<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 23, 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
SERENA SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA (prior to reincorporation) 7372 94-2669809
DELAWARE (after reincorporation) (Primary Standard (I.R.S. Employer
(State or other jurisdiction of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
SERENA SOFTWARE, INC.
500 AIRPORT BOULEVARD, 2ND FLOOR
BURLINGAME, CALIFORNIA 94010-1904
(650) 696-1800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
RICHARD A. DOERR
SERENA SOFTWARE, INC.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
500 AIRPORT BOULEVARD, 2ND FLOOR
BURLINGAME, CALIFORNIA 94010-1904
(650) 696-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
COPIES TO:
DOUGLAS H. COLLOM CARLA S. NEWELL
ROBERT F. KORNEGAY DOUGLAS T. SHEEHY
MARK B. BAUDLER JOHN F. DIETZ
PRIYA CHERIAN HUSKINS GUNDERSON DETTMER STOUGH VILLENEUVE
WILSON SONSINI GOODRICH & ROSATI FRANKLIN & HACHIGIAN, LLP
PROFESSIONAL CORPORATION 155 CONSTITUTION DRIVE
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304-1050 (650) 321-2400
(650) 493-9300
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
----------------
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 145 under the Securities Act
of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT TO AGGREGATE
TITLE OF EACH CLASS OF BE REGISTERED OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED (1) (1)(2) REGISTRATION FEE
<S> <C> <C> <C>
Common Stock, $0.001 par value....................... 6,900,000 $75,900,000 $21,100
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) promulgated under the Securities Act of 1933, as
amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 23, 1998
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>
PROSPECTUS
6,000,000 SHARES
[LOGO]
COMMON STOCK
This is an initial public offering of common stock by SERENA Software,
Inc. Of the 6,000,000 shares of common stock being sold in this offering,
4,000,000 shares are being sold by SERENA Software and 2,000,000 shares are
being sold by the selling stockholders. SERENA Software will not receive any of
the proceeds from the sale of shares by the selling stockholders. The estimated
initial public offering price will be between $ and $ per share.
--------------
There is currently no public market for the common stock. SERENA
Software has applied to have the common stock approved for quotation on the
Nasdaq National Market under the symbol SRNA.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------------- ---------
<S> <C> <C>
Initial public offering price.................................. $ $
Underwriting discounts and commissions......................... $ $
Proceeds to SERENA Software, before expenses................... $ $
Proceeds to the selling stockholders, before expenses.......... $ $
</TABLE>
SERENA Software has granted the underwriters an option for a period of
30 days to purchase up to 900,000 additional shares of common stock.
--------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
-------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
HAMBRECHT & QUIST
SG COWEN
SOUNDVIEW TECHNOLOGY GROUP
, 1998
<PAGE>
The following diagram illustrates SERENA's FULL.CYCLE ENTERPRISE
software change management environment which will be comprised of the FULL.CYCLE
MAINFRAME product suite, the planned FULL.CYCLE DESKTOP product suite and the
SERNET CONNECT communications module:
Graphic depicting the Company's FULL.CYCLE Enterprise SCM environment which is
comprised of the FULL.CYCLE MAINFRAME and FULL.CYCLE DESKTOP product suites and
the SERNET Communication module. A cylinder appears on the left edge of the
graphic with "Source Code," "Application Code" and "Data" printed on it. The
cyclinder is connected from its right side to a figure labeled "Mainframe". The
Mainframe figure is connected from its right side to a figure labeled "Window
Internet." The Window Intranet figure is connected from its right side to a
figure labeled "Desktop" with "Client or Server" appearing beneath the desktop
figure. The desktop figure is connected on its right side to a cylinder
appearing on the right edge of the graphic with "Source Code," "Application
Code" and "Data" printed on it. The bottom half of the graphic is composed of
two large rectangles on the left and right side of the bottom of the graphic
connected by a thin rectangle labeled "SERNET Connect". The large rectangle on
the left is labeled "FULL.CYCLE Mainframe" and contains a circle labeled "SERNET
Mainframe." To the left of the circle appear the Company's FULL.CYCLE Mainframe
product names: Change Man, COMPAREX, CDF, SyncTrac, StarTool and StarWarp. The
large rectangle on the right is labeled "FULL CYCLE Desktop*" and contains a
circle labeled "SERNET Desktop" intended to indicate the Company's desktop SCM
product suite. To the right of the circle appear the Company's FULL.CYCLE
Desktop planned product names: Change, Compare, Merge + Reconcile and Detect +
Resolve. Below the large rectangle on the right "*UNDER DEVELOPMENT" appears in
all capital letters.
Information contained on SERENA's Web site does not constitute part of
this prospectus.
COMPAREX, CHANGE MAN, STARTOOL and SYNCTRAC are registered United States
trademarks of the Company. SERNET, FULL.CYCLE, CDF, CONCURRENT DEVELOPMENT
FACILITY, STARWARP and SER(POWER) and the SERENA logo are also trademarks of the
Company. This prospectus also contains trademarks and tradenames of other
companies.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................................... 4
Risk Factors................................................. 7
Forward Looking Statements................................... 21
Use of Proceeds.............................................. 22
Dividend Policy.............................................. 22
Capitalization............................................... 23
Dilution..................................................... 24
Selected Consolidated Financial Data......................... 25
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 26
Business..................................................... 36
Management................................................... 49
Certain Transactions......................................... 58
Principal and Selling Stockholders........................... 60
Description of Capital Stock................................. 62
Shares Eligible for Future Sale.............................. 64
Underwriting................................................. 66
Legal Matters................................................ 68
Experts...................................................... 68
Change in Auditors........................................... 68
Additional SERENA Information................................ 68
Index to Financial Statements................................ F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE COMMON STOCK. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY INCLUDING "RISK FACTORS" AND THE
FINANCIAL STATEMENTS BEFORE MAKING AN INVESTMENT DECISION. IN THIS PROSPECTUS,
THE "COMPANY," "SERENA," "SERENA SOFTWARE," "WE," AND "OUR" REFER TO SERENA
SOFTWARE, INC. AND ITS SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE REQUIRES.
THE COMPANY
SERENA is a leading provider of software change management ("SCM")
products and services used to manage and control software change for information
technology ("IT") organizations. In our 18 year history, we have developed
highly effective SCM solutions that enable our customers to improve their return
on IT investments by increasing programmer productivity and reducing application
development and IT infrastructure maintenance costs.
Successful management of IT infrastructures requires managing rapid and
unpredictable technological change within increasingly complex and diverse
computing environments. Business issues such as competitive pressures, short
time-to-market windows, regulatory changes and Year 2000 and European Monetary
Union conversions introduce additional requirements for change. A key challenge
for IT managers is managing software change throughout the business
organization, including new version releases, "bug fixes," upgrades and
application introductions. Any software change, if not managed effectively, has
the potential to cause system outages or corrupt data which can result in
disruption and lost business.
Our products are designed to assist businesses in managing complexity by
automating the management of software applications. Our FULL.CYCLE MAINFRAME
product suite creates an IT environment that improves product consistency,
enhances software integrity, protects valuable software assets and facilitates
parallel development efforts. In addition, our SER(POWER) consulting services
enable customers to customize our products to fully address their specific SCM
requirements. As of October 31, 1998, our FULL.CYCLE MAINFRAME products have
been installed in over 2,000 data centers worldwide, and our customers include
36 of the Fortune 50 companies such as Chase Manhattan, Citigroup, General
Electric, IBM, MetLife, Merrill Lynch and Prudential.
We intend to maintain our technology leadership in providing SCM
solutions for the mainframe and to use the proprietary technology and expertise
incorporated in our FULL.CYCLE MAINFRAME products to develop our SCM product
suite for the desktop, FULL.CYCLE DESKTOP. This will enable us to provide
customers with a complete SCM solution across the IT organization. We expect to
release an initial version of our first desktop product, DETECT+RESOLVE, in the
first half of calendar 1999.
In 1998, we initiated a strategic expansion of our sales, marketing and
professional services capabilities. This strategic expansion has included hiring
additional direct sales personnel, initiating a telesales effort, recruiting
additional third party distributors and increasing our professional services
staff. In addition, we are also expanding our target market internationally to
include companies within the Global 2000.
In September 1998, we acquired Optima Software, which had served as the
primary distributor of our flagship product, CHANGE MAN, for over ten years.
This acquisition significantly increases our sales, marketing and professional
services capabilities and enables us to sell and market CHANGE MAN as part of
our FULL.CYCLE MAINFRAME product suite.
