<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Remedy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Remedy Logo
1505 SALADO DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
April , 1998
Dear Remedy Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of Remedy
Corporation, which will be held at the Company's offices at 1505 Salado Drive,
Mountain View, California, on Thursday, May 28, 1998, at 4:00 p.m. local time.
At the meeting, in addition to the election of directors and ratification of
auditors, stockholders will be asked to vote on four stock proposals, one to
increase the number of authorized shares of Common Stock, one to increase the
number of shares available for grant under the 1995 Stock Option/Stock Issuance
Plan (the "Option Plan"), and one to increase the number of shares available for
purchase under the Employee Stock Purchase Plan ("ESPP") and one to modify the
automatic option grants to be offered to non-employee directors under the 1995
Non-Employee Directors Stock Option Plan (the "Director Option Plan"),
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.
I would like to direct your attention to a proposal of key importance to Remedy.
Stock options are granted to all Remedy employees and are one of the primary
incentives used to attract and retain the most qualified people. At the last
Annual Meeting, stockholders approved an automatic increase to the option pool.
In fiscal 1997, Remedy increased its employee population by over 50% through
hiring to manage our growth. We are now recommending approval of an automatic
increase of 6% for 1999 and 2000. The number of shares available to grant is now
insufficient to meet the Company's growth plans over the next couple of years,
particularly in the extremely competitive hiring environment in Silicon Valley.
In Proposal No. 3, Remedy proposes a two-year automatic increase of 6% of its
outstanding capital stock to generate a pool of shares sufficient to meet
expected growth in its employee base. We urge you to vote FOR these options to
be available for use in 1999 and 2000.
Remedy's future success depends in large part upon its ability to attract,
retain and motivate those people whose skills and performance are critical to
our success. I urge you to review the proxy materials carefully and to vote FOR
the proposals to increase the number of authorized shares of Common Stock and to
amend the Option Plan and Purchase Plan to increase the number of authorized
shares and to amend the Directors Option Plan to modify the periodic option
grants to be made to non-employee directors.
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 28, 1998
The Annual Meeting of Stockholders of Remedy Corporation (the "Company")
will be held at the Company's offices at 1505 Salado Drive, Mountain View, CA
94043 on Thursday, May 28, 1998, 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 the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that the
Company is authorized to issue from 120,000,000 to 240,000,000;
3. To approve an amendment to the 1995 Stock Option/Stock Issuance
Plan, including an increase to the number of shares available, as set forth
in the accompanying proxy;
4. To approve an amendment to the Employee Stock Purchase Plan,
including an increase to the number of shares available, as set forth in
the accompanying proxy;
5. To approve an amendment to the 1995 Non-Employee Directors Stock
Option Plan, including an increase to the number of shares to be awarded
periodically to non-employee directors, as set forth in the accompanying
proxy;
6. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998; and
7. 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 April 7, 1998 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 , 1998
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 28, 1998
------------------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Remedy Corporation, a Delaware corporation ("Remedy" or the "Company"), for use
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Company's offices at 1505 Salado Drive, Mountain View, California 94043, on May
28, 1998, and at any adjournment or postponement of the Annual Meeting. These
proxy solicitation materials were first mailed on or about April 22, 1998 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 April 7, 1998, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 28,881,587
shares of Common Stock outstanding. Each stockholder of record on April 7, 1998
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 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. Approval of the adoption of the amendment to the Company's
Employee Stock Purchase Plan requires the affirmative vote of a majority of
those shares present in person or represented by proxy, and entitled to vote at
the Annual Meeting. Abstentions are not affirmative votes and, therefore, will
have the same effect as a vote against the proposal. Broker non-votes will not
be treated as entitled to vote on the matter and thus, will not affect the
outcome of the voting on the proposal.
Proposal 5. Approval of the adoption of the amendment to the Company's 1995
Non-Employee Directors Stock Option 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 6. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998
requires the affirmative vote of a majority of those shares present, in person
or represented by proxy, and voted either affirmatively or negatively at the
Annual Meeting. Abstentions and broker non-votes will not be counted as having
been voted on the proposal.
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, 4, 5 and 6 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.
2
<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Company currently has authorized five directors. At the Annual Meeting,
five directors are to be elected to serve until the Company's next Annual
Meeting or until their successors are elected and qualified. The directors who
are being nominated for reelection to the Board of Directors (the "Nominees"),
their ages as of April 1, 1998, 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 41 1990 Chairman of the Board and
Chief Executive Officer
David A. Mahler 41 1990 Vice President, Business
Development and Director
Harvey C. Jones, Jr.(1)(2) 45 1994 Director
John F. Shoch(1)(2) 49 1991 Director
James R. Swartz(2) 55 1991 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Garlick co-founded the Company in November 1990. Since that time he has
served as Chairman of the Board and Chief Executive Officer of the Company. From
September 1984 to June 1990, Mr. Garlick was employed by Sun Microsystems, Inc.,
a manufacturer of computer workstations, most recently as Vice President of
Distributed Systems. Mr. Garlick holds B.S.E.E. and M.S.E.E. degrees in computer
engineering from Stanford University.
Mr. Mahler co-founded the Company in November 1990 and has been a director
of the Company since that time. In addition, since March 1995, Mr. Mahler has
served as Vice President, Business Development of the Company. From December
1997 through March 1998, Mr. Mahler served as the acting Vice President,
Worldwide Sales of the Company. From November 1990 to June 1995, Mr. Mahler
served as Vice President, Marketing of the Company. From November 1990 to March
1993, Mr. Mahler also served as Chief Financial Officer of the Company. From
November 1978 to October 1990, Mr. Mahler was employed by Hewlett-Packard
Company, a manufacturer of computers and related products, most recently as
product marketing manager. Mr. Mahler holds a B.S. degree in computer science
from Case Western Reserve University.
Mr. Jones has been a director of the Company since November 1994. Mr. Jones
served as the Chairman of the Board of Synopsys, Inc. ("Synopsys"), an
electronic design automation company, from January 1993 until February 1998. Mr.
Jones also served as Chief Executive Officer of Synopsys from December 1987
until January 1994 and as President of Synopsys from December 1987 until January
1993. Mr. Jones 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 Netopia, 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 was also a director of Picture Tel Corporation, a developer and
manufacturer of video conferencing systems, until June 1997. 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, 1997, the Board of Directors held
6 meetings. For the fiscal year, each of the directors during the term of their
tenure attended or participated in at least 75% of the aggregate of (i) the
total number of meetings or actions by written consent of the Board of Directors
and (ii) the total number of meetings held by all Committees of the Board of
Directors on which each such director served. During such year the Board of
Directors had an Audit Committee and a Compensation Committee.
During the fiscal year ended December 31, 1997, the Audit Committee held 4
meetings. The Audit Committee currently consists of two directors, Messrs. Jones
and Shoch. The Audit Committee is primarily responsible for approving the
services performed by the Company's independent auditors and reviewing their
reports regarding the Company's accounting practices and systems of internal
accounting controls.
