<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
REMEDY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:
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Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE> 2
(REMEDY LOGO)
1505 SALADO DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
April xx, 1997
TO THE STOCKHOLDERS OF REMEDY CORPORATION
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Remedy Corporation (the "Company") that will be held at the Company's offices
located at 2350 Bayshore Parkway, Mountain View, California, on Wednesday, May
21, 1997, at 4:00 p.m., local time.
Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.
It is important that your shares be represented and voted at the meeting.
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. Returning the proxy does NOT deprive you of your right to attend 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.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.
Sincerely,
/s/ LAWRENCE L. GARLICK
LAWRENCE L. GARLICK
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
(REMEDY LOGO)
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1997
The Annual Meeting of Stockholders of Remedy Corporation (the "Company")
will be held at the Company's offices at 2350 Bayshore Parkway, Mountain View,
CA 94043 on Wednesday, May 21, 1997, 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 approve an amendment to and restatement of the Company's
Certificate of Incorporation (i) to increase the number of shares of Common
Stock that the Company is authorized to issue from 60,000,000 to
120,000,000, and (ii) to increase the number of shares of Preferred Stock
that the Company is authorized to issue from 10,000,000 to 20,000,000;
3. To approve amendments to the 1995 Stock Option/Stock Issuance Plan,
including an increase to the number of shares available, as set forth in
the accompanying proxy;
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997; and
5. 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 28, 1997 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 xx, 1997
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> 4
(REMEDY LOGO)
1505 SALADO DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1997
------------------------
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 2350 Bayshore Parkway, Mountain View, California 94043, on
May 21, 1997, and at any adjournment or postponement of the Annual Meeting.
These proxy solicitation materials were first mailed on or about April xx, 1997
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 28, 1997, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 27,042,797
shares of Common Stock outstanding. Each stockholder of record on March 28, 1997
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> 5
Proposal 2. Approval of the adoption of the amendment to and restatement of
the Company's Certificate of Incorporation requires the affirmative vote of a
majority of the Company's Common Stock issued and outstanding and entitled to
vote at the Annual Meeting. Abstentions and broker non-votes are not affirmative
votes and, therefore, will have the same effect as a vote against 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.
Proposal 4. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997
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 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 proposal and thus, will not effect 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 Proposals Nos. 2, 3 and 4 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 Beacon Hill Partners to assist in the
solicitation of proxies for which it will receive a fee from the Company of
approximately $3,000, 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.
STOCK DIVIDEND
On February 15, 1996, the Board of Directors of the Company approved a
three-for-two stock split on the Company's Common Stock. The stock split was
effected in the form of a stock dividend and entitled each stockholder of record
on March 11, 1996 to receive one additional share of Common Stock for each two
shares of Common Stock held by such stockholder. The stock dividend was effected
on March 25, 1996. On October 1, 1996, the Board of Directors of the Company
approved a two-for-one stock split on the Company's Common Stock. The stock
split was effected in the form of a stock dividend and entitled each stockholder
of record on October 14, 1996 to receive one additional share of Common Stock
for each share of Common Stock held by such stockholder. The stock dividend was
effected on October 25, 1996. Except as otherwise
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<PAGE> 6
provided herein, each of the share numbers and share prices referred to in this
Proxy Statement reflects the stock dividend.
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 March 1, 1997, 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 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 47 1990 Chairman of the Board and
Chief Executive Officer
David A. Mahler 40 1990 Vice President, Business
Development and Director
Harvey C. Jones, Jr.(1) 44 1994 Director
John F. Shoch(1) 47 1991 Director
James R. Swartz(1) 54 1991 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee and 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. Mr. Mahler also currently serves as Vice
President, Business Development 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
has been the Chairman of the Board of Synopsys, Inc. ("Synopsys"), an electronic
design automation company, since December 1992 and was first elected a director
in 1988. 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 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 is also a director of Conductus,
Inc., a superconducting electronics company and Red Brick Systems, Inc., a data
warehouse company. Mr. Shoch holds a B.S. in political science and an M.S. and a
Ph.D. in computer science from Stanford University.