Our headquarters are located at 500 Airport Boulevard, 2(nd) Floor,
Burlingame, California 94010-1904, and our telephone number is (650) 696-1800.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by SERENA............... 4,000,000 shares
Common stock offered by the selling
stockholders................................. 2,000,000 shares
Common stock to be outstanding after this
offering..................................... 24,204,250 shares (1)
Use of proceeds.............................. For working capital, general corporate
purposes and potential strategic investments
or acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... SRNA
</TABLE>
- - - - ------------------------------
(1) Based on shares outstanding as of October 31, 1998. Excludes 2,153,250
shares of common stock that were reserved for issuance upon exercise of
stock options under our Amended and Restated 1997 Stock Option and Incentive
Plan (the "1997 Plan") as of October 31, 1998, of which 796,860 options were
outstanding at such date at a per share weighted average exercise price of
$3.59. Includes 1,896,750 shares issued under restricted stock agreements
under our 1997 Plan. In addition, in connection with this offering, our
board of directors has approved (i) an increase of 500,000 shares reserved
under the 1997 Plan; (ii) a reserve of 150,000 shares for options to be
granted under the 1999 Directors Option Plan; and (iii) a reserve of 225,000
shares for options to be granted under the 1999 Employee Stock Purchase
Plan. See "Management--1997 Stock Plan," "--1999 Director Option Plan,"
"--1999 Employee Stock Purchase Plan," "Description of Capital Stock" and
Note 6 of Notes to Consolidated Financial Statements of SERENA.
------------------
UNLESS OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS TAKES INTO
ACCOUNT (A) A 3-FOR-2 STOCK SPLIT EFFECTED IN JULY 1998, (B) A 3-FOR-2 STOCK
SPLIT EFFECTED IN NOVEMBER 1998 AND (C) THE ASSUMED COMPLETION OF SERENA'S
REINCORPORATION INTO DELAWARE PRIOR TO THE COMPLETION OF THIS OFFERING. PRO
FORMA INFORMATION GIVES EFFECT TO SERENA'S SEPTEMBER 1998 ACQUISITION OF OPTIMA
SOFTWARE ("OPTIMA") AS IF SUCH ACQUISITION OCCURRED AT THE BEGINNING OF THE
PERIOD PRESENTED. UNLESS OTHERWISE INDICATED, THE INFORMATION THROUGHOUT THIS
PROSPECTUS DOES NOT TAKE INTO ACCOUNT THE POSSIBLE ISSUANCE OF ADDITIONAL SHARES
OF COMMON STOCK TO THE UNDERWRITERS PURSUANT TO THEIR OVER-ALLOTMENT OPTION.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JANUARY 31, JULY 31,
---------------------------------------------- --------------------
1998 1998
------------------------ ---------
1996 1997 ACTUAL PRO FORMA (1) 1997 ACTUAL
--------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue........................................ $ 10,744 $ 17,454 $ 32,147 $ 41,315 $ 12,979 $ 18,916
Operating income............................... 184 1,025 7,693 7,211 2,872 4,070
Net income..................................... $ 278 $ 862 $ 4,761 $ 3,904 $ 1,921 $ 2,471
Net income per share (2):
Basic........................................ $ 0.02 $ 0.05 $ 0.31 $ 0.21 $ 0.12 $ 0.16
Diluted...................................... $ 0.02 $ 0.05 $ 0.31 $ 0.21 $ 0.12 $ 0.15
Shares used to compute net income per share
(2):
Basic........................................ 15,750 15,750 15,248 18,436 15,376 15,639
Diluted...................................... 15,750 15,750 15,272 18,460 15,376 16,361
<CAPTION>
PRO FORMA (1)
-------------
<S> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue........................................ $ 23,284
Operating income............................... 4,825
Net income..................................... $ 2,747
Net income per share (2):
Basic........................................ $ 0.15
Diluted...................................... $ 0.14
Shares used to compute net income per share
(2):
Basic........................................ 18,827
Diluted...................................... 19,549
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30,
1997 1997 1997 1998 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED QUARTERLY STATEMENT OF INCOME DATA (1):
Revenue..................................................... $ 7,181 $ 8,988 $ 9,844 $ 15,302 $ 10,835
Operating income............................................ 599 1,260 2,213 3,139 2,146
Net income.................................................. $ 256 $ 666 $ 1,345 $ 1,637 $ 1,220
Net income per share (2):
Basic..................................................... $ 0.01 $ 0.04 $ 0.07 $ 0.09 $ 0.07
Diluted................................................... $ 0.01 $ 0.04 $ 0.07 $ 0.09 $ 0.06
<CAPTION>
JULY 31,
1998
-----------
<S> <C>
PRO FORMA COMBINED QUARTERLY STATEMENT OF INCOME DATA (1):
Revenue..................................................... $ 12,449
Operating income............................................ 2,679
Net income.................................................. $ 1,527
Net income per share (2):
Basic..................................................... $ 0.08
Diluted................................................... $ 0.08
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1998
-----------------------------------------
ACTUAL PRO FORMA (1) AS ADJUSTED (3)
--------- ------------- ---------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 15,665 $ 15,633 $
Working capital........................................................ 10,889 10,478
Total assets........................................................... 25,095 42,872
Total liabilities and deferred revenue................................. 14,079 15,918
Total stockholders' equity............................................. 11,016 26,954 $
</TABLE>
- - - - ------------------------------
(1) The pro forma consolidated statement of income data for the fiscal year
ended January 31, 1998 and for the six months ended July 31, 1998 and the
pro forma consolidated balance sheet data as of July 31, 1998 have been
derived from the unaudited Pro Forma Condensed Combined Financial Statements
contained elsewhere in this prospectus. The pro forma combined quarterly
statement of income data is derived from unaudited pro forma condensed
combined statements of income not included in this prospectus. The pro forma
statement of income data gives effect to SERENA's acquisition of Optima as
if it had occurred on February 1, 1997. For pro forma purposes, SERENA's
consolidated statement of income for the fiscal year ended January 31, 1998
has been combined with Optima's consolidated statement of income for the
fiscal year ended December 31, 1997, and SERENA's consolidated statement of
income for the six month period ended July 31, 1998 has been combined with
Optima's consolidated statement of income for the six month period ended
July 31, 1998. For pro forma purposes, SERENA's consolidated statement of
income for the four quarterly periods ended January 31, 1998 has been
combined with Optima's consolidated statement of income for the four
quarterly periods ended December 31, 1997. For pro forma purposes SERENA's
consolidated statement of income for the two quarterly periods ended July
31, 1998 has been combined with Optima's consolidated statement of income
for the same periods. For purposes of the pro forma consolidated balance
sheet, SERENA's consolidated balance sheet as of July 31, 1998 has been
combined with the consolidated balance sheet of Optima as of July 31, 1998
giving effect to the Optima acquisition as if it had occurred on July 31,
1998.
(2) See Notes 1(m) and 4(d) of Notes to Consolidated Financial Statements of
SERENA for an explanation of the determination of the number of shares used
in computing per share data.
(3) As adjusted to reflect the application of the net proceeds from the sale of
the 4,000,000 shares of common stock offered by the Company at an assumed
initial public offering price of $ and after deducting the underwriting
discounts and commissions and estimated offering expenses.
6
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. THE RISKS
DESCRIBED BELOW ARE NOT THE ONLY ONES THAT SERENA MAY FACE. ADDITIONAL RISKS
THAT ARE NOT YET IDENTIFIED OR THAT WE CURRENTLY THINK ARE IMMATERIAL MAY
MATERIALLY ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION IN THE FUTURE.
ANY OF THE FOLLOWING RISKS COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION AND COULD RESULT IN A COMPLETE LOSS OF
YOUR INVESTMENT.
IN THIS PROSPECTUS, WE MAKE STATEMENTS THAT RELATE TO OUR FUTURE PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS WHICH INVOLVE RISKS AND UNCERTAINTIES.
THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF THE WORDS SUCH AS "EXPECTS,"
"ANTICIPATES," "INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES" AND SIMILAR
EXPRESSIONS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
THESE STATEMENTS. FACTORS THAT COULD CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
Our quarterly operating results have varied greatly in the past and may
vary greatly in the future depending upon a number of factors, including many
that are beyond our control. Factors that may materially affect our quarterly
operating results include the following, as well as others discussed in this
prospectus:
- The size, timing and contractual terms of large orders for our
software products
- The budgeting cycles of our customers and potential customers and
their willingness to invest in new SCM solutions or upgrade their
existing solutions
- Market demand for our software products and services, including our
desktop products that are currently under development
- Our ability to develop and introduce on a timely basis and to market
new and enhanced versions of our software, including our desktop
products currently under development
- Seasonal trends in customer purchasing patterns
- Activities by our competitors, including releases of new software
products, changes in pricing policies and acquisitions or strategic
partnership activities
- Any downturn in our customers' businesses, in the domestic economy or
in international economies where our customers do substantial business
- Changes in the mix of software products and services sold by us,
including the mix between higher margin software products and lower
margin maintenance and services and the percentage of software
products sold which require us to pay a royalty to a third party
- Our ability to hire, integrate and retain technical, sales, marketing
and professional services personnel
- Risks associated with our planned international expansion, including
longer sale cycles and currency fluctuations
- Changes in our pricing policies resulting from competitive pressures
or other factors
- Cancellation of maintenance agreements by customers or any significant
decrease in the percentage of customers who renew their maintenance
agreements with us
- Software defects and other product quality problems
7
<PAGE>
Our software license revenue in any quarter depends on orders booked and
shipped in the last month, weeks or days of that quarter. At the end of each
quarter, we typically have either minimal or no backlog of orders for the
subsequent quarter. Depending on the size and complexity of the transaction, as
well as the product being licensed, it typically takes from six to 18 months
from the time we initially contact a potential customer to the time we complete
a new license transaction. Because we do not know when, or if, our potential
customers will place orders and finalize contracts, we cannot accurately predict
our revenue and operating results for future quarters. If a large number of
orders or several large orders did not occur or were deferred, our revenue in
that quarter could be substantially reduced. This would materially adversely
affect our operating results and could impair our business in future periods.
