the one (1)-year
period ending December 31, 1999 plus the period through April 1, 2000 and (ii)
the weighted average exercise price payable per share. No direct stock issuances
have been made under the Option Plan to date.
NEW PLAN BENEFITS AND OPTION GRANT TABLE
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE OF
NAME AND POSITION OPTION SHARES GRANTED OPTION
----------------- ------------- -----------------
<S> <C> <C>
Lawrence L. Garlick.................................... 160,000 $30.2188
Richard P. Allocco..................................... 80,000 $27.0000
Michael Dionne......................................... 70,000 $28.8393
Ron Fior............................................... 60,000 $29.1458
Matthew R. Miller...................................... 70,000 $25.1607
Gary Oliver............................................ 115,000 $20.8424
Executive Officers as a group (7 persons).............. 660,000 $25.1033
Non-employee directors as a group (3 persons).......... 0(1) 0
All employees, including current officers who are not
executive officers, as a group (approximately 1065
persons)............................................. 4,358,167 $29.05569
</TABLE>
- ---------------
(1) Non-employee directors are not eligible for grants under the 1995 Stock
Option/Stock Issuance Plan.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
GRANTED UNDER THE OPTION PLAN
Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
16
<PAGE> 19
Incentive Stock Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The excess of the fair market value of the
purchased shares over the exercise price paid for the shares on the date of
exercise will be includable in alternative minimum taxable income. The optionee
will, however, recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares, then the excess of (i) the fair market value of those shares on
the date the option was exercised over (ii) the exercise price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.
If the optionee 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 excess of (i) the fair market
value of such shares on the date the option was exercised over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
The Company anticipates that any compensation deemed paid by the Company upon
one or more disqualifying dispositions of incentive stock option shares by the
Company's executive officers will remain deductible by the Company and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are subject to
repurchase by the Company. These special provisions may be summarized as
follows:
(i) If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of service prior to vesting in
such shares, the optionee will not recognize any taxable income at the
time of exercise but will have to report as ordinary income, as and
when the Company's repurchase right lapses, an amount equal to the
excess of (a) the fair market value of the shares on the date such
repurchase right lapses with respect to such shares over (b) the
exercise price paid for the shares.
(ii) The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of
the non-statutory option an amount equal to the excess of (a) the fair
market value of the purchased shares on the exercise date (determined
as if the shares were not subject to the Company's repurchase right)
over (b) the exercise price paid for such shares. If the Section 83(b)
election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The
17
<PAGE> 20
Company anticipates that the compensation deemed paid by the Company upon the
exercise of non-statutory options with exercise prices equal to the fair market
value of the option shares on the grant date will remain deductible by the
Company and will not have to be taken into account for purposes of the $1
million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company.
Stock Appreciation Rights. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.
Stock Issuances. The tax principles applicable to direct stock issuances
under the Option Plan will be substantially the same as those summarized above
for the exercise of non-statutory option grants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1995 STOCK OPTION/STOCK ISSUANCE 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.
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 1999 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 1999 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. Mahler who filed two late
reports reflecting three transactions.
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 1999, 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.
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<PAGE> 21
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 2001 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 22, 2000 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 2001 Annual meeting of stockholders of the company must
be received by the Company at its offices not later than March 3, 2001. 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 17, 2000
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.
19
<PAGE> 22
PROXY REMEDY CORPORATION PROXY
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 26, 2000
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 Friday,
May 26th, 2000 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> 23
REMEDY CORPORATION
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
<S> <C> <C>
1. To elect the following directors 2. To ratify the appointment of FOR AGAINST ABSTAIN
to serve for a term ending upon the Ernst & Young, LLP as the [ ] [ ] [ ]
2001 Annual Meeting of Stockholders Company's independent auditors
or until their successors are for the fiscal year ending
elected and qualified: December 31, 2000.
NOMINEES: Lawrence L. Garlick,
Sheri Anderson, David A. Mahler,
Harvey C. Jones, Jr., and John F.
Shoch.
FOR WITHHELD For all nominees, except for 3. To approve an amendment to the FOR AGAINST ABSTAIN
[ ] [ ] nominees written below. Company's 1995 Stock [ ] [ ] [ ]
[ ] Option/Stock Issuance Plan,
-------------------- including an increase to the
Nominee exception(s). number of shares available, as
set forth in the accompanying
proxy.
</TABLE>
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
Signature:___________________ Signature (if held jointly):______________________
Date:_______, 2000
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.