3
<PAGE> 7
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 is also a director of PictureTel
Corporation, a developer and manufacturer of video conferencing systems,
Farallon Communications, Inc., a developer and manufacturer of Internet/Intranet
and LAN products and Polycom, Inc. a developer and manufacturer of audio and
data conferencing systems. 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.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Board of Directors held
6 meetings and acted by written consent on 0 occasions. 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, 1996 the Audit Committee held 4
meetings. The Audit Committee currently consists of three directors, Messrs.
Jones, Shoch and Swartz. 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, 1996, the Compensation Committee
held 7 meetings and acted by written consent on 19 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 Plan"). As of March 28, 1997, there were three
non-employee Board members eligible to participate in the Directors Plan. Under
the Directors Plan, options may be granted to the non-employee members of the
Board to purchase up to 168,750 shares of Common Stock. Each individual who was
serving as a non-employee Board member on the date of the initial public
offering received at that time, and each individual who first is elected or
appointed as a non-employee Board member after that date will receive, an option
grant to purchase 30,000 shares of Common Stock, provided such individual had
not previously been granted an option. In addition, at each Annual Stockholders
Meeting, beginning with the 1996 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 7,500 shares of
Common Stock. The option price for each option grant under the Directors 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 full vesting. With respect to
each initial grant, the repurchase right shall lapse and the optionee vest in
four (4) equal annual installments from the grant date. Each annual grant shall
vest on the day immediately prior to the fourth Annual Meeting after the grant
date. The option will remain exercisable for a 12-month period following the
optionee's termination of service as a Board
4
<PAGE> 8
member for any reason. 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. Automatic grants of
options to purchase 7,500 shares of Common Stock each were made to Messrs.
Jones, Shoch and Swartz on May 21, 1996, at an exercise price of $42.50 per
share. In connection with the 1997 Annual Meeting, Messrs. Jones, Shoch and
Swartz will each receive automatic grants of options to purchase 7,500 shares of
Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
5
<PAGE> 9
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 3, 1997 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)(2)
----------------------------
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OWNERSHIP
-------------------------------------------------- --------- ----------
<S> <C> <C>
Amerindo Investment Advisors, Inc................. 3,271,134 12.1%
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
Pilgrim Baxter & Associates....................... 2,994,000 11.1%
1255 Drummers Lane, Suite 300
Wayne, PA 19087
Lawrence L. Garlick............................... 3,293,737 12.2%
Chairman of the Board and
Chief Executive Officer
1505 Salado Drive
Mountain View, CA 94043
David A. Mahler................................... 1,279,562 4.7%
Vice President, Business Development and
Director
1505 Salado Drive
Mountain View, CA 94043
Bernard R. Cote................................... 220,723 *
Vice President, Customer Support
George A. de Urioste.............................. 354,975 1.3%
Vice President, Finance and Chief Financial
Officer
Vasu S. Devan(3).................................. 377,475 1.4%
Vice President, Sales
Harvey C. Jones, Jr............................... 142,500 *
Director
John F. Shoch..................................... 137,500 *
Director
James R. Swartz(4)................................ 111,626 *
Director
All directors and executive officers as a group
(11 persons)(3)................................. 6,246,939 23.15
</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.
6
<PAGE> 10
(2) The number of shares of Common Stock deemed outstanding as of March 3, 1997
includes the shares issuable pursuant to stock options that may be exercised
within 60 days after March 3, 1997.
(3) Includes 950 shares held in trust for Mr. Devan's minor children.
(4) Includes 21,856 shares held by the Swartz Family Partnership, of which Mr.
Swartz is the general partner.
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, 1996.
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 1996 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 & Quist Software Index ("H&Q 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 the constituent members of the
H&Q Index may not be competitive with the Company for executive talent or
compensation information for one or more of such companies may not be available.
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.
7
<PAGE> 11
ANNUAL INCENTIVE COMPENSATION
Each year the Committee will establish a set of objectives for each
executive officer, one based on Company performance and the second based on
achievement of individual objectives. At the end of the fiscal year, the
Committee will evaluate the objectives to determine whether the specified
objectives were met and will determine whether extraordinary accomplishments
should be considered in determining the bonus award. For 1996, target incentives
varied by group and each Vice President's objectives required achievement of his
group's objectives, as well as achievement of corporate revenue, earnings per
share and operating profit targets. For the 1996 fiscal year, the Company
exceeded its performance targets. For 1996, actual bonuses paid reflected an
individual's accomplishment of both corporate and functional objectives, with
greater weight being given to achievement of corporate rather than functional
objectives.