Any of the factors described above could have a material adverse effect
on our business and results of operations. As a result, we believe that
quarter-to-quarter comparisons of our financial results are not necessarily
meaningful, and you should not rely on them as an indication of our future
performance.
SEASONALITY
We have experienced and expect to continue to experience seasonality in
sales of our software products. Our revenue and operating results in our quarter
ending January 31 are typically higher relative to our other quarters, because
many customers make purchase decisions based on their calendar year-end
budgeting requirements. In addition, our January quarter tends to reflect the
effect of the incentive compensation structure for our sales organization, which
is based on satisfaction of fiscal year-end quotas. As a result, we have
historically experienced a substantial decline in revenue in the first quarter
of each fiscal year relative to the preceding quarter. We are also currently
attempting to expand our presence in international markets, particularly in
Europe. We expect our quarter ending October 31 to reflect the effects of summer
slowing of international business activity and spending activity generally
associated with that time of year, particularly in Europe. To the extent that
our revenue in Europe or other parts of the world increase in future periods, we
expect our period-to-period revenues to reflect any seasonal buying patterns in
these markets.
UNCERTAINTY AS TO FUTURE OPERATING RESULTS
Although SERENA has been profitable in recent years, we may not remain
profitable on a quarterly or annual basis in the future. We anticipate that our
expenses will increase substantially in the foreseeable future as we:
- Increase our sales and marketing activities, including expanding our
United States and international direct sales forces and extending our
telesales efforts
- Develop our technology, including our FULL.CYCLE DESKTOP suite of SCM
products for the desktop platform
- Broaden our professional services offerings and delivery capabilities
- Expand our distribution channels
- Pursue strategic relationships and acquisitions
With these additional expenses, in order to maintain our current levels
of profitability, we will be required to increase our revenues correspondingly.
Although our revenue has grown in recent years, we do not believe that we will
maintain this rate of revenue growth. In addition, we may not experience any
revenue growth in the future, and our revenue could in fact decline. Any failure
to significantly increase our revenue as we implement our product, service and
distribution strategies would materially adversely affect our business,
operating results and financial condition.
Our professional service revenue and maintenance revenue are dependent
upon the continued use of these services by our installed customer base. Any
downturn in our software license revenue would
8
<PAGE>
have a negative impact on the growth of our professional services revenue and
maintenance revenue in future quarters. The terms of our standard license
arrangements provide for a one-time license fee and a prepayment of one year of
software maintenance and support fees. The maintenance agreement is renewable
annually at the option of the customer and there are no minimum payment
obligations or obligations to license additional software. Therefore, our
current customers may not necessarily generate significant maintenance revenue
in future periods. In addition, our customers may not necessarily purchase
additional products, upgrades or professional services.
Our efforts to expand our software product suites, sales and marketing
activities, direct and indirect distribution channels and professional service
offerings and to pursue strategic relationships or acquisitions may not succeed
or may prove more expensive than we currently anticipate. As a result, we cannot
predict our future operating results with any degree of certainty.
DEPENDENCE ON FULL.CYCLE MAINFRAME PRODUCTS
Historically, all of our software license revenue has resulted from the
sale of our FULL.CYCLE MAINFRAME products. In particular, CHANGE MAN and
COMPAREX, two of our FULL.CYCLE MAINFRAME products, have been responsible for a
substantial majority of our revenue. In fiscal 1997, 1998 and the six months
ended July 31, 1998, sales of CHANGE MAN and COMPAREX together accounted for
approximately 72%, 82% and 71% of our software license revenue, respectively. We
expect that these products will continue to account for a large portion of our
software license revenue for the foreseeable future. Our future operating
results depend on continued market acceptance of our FULL.CYCLE MAINFRAME
products, including future enhancements. Any factors adversely affecting the
pricing of, demand for or market acceptance of our FULL.CYCLE MAINFRAME
products, such as competition or technological change, could materially
adversely affect our business and operating results.
EMERGING AND EVOLVING SCM MARKET
The SCM market is in an early stage of development. IT organizations
have traditionally addressed SCM needs internally and have only recently become
aware of the benefits of third-party SCM solutions as their SCM requirements
have become more complex. Since the market for our products is still evolving,
it is difficult to assess the competitive environment or the size of the market
that may develop. Our future financial performance will depend in large part on
the continued growth in the number of businesses adopting third-party SCM
products and the expansion of their use on a company-wide basis. The SCM market
for third-party products may grow slower than we anticipate. In addition,
technologies, customer requirements and industry standards may change rapidly.
If we cannot improve or augment our products as rapidly as existing
technologies, customer requirements and industry standards evolve, our products
or services could become obsolete. The introduction of new or technologically
superior products by competitors could also make our products less competitive
or obsolete. As a result of any of these factors, our position in existing
markets or potential markets could be eroded. If we fail to properly assess and
address the SCM market or if our products and services fail to achieve market
acceptance for any reason, our business and operating results would be
materially adversely affected.
DEPENDENCE ON IBM AND IBM-COMPATIBLE MAINFRAMES
We are substantially dependent upon the continued use and acceptance of
IBM and IBM-compatible mainframes and growth of this market. All of our software
license revenue to date has been attributable to sales of our FULL.CYCLE
MAINFRAME products. We expect that, for the foreseeable future, substantially
all of our software license revenue will come from sales of our mainframe
products. As a result, future sales of our existing products and associated
maintenance revenue and professional service revenue will depend on continued
use of mainframes. Recently there has been a trend away from the use of
centralized mainframes in enterprise computing environments to more
decentralized client/server networks. Although some IT organizations are
utilizing mainframes as large enterprise servers, this practice is
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relatively new and still emerging. If the role of the mainframe does not
increase as we anticipate, or if it in any way decreases, this would materially
adversely affect our business, operating results and financial condition.
Additionally, if there is a wide acceptance of other platforms or if new
platforms emerge that provide enhanced enterprise server capabilities, our
business and future operating results may be materially adversely affected.
PRODUCT EXPANSION TO THE DESKTOP PLATFORM
We are currently developing our FULL.CYCLE DESKTOP product suite that is
designed to support the desktop platform. Historically, all of our products have
been designed for the mainframe platform, and all of our software license
revenue, maintenance revenue and professional services revenue to date have been
attributable to licenses for these mainframe products. We do not have experience
developing, marketing, selling or supporting desktop products. Developing,
marketing and selling our desktop products will require significant resources
that we may not have. In particular, competition for experienced software
engineers and sales personnel is intense, and we may not be able to hire or
retain sufficient numbers of these engineers or sales personnel to successfully
develop or sell our FULL.CYCLE DESKTOP products. Our sales and marketing
organizations have historically focused exclusively on sales of our products for
the mainframe and have limited experience marketing and selling desktop
products. Additionally, we do not have any experience in providing support
services for desktop products. Competition for qualified support staff is
intense and if we fail to attract qualified support personnel this could impair
our ability to support our FULL.CYCLE DESKTOP products. Many of our competitors
have substantially greater experience providing desktop compatible software
products, and many also have significantly greater financial and organizational
resources than we do. If we do not successfully develop, market, sell and
support our FULL.CYCLE DESKTOP products, this would materially adversely affect
our business and our future operating results.
PRODUCT DEVELOPMENT DELAYS
We have experienced product development delays in the past and may
experience delays in the future. Difficulties in product development could delay
or prevent the successful introduction or marketing of new or improved products
or the delivery of new versions of our products to our customers. In particular,
we are currently developing our FULL.CYCLE DESKTOP product suite for the desktop
platform. However, we do not have experience with developing applications
designed for the desktop. We anticipate releasing the initial version of the
first of our FULL.CYCLE DESKTOP products, DETECT+RESOLVE, in the first half of
calendar 1999 and an initial version of other FULL.CYCLE DESKTOP products before
the end of calendar 1999. If we should be delayed for any reason in releasing
our new desktop products, this would impair our growth plans. If we are unable,
for technological or other reasons, to develop and introduce new and improved
products in a timely manner, including the FULL.CYCLE DESKTOP products, this
could materially adversely affect our business and future operating results.
MANAGEMENT OF GROWTH
Our business has grown substantially in recent periods, with total
revenue increasing from $17.5 million in fiscal 1997 to $32.1 million in fiscal
1998 and from $13.0 million in the six months ended July 31, 1997 to $18.9
million for the six months ended July 31, 1998. Beginning in fiscal 1998 and
continuing in fiscal 1999, we began a strategic expansion of our sales,
marketing and professional service activities. In addition, the September 1998
acquisition of Optima significantly expanded the size of our sales, marketing
and professional service organizations. This growth has resulted, and any future
growth will result, in new and increased responsibilities for management
personnel. Several of our executive officers, including our President and Chief
Executive Officer, our Vice President, Finance and Chief Financial Officer, and
certain other operating vice presidents have been employed by the Company for a
relatively short period of time. Since joining SERENA, the new management team
has devoted substantial efforts to significantly expand our sales, marketing and
professional services activities. This management
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team has not worked together previously and may not be able to successfully
implement this strategy. Such failure would materially adversely affect our
business and our future operating results. Our ability to compete effectively
and to manage any future growth and our future operating results will depend in
part on our ability to implement and expand operational, customer support and
financial control systems and to train and manage our employees. We may not be
able to augment or improve existing systems and controls or implement new
systems and controls in response to future growth, if any. Any failure to do so
could materially adversely affect our business.