During the fiscal year ended December 31, 1997, the Compensation Committee
held 5 meetings and acted by written consent on 27 occasions. The Compensation
Committee currently consists of three directors, Messrs. Jones, Shoch and
Swartz. The Compensation Committee is primarily responsible for reviewing and
approving the Company's general compensation policies and setting compensation
levels for the Company's executive officers and administering the Company's 1995
Stock Option/Stock Issuance Plan and the Company's Employee Stock Purchase Plan.
The Company currently has no standing Nominating Committee. Nominations for
election of directors at the Annual Meeting were made by the full Board of
Directors of the Company.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors. Non-employee Board members are eligible to receive
automatic option grants under the Company's 1995 Non-Employee Directors Stock
Option Plan (the "Directors Option Plan"). As of April 7, 1998, there were three
non-employee Board members eligible to participate in the Directors Option Plan.
Under the Directors Option Plan, options may be granted to the non-employee
members of the Board to purchase up to 412,500 shares of Common Stock. Each
individual who first is elected or appointed as a non-employee Board member will
receive an option grant to purchase 20,000 shares of Common Stock, provided such
individual had not previously been granted an option. In addition, at each
Annual Stockholders Meeting, beginning with the 1998 Annual Meeting, each
individual who has served as a non-employee Board member for at least six months
prior to such Annual Meeting will receive an additional option grant to purchase
10,000 shares of Common Stock and an additional option grant to purchase 5,000
shares of Common Stock for each committee assignment. The option price for each
option grant under the Directors Option Plan will be equal to the fair market
value per share of Common Stock on the automatic grant date and each automatic
option grant will be immediately exercisable for all of the option shares. The
shares purchasable under the option will be subject to repurchase at the
original exercise price in the event the optionee's Board service should cease
prior to vesting. Each grant shall vest in 48 equal monthly installments from
the grant date. The option will remain exercisable for a 6-month period
following the optionee's termination of service as a Board member for any reason
other than death and for a 12-month period following the optionee's termination
of service as a Board member due to death. The option shares will become fully
vested in the event of a Corporate Transaction or a Change in Control. The
option shares will become vested
4
<PAGE> 8
in the event of the optionee's cessation of Board service by reason of death or
disability as if he or she remained in service through the next Annual Meeting.
Upon the occurrence of a hostile tender offer, the optionee will have a thirty
(30) day period in which to surrender to the Company each automatic option that
has been in effect for at least six (6) months in return for a cash distribution
from the Company in an amount per canceled option share (whether or not the
optionee is otherwise vested in those shares) equal to the excess of (i) the
highest reported price per share of Common Stock paid in the tender offer over
(ii) the option exercise price payable per share. Pursuant to the terms of the
Directors Option Plan in effect at that time, automatic grants of options to
purchase 7,500 shares of Common Stock each were made to Messrs. Jones, Shoch and
Swartz on May 21, 1997 at an exercise price of $37.625 per share. In connection
with the 1998 Annual Meeting, Messrs. Jones, Shoch and Swartz will each receive
automatic grants of options to purchase 10,000 shares of Common Stock, plus
5,000 shares for each committee on which such individual serves.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 1, 1998 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.
5
<PAGE> 9
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....................... 3,279,034 11.36%
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
Capital Group Companies, Inc............................ 2,997,000 10.38%
333 South Hope Street, 52nd Floor
Los Angeles, CA 90071
Putnam Investments, Inc................................. 2,343,822 8.12%
One PO Square
Boston, MA 02109
Lawrence L. Garlick..................................... 2,937,866 10.18%
Chairman of the Board and
Chief Executive Officer
1505 Salado Drive
Mountain View, CA 94043
David A. Mahler......................................... 1,101,375 3.81%
Vice President, Business Development and
Director
1505 Salado Drive
Mountain View, CA 94043
George A. de Urioste.................................... 281,644 *
Vice President, Finance and Operations, Chief
Financial Officer
Vasu S. Devan(3)........................................ 276,334 *
Former Vice President, Sales
Bernard R. Cote......................................... 149,359 *
Vice President
John F. Shoch........................................... 130,000 *
Director
Harvey C. Jones, Jr..................................... 120,000 *
Director
James R. Swartz(4)...................................... 119,126 *
Director
Matthew R. Miller....................................... 11,066 *
Vice President, Marketing
All directors and executive officers as a group
(10 persons)(3)(4).................................... 5,356,965 18.55%
</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 April 1, 1998
includes the shares issuable pursuant to stock options that may be exercised
within 60 days after April 1, 1998.
(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, 1997.
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 1997 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 compensation information for one
or more of such companies may not be available or the constituent members of the
H&Q Index may not be competitive with the Company for executive talent. In
addition, certain companies may be included in the Peer Companies, even though
they are not included in the H&Q Index, to the extent the Company competes for
executive talent with those companies.
BASE SALARY
The base salary for each executive officer is set on the basis of personal
performance and a review of comparable positions at the Peer Companies. The
level of base salary set for such executive officers to date has been comparable
to the average of the surveyed compensation data for the Peer Companies.
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 1997, 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 1997, actual bonuses paid reflected an
individual's accomplishment of both corporate and functional objectives, with
equal weight being given to achievement of corporate and functional objectives.
For the 1997 fiscal year, the Company did not meet all of its performance
targets and no officer received all of his targeted bonus.
LONG-TERM INCENTIVE COMPENSATION
During fiscal 1997, the Committee, in its discretion, made option grants to
Messrs. Garlick, Mahler, Cote, de Urioste, Devan, and Miller under the 1995
Stock Option/Stock Issuance Plan. Generally, the size of each grant was set at a
level that the Committee deemed appropriate to create a meaningful opportunity
for stock ownership based upon the individual's 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 varied from
individual to individual at the Committee's discretion.
The grants are designed to align the interests of the executive officer
with those of the stockholders and provide each individual with a significant
incentive to manage the Company from the perspective of an owner with an equity
stake in the business. Each grant allows the officer to acquire shares of the
Company's Common Stock at a fixed price per share (the market price on the grant
date) over a specified period of time. The option generally vests in periodic
installments over a four-year period, contingent upon the executive officer's
continued employment with the Company. Accordingly, the option will provide a
return to the executive officer only if he or she remains in the Company's
employ, and then only if the market price of the Company's Common Stock
appreciates over the option term.
CEO COMPENSATION
The annual base salary for Mr. Garlick, the Company's Chairman of the Board
and Chief Executive Officer, was established by the Committee on February 25,
1997, for the period January 1 to December 31, 1997. 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 1997 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. For 1997, the Chief Executive Officer's objectives required
achievement of corporate bookings of $160 million and earnings per share of
$0.86. Each and every year, the annual incentive plan is reevaluated with a new
achievement threshold and new targets for revenue growth, earnings per share and
profitability. The option grant made to the Chief Executive Officer during the
1997 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.