LONG-TERM INCENTIVE COMPENSATION
During fiscal 1996, the Committee, in its discretion, made option grants to
Messrs. Garlick, Mahler, Bergan, Cote, de Urioste, Devan, Miller and to Ms. Laub
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 current
position with the Company, but there was also taken into account the
individual's potential for future responsibility and promotion, the individual's
performance in the recent period, 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 will vary 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 April 23, 1996
for the period January 1 to December 31, 1996. 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. Mr. Garlick's base salary is below the 50th
percentile of the surveyed data for the Peer Companies.
The remaining components of the Chief Executive Officer's 1996 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, such as revenue growth, earnings per share and operating
profit. Each and every year, the annual incentive plan is reevaluated with a new
achievement threshold and new targets for revenue growth and profitability. The
option grant made to the Chief Executive Officer during the 1996 fiscal year was
intended to reflect his years of service with the Company and to place a
significant portion of his total compensation at risk, because the options will
have no value unless there is appreciation in the value of the Company's Common
Stock over the option term.
TAX LIMITATION
As a result of federal tax legislation enacted in 1993, 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. This limitation will be
in
8
<PAGE> 12
effect for all fiscal years of the Company beginning after January 1, 1994, but
it is not expected that the compensation to be paid to the Company's executive
officers for the 1997 fiscal year will exceed the $1 million limit per officer.
In addition, the stockholders approved a provision of the Company's 1995 Stock
Option/Stock Issuance Plan that imposes 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 remaining 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 1996 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> 13
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, 1996 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(1) AMONG REMEDY CORPORATION,
THE S&P 500 INDEX AND THE HAMBRECHT & QUIST SOFTWARE INDEX
CUMULATIVE TOTAL RETURN
-----------------------
3/17/95 12/95 12/96
REMEDY CORP RMDY 100 174 474
S&P 500 1500 100 127 156
H&Q COMPUTER SOFTWARE IHCS 100 124 151
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 dividend). The graph above commences with the first trading day closing
price ($11.33) (as adjusted to reflect the March 1996 and October 1996 stock
dividend). 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.
10
<PAGE> 14
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 four most highly compensated
executive officers (the "Named Officers") whose compensation for the fiscal year
ended December 31, 1996 exceeded $100,000 for services rendered in all
capacities to the Company during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ AWARDS
NAME AND PRESENT OTHER ANNUAL SECURITIES
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION UNDERLYING OPTIONS
- ---------------------------------------- ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Lawrence L. Garlick..................... 1996 $ 192,000 $181,250 0 75,000
Chairman of the Board and 1995 $ 175,006 $147,697 0 60,000
Chief Executive Officer 1994 $ 170,000 $ 14,484 0 183,000
Bernard R. Cote......................... 1996 $ 185,000 $148,950 $ 26,250(2) 60,000
Vice President, Customer Support 1995 $ 168,532 $120,972 $ 30,000(2) 45,000
1994 $ 150,000 $ 13,058 $ 36,150(2) 50,700
George A. de Urioste.................... 1996 $ 155,000 $119,625 0 45,000
Vice President, Finance and 1995 $ 131,716 $110,795 0 36,000
Chief Financial Officer............... 1994 $ 115,538 $ 12,714 0 24,000
Vasu S. Devan........................... 1996 $ 165,000 $132,250 0 45,000
Vice President, Sales 1995 $ 150,000 $118,825 0 24,000
1994 $ 150,000 $ 12,780 0 65,700
David A. Mahler......................... 1996 $ 155,000 $106,875 0 45,000
Vice President, Business 1995 $ 145,006 $ 95,270 0 30,000
Development and Director.............. 1994 $ 140,000 $ 11,928 0 117,000
</TABLE>
- ---------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Housing allowance.