INTEGRATION OF OPTIMA SOFTWARE INTO SERENA'S BUSINESS
Our acquisition of Optima, which was completed in September 1998, will
require integrating the businesses and operations of the two companies. Prior to
the acquisition, Optima had been the primary distributor of the CHANGE MAN
product for over ten years. As a result, Optima was responsible for a
substantial portion of our software license revenues. If we do not successfully
integrate Optima into our business, this may materially adversely affect our
business, in particular our ability to sell CHANGE MAN to prospective customers.
Additionally, we may never achieve anticipated synergies from the acquisition of
Optima, including marketing, distribution or other operational benefits.
Integrating Optima into our existing business may prove difficult given that the
two companies are geographically separated, have different corporate cultures
and have personnel with different business backgrounds. Potential problems with
this integration could include:
- The inability to retain a sufficient number of Optima's key employees,
including its existing sales force and professional service personnel
- Difficulties encountered standardizing sales quotas, territories and
incentive compensation plans for sales personnel
- The lack of focus on achieving our core business objectives if
management pays excessive attention to the integration process
- Impairment of relationships with clients and employees
If we fail to successfully integrate the two businesses, this could materially
adversely affect our business and future operating results.
EXPANSION OF DISTRIBUTION CHANNELS
Historically, we have had a relatively small direct sales staff, and
Optima served as our primary distribution channel for CHANGE MAN. Our ability to
achieve revenue growth in future periods will be heavily dependent on our
ability to integrate Optima's direct sales force with our business and on our
success in recruiting and training sufficient direct sales personnel. We are
planning to significantly expand our direct sales efforts in North America and
Europe and while we are investing, and plan to continue to invest, substantial
resources on this expansion, we have at times experienced, and expect to
continue to experience, difficulty in recruiting and retaining qualified direct
sales personnel. Competition for qualified sales personnel both in the United
States and abroad is intense. In addition to expanding our direct sales efforts,
we are also currently investing, and we intend to continue to invest,
substantial resources in selling our products through telesales personnel. If we
fail to significantly expand our direct sales and telesales force, our ability
to sell our products into new markets and to increase our product penetration
into our existing markets will be impaired. We also intend to extend our
distribution channels by partnering with leading helpdesk management, software
distribution application and system framework providers and may also attempt to
develop additional sales and marketing channels through system integrators,
original equipment manufacturers and other partners. Failure to expand our
distribution channels through any of these means could materially adversely
affect our business and our future operating results.
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EXPANSION OF PROFESSIONAL SERVICES
We believe that providing high quality consulting, training, customer
support and education is essential to maintaining our competitive position. In
particular, consulting services and customer support are critical to our future
success because the market for third party SCM solutions is still evolving, and
many organizations have limited experience using third party SCM solutions.
Customers have only recently begun to look to third party providers for SCM
solutions as the complexity of computer networks and number of applications has
increased. If we are unable to provide comprehensive consulting services and
customer support to our customers and prospective customers, this may materially
adversely affect our business and our ability to sell our products. We intend to
significantly expand our professional services and customer support
organizations, including providing these services for both desktop and mainframe
applications and systems. Competition for additional qualified technical
personnel to perform these services is intense. Our existing professional
services and customer support organizations may not be sufficient to manage any
future growth in our business. The failure to expand our professional services
and customer support organizations or to integrate Optima's professional
services personnel into our professional services organization could materially
adversely affect our business.
INTERNATIONAL OPERATIONS
International sales represented approximately 15% of our total revenue
in both fiscal 1997 and 1998 and approximately 19% of total revenue for the six
months ended July 31, 1998. Our international revenue is attributable
principally to our European operations.
We intend to expand the scope of our international operations and
currently have a subsidiary in the United Kingdom and are in the process of
establishing another subsidiary in Germany. Our continued growth and
profitability will require continued expansion of our international operations,
particularly in Europe. In addition, in calendar 1999, we intend to open
additional international offices, including at least one additional European
office. We have only limited experience in marketing, selling and supporting our
products internationally. Additionally, we do not have any experience in
developing foreign language versions of our products. Such development may be
more difficult or take longer than we anticipate. We may not be able to
successfully market, sell, deliver and support our products internationally. If
we are unable to expand our international operations successfully and in a
timely manner, this could materially adversely affect our business and operating
results. Such expansion will require significant management attention and
financial resources. In particular, we will have to attract experienced
management, marketing, sales and professional services personnel for our
international offices. Competition for such personnel is intense, and we may be
unable to attract qualified staff.
Our international operations are, and any expanded international
operations will be, subject to a variety of risks associated with conducting
business internationally that could materially adversely affect our business,
including the following:
- Difficulties in staffing and managing international operations
- Problems in collecting accounts receivable
- Longer payment cycles
- Fluctuations in currency exchange rates
- Seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world
- Recessionary environments in foreign economies
- Increases in tariffs, duties, price controls or other restrictions on
foreign currencies or trade barriers imposed by foreign countries
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CURRENCY FLUCTUATIONS
A majority of our international business is conducted in foreign
currencies, principally the British pound. Fluctuations in the value of foreign
currencies relative to the U.S. dollar have caused and will continue to cause
currency transaction gains and losses. We cannot predict the effect of exchange
rate fluctuations upon future operating results. We may experience currency
losses in the future. To date, we have not adopted a hedging program to protect
SERENA from risks associated with foreign currency fluctuations.
COMPETITION
The market for our products is highly competitive and diverse. The
technology for SCM products may change rapidly. New products are frequently
introduced, and existing products are continually enhanced. Competitors vary in
size and in the scope and breadth of the products and services that they offer.
Many of our current and potential competitors have greater financial, technical,
marketing and other resources than we do. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements. They may also be able to devote greater resources to the
development, promotion and sale of their products than we can. We may not be
able to compete successfully against current and future competitors.
EXISTING COMPETITION. We face competition from a number of sources,
including:
- Customers' internal IT departments
- Providers of SCM products that compete directly with CHANGE MAN and
COMPAREX such as Computer Associates, PLATINUM technology, IBM and
smaller private companies
- Providers of SCM application development programmer productivity and
system management products such as Compuware, IBM and smaller private
companies
FUTURE COMPETITION Barriers to entry in the software market are
relatively low. As a result, we may face competition in the future from
established companies who have not previously entered the mainframe SCM market
or from emerging software companies. These companies may not only develop their
own mainframe SCM solutions, but they may also acquire or establish cooperative
relationships with our current competitors, including cooperative relationships
between large, established companies and smaller private companies. Because
larger companies have significant financial and organizational resources
available, they may be able to quickly penetrate the mainframe SCM market
through acquisitions or strategic relationships and may be able to leverage the
technology and expertise of smaller companies and develop successful SCM
products for the mainframe. We expect that the software industry, in general,
and providers of SCM solutions, in particular, will continue to consolidate. It
is possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Increased competition may materially
adversely affect our business due to price reductions, reduced gross margins and
reduction in market share.
Our ability to sell our products also depends, in part, on the
compatibility of our products with other third party products, particularly
those provided by IBM. Developers of these third party products may change their
products so that they will no longer be compatible with our products. These
third party developers may also decide to bundle their products with other SCM
products for promotional purposes. If that were to happen, our business and
future operating results may be materially adversely affected.
We anticipate that we will also face significant competition as we
develop, market and sell our FULL.CYCLE DESKTOP products. We do not have
experience in developing, selling, marketing or supporting desktop products
since all of our products to date have been designed to support the mainframe.
Penetrating the existing desktop SCM market will be difficult. Competitors in
the desktop market include PLATINUM technology, Micro Focus/INTERSOLV,
Microsoft, Novadigm, Novell, Rational Software and
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other smaller private companies. If we are unable to successfully penetrate the
desktop SCM market, our business and future operating results will be materially
adversely affected.
CUSTOMER USE OF SCM PRODUCTS FOR SPECIFIC BUSINESS ISSUES
We have derived a portion of our recent software license revenue and
professional services revenue from products designed to help customers resolve
SCM q problems for specific business issues. This is particularly true for our
STARTOOL and STARWARP products. We expect that current and future customers may
continue to adopt our products selectively to resolve specific SCM issues, such
as those related to Year 2000 remediation and European Monetary Union ("EMU")
conversion. Market acceptance of our products and services will depend, in large
part, on whether customers use our products as part of their overall IT
management strategy in addition to using them to resolve SCM problems related to
specific business issues. Market acceptance of our products to address general
IT business needs as well as to resolve specific business issues, such as Year
2000 remediation or EMU conversion, is critical to our business and future
success. If customers do not expand their use of our products, implement new
software products introduced by us or do not use our related maintenance and
support services to address their general IT business requirements as well as
specific issues, this will materially adversely affect our business and our
ability to sell our products.