8
<PAGE> 12
TAX LIMITATION
Under the federal tax laws, a publicly held company such as Remedy
Corporation will not be allowed a federal income tax deduction for compensation
paid to certain executive officers to the extent that compensation exceeds $1
million per officer in any year. It is not expected that the compensation to be
paid to the Company's executive officers for the 1998 fiscal year will exceed
the $1 million limit per officer. In order to qualify option grants under the
Company's 1995 Stock Option/Stock Issuance Plan for an exemption available to
performance-based compensation, the stockholders have approved certain
provisions of the Plan, including a limit on the maximum number of shares of
Common Stock for which any one participant may be granted stock options each
calendar year over the term of the Plan. Accordingly, any compensation deemed
paid to an executive officer when he exercises an outstanding option under the
1995 Stock Option/Stock Issuance Plan with an exercise price equal to the fair
market value of the option shares on the grant date will qualify as
performance-based compensation that will not be subject to the $1 million
limitation.
COMPENSATION COMMITTEE
Harvey C. Jones, Jr.
John F. Shoch
James R. Swartz
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
in November, 1994 and the members of the Compensation Committee are Messrs.
Jones, Shoch and Swartz. None of the members of the Compensation Committee was
at any time during the 1997 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, 1997, 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
<TABLE>
<CAPTION>
MEASUREMENT PERIOD H&Q COMPUTER
(FISCAL YEAR COVERED) REMEDY CORP. S&P 500 SOFTWARE
<S> <C> <C> <C>
3/17/95 100 100 100
12/95 174 127 124
12/96 474 156 151
12/97 185 151 183
</TABLE>
The Company effected its initial public offering on March 16, 1995 at a per
share price of $7.67 (as adjusted to reflect the March 1996 and October 1996
stock dividends). The graph above commences with the first trading day closing
price ($11.33) (as adjusted to reflect the March 1996 and October 1996 stock
dividends). Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that might
incorporate this Proxy Statement or future filings made by the Company under
those statutes, the Compensation Committee Report and Stock Performance Graph
are not deemed filed with the Securities and Exchange Commission and shall not
be deemed incorporated by reference into any of those prior filings or into any
future filings made by the Company under those statutes.
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 plus one individual who terminated employment prior to fiscal
year-end (the "Named Officers") whose compensation for the fiscal year ended
December 31, 1997 exceeded $100,000 for services rendered in all capacities to
the Company during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL 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..................... 1997 $220,000 $ 13,200 0 60,000
Chairman of the Board and 1996 $192,000 $181,250 0 75,000
Chief Executive Officer 1995 $175,006 $147,697 0 60,000
Bernard R. Cote......................... 1997 $205,000 $ 51,250 0 45,000
Vice President 1996 $185,000 $148,950 $26,250(2) 60,000
1995 $168,532 $120,972 $30,000(2) 45,000
George A. de Urioste.................... 1997 $172,000 $ 47,300 0 37,500
Vice President, Finance and 1996 $155,000 $119,625 0 45,000
Operations, Chief Financial Officer 1995 $131,716 $110,795 0 36,000
David A. Mahler......................... 1997 $170,000 $ 32,300 0 37,500
Vice President, Business 1996 $155,000 $106,875 0 45,000
Development and Director................ 1995 $145,006 $ 95,270 0 30,000
Matthew R. Miller....................... 1997 $165,000 $ 85,375 0 30,000
Vice President, Marketing 1996 $ 65,994 $ 84,546 0 100,000
1995 -- -- -- --
Vasu S. Devan........................... 1997 $185,000 $ 31,000 $39,611(3) 37,500
Former Vice President, Sales 1996 $165,000 $132,250 0 45,000
1995 $150,000 $118,825 0 24,000
</TABLE>
- ---------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Housing allowance.
(3) Accrued vacation pay out.
The following table sets forth further information regarding individual
grants of options for the Company's Common Stock during fiscal 1997 to the Named
Officers. Such grants were made pursuant to the Company's 1995 Stock
Option/Stock Issuance Plan. In accordance with the rules of the Securities and
Exchange Commission ("SEC"), the table sets forth the hypothetical gains or
"option spreads" that would exist for the options at the end of their respective
ten-year terms based on assumed annualized rates of compound stock price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises are
dependent on the future performance of
11
<PAGE> 15
the Company's Common Stock and overall market conditions. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
Except for the limited stock appreciation rights described in Footnote (1)
below, which form part of certain option grants made to each Named Officer, no
stock appreciation rights were granted to such officers during the 1997 fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE($)(3) DATE 5%($) 10%($)
---- --------------- ------------ --------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lawrence L. Garlick... 40,000 1.59% 40.00 02/25/07 1,006,231 2,549,988
Lawrence L. Garlick... 20,000 .79% 39.38 09/02/07 495,254 1,255,072
Bernard R. Cote....... 30,000 1.19% 40.00 02/25/07 754,674 1,912,491
Bernard R. Cote....... 15,000 .60% 39.38 09/02/07 371,441 941,304
George A. de
Urioste............. 25,000 .99% 40.00 02/25/07 628,895 1,593,742
George A. de
Urioste............. 12,500 .50% 39.38 09/02/07 309,534 784,420
David A. Mahler....... 25,000 .99% 40.00 02/25/07 628,895 1,593,742
David A. Mahler....... 12,500 .50% 39.38 09/02/07 309,534 784,420
Matthew R. Miller..... 20,000 .79% 40.00 02/25/07 503,116 1,274,994
Matthew R. Miller..... 10,000 .40% 39.38 09/02/07 247,627 627,536
Vasu S. Devan......... 25,000 .99% 40.00 02/25/07 628,895 1,593,742
Vasu S. Devan......... 12,500 50% 39.38 09/02/07 309,534 784,420
</TABLE>
- ---------------
(1) Each of the options listed in the table was granted either on February 25,
1997 or September 2, 1997. Options granted on February 25, 1997 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. Options granted on September 2,
1997 become exercisable in a series of equal monthly installments over a
period of 48 months. Certain options include a limited stock appreciation
right that will result in the cancellation of that option, to the extent
exercisable for one or more option shares, upon the successful completion of
a hostile tender offer for more than 50% of the Company's outstanding voting
stock. In return for the canceled option, the optionee will receive a cash
distribution per canceled option share equal to the excess of (i) the
highest price per share of Common Stock paid in such tender offer over (ii)
the exercise price payable per share under the canceled option. The plan
administrator has the discretionary authority to reprice the options through
the cancellation of those options and the grant of replacement options with
an exercise price based on the fair market value of the option shares on the
regrant date. The options have a maximum term of 10 years measured from the
option grant date, subject to earlier termination in the event of the
optionee's cessation of service with the Company. Under each of the options,
the option shares will vest upon an acquisition of the Company by merger or
asset sale, unless the acquiring entity or its parent corporation assumes
the outstanding options. Any options which are assumed or replaced in the
transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any unvested option shares which do not otherwise vest at
that time shall automatically vest) in the event the optionee's service
terminates by reason of an involuntary or constructive termination within 18
months following the transaction.
(2) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the Common Stock
12
<PAGE> 16
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
(3) The exercise price for each option may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise.