11
<PAGE> 15
The following table sets forth further information regarding individual
grants of options for the Company's Common Stock during fiscal 1996 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 (3)
below, which forms part of certain option grants made to each Named Officer, no
stock appreciation rights were granted to such officers during the 1996 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 3.02% $17.92 01/11/06 $845,077 $2,141,592
Bernard R. Cote....... 60,000 2.42% $17.92 01/11/06 $676,062 $1,713,273
George A. de
Urioste............. 45,000 1.81% $17.92 01/11/06 $507,046 $1,284,955
Vasu S. Devan......... 45,000 1.81% $17.92 01/11/06 $507,046 $1,284,955
David A. Mahler....... 45,000 1.81% $17.92 01/11/06 $507,046 $1,284,955
</TABLE>
- ---------------
(1) Each of the options listed in the table was granted on January 11, 1996. 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 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
Company's repurchase right with respect to the unvested option shares is
transferred to the acquiring entity.
(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) Options 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. 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.
12
<PAGE> 16
The following table sets forth, for each of the Named Officers, the
year-end value of unexercised options. No options were exercised by the Named
Officers in 1996. No stock appreciation rights were exercised during such fiscal
year by the Named Officers, and except for the limited stock appreciation rights
described in footnote (3) 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....................... 175,186 142,814 $ 9,125,614 $ 6,061,796
Bernard R. Cote........................... 59,912 95,788 $ 3,018,561 $ 3,875,388
George A. de Urioste...................... 175,312 76,688 $ 9,275,184 $ 3,171,441
Vasu S. Devan............................. 120,635 74,755 $ 6,370,804 $ 3,112,206
David A. Mahler........................... 108,625 83,375 $ 5,694,219 $ 3,547,781
</TABLE>
- ---------------
(1) Market value of underlying securities at fiscal year ended December 31, 1996
($53.75) 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 17, 1995, Mr. Jones, a member of the Company's Board of Directors,
purchased 60,000 shares of Common Stock in the Company's initial public offering
of Common Stock at the price of $7.67 per share.
PROPOSAL NO. 2 -- AMENDMENT TO AND RESTATEMENT OF THE
COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend and restate the Company's Certificate
of Incorporation to increase the number of authorized shares of Common Stock of
the Company from 60,000,000 to 120,000,000 shares and to increase the number of
authorized shares of Preferred Stock of the Company from 10,000,000 to
20,000,000 shares. Accordingly, the Board of Directors has unanimously approved
the proposed Amended and Restated Certificate of Incorporation, in substantially
the form attached hereto as Exhibit A (the "Restated Certificate"), and hereby
solicits the approval of the Company's stockholders of the Restated Certificate.
If the stockholders approve the Restated Certificate, the Board of Directors
currently intends to file the Restated Certificate with the Secretary of State
of the State of Delaware as soon as practicable following such stockholder
approval. If the Restated Certificate is not approved by the stockholders, the
existing Certificate of Incorporation will continue in effect.
The objectives of the increases in the authorized number of shares of
Common Stock and Preferred Stock are to ensure that the Company has sufficient
shares available for future issuances. The Board of
13
<PAGE> 17
Directors believes that it is prudent to increase the authorized number of
shares of Common Stock and Preferred Stock to the proposed levels in order to
provide a reserve of shares available for issuance to meet business needs as
they arise. Such future activities may include, without limitation, financings,
establishing strategic relationships with corporate partners, providing equity
incentives to employees, officers or directors, or effecting stock splits or
dividends. The additional shares of Common Stock or Preferred Stock authorized
may also be used to acquire or invest in complementary businesses or products or
to obtain the right to use complementary technologies. Although the Company has
no present obligation to issue additional shares of Common Stock or Preferred
Stock (except pursuant to employee stock incentive plans), the Company may
continue to evaluate potential acquisitions of or investments with third
parties. However, the Company currently has no specific plans to enter into any
such transaction.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT TO AND RESTATEMENT OF THE CERTIFICATE
OF INCORPORATION
If the stockholders approve the proposed Restated Certificate, the Board of
Directors may cause the issuance of additional shares of Common Stock or
Preferred Stock without further vote of the stockholders of the Company, except
as provided under Delaware corporate law or under the rules of any securities
exchange on which shares of Common Stock and Preferred Stock of the Company are
then listed. Current holders of Common Stock have no preemptive or similar
rights, which means that current stockholders do not have a prior right to
purchase any new issue of capital stock of the Company in order to maintain
their appropriate ownership thereof. The issuance of additional shares of Common
Stock or Preferred Stock would decrease the proportionate equity interest of the
Company's current stockholders and, depending upon the price paid for such
additional shares, could result in dilution to the Company's current
stockholders.