RELIANCE ON LICENSED OR JOINT-OWNED TECHNOLOGY
STARTOOL AND STARWARP. We license our STARTOOL and STARWARP
products on an exclusive worldwide basis from A. Bruce Leland, one of our
employees. Mr. Leland holds all proprietary rights with respect to the STARTOOL
and STARWARP technology, including any derivative works or enhancements of the
existing STARTOOL and STARWARP products. Licenses of STARTOOL accounted for 12%
of our software license revenue for fiscal 1998 and 10% of our software license
revenue for the six months ended July 31, 1998. Licenses of STARWARP accounted
for 9% of our software license revenue for the six months ended July 31, 1998
but did not account for any software license revenue in fiscal 1998. Although
Mr. Leland has been employed with SERENA since February 1989, Mr. Leland may not
remain with SERENA in the future. We pay royalties of approximately 36% on net
revenue recognized from license and maintenance agreements related to STARTOOL
and STARWARP. Our licenses for these products are terminable by Mr. Leland upon
30 days notice in the event certain conditions occur, including our failure to
pay royalties to Mr. Leland on a timely basis or any other material breach by us
of the license agreement. The termination of our licenses for the STARTOOL or
STARWARP products would materially adversely affect our business, operating
results and financial condition. Should the licenses for the STARTOOL and
STARWARP products terminate, we may not be able to replace the functionality of
these products. In addition, we may not be able to continue to develop
enhancements for these products. If we are unable to replace the functionality
of these products or are unable to provide product enhancements to existing
STARTOOL and STARWARP customers, this could materially adversely affect our
business, operating results and financial condition.
SYNCTRAC. We share ownership rights in our SYNCTRAC technology for
mainframe platforms with High Power Software ("HPS"). Sales of SYNCTRAC
accounted for 3% of our software license revenue in fiscal 1998 and 4% of our
software license revenue in the six months ended July 31, 1998. HPS receives 50%
of all software license revenue and maintenance revenue derived from licenses of
the SYNCTRAC product for mainframe platforms. Although we have historically had
primary responsibility for marketing, licensing and supporting SYNCTRAC, HPS has
the ability to jointly direct these efforts. If in the future we are unable to
reach agreement with HPS on the direction or evolution of the product, our
ability to market or promote the product would be compromised. This could have a
material adverse effect on our business, operating results and financial
condition.
LENGTHY SALES CYCLES
Our sales cycle typically takes six to 18 months to complete and varies
from product to product. The length of the sales cycle may vary depending on a
number of factors over which we may have little or
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no control, including the size of a potential transaction and the level of
competition that we encounter in our selling activities. Additionally, the
emerging market for SCM products and services contributes to the lengthy sales
process in that during the sales cycle we often have to teach potential
customers about the use and benefits of our products. In certain circumstances,
we license our software to customers on a trial basis to assist the customers in
their evaluation of our products. Our sales cycle can be further extended for
product sales made through third party distributors. Any delay in the sales
cycle of a large license or a number of smaller licenses could result in
significant fluctuations in our quarterly operating results.
DEPENDENCE ON KEY PERSONNEL
Our success will depend to a significant extent on the continued service
of our senior executives and certain other key employees, including certain
sales, consulting, technical and marketing personnel. In particular, we have
historically relied on the experience and dedication of our product authors.
None of our senior management or key employees, including key product authors,
has long term employment agreements with SERENA. In addition, we do not maintain
key man life insurance on our employees and have no plans to do so. If we lost
the services of one or more of our key executives or employees, including if one
or more of our executive officers, employees or product authors decided to join
a competitor or otherwise compete directly or indirectly with SERENA, this could
materially adversely affect our business.
ABILITY TO RECRUIT PERSONNEL
EXECUTIVE OFFICERS AND KEY PERSONNEL. Our future success will likely
depend in large part on our ability to attract and retain additional experienced
sales, technical, marketing and management personnel. Competition for such
personnel in the computer software industry is intense, and in the past we have
experienced difficulty in recruiting qualified personnel, especially developers
and sales personnel. We expect competition for qualified personnel to remain
intense, and we may not succeed in attracting or retaining such personnel. If we
do not, this could materially adversely affect our business. In addition, new
employees generally require substantial training in the use of our products.
This training will require substantial resources and management attention.
INTERNATIONAL OPERATIONS. We intend to expand the scope of our
international operations and these plans will require us to attract experienced
management, service, marketing, sales and support personnel for our
international offices. Competition for such personnel is intense, and we may not
be able to attract or retain such experienced personnel.
NON-U.S. CITIZENS WORKING IN THE UNITED STATES. To achieve our business
objectives, we may recruit and employ skilled technical professionals from other
countries to work in the United States. Limitations imposed by federal
immigration laws and the availability of visas could materially adversely affect
our ability to attract necessary qualified personnel. This may have a material
adverse effect on our business and future operating results.
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of this offering, SERENA's officers, directors and
persons or entities directly related to these individuals will together
beneficially own approximately 65.2% of the outstanding shares. In particular,
Douglas D. Troxel, SERENA's founder, the Chairman of its board of directors and
its Chief Technology Officer, will own approximately 57.4% of the outstanding
shares. As a result, Mr. Troxel, in particular, and SERENA's officers and
directors, in general, will be able to control most matters requiring
stockholder approval. These matters would include the election of SERENA
directors and any approval of potential mergers, consolidations or sales of all
or substantially all of the assets of SERENA. The ability of SERENA's officers
and directors to prevent a potential change of control event may discourage
potential bids to acquire SERENA unless the terms of acquisition are approved by
these stockholders.
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YEAR 2000 RISKS
Many computer systems and software products are coded to accept only two
digit entries in the date code field. These date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates. As
a result, many companies' software and computer systems may need to be upgraded
or replaced in order to comply with such Year 2000 requirements.
In the ordinary course of our business, we test and evaluate our
software products. We believe that our software products are generally Year 2000
compliant, meaning that the use or occurrence of dates on or after January 1,
2000 will not materially affect the performance of our software products or the
ability of our products to correctly create, store, process and output
information of data involving dates. However, we may learn that certain of our
software products do not contain all necessary software routines and codes
necessary for the accurate calculation, display, storage and manipulation of
data involving dates. In addition, in certain cases, we have warranted that the
use or occurrence of dates on or after January 1, 2000 will not adversely affect
the performance of our products with respect to four digit date dependent data
or the ability to create, store, process and output information related to such
data. If any of our licensees experience Year 2000 problems as a result of their
use of our software products, those licensees could assert claims for damages.
We use third party equipment and software that may not be Year 2000
compliant. We are conducting a review of products provided by outside vendors to
determine if their products are Year 2000 compliant. This review has not been
completed. However, we have sought assurances from the suppliers of all third
party software that we believe is critical to our business that their software
is Year 2000 compliant. If this third party equipment or software does not
operate properly with regard to the Year 2000, we may incur unexpected expenses
to remedy any problems. These costs may materially adversely affect our
business. In addition, if our key systems, or a significant number of our
systems, failed as a result of Year 2000 problems we could incur substantial
costs and disruption of our business. We may also experience delays in
implementing Year 2000 compliant software products.
We are still reviewing the impact the Year 2000 issue will have on our
internal software and information systems. We plan to take necessary actions
based on the results of such analysis. We have not yet determined the costs
related to achieving Year 2000 compliance. To date our costs have not been
material, and we do not expect that such costs will be material in the future.
If these costs are material, they will materially adversely affect our business.
In addition, the purchasing patterns of our customers and potential
customers may be affected by Year 2000 issues. Many companies are spending
significant resources to correct their current software systems for Year 2000
compliance. While sales of certain of our products, in particular STARTOOL,
STARWARP and COMPAREX, have benefited from increased customer spending on Year
2000 readiness, we believe sales of our other FULL.CYCLE MAINFRAME products have
been and will continue to be adversely affected by customer focus on Year 2000
issues. Market acceptance of our products to address general IT business needs
as well as resolution of specific business issues such as Year 2000 readiness is
critical to our business and future success.
EVOLVING TECHNOLOGY STANDARDS
Our future success will depend on our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging hardware, software, database and networking platforms. We will have to
develop and introduce enhancements to our existing products and new products on
a timely basis to keep pace with technological developments, evolving industry
standards and changing customer requirements. We expect that we will have to
respond quickly to rapid technological change, changing customer needs, frequent
new product introductions and evolving industry standards that may render
existing products and services obsolete. As a result, our position in existing
markets or potential markets could be eroded rapidly by product advances. The
life cycles of our products are difficult to estimate. Our growth and future
financial performance will depend in part upon our ability to enhance
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existing applications, develop and introduce new applications that keep pace
with technological advances, meet changing customer requirements and respond to
competitive products. Our product development efforts are expected to continue
to require substantial investments. We may not have sufficient resources to make
the necessary investments. Any of these events could have a material adverse
effect on our business, operating results and financial condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
Our success will be heavily dependent upon proprietary technology. We
rely primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. Such means of protecting our proprietary rights may not be
adequate. We submitted four patent applications for our technology in 1998, and
each of these applications is still pending. These patents may never be issued.