The following table sets forth, for each of the Named Officers, the number
of shares acquired on exercise and the year-end value of unexercised options. 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 (1) to the Option Grant Table that form part of the outstanding stock
options held by those officers, no stock appreciation rights were outstanding at
the end of that fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence L. Garlick....... 0 -- 262,373 115,627 4,387,493 385,417
Bernard R. Cote........... 0 -- 109,587 91,113 1,447,189 347,586
George A. de Urioste...... 194,250 7,672,749 26,124 69,126 106,483 202,267
David A. Mahler........... 0 -- 160,249 69,251 2,737,233 216,767
Matthew R. Miller......... 30,000 419,126 6,666 93,334 0 0
Vasu S. Devan............. 141,902 6,125,383 24,368 66,620 88,525 174,310
</TABLE>
- ---------------
(1) Market price less exercise price on date of exercise.
(2) Market value of underlying securities at fiscal year ended December 31, 1997
($21.00) minus the exercise price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
None of the Company's executive officers have employment or severance
agreements with the Company, and their employment may be terminated at any time
at the discretion of the Board of Directors.
The Compensation Committee has the authority under the 1995 Stock
Option/Stock Issuance Plan to provide for the acceleration of options and the
vesting of the shares of Common Stock subject to the outstanding options held by
the Chief Executive Officer and the Company's other executive officers under
that Plan.
PROPOSAL NO. 2 -- AMENDMENT TO 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 the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock of the
Company from 120,000,000 to 240,000,000 shares. Accordingly, the Board of
Directors has unanimously approved the proposed Certificate of Amendment to the
Amended and Restated Certificate of Incorporation, in substantially the form
attached hereto as Exhibit A (the "Certificate of Amendment"), and hereby
solicits the approval of the Company's stockholders of the Certificate of
Amendment. If the stockholders approve the Certificate of Amendment, the Board
of Directors currently intends to file the Certificate of Amendment with the
Secretary of State of the State of Delaware as soon as practicable following
such stockholder approval. If the Certificate of Amendment is not approved by
the stockholders, the existing Certificate of Incorporation will remain
unchanged.
13
<PAGE> 17
The objective of the increase in the authorized number of shares of Common
Stock is to ensure that the Company has sufficient shares available for future
issuances. The Board of Directors believes that it is prudent to increase the
authorized number of shares of Common Stock to the proposed level 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 authorized may also be used to
acquire or invest in complementary businesses or products or to obtain the right
to use complementary technologies. The Company has no present plans to issue
additional shares of Common Stock (except pursuant to employee stock incentive
plans).
POSSIBLE EFFECTS OF THE AMENDMENT TO THE AMENDED AND RESTATED OF THE CERTIFICATE
OF INCORPORATION
If the stockholders approve the proposed Certificate of Amendment, the
Board of Directors may cause the issuance of additional shares of Common 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 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 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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED 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.
The stockholders are being asked to vote on a proposal to approve an
amendment to the Option Plan to provide for an automatic annual increase in the
share reserve in 1999 and 2000. The proxy holders intend to vote all proxies
received by them FOR the Amendment to the Option Plan.
The Option Plan was adopted on January 17, 1995, approved by the
stockholders on February 21, 1995, to become effective on March 17, 1995 as a
successor to the 1991 Stock Option and Restricted Stock Plan ("Predecessor
Plan"). The Board and the stockholders approved an amendment to the Option Plan
on May 21, 1997 to provide for automatic annual increases in the share reserve
in 1997 and 1998 and to make certain other changes. The Board of Directors
believes that option grants and the stock issuances under the Option Plan play
an important role in the Company's efforts to attract, employ and retain
employees, directors, and consultants of outstanding ability. The principal
terms and provisions of the Option Plan are summarized below. The summary,
however, is not intended to be a complete description of all the terms of the
Option Plan. A copy of the Option Plan will be furnished by the Company to any
stockholder upon written request to the Secretary of the Company at the
executive offices in Mountain View, California.
Structure. The Option Plan is divided into (i) the Option Grant Program
under which eligible persons may, at the discretion of the Committee, be granted
options to purchase shares of Common Stock at an exercise price not less than
85% of their fair market value on the grant date and (ii) the Stock Issuance
14
<PAGE> 18
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) and non-employee members of
the board of directors of any parent or subsidiary corporation are eligible to
receive option grants or stock issuances under the Option Plan. Non-employee
members of the Board are eligible solely for automatic grants under the 1995
Non-Employee Directors Stock Option Plan.
As of April 1, 1998, approximately 643 persons (including seven officers)
were eligible to participate in the Option Plan.
Securities Subject to Option Plan. The maximum number of shares of Common
Stock that may be issued over the term of the Option Plan is 15,718,423 shares.
The Option Plan provided that the number of shares of Common Stock available for
issuance under the Option Plan would automatically increase on the first trading
day of 1996 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; 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. On January 1, 1997 and January 1, 1998, 3,053,932 and 3,068,643
shares of Common Stock were added respectively to the pool pursuant to a 10%
automatic increase approved by the stockholders at the last Annual Meeting. The
amendment to the Option Plan that is the subject of this Proposal No. 3 provides
for a 6% automatic increase for two additional years. 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 1999 and 2000 calendar years by an amount equal to six
percent (6%) of the shares of Common Stock and Common Stock equivalents
outstanding on December 31 of the immediately preceding calendar year; each such
automatic annual increase may not exceed 4,000,000 shares.
No one person participating in the Option Plan may receive options and
direct stock issuances for more than 1,200,000 shares of Common Stock per
calendar year.
Should an option expire or terminate for any reason prior to exercise in
full, including options incorporated from the Predecessor Plan, the shares
subject to the portion of the option not so exercised will be available for
subsequent option grants under the Option Plan.
15
<PAGE> 19
OPTION GRANT PROGRAM
Price and Exercisability. The option exercise price per share in the case
of an Incentive Option may not be less than one hundred percent (100%) of the
fair market value of the Common Stock on the grant date and, in the case of a
non-statutory option, eighty-five percent (85%) of the fair market value of the
Common Stock on the grant date. Options granted under the Option Grant Program
become exercisable at such time or times and during such period as the Committee
may determine and set forth in the instrument evidencing the option grant.
The exercise price may be paid in cash, by check made payable to the
Company or in shares of Common Stock. Options may also be exercised through a
same-day sale program, pursuant to which a designated brokerage firm is to
effect the immediate sale of the shares purchased under the option and pay over
to the Company, out of the sale proceeds on the settlement date, sufficient
funds to cover the exercise price for the purchased shares plus all applicable
withholding taxes. The Committee may also assist any optionee (including an
officer or director) in the exercise of his or her outstanding options by (a)
authorizing a Company loan to the optionee or (b) permitting the optionee to pay
the exercise price in installments over a period of years. The terms and
conditions of any such loan or installment payment will be established by the
Committee in its sole discretion.
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price and
become a holder of record of the shares. Options are not assignable or
transferable other than by will or the laws of descent and distribution, and
during the optionee's lifetime, the option may be exercised only by the
optionee.
Termination of Service. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated
post-service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally during such limited period be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The Committee has complete discretion to
extend the period following the optionee's cessation of service during which his
or her outstanding options may be exercised and/or to accelerate the
exercisability of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more
options may be subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service prior to vesting
in such shares. The Committee has complete discretion in establishing the
vesting schedule to be in effect for any such unvested shares and may cancel the
Company's outstanding repurchase rights with respect to those shares at 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.