In addition, the Board of Directors could use authorized but unissued
shares to create impediments to a takeover or a transfer of control of the
Company. For example, the Board of Directors has the authority to issue the
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the stockholders.
The issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of Common Stock. The issuance of Preferred Stock with voting and conversion
rights may adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others. At present, the Company has no
plans to issue any of the Preferred Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OR THE APPROVAL OF THE AMENDMENT
TO AND RESTATEMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION.
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
number 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. During fiscal 1996,
the Company granted options under the Option Plan at a greater than anticipated
rate due to revenue growth and increased hiring. If such growth continues in
future years, the share reserve under the Option Plan will not be adequate for
the number of option grants to employees required. Accordingly, the Board has
approved an automatic increase to ensure a sufficient number of shares will be
available for recruitment and retention purposes.
14
<PAGE> 18
The stockholders are being asked to vote on a proposal to approve an
amendment to the Option Plan to (i) provide for automatic annual increases in
the share reserve in 1997 and 1998, and (ii) make certain other changes to
delete provisions made inapplicable by changes to SEC rules governing option
grants to officers and directors subject to the short-swing profit rules of the
Federal securities laws. The proxy holders intend to vote all proxies received
by them FOR the Amendment to the 1995 Stock Option/Stock Issuance Plan. The
Option Plan was adopted on January 17, 1995, approved by the stockholders on
February 21, 1995 and became effective on March 17, 1995 upon the Corporation's
initial public offering. The Company established the Option Plan as a successor
to the 1991 Stock Option and Restricted Stock Plan ("Predecessor Plan") to
provide a means whereby employees, officers, directors, consultants, and
independent advisors of the Company or parent or subsidiary corporations may be
given an opportunity to purchase shares of Common Stock. 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 employees (including officers), consultants, and independent
contractors 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 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) 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 March 3, 1997, approximately 452 persons (including nine officers)
were eligible to participate in the Option Plan.
Securities Subject to Option Plan. The maximum number of shares of Common
Stock which may be issued over the term of the Option Plan is 12,649,780 shares.
The Option Plan originally provided that the number of shares of Common Stock
available for issuance under the Option Plan would automatically
15
<PAGE> 19
increase on the first trading day of the 1996 and 1997 calendar years by an
amount equal to five percent (5%) of the shares of Common Stock and Common Stock
equivalents outstanding on December 31 of the immediately preceding calendar
year and each such automatic increase could not exceed 1,500,000 shares. As a
result, 1,459,848 shares of Common Stock were added to the pool on January 1,
1996 and 1,500,000 shares of Common Stock were added to the pool on January 1,
1997. The amendment to the Option Plan which is the subject of this Proposal No.
3 would extend the automatic increase by one more year and increase the amount
of the increase to 10%. 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 1997
and 1998 calendar years by an amount equal to ten percent (10%) of the shares of
Common Stock and Common Stock equivalents outstanding on December 31 of the
immediately preceding calendar year; such automatic annual increase may not
exceed 4,000,000 shares. As a result of this amendment, the number of shares
authorized for issuance under the Option Plan would be increased on January 1,
1997 by a total of 3,053,932 shares of Common Stock.
No one person participating in the Option Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,200,000 shares of Common Stock (after giving effect to the stock
dividends effected by the Company) per calendar year. Prior to the amendment of
the Option Plan which is the subject of this Proposal No. 3, the per person
limit applied to all options, separately exercisable stock appreciation rights
and direct stock issuances awarded over the term of the Option Plan.
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 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
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.
16
<PAGE> 20
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 any
time, thereby accelerating the vesting of the shares subject to the canceled
rights.
Incentive Options. Incentive Options may only be granted to individuals who
are employees of the Company or its parent or subsidiary corporation. During any
calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Common Stock for which one or more options granted to any
employee under the Option Plan (or any other option plan of the Company or its
parent or subsidiary corporations) may for the first time become exercisable as
incentive stock options under section 422 of the Code shall not exceed $100,000.