Even if these patents are issued, they may not provide sufficiently broad
protection or they may not prove enforceable in actions against alleged
infringers. Despite precautions that we take, it may be possible for
unauthorized third parties to copy aspects of our current or future products or
to obtain and use information that we regard as proprietary. In particular, we
may provide our licensees with access to our data model and other proprietary
information underlying our licensed applications. Additionally, our competitors
may independently develop similar or superior technology. Policing unauthorized
use of software is difficult and some foreign laws do not protect our
proprietary rights to the same extent as United States laws. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Litigation could result in substantial costs and diversion of
resources and could materially adversely affect our business, operating results,
and financial condition.
RISKS OF INFRINGEMENT
Third parties may claim that our current or future products infringe
their proprietary rights. In September 1998, Compuware Corporation filed a
lawsuit against us alleging copyright infringement, trade secret
misappropriation and various tort claims related to the sale of our STARTOOL and
STARWARP products. Due to the nature of litigation generally and because the
lawsuit is at an early stage, we cannot ascertain the availability of injunctive
relief or other equitable remedies or estimate the total expenses, possible
damages or settlement value, if any, that may ultimately be incurred with
Compuware's claim. See "Business--Litigation." We may receive additional claims
in the future, and any such claims could affect our relationships with existing
customers and may prevent future customers from licensing our products. Because
we are dependent upon a limited number of products, any such claims, including
the Compuware claim, with or without merit, could be time consuming, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Royalty or license agreements may not be
available on acceptable terms or at all. We expect that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the software industry segment grows and the
functionality of products in different industry segments overlaps. As a result
of these factors, infringement claims could materially adversely affect our
business.
PRODUCT ERRORS
Because our software products are complex, they often contain errors or
"bugs" that can be detected at any point in a product's life cycle. While we
continually test our products for errors and work with customers through our
customer support services to identify and correct bugs in our software, we
expect that errors in our products will continue to be found in the future.
Although many of these errors may prove to be immaterial, certain of these
errors could be significant. Detection of any significant errors may result in,
among other things, loss of, or delay in, market acceptance and sales of our
products, diversion of development resources, injury to our reputation, or
increased service and warranty costs. In the past we have discovered errors in
certain of our products and have experienced delays in shipment of our products
during the period required to correct these errors. In addition, in certain
cases we have
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warranted that our products will operate in accordance with specified customer
requirements. If our products fail to conform to such specifications, customers
could demand a refund for the software license fee paid to us or assert claims
for damages.
PRODUCT LIABILITY
Our license agreements with our customers typically contain provisions
designed to limit exposure to potential product liability claims. Such
limitation of liability provisions may, however, not be effective under the laws
of certain jurisdictions to the extent local laws treat certain warranty
exclusions as unenforceable. Although we have not experienced any product
liability claims to date, the sale and support of our products entail the risk
of such claims. In particular, issues relating to Year 2000 compliance have
increased awareness of the potential adverse effects of software defects and
malfunctions. We may be subject to such claims in the future. While we carry
insurance covering such liability, such policies may not provide sufficient
protection should a claim be asserted. A material product liability claim could
materially adversely affect our business.
RISKS ASSOCIATED WITH POTENTIAL FUTURE ACQUISITIONS
In the future we may make acquisitions of, or large investments in,
businesses that offer products, services and technologies that we believe would
help us better provide SCM products and services or help us expand our
distribution channels. However, we may not be able to complete any such
additional acquisitions in the future. Any future acquisitions or investments
would present risks commonly encountered in acquisitions of businesses. The
following are examples of such risks:
- Difficulty in combining the technology, operations or work force of
the acquired business
- Disruption of SERENA's on-going businesses
- Difficulty in realizing the potential financial or strategic benefits
of the transaction
- Difficulty in maintaining uniform standards, controls, procedures and
policies
- Possible impairment of relationships with employees and clients as a
result of any integration of new businesses and management personnel
We expect that future acquisitions, if any, could provide for
consideration to be paid in cash, shares of SERENA common stock, or a
combination of cash and SERENA common stock. If the consideration for such
transaction is paid in common stock, this would further dilute existing
stockholders. Any amortization of goodwill or other assets resulting from such
acquisition transaction could materially impair our operating results and
financial condition. If such an acquisition or large investments were to take
place, the risks described above could materially adversely affect our business
and future operating results.
UNDESIGNATED PREFERRED STOCK
Upon completion of the offering, SERENA's board of directors will have
the authority to issue up to 5,000,000 shares of preferred stock in one or more
series. The board of directors can fix the price, rights, preferences,
privileges and restrictions of such preferred stock without any further vote or
action by SERENA's stockholders. The issuance of preferred stock allows SERENA
to have flexibility in connection with possible acquisitions and other corporate
purposes. However, the issuance of shares of preferred stock may delay or
prevent a change in control transaction without further action by the SERENA
stockholders. As a result, the market price of the SERENA common stock and the
voting and other rights of the holders of SERENA common stock may be adversely
affected. The issuance of preferred stock may result in the loss of voting
control to others. SERENA has no current plans to issue any shares of preferred
stock.
ANTITAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS
Certain provisions of SERENA's charter documents will specify certain
procedures for nominating directors and submitting proposals for consideration
at stockholder meetings. Such provisions are
18
<PAGE>
intended to increase the likelihood of continuity and stability in the
composition of the SERENA board of directors and in the policies set by the
board. These provisions also discourage certain types of transactions, which may
involve an actual or threatened change of control transaction. These provisions
are designed to reduce the vulnerability of SERENA to an unsolicited acquisition
proposal. As a result, these provisions could discourage potential acquisition
proposals and could delay or prevent a change in control transaction. These
provisions are also intended to discourage certain tactics that may be used in
proxy fights. However, they could have the effect of discouraging others from
making tender offers for SERENA's shares. As a result, these provisions may
prevent the market price of SERENA common stock from reflecting the effects of
actual or rumored takeover attempts. These provisions may also prevent changes
in the management of SERENA.
ANTITAKEOVER EFFECTS OF DELAWARE LAW
SERENA will be subject to the antitakeover provisions of the Delaware
General Corporation Law, which regulates corporate acquisitions. The Delaware
law prevents certain Delaware corporations, which will include SERENA, from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of Delaware law, a
"business combination" includes, among other things, a merger or consolidation
involving SERENA and the interested stockholder and the sale of more than 10% of
SERENA's assets. In general, Delaware law defines an "interested stockholder" as
any entity or person beneficially owning 15% or more of the outstanding voting
stock of a corporation and any entity or person affiliated with or controlling
or controlled by such entity or person. Under Delaware law, a Delaware
corporation may "opt out" of the antitakeover provisions. SERENA does not intend
to "opt out" of these antitakeover provisions of Delaware Law.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of SERENA's common stock in the
public market following this offering could materially adversely affect the
market price for such stock. The number of shares of common stock available for
sale in the public market is limited by restrictions under federal securities
law and under certain agreements that SERENA's stockholders have entered into
with the underwriters. Those agreements restrict SERENA's stockholders from
selling, pledging or otherwise disposing of their shares for a period of 180
days after the date of this prospectus without the prior written consent of
Hambrecht & Quist LLC. Hambrecht & Quist LLC may, however, in its sole
discretion, release all or any portion of the common stock from the restrictions
of the lockup agreements.
Based on shares of SERENA common stock outstanding as of the date of
this prospectus, as a result of the restrictions of federal securities law and
the agreements SERENA's stockholders have entered into with the underwriters, no
shares other than the 6,000,000 shares offered hereby will be eligible for sale
on the date of this prospectus. Approximately 16,516,750 of the restricted
shares will become eligible for sale 180 days after the date of this prospectus
when the underwriters' restrictions on selling, pledging or otherwise disposing
shares of common stock are released. Of the 16,516,750 shares that will be
eligible for sale 180 days after the date of this prospectus, 1,896,750 shares
were issued to certain officers and directors of the Company pursuant to
restricted stock agreements under the 1997 Plan of which approximately 782,391
shares will remain subject to stock repurchase rights in favor of the Company at
the 180th day should such officers or directors terminate their relationship
with SERENA. These repurchase rights will lapse ratably over time. In addition
to the restricted shares described above, approximately 1,687,500 shares, all of
which were issued in connection with our September 1998 acquisition of Optima,
will become available for sale in the public market at various times after the
180th day following the date of this prospectus in accordance with federal
securities law. Most of the restricted shares that will become eligible for sale
at the 180th date after the date of this prospectus or afterward will be subject
to certain volume limitations because they will be held by affiliates of SERENA.
19
<PAGE>
On or prior to the 180th day following the date of this prospectus, we
intend to register under the federal securities laws an additional 4,925,000
shares of common stock previously issued or reserved for issuance under our 1997
Plan, our 1999 Director Option Plan and our 1999 Employee Stock Purchase Plan.