16
<PAGE> 20
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. 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
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<PAGE> 21
period or (b) have been elected or nominated for selection as Board members
by the continuing Board members,
the Committee has the discretion to accelerate outstanding options and terminate
the Company's outstanding repurchase rights. The Committee also has the
discretion to terminate the Company's outstanding repurchase rights upon the
subsequent termination of the optionee's service within a specified period
following the Change in Control.
The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other efforts
to gain control of the Company.
Valuation. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Common Stock on any relevant date will be the closing price per share of Common
Stock on that date, as such price is reported on the Nasdaq National Market
System. The closing price of the Common Stock on April 7, 1998 was $20.875 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 and direct stock issuances per calendar year, (iii) the maximum number
and/or class of securities for which the share reserve is to increase
automatically each year, and (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option (including any
option incorporated from the Predecessor Plan) in order to prevent the dilution
or enlargement of benefits thereunder.
Each outstanding option that is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities that would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
Option Plan Amendments. The Board may amend or modify the Option Plan in
any and all respects whatsoever. The approval of the stockholders will be
obtained to the extent required by applicable law. Prior to the amendment that
is the subject of this Proposal No. 3, the Board could not amend the Option Plan
without stockholder approval if the amendment would (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.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on April 30, 2005. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of April 1, 1998, options covering 7,234,611 shares were outstanding
under the Option Plan, 2,562,127 shares remained available for future option
grant and 5,921,685 shares have been issued under the Option Plan. The
expiration dates for all such options range from September 18, 2001 to March 31,
2008.
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, 1997 plus the period through April 1, 1998 and (ii)
the weighted average exercise price payable per share. No direct stock issuances
have been made under the Option Plan to date.
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<PAGE> 22
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.......................... 135,000 $27.1644
Bernard R. Cote.............................. 65,000 $16.8462
David A. Mahler.............................. 77,500 $28.0605
Matthew Miller............................... 150,000 $16.8542
George de Urioste............................ 77,500 $16.9113
Executive Officers as a group (7 persons).... 763,750 $19.8531
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 636 persons)................ 4,426,767 $18.6110
</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 includable in alternative minimum taxable income. The optionee
will, however, recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares, then the excess of (i) the fair market value of those shares on
the date the option was exercised over (ii) the exercise price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs equal to the excess of (i) the fair market
value of such shares on the date the option was exercised over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
The Company anticipates that any compensation deemed paid by the Company upon
one or more disqualifying dispositions of incentive stock option shares by the
Company's executive officers will remain deductible by the Company and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares on the exercise date over the
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<PAGE> 23
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 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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
PROPOSAL NO. 4 -- AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The stockholders are being asked to approve an amendment to the Remedy
Corporation Employee Stock Purchase Plan (the "Purchase Plan") to increase the
number of shares issuable thereunder by 920,593 shares, which represents 3% of
outstanding Common Stock and Common Stock equivalents as of December 31, 1997,
and to expand the Board's authority to amend the Purchase Plan. The Board
approved the amendment to the Purchase Plan, which is the subject of this
Proposal No. 4, on March 24, 1998. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to meet the requirements
of an "employee stock purchase plan" as defined in Section 423 of the Internal
Revenue Code (the "Code"). If the amendment to the Purchase Plan is not approved
by the stockholders, the Purchase Plan will continue in effect in accordance
with its current terms.
The Purchase Plan was adopted by the Board on January 17, 1995 and approved
by the stockholders on February 21, 1995. On May 21, 1996, the stockholders
approved an amendment to the Purchase Plan to
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<PAGE> 24
(a) provide for concurrent offering periods; (b) permit contributions of up to
20% of eligible compensation; (c) increase the maximum semi-annual dollar
contribution from $7,500 to $10,000; and (d) expand eligible compensation to
include all cash compensation. The Purchase Plan was amended on February 15,
1996 to provide a common share pool with the International Plan. The following
summary of certain Purchase Plan provisions is qualified, in its entirety, by
reference to the Purchase Plan. Copies of the Purchase Plan document may be
obtained by a stockholder upon written request to the Secretary of the Company
at the executive offices in Mountain View, California.
In addition to the Purchase Plan, the Company maintains the International
Employee Stock Purchase Plan ("International Plan") pursuant to which eligible
non-U.S. citizens and U.S. citizens working abroad who are not paid in U.S.
currency, and who are employed by the Company or any participating subsidiary or
parent corporation on a regularly-scheduled basis of more than twenty (20) hours
per week for more than five (5) months per calendar year may purchase Common
Stock pursuant to payroll deductions.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively,
"Participating Companies") an opportunity to participate in the ownership of the
Company by purchasing Common Stock of the Company through payroll deductions. In
addition, as of April 1, 1998, Remedy Gmbh, Remedy Sarl, Remedy Pte. Ltd.,
Remedy UK, Ltd., Remedy Canada, Ltd. and Remedy KK participate in the
International Plan.
The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity to
purchase shares of Common Stock at a favorable price. The Company believes that
the stockholders will correspondingly benefit from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Purchase Plan.
Administration. The Purchase Plan is administered by the Compensation
Committee of the Board (the "Committee") and may be administered by the Board.
All costs and expenses incurred in plan administration will be paid by the
Company without charge to participants. All cash proceeds received by the
Company from payroll deductions under the Purchase Plan shall be credited to a
non-interest bearing book account.
Shares and Terms. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum number
of shares of Common Stock that may be issued in the aggregate under the Purchase
Plan and the International Plan is 1,200,000, not including the 920,593 shares
which is the subject of this Proposal No. 4. Common Stock subject to a
terminated purchase right shall be available for purchase pursuant to purchase
rights subsequently granted.
Adjustments. If any change in the Common Stock occurs (through
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration), appropriate adjustments shall
be made by the Company to the class and maximum number of shares subject to the
Purchase Plan, to the class and maximum number of shares purchasable by each
participant on any one purchase date, and the class and number of shares and
purchase price per share subject to outstanding purchase rights in order to
prevent the dilution or enlargement of benefits thereunder.
Eligibility. Generally, any individual who is customarily employed by a
Participating Company more than 20 hours per week and for more than five months
per calendar year is eligible to participate in the Purchase Plan. Approximately
642 employees (including seven officers) were eligible to participate in the
Purchase Plan as of April 1, 1998.
Offering Periods. The Purchase Plan is implemented by offering periods that
generally have a duration of twenty-four months; each offering period is
comprised of a series of one or more successive purchase periods, which
generally have a duration of six (6) months. Offering periods are concurrent and
successive and, accordingly, a new offering period commences every six months
and runs concurrently with each prior offering period. The Committee in its
discretion may vary the beginning date and ending date of the offering periods,
provided no offering period shall exceed twenty-four (24) months in length, and
may vary the duration of an offering period or purchase period. Generally,
purchase periods start on the first business day in each of May
21
<PAGE> 25
and November and end, respectively, on the last business day of October of the
same year and April of the following year. A new offering period will begin on
May 1, 1998 and will end on April 28, 2000.