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
(ii) 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 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. No such acceleration will occur,
however, if the option is either to be assumed by the successor corporation
or replaced by a comparable option to purchase shares of the capital stock
of the
17
<PAGE> 21
successor corporation. 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 a majority of the Board in (a) who were still
in office at the time such election or nomination was approved by the
Board, 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 27, 1997 was $40.75 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 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, separately exercisable stock appreciation rights 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
18
<PAGE> 22
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. However, the Board may not, without the
approval of the Company's stockholders, (i) materially increase the maximum
number of shares issuable under the Option Plan (except in connection with
certain changes in capitalization), or (ii) materially modify the eligibility
requirements for option grants. Prior to the amendment of the Option Plan which
is the subject of this Proposal No. 3, the Board could not, without stockholder
approval, amend the Option Plan to materially increase the benefits accruing to
participants under the Option Plan.
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 March 3, 1997, options covering 5,981,929 shares were outstanding
under the Option Plan, 2,385,870 shares remained available for future option
grant assuming stockholder approval of this Proposal No. 3, and 11,895,863
shares have been issued under the Option Plan. The expiration dates for all such
options range from September 18, 2001 to March 17, 2007.
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, 1996 plus the period through March 3, 1997 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 OPTIONS
-------------------------------------------- ------------- -----------------
<S> <C> <C>
Lawrence L. Garlick......................... 115,000 $ 25.60
Bernard R. Cote............................. 90,000 $ 25.28
George A. de Urioste........................ 70,000 $ 25.80
Vasu S. Devan............................... 70,000 $ 25.80
David A. Mahler............................. 70,000 $ 25.80
Executive Officers as a group (8 persons)... 647,500 $ 27.04
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 441 persons).... 2,277,417 $ 31.28
</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:
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
19
<PAGE> 23
includible 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 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
20
<PAGE> 24
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.
ACCOUNTING TREATMENT
Under present accounting principles, neither the grant nor the exercise of
options issued with an exercise price equal to the fair market value of the
option shares on the grant date will result in any charge to the Company's
earnings. However, the number of outstanding options may be a factor in
determining the Company's reported earnings per share.
Should one or more optionees be granted stock appreciation rights that have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to be
charged periodically against the Company's earnings. Accordingly, at the end of
each fiscal quarter, the amount (if any) by which the fair market value of the
shares of Common Stock subject to such outstanding stock appreciation rights has
increased from prior quarter-end will be accrued as compensation expense to the
extent such fair market value is in excess of the aggregate exercise price in
effect for such rights.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
PROPOSAL NO. 4 -- 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, 1997. 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. The affirmative vote of the holders of
a majority of the Company's Common Stock represented and voting on this proposal
at the meeting is required to ratify the Board's selection of Ernst & Young LLP.
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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1997.
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 1996 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written
21
<PAGE> 25
representations received from one or more of such persons that no annual Form 5
reports were required to be filed by them for the 1996 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 Ms. Laub, who filed 3 reports
reflecting 3 transactions late.
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 1996, 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 1998 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1998 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 12, 1997 in order to be included. 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 xx, 1997
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.
22
<PAGE> 26
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REMEDY CORPORATION
A DELAWARE CORPORATION
(PURSUANT TO SECTIONS 242 AND 245
OF THE DELAWARE GENERAL CORPORATION LAW)
REMEDY CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, hereby certifies
as follows:
ONE: That the name of the corporation is Remedy Corporation and that the
corporation was originally incorporated on November 20, 1990, under the name of
Remedy Corp., pursuant to the General Corporation Law.
TWO: That the Board of Directors of the corporation, by unanimous vote,
adopted resolutions proposing to amend and restate the Certificate of
Incorporation of the corporation and authorizing the appropriate officers of the
corporation to solicit the consent of the stockholders therefor, which
resolution setting forth the proposed amendment and restatement is as follows:
"RESOLVED, that the Certificate of Incorporation of the corporation (the
"Certificate") be amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Remedy Corporation.