These registered shares will include 1,896,750 shares of common stock previously
issued to certain officers and directors of the Company under restricted stock
agreements pursuant to the 1997 Plan. Of the shares issuable upon exercise of
outstanding options to be registered, approximately 253,267 shares will be
vested and eligible for sale on the 180th date following the date of this
prospectus. In addition, at the 180th day 1,114,359 shares issued pursuant to
restricted stock agreements under the 1997 Plan will no longer be subject to
repurchase rights in favor of SERENA under those restricted stock agreements and
such shares will be eligible for resale.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the book
value per share of common stock. Investors purchasing common stock in this
offering will, therefore, incur immediate dilution of $ in net tangible
book value per share of common stock. This dilution figure deducts the estimated
underwriting discounts and commissions and estimated offering expenses payable
by SERENA from the initial public offering price. Investors will incur
additional dilution upon the exercise of outstanding stock options.
NO PRIOR MARKET
Before this offering there has not been a public market for our common
stock. The initial public offering price will be determined by negotiations
between SERENA and the representatives of the underwriters. See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price. An active public market for SERENA common stock may not develop
or be sustained after this offering. The market price of the common stock may
decline below the initial public offering price.
POSSIBLE VOLATILITY OF STOCK PRICE
Future announcements concerning SERENA or our competitors could cause
the market price of the common stock to fluctuate greatly. These type of
announcements may include information concerning:
- Any shortfall in revenues or net income from revenues or net income
expected by securities analysts
- Announcements of new products by SERENA or our competitors
- Quarterly fluctuations in our financial results or the results of
other software companies, including those of our direct competitors
- Changes in analysts' estimates of our financial performance, the
financial performance of our competitors, or the financial performance
of software companies in general
- Changes in prices for our products or the products of our competitors
- Changes in our revenue growth rates or the growth rates of our
competitors
- Sales of large blocks of SERENA common stock
- Conditions in the financial markets in general and to software
industry in particular
In addition, stock prices and trading volumes for many technology
companies fluctuate widely for reasons which may be unrelated to their business
or results of operations. These fluctuations, as well as general economic,
market and political conditions, could materially adversely affect the market
price of a common stock.
20
<PAGE>
DISCRETION AS TO USE OF PROCEEDS
Our primary purpose is to create a public market for our common stock.
As of the date of this prospectus, we do not plan to use the proceeds from this
offering other than for working capital and general corporate purposes. We may
also use the proceeds in future strategic acquisitions of, or investments in,
businesses that offer products, services and technologies that further our
ability to provide SCM products and services to businesses or increase our
ability to sell our products and services to new markets. Accordingly, SERENA
will have broad discretion as to the use of the proceeds from this offering.
Until the need arises to use the proceeds, we plan to invest the net proceeds in
investment grade, interest-bearing securities.
FORWARD LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and elsewhere in this
prospectus are "forward-looking statements." Such forward-looking statements
include, without limitation, statements about the Company's plans, objectives,
expectations and intentions and other statements contained in the prospectus
that are not historical facts. When used in this prospectus, the words
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates"
and similar expressions are generally intended to identify forward-looking
statements. Because such forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements, including the Company's plans, objectives, expectations and
intentions and other factors discussed under "Risk Factors."
21
<PAGE>
USE OF PROCEEDS
SERENA will receive net proceeds of $ from the sale of 4,000,000
shares of common stock (and an additional $ from the sale of 900,000
shares if the underwriters' over-allotment option is exercised in full) at an
assumed initial public offering price of $ per share after deducting
underwriting commissions and discounts of $ (and an additional $ if
the underwriters' over-allotment option is exercised in full) and expenses of
$ . SERENA will not receive any proceeds from the sale of common stock by
the selling stockholders.
The principal purpose of this offering is to create a public market for
the common stock of SERENA. We intend to use the proceeds of the offering for
working capital, general corporate purposes and potential strategic investments
or acquisitions that complement our products, services, technologies or
distribution channels. Pending such uses, we intend to invest the net proceeds
of the initial public offering in investment grade interest-bearing securities.
DIVIDEND POLICY
SERENA has never declared or paid any cash dividends on shares of its
common stock. We intend to retain any future earnings for future growth and do
not anticipate paying any cash dividends in the foreseeable future.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at (a)
July 31, 1998, after giving effect to a three-for-two stock split effected in
July 1998 and a three-for-two stock split effected in November 1998, (b) the pro
forma total capitalization to reflect the issuance of 3,187,500 shares of common
stock in connection with the September 1998 Optima acquisition, and (c) as
adjusted to give effect to the Company's receipt of the estimated net proceeds
from the sale of 4,000,000 shares of common stock offered by the Company hereby
at an assumed initial public offering price of $ per share and the
application of the net proceeds therefrom. The capitalization information set
forth in the table below is qualified by, and should be read in conjunction
with, the more detailed Consolidated Financial Statements of SERENA and notes
thereto and the Pro Forma Condensed Consolidated Financial Statements and notes
thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
JULY 31, 1998
-----------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; no
shares issued and outstanding, actual, pro forma and as
adjusted........................................................ $ -- $ -- $ --
Common Stock: $0.001 par value, 60,000,000 shares authorized;
17,016,750 issued and outstanding, actual; 20,204,250 shares
issued and outstanding, pro forma; 24,204,250 shares issued and
outstanding, as adjusted (1).................................... 17 21
Additional paid-in capital........................................ 5,601 21,535
Notes receivable from stockholders................................ (1,922) (1,922)
Deferred stock-based compensation................................. (1,958) (1,958)
Accumulated other comprehensive losses............................ (28) (28)
Retained earnings................................................. 9,306 9,306
------------ ------------ -------------
Total stockholders' equity and capitalization................. $ 11,016 $ 26,954 $
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
- - - - ------------------------------
(1) Based upon shares outstanding as of July 31, 1998. Includes 1,896,750 shares
issued under restricted stock agreements under the 1997 Plan. Excludes
2,153,250 shares of common stock that were reserved for issuance upon
exercise of stock options under the 1997 Plan as of July 31, 1998, of which
801,360 options were outstanding at such date at a per share weighted
average exercise price of $3.59. In addition, in connection with this
offering, our board of directors has approved (i) an increase of 500,000
shares for options under the 1997 Plan; (ii) a reserve of 150,000 shares for
options to be granted under the 1999 Director Option Plan; and (iii) a
reserve of 225,000 shares for options to be granted under the 1999 Employee
Stock Purchase Plan. See "Management--Incentive Stock Plans," "Description
of Capital Stock" and Notes 6 and 9 of Notes to Consolidated Financial
Statements of SERENA.
23
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of July 31,
1998, assuming the acquisition of Optima on that date, was $10.9 million, or
approximately $0.64 per share. Pro forma net tangible book value per share
represents the amount of the Company's total assets less total liabilities,
divided by the pro forma number of shares of common stock outstanding. Dilution
in pro forma net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of common stock in the
offering made hereby and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering. After giving
effect to the sale of the 4,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $ per share
and after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company, the pro forma net tangible
book value of the Company at July 31, 1998 would have been $ , or
approximately $ per share. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing stockholders and
an immediate dilution in pro forma net tangible book value of $ per share
to new investors of common stock in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Net pro forma tangible book value per share as of July 31, 1998... $ 0.64
Increase in pro forma net tangible book value per share
attributable to new investors...................................
---------
Pro forma net tangible book value per share after offering............
---
Dilution in pro forma net tangible book value per share to new
investors........................................................... $
---
---
</TABLE>
The following table sets forth, on a pro forma basis as of July 31,
1998, the differences between the number of shares of common stock purchased
from the Company, the total effective cash consideration paid and the average
price per share paid by existing holders of common stock and by the new
investors, before deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, at an assumed public offering price of
$ per share.
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED AVERAGE
-------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)......... 20,204,250 83.5% $ 373 % $ 0.00
New investors (1)................. 4,000,000 16.5
--------- --------- ----------- -----------
Total..................... 24,204,250 100.00% $ 100.0%
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
The foregoing computations assume no exercise of options after July 31,
1998. Excludes 2,153,250 shares of common stock that were reserved for issuance
upon exercise of stock options under the 1997 Plan as of July 31, 1998, of which
801,360 options were outstanding at such date at a per share weighted average
exercise price of $3.59. Includes 1,896,750 shares issued under restricted stock
agreements under the 1997 Plan. In addition, connection with this offering the
board of directors approved (i) an increase of 500,000 shares reserved for
future issuance under the 1997 Plan; (ii) 150,000 shares reserved for future
issuance under the 1999 Director Option Plan; and (iii) 225,000 shares reserved
for future issuance under the 1999 Employee Stock Purchase Plan. To the extent
that any shares are issued upon exercise of options that are presently
outstanding or granted in the future, or reserved for future issuance under the
Company's stock plans, there will be further dilution to new investors.
"Management--Incentive Stock Plans," "Description of Capital Stock" and Notes 6
and 9 of Notes to Consolidated Financial Statements of SERENA.
- - - - ------------------------
(1) Sales by the selling stockholders in this offering will reduce the number
of shares of common stock held by existing stockholders to 18,204,500 or
approximately 75.2% (approximately 72.5%, if the Underwriters'
over-allotment option is exercised in full) of the total number of shares
of common stock outstanding upon the closing of this offering and will
increase the number of shares held by new public investors to 6,000,000 or
approximately 24.8% (6,900,000 shares, or approximately 27.5%, if the
Underwriters' over-allotment option is exercised in full) of the total
number of shares of common stock outstanding after this offering. See
"Principal and Selling Stockholders."