The participant will have a separate purchase right for each offering
period in which he or she participates. The purchase right will be granted on
the first day of the offering period and will be automatically exercised in
successive installments on the last day of each purchase period within the
offering period.
Purchase Price. The purchase price per share under the Purchase Plan is 85%
of the lower of (i) the fair market value of a share of Common Stock on the
first day of the applicable offering period or, if later, the participant's
entry date into the offering period, or (ii) the fair market value of a share of
Common Stock on the purchase date. Generally, the fair market value of the
Common Stock on a given date is the closing sale price of the Common Stock, as
reported on the Nasdaq National Market System. The market value of the Common
Stock as reported on the Nasdaq Stock Market as of April 7, 1998, was $20.875
per share.
Limitations. The plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following:
1. No purchase right shall be granted to any person who immediately
thereafter would own, directly or indirectly, stock or hold outstanding
options or rights to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the
Company or any of its parent or subsidiary corporations.
2. In no event shall a participant be permitted to purchase more than
3,000 shares on any one purchase date.
3. The right to purchase Common Stock under the Purchase Plan (or any
other employee stock purchase plan that the Company or any of its
subsidiaries may establish) in an offering intended to qualify under
Section 423 of the Code may not accrue at a rate that exceeds $25,000 in
fair market value of such Common Stock (determined at the time such
purchase right is granted) for any calendar year in which such purchase
right is outstanding.
4. In no event may a participant's payroll deductions for a
semi-annual purchase period exceed $10,000.
The purchase right shall be exercisable only by the participant during the
participant's lifetime and shall not be assignable or transferable by the
participant.
Payment of Purchase Price; Payroll Deductions. Payment for shares by
participants shall be by accumulation of after-tax payroll deductions during the
purchase period. The deductions may not exceed 20% of a participant's cash
compensation paid during a purchase period. Cash compensation for this purpose
will include elective contributions that are not includable in income under Code
Sections 125 or 401(k) and all bonuses, overtime, commissions, and other amounts
to the extent paid in cash.
The participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to the purchase date by the applicable purchase price (subject to the
"Limitations" section). No fractional shares shall be purchased. Any payroll
deductions accumulated in a participant's account that are not sufficient to
purchase a full share will be retained in the participant's account for the
subsequent purchase period. No interest shall accrue on the payroll deductions
of a participant in the Purchase Plan.
Termination and Change to Payroll Deductions. A purchase right shall
terminate at the end of the offering period or earlier if (i) the participant
terminates employment and any payroll deductions that the participant may have
made with respect to a terminated purchase right will be refunded or (ii) the
participant elects to withdraw from the Purchase Plan. Any payroll deductions
that the participant may have made with respect to a terminated purchase right
under clause (ii) will be refunded unless the participant elects to have the
funds applied to the purchase of shares on the next purchase date. A participant
may decrease his or her deductions during a purchase period as permitted by the
Committee.
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<PAGE> 26
Amendment and Termination. The Purchase Plan shall continue in effect until
the earlier of (i) the last business day in December, 2004, (ii) the date on
which all shares available for issuance under the Purchase Plan shall have been
issued or (iii) a Corporate Transaction, unless the Purchase Plan is earlier
terminated by the Board in its discretion.
The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan. The approval of the stockholders will be obtained to the extent required
by applicable law. Prior to the amendment that is the subject of this Proposal
No. 4, the Board could not amend the Purchase Plan without stockholder approval
if the amendment would (i) alter the purchase price formula so as to reduce the
purchase price payable for shares under the Purchase Plan, (ii) materially
increase the number of shares issuable under the Purchase Plan or the maximum
number of shares purchasable per participant, or (iii) materially increase the
benefits accruing to participants under the Purchase Plan or materially modify
the eligibility requirements.
In addition, the Company has specifically reserved the right, exercisable
in the sole discretion of the Board, to terminate the Purchase Plan immediately
following any six-month purchase period. If such right is exercised by the
Board, then the Purchase Plan will terminate in its entirety and no further
purchase rights will be granted or exercised, and no further payroll deductions
shall thereafter be collected under the Purchase Plan.
Corporate Transaction. In the event of (i) a merger or consolidation in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction or (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company (a "Corporate Transaction"), each purchase right
under the Purchase Plan will automatically be exercised immediately before
consummation of the Corporate Transaction as if such date were the last purchase
date of the offering period. The purchase price per share shall be equal to
eighty-five percent (85%) of the lower of the fair market value per share of
Common Stock on the start date of the offering period (or on the participant's
entry date, if later) or the fair market value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. Any
payroll deductions not applied to such purchase shall be promptly refunded to
the participant.
The grant of purchase rights under the Purchase Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
Proration of Purchase Rights. If the total number of shares of Common Stock
for which purchase rights are to be granted on any date exceeds the number of
shares then remaining available under the Purchase Plan, the Committee shall
make a pro rata allocation of the shares remaining.
Federal Income Tax Consequences. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Under a plan which so qualifies, no taxable
income will be reportable by a participant, and no deductions will be allowable
to the Company, by reason of the grant or exercise of the purchase rights issued
thereunder. A participant will, however, recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of
disposition.
A sale or other disposition of the purchased shares will be a disqualifying
disposition if made before the later of two years after the start of the
offering period in which such shares were acquired or one year after the shares
are purchased. If the participant makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the amount by
which the fair market value of such shares on the date of purchase exceeded the
purchase price, and the participant will be required to satisfy the employment
and income tax withholding requirements applicable to such income. In no other
instance will the Company be allowed a deduction with respect to the
participant's disposition of the purchased shares.
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<PAGE> 27
Any additional gain or loss recognized upon the disposition of the shares
will be a capital gain, which will be long-term if the shares have been held for
more than one (1) year following the date of purchase under the Purchase Plan.
The foregoing is only a summary of the federal income taxation consequences
to the participant and the Company with respect to the shares purchased under
the Purchase Plan. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any city, state
or foreign country in which the participant may reside.
New Purchase Plan Benefits. Since purchase rights are subject to
discretion, including an employee's decision not to participate in the Purchase
Plan, awards under the Purchase Plan for the current fiscal year are not
determinable. However, in the purchase period that ended on October 31, 1997
each of the Named Officers purchased the following number of shares of Common
Stock at a purchase price of $26.35 per share. Mr. Garlick: 0; Mr. Cote: 379;
Mr. Devan: 379; Mr. de Urioste: 379; Mr. Mahler: 232; Mr. Miller: 0; and all
executive officers as a group (7 persons) purchased 2,127 shares. In addition,
each of the Named Officers, other than Mr. Garlick, have the right to purchase a
maximum of 3,000 shares of Common Stock at a price that will not exceed $39.42
per share on each of the April 30, 1998, October 30, 1998 and April 30, 1999
purchase dates.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 5 -- AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Remedy Corporation 1995 Non-Employee Directors Stock Option Plan (the
"Directors Option Plan") was created in order to assist the Company in the
recruitment, retention and motivation of non-employee directors who are
experienced, highly qualified and in a position to make material contributions
to the Company's success. The Company established the Directors Option Plan to
provide for the automatic grant of non-statutory stock options to non-employee
members of the Board of Directors of the Company (the "Board"). The Company
believes that stock options are critical in attracting and retaining
non-employee directors. The stockholders are being asked to vote on a proposal
to approve an amendment to the Directors Option Plan to modify the option grants
to be made periodically to the non-employee directors and to expand the Board's
authority to amend the Directors Option Plan. The proxy holders intend to vote
all proxies received by them FOR the Amendment to the 1995 Non-Employee
Directors Stock Option Plan.