ARTICLE II
The address of the registered office of this corporation in the State of
Delaware is 32 Loockerman Square, Suite L-100 in the City of Dover, County of
Kent. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock to be
designated common stock ("Common Stock") and preferred stock ("Preferred
Stock"). The number of shares of Common Stock authorized to be issued is One
Hundred Twenty Million (120,000,000), par value $0.00005 per share, and the
number of shares of Preferred Stock authorized to be issued is Twenty Million
(20,000,000), par value $0.00005 per share.
The Preferred Stock may be issued from time to time in one or more series,
without further stockholder approval. The Board of Directors is hereby
authorized, in the resolution or resolutions adopted by the Board of Directors
providing for the issue of any wholly unissued series of Preferred Stock, within
the limitations and restrictions stated in this Amended and Restated Certificate
of Incorporation, to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences of
any wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of
A-1
<PAGE> 27
them, and to increase or decrease the number of shares of any series subsequent
to the issue of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
that they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
ARTICLE V
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend, and rescind any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall, to the full extent permitted by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to this corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE X
No action required to be taken or that may be taken at any annual or
special meeting of the stockholders of this corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is also
authorized to provide indemnification of (and advancement of expenses to) such
agents (and any other persons to which Delaware law permits this corporation to
provide indemnification) through Bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the General Corporation Law of the State of Delaware, subject only to
limits created by applicable Delaware law (statutory or non-statutory), with
respect to actions for breach of duty to this corporation, its stockholders, and
others.
A-2
<PAGE> 28
Any repeal or modification of any of the foregoing provisions of this
Article shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE XII
This corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation."
* * * *
THREE: That thereafter said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and Section 245 of the General
Corporation Law by obtaining a majority vote of the Common Stock in favor of
said amendment and restatement in the manner set forth in Section 222 of the
General Corporation Law.
IN WITNESS WHEREOF, REMEDY CORPORATION has caused its corporate seal to be
hereunto affixed and this Amended and Restated Certificate of Incorporation to
be signed by its President and attested to by its Secretary this 25th day of
February 1997.
REMEDY CORPORATION
- --------------------------------------
Lawrence L. Garlick, Chairman of the
Board and Chief Executive Officer
ATTEST
- --------------------------------------
Robert V. Gunderson, Jr., Secretary
A-3
<PAGE> 29
PROXY PROXY
REMEDY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 1996
The undersigned hereby appoints LAWRENCE L. GARLICK and GEORGE A. DE
URIOSTE, or either of them, as proxies for the undersigned, with full power of
substitution, and hereby authorizes them to represent and to vote, as
designated below, all of the Common Stock of the Company which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Remedy Corporation to be held on May 21, 1996 at 4:00 p.m.,
local time, or at any adjournment or postponement thereof. This Proxy, when
properly executed, will be voted in accordance with your indicated directions.
If no direction is made, this Proxy will be voted FOR proposals 1, 2, 3 and 4.
The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4.
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN AND DATE THIS PROXY ON THE
REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 30
REMEDY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
1. Election of Directors
Nominees: L. Garlick, D. Mahler,
H. Jones, Jr., J. Shoch, J. Swartz
Nominee Exception
____________________________________________________
For All
For Withheld Except
// // //
2. To approve the amendment and restatement of the Company's Certificate of
Incorporation to (i) increase the number of shares of Common Stock
authorized to be issued from 20,000,000 to 60,000,000, and (ii) increase the
number of shares of Preferred Stock authorized to be issued from 2,000,000
to 10,000,000.
For Against Abstain
// // //
3. To approve the amendment to the Company's Employee Stock Purchase Plan
("Plan") to (i) provide for new 24-month enrollment period every six months,
(ii) permit participants to contribute a maximum of 20% eligible
compensation, (iii) increase the maximum amount of payroll deductions by a
participant during any semi-annual purchase period to $10,000, and (iv)
expand types of compensation eligible for withholding under the Plan to
include commissions, bonuses and certain other cash compensation.
For Against Abstain
// // //
4. To ratify Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending December 31, 1996.
For Against Abstain
// // //
Mark here for address change and
note new address below: //
The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
Please sign exactly as your name(s) is
(are) shown on the stock certificate to
which the proxy applies. When shares are
held by joint tenants, both should sign.
When signing as an attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Signature(s)___________________________________________ Date: ________________