The Directors Option Plan was originally adopted on January 17, 1995 and
approved by the stockholders on February 21, 1995. The Board amended the
Directors Option Plan on March 24, 1998 (A) to decrease the number of shares of
Common Stock to be awarded to new non-employee directors from 30,000 to 20,000
shares, (B) to increase the annual grants from 7,500 to 10,000 shares, (C) to
provide for an option grant of 5,000 shares to each non-employee director
serving on a Board committee (up to a maximum of 10,000 shares each year for
committee assignments), and (D) to modify the vesting schedule such that all
such options vest in 48 equal monthly installments, as discussed below.
The principal terms and provisions of the Directors Option Plan are
summarized below. The summary, however, is not intended to be a complete
description of all the terms of the Directors Option Plan. A copy of the
Directors Option Plan will be furnished by the Company to any stockholder upon
written request to the Corporate Secretary at the executive offices in Mountain
View, California.
Administration; Eligibility. The Directors Option Plan is
self-administering. The persons eligible to receive option grants under the
Directors Option Plan are the non-employee Board members. As of April 7, 1998, 3
persons were eligible to participate in the Directors Option Plan.
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<PAGE> 28
Securities Subject to Directors Option Plan. The maximum number of shares
of Common Stock currently reserved for issuance over the term of the Directors
Option Plan is 412,500 shares. The number of shares of Common Stock available
for issuance under the Directors Option Plan shall automatically increase on the
first trading day of each calendar year during the term of the Directors Option
Plan, beginning with the 1996 calendar year, by an amount equal to 37,500 shares
of Common Stock. Accordingly, the pool reflects 112,500 shares added on January
1, 1996, January 1, 1997, and January 1, 1998. Should an option expire or
terminate for any reason prior to exercise in full, the shares subject to the
portion of the option not so exercised will be available for subsequent option
grants under the Directors Option Plan.
Automatic Option Grant Program. Under the Directors Option Plan,
non-employee Board members will receive option grants at specified intervals
over their period of Board service. These special grants may be summarized as
follows:
1. Each individual who first becomes a non-employee Board member on or
after the 1998 Annual Meeting, whether through election by the stockholders
or appointment by the Board, will automatically be granted, at the time of
such initial election or appointment, a nonstatutory stock option to
purchase 20,000 shares of Common Stock, after giving effect to the
amendment that is the subject of this Proposal No. 5. At the Company's
initial public offering, each non-employee Board member was granted a
nonstatutory stock option to purchase 30,000 shares of Common Stock, under
the terms of the Directors Option Plan in effect at that time.
2. On the date of each Annual Stockholders Meeting beginning with the
1998 Annual Meeting, each individual who is serving as a non-employee Board
member at that time will receive an additional grant of a nonstatutory
stock option under the Option Plan to purchase 10,000 shares of Common
Stock, provided such individual has been a member of the Board for at least
six months, after giving effect to the amendment that is the subject of
this Proposal No. 5. At the Annual Stockholders Meeting in 1996 and 1997,
each individual who was serving as a non-employee Board member at that
time, received an additional grant of a nonstatutory stock option under the
Directors Option Plan to purchase 7,500 shares of Common Stock, under the
terms of the Directors Option Plan in effect at that time.
3. On the date of each Annual Stockholders Meeting beginning with the
1998 Annual Meeting, each individual who is serving as a non-employee Board
member at that time will receive an additional grant of a nonstatutory
stock option under the Option Plan to purchase 5,000 shares of Common Stock
for each committee of the Board on which such individual serves, up to a
maximum of 10,000 additional shares, provided such individual has been a
member of the Board for at least six months, after giving effect to the
amendment that is the subject of this Proposal No. 5.
Price. The option price per share will be equal to the fair market value
per share of Common Stock on the automatic grant date and each option is to have
a maximum term of ten years from the grant date. 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.
Exercisability. Each automatic option grant will be immediately exercisable
for all of the option shares; the shares purchasable under the option shall be
subject to repurchase at the original exercise price in the event the optionee's
Board service should cease prior to full vesting. Each automatic grant shall
vest in 48 equal monthly installments from the date of the Annual Meeting at
which the option was granted, after giving effect to the amendment that is the
subject of this Proposal No. 5. Each initial grant made in 1996 will vest in
four equal annual installments from the grant date and each annual grant made in
1996 and 1997 will vest in full on the day immediately prior to the fourth
Annual Meeting after the grant date.
Termination of Service. The option will remain exercisable for a 6-month
period following the optionee's termination of service as a Board member for any
reason. The option may be exercised following the Board member's death while
holding the option by the personal representatives of the optionee's estate or
the person to whom the grant is transferred by the optionee's will or the laws
of inheritance within the 12-month period
25
<PAGE> 29
following optionee's death. In no event, however, may the option be exercised
after the expiration date of the option term. During the applicable exercise
period, the option may not be exercised for more than the number of shares (if
any) for which it is exercisable at the time of the optionee's cessation of
Board service. In the event of the optionee's cessation of Board service by
reason of death or permanent disability, the optionee will become vested in an
additional member of option shares as if he or she remained in service through
the next Annual Meeting.
Stockholder Rights. 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.
Acceleration of Options/Termination of Repurchase Rights. Upon the
occurrence of a Corporate Transaction (as defined above under Proposal No. 3),
each outstanding option under the Directors Option Plan will, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
fully vested shares. 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.
Upon the occurrence of a Change in Control (as defined above under Proposal
No. 3), each outstanding option under the Directors Option Plan will,
immediately prior to the effective date of the Change in Control, become fully
exercisable for fully vested shares and will remain exercisable until the
expiration of the option.
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.
Limited Stock Appreciation Rights. Each optionee is granted a limited stock
appreciation right in connection with their option grants under the Directors
Option Plan. Any option with such a limited stock appreciation right in effect
for at least six (6) months may be surrendered by the optionee for all of the
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 director 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.
Valuation. For purposes of establishing the option price and for all other
valuation purposes under the Directors 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. The closing price of the Common Stock on April 7, 1998 was $20.875 per
share.
Changes in Capitalization. In the event any change is made to the Common
Stock issuable under the Directors 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 Directors Option Plan, (ii) the
maximum number and/or class of securities for which the share reserve is to
increase automatically each year, (iii) the number and/or class of securities
for which automatic option grants are to be subsequently made per director and
(iv) the number and/or class of securities and the exercise price per share in
effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Directors
Option Plan on both an aggregate and a per-participant basis.
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<PAGE> 30
Directors Option Plan Amendments. The Board may amend or modify the
Directors Option Plan in any and all respects whatsoever. The approval of the
Company's stockholders will be obtained to the extent required by applicable law
or deemed advisable by the Board. Prior to the amendment that is the subject of
this Proposal No. 5, the Directors Option Plan could not be amended at intervals
more frequently than once every six (6) months and the Board could not, without
the approval of the Company's stockholders, (i) materially increase the maximum
number of shares issuable under the Directors Option Plan (except in connection
with certain changes in capitalization), (ii) materially modify the eligibility
requirements for participation in the Directors Option Plan, or (iii) otherwise
materially increase the benefits accruing to optionees under the Directors
Option Plan.
Unless sooner terminated by the Board, the Directors Option Plan will in
all events terminate on January 16, 2005. Any options outstanding at the time of
such termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of April 1, 1998, options covering 180,000 shares were outstanding under
the Directors Option Plan, 232,500 shares remained available for future option
grant, and no shares have been issued under the Directors Option Plan. The
expiration date for all such options ranges from March 16, 2005 to May 20, 2007.
New Plan Benefits and Option Grant Table
Since the Directors Option Plan is a formula plan, the number of options to
be granted to an optionee is set forth above.
The table below shows, as to each of the non-employee directors, (i) the
number of shares of Common Stock for which options have been granted under the
Directors Option Plan for the one (1)-year period ending December 31, 1997 plus
the period through April 1, 1998 and (iii) the weighted average exercise price
per share.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE EXERCISE
OPTION PRICE OF GRANTED
NAME SHARES OPTIONS
---- ------------- ----------------
<S> <C> <C>
Harvey C. Jones, Jr............................... 7,500 $37.625
John F. Shoch..................................... 7,500 $37.625
James R. Swartz................................... 7,500 $37.625
</TABLE>
Federal Income Tax Consequences of Options Granted under the Directors
Option Plan
The federal income tax consequences of the options granted pursuant to the
Directors Option Plan are the same as the federal income tax consequences
described for non-statutory stock options granted pursuant to the Option Plan
set forth above.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
PROPOSAL NO. 6 -- 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, 1998. Ernst & Young LLP has audited the
Company's financial statements since the fiscal year ended December 31, 1992.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he desires to
do so, and will be available to respond to appropriate questions. In the event
the stockholders fail to ratify the appointment, the Board of Directors will
reconsider its selection.
27
<PAGE> 31
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their 1997 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for the 1997 fiscal year, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than ten-percent stockholders, except Mr. Cote who filed late one
report reflecting one transaction.
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 1997, 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 1999 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1999 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 24, 1998 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 postpone-
28
<PAGE> 32
ments 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,
LAWRENCE L. GARLICK
LAWRENCE L. GARLICK
Chairman of the Board and
Chief Executive Officer
Mountain View, California
April , 1998
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.
29
<PAGE> 33
EXHIBIT A
CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF REMEDY CORPORATION
A DELAWARE CORPORATION
(PURSUANT TO SECTION 242 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: The first paragraph of Article FOURTH of the Restated Certificate of
Incorporation of this Corporation is amended to read in its entirety as follows:
"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
two hundred forty million (240,000,000), 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."
TWO: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law by obtaining a majority vote of
the Common Stock in favor of said amendment 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 Amendment to the Amended and Restated Certificate of
Incorporation to be signed by its President and attested to by its Secretary
this 28th day of May 1998.
REMEDY CORPORATION
- ---------------------------------------------------------
Lawrence L. Garlick, Chairman of the Board and
Chief Executive Officer
ATTEST
- ------------------------------------------------------
Robert V. Gunderson, Jr., Secretary
A-1
<PAGE> 34
PROXY REMEDY CORPORATION PROXY
1505 SALADO DRIVE, MOUNTAIN VIEW, CA 94043
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF REMEDY CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
The undersigned holder of Common Stock, par value $.00005, of Remedy
Corporation (the "Company") hereby appoints Lawrence L. Garlick and George de
Urioste, or either of them, with full power of substitution in each, as proxies
to cast all votes as specified in this Proxy and all Common Stock of the Company
that the undersigned stockholder would be entitled to cast if personally present
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, May 28th, 1998 at 4:00 PM local time, at 1505 Salado Drive, Mountain
View, CA 94043, and at any adjournments or postponements of the Annual Meeting,
upon the following matters. The undersigned stockholder hereby revokes any proxy
or proxies heretofore.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS AND FOR PROPOSALS 2, 3, 4,
5 AND 6 AND IN ACCORDANCE WITH THE DETERMINATION OF THE PROXY HOLDER AS TO OTHER
MATTERS. THE UNDERSIGNED STOCKHOLDER MAY REVOKE THIS PROXY AT ANY TIME BEFORE IT
IS VOTED BY DELIVERING TO THE CORPORATE SECRETARY OF THE COMPANY EITHER A
WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE,
OR BY APPEARING AT THE ANNUAL MEETING AND VOTING IN PERSON. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE ELECTIONS OF DIRECTORS AND FOR PROPOSALS 2,
3, 4, 5 AND 6.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN
AND RETURN ALL CARDS IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 35
REMEDY CORPORATION
[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C>
1. To elect the following directors to serve for a term ending 2. To approve an amendment to the FOR AGAINST ABSTAIN
upon the 1999 Annual Meeting of Stockholders or until their Company's Certificate of [ ] [ ] [ ]
successors are elected and qualified: Incorporation, as set forth in
the accompanying proxy.
NOMINEES: Lawrence L. Garlick, David A. Mahler, Harvey L. Jones,
Jr., John F. Shoch and James R. Swartz.
3. To approve an amendment to the FOR AGAINST ABSTAIN
FOR WITHHELD For all nominees, except Company's 1995 Stock Option/Stock [ ] [ ] [ ]
for nominees written below. Issuance Plan, including an
[ ] [ ] [ ]______________________ increase to the number of shares
Nominee exception(s). available, as set forth in the
accompanying proxy.
4. To approve an amendment to the FOR AGAINST ABSTAIN
Company's Employee Stock Purchase [ ] [ ] [ ]
Plan, including an increase to
the number of shares available,
as set forth in the accompanying
proxy.
5. To approve an amendment to the FOR AGAINST ABSTAIN
1995 Non-Employee Directors Stock [ ] [ ] [ ]
Option Plan, as set forth in the
accompanying proxy.
6. To ratify the appointment of FOR AGAINST ABSTAIN
Ernst & Young, LLP as the [ ] [ ] [ ]
Company's independent auditors
for the fiscal year ending
December 31, 1998.
In their discretion, the proxies FOR AGAINST ABSTAIN
are authorized to vote upon such [ ] [ ] [ ]
other business as may properly
come befor ethe Annual Meeting.
</TABLE>
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
Signature:____________________________ Signature (if held jointly):____________
________________________ Date:_______,_98__
Please date and sign exactly as your name(s) is (are) shown on the share
certificates to which the Proxy applies. When signing as executor,
administrator, trustee, guardian, attorney-in fact or other fiduciary please
give full title as such. When signing as a joint-tenant, both should sign. When
signing as corporation, please sign in full corporate name by President or other
authorized officer. If you sign for a partnership, please sign in partnership
name by an authorized person.