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data presented
below are derived from the consolidated financial statements of SERENA Software,
Inc. and its subsidiaries. The financial statements for each of the three years
ended January 31, 1998 have been audited by KPMG Peat Marwick LLP, independent
auditors. The selected historical consolidated financial data as of July 31,
1998 and for the six months ended July 31, 1997 and 1998 have been derived from
unaudited consolidated financial statements that include, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
that the Company considers necessary for a fair presentation of the Company's
results of operations for that period. The statement of income unaudited pro
forma financial information below has been derived from the unaudited Pro Forma
Condensed Combined Financial Statements included elsewhere in this prospectus.
The pro forma statement of income data give effect to SERENA's September 1998
acquisition of Optima as if the acquisition had occurred at the beginning of the
earliest period presented, February 1, 1997. The selected unaudited pro forma
financial information below does not represent what SERENA's results of
operations would have been if the Optima acquisition had occurred on the date
indicated, or the results of operations of SERENA and Optima as a combined
company for any future period. The selected consolidated financial data set
forth below is qualified in its entirety by, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Consolidated Financial Statements of SERENA and Optima and
notes thereto and the Unaudited Pro Forma Condensed Combined Financial
Statements and notes thereto included elsewhere in this prospectus. The
operating results for the periods presented are not necessarily indicative of
the results to be expected for the full fiscal year or any other period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, SIX MONTHS ENDED JULY 31,
------------------------------------------------------------ --------------------------------
1998 1998
------------------------ -----------------------
1994 1995 1996 1997 ACTUAL PRO FORMA (1) 1997 ACTUAL PRO FORMA (1)
------- ------- ------- ------- -------- -------------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
DATA:
Revenue:
Software licenses.... $ 3,055 $ 3,627 $ 4,606 $ 8,229 $ 17,839 $ 22,962 $ 6,504 $9,988 $ 11,722
Maintenance.......... 3,171 4,141 5,679 8,730 12,258 12,691 5,688 7,735 8,430
Professional
service............ 160 370 459 495 2,050 5,662 787 1,193 3,132
------- ------- ------- ------- -------- ------- ------- ------- -------
Total revenue...... 6,386 8,138 10,744 17,454 32,147 41,315 12,979 18,916 23,284
------- ------- ------- ------- -------- ------- ------- ------- -------
Operating expenses:
Cost of revenue...... 2,006 2,951 3,330 5,207 6,813 8,985 2,872 3,816 5,183
Sales and
marketing.......... 1,354 1,866 2,505 4,605 7,947 11,598 3,538 5,707 7,042
Research and
development........ 1,539 1,837 2,998 4,321 5,518 5,518 2,369 2,073 2,073
General and
administrative..... 935 1,312 1,727 2,296 3,296 5,577 1,328 1,692 2,080
Stock-based
compensation....... -- -- -- -- 880 880 -- 1,558 1,558
Amortization of
intangible
assets............. -- -- -- -- -- 1,546 -- -- 523
------- ------- ------- ------- -------- ------- ------- ------- -------
Total operating
expenses......... 5,834 7,966 10,560 16,429 24,454 34,104 10,107 14,846 18,459
------- ------- ------- ------- -------- ------- ------- ------- -------
Operating income....... 552 172 184 1,025 7,693 7,211 2,872 4,070 4,825
Interest and other
income, net.......... -- 93 160 115 321 343 130 343 343
------- ------- ------- ------- -------- ------- ------- ------- -------
Income before income
taxes................ 552 265 344 1,140 8,014 7,554 3,002 4,413 5,168
Income taxes........... 36 10 66 278 3,253 3,650 1,081 1,942 2,421
------- ------- ------- ------- -------- ------- ------- ------- -------
Net income............. $ 516 $ 255 $ 278 $ 862 $ 4,761 $ 3,904 $ 1,921 $2,471 $ 2,747
------- ------- ------- ------- -------- ------- ------- ------- -------
------- ------- ------- ------- -------- ------- ------- ------- -------
Net income per share:
Basic................ $ 0.03 $ 0.02 $ 0.02 $ 0.05 $ 0.31 $ 0.21 $ 0.12 $ 0.16 $ 0.15
------- ------- ------- ------- -------- ------- ------- ------- -------
------- ------- ------- ------- -------- ------- ------- ------- -------
Diluted.............. $ 0.03 $ 0.02 $ 0.02 $ 0.05 $ 0.31 $ 0.21 $ 0.12 $ 0.15 $ 0.14
------- ------- ------- ------- -------- ------- ------- ------- -------
------- ------- ------- ------- -------- ------- ------- ------- -------
Shares used to compute
net income per share:
Basic................ 15,750 15,750 15,750 15,750 15,248 18,436 15,376 15,639 18,827
------- ------- ------- ------- -------- ------- ------- ------- -------
------- ------- ------- ------- -------- ------- ------- ------- -------
Diluted.............. 15,750 15,750 15,750 15,750 15,272 18,460 15,376 16,361 19,549
------- ------- ------- ------- -------- ------- ------- ------- -------
------- ------- ------- ------- -------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
JANUARY 31, 1998
----------------------------------------------------- ---------
1994 1995 1996 1997 1998 ACTUAL
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 708 $ 1,953 $ 2,840 $ 4,031 $ 9,024 $ 15,665
Working capital........................................ 472 434 429 618 6,942 10,889
Total assets........................................... 2,734 4,327 6,717 9,233 20,567 25,095
Total liabilities and deferred revenue................. 2,054 3,400 5,508 7,187 13,582 14,079
Total shareholders' equity............................. $ 680 $ 927 $ 1,209 $ 2,046 $ 6,985 $ 11,016
<CAPTION>
PRO FORMA (1)
---------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 15,633
Working capital........................................ 10,478
Total assets........................................... 42,872
Total liabilities and deferred revenue................. 15,918
Total shareholders' equity............................. $ 26,954
</TABLE>
- - - - ----------------------------------
(1) For purposes of the pro forma condensed combined statements of income,
SERENA's consolidated statement of income for the fiscal year ended January
31, 1998 has been combined with Optima's consolidated statement of income
for the fiscal year ended December 31, 1997 and SERENA's consolidated
statement of income for the six month period ended July 31, 1998 has been
combined with Optima's consolidated statement of income for the six month
period ended July 31, 1998, giving effect to the Optima acquisition as if it
had occurred on February 1, 1997. For pro forma balance sheet purposes,
SERENA's consolidated balance sheet as of July 31, 1998 has been combined
with the consolidated balance sheet of Optima as of July 31, 1998, giving
effect to the Optima acquisition as if it had occurred on such date.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF SERENA AND THE NOTES THERETO AND THE PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES,
SUCH AS THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE
COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS,"
"BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
SERENA is a leading provider of software change management ("SCM") products
and services for managing and controlling change throughout the software
application life cycle. The Company was founded in 1980 and introduced its first
SCM product, COMPAREX, in 1981. Since then, the Company has developed a full
suite of FULL.CYCLE MAINFRAME products, including its flagship product CHANGE
MAN, which was introduced in 1988.
Prior to fiscal 1998, the Company focused primarily on product development
while relying on third party distributors for the majority of the Company's
sales, marketing and professional services activities. In fiscal 1998, the
Company hired a President and Chief Executive Officer who initiated a strategic
expansion of the Company's sales, marketing and professional service
capabilities. This strategic expansion includes hiring additional direct sales
personnel, initiating a telesales effort, recruiting additional third party
distributors and increasing its professional services staff. The Company also
broadened its professional management team to implement and manage the strategic
expansion initiatives. See "Risk Factors--Management of Growth."
In September 1998, the Company acquired Optima Software, Inc. ("Optima") the
primary distributor of the Company's flagship CHANGE MAN product for over ten
years. This acquisition significantly expands the Company's professional
services and sales and marketing capabilities and enables the Company to market
CHANGE MAN as part of the FULL.CYCLE MAINFRAME product suite. The Optima
acquisition was accounted for under the purchase method of accounting and the
results of operations of Optima will be included in the Company's historical
results after the acquisition date. The pro forma results of operations include
the historical financial statements of the Company and those of Optima and give
effect to the acquisition as if it had occurred on February 1, 1997, the
beginning of the earliest pro forma period presented. Any failure to
successfully integrate Optima into the Company's business could have a material
adverse effect on the Company's business, operating business and future
operating results. See "Risk Factors--Integration of Optima Software into
SERENA's Business."
The Company has grown rapidly in recent years as total revenue has increased
from $6.4 million in fiscal 1994 to $32.1 million in fiscal 1998. The growth in
total revenue has been primarily attributable to increased demand for the
Company's FULL.CYCLE MAINFRAME products as a result of greater awareness of and
need for third party SCM solutions. The Company derives its revenue from
software licenses, maintenance and professional services.
Currently, all of the Company's software license revenue is derived from its
FULL.CYCLE MAINFRAME products. Customers typically purchase the FULL.CYCLE
MAINFRAME products under Million Instructions Per Second (MIPS)-based, perpetual
licenses. Initial license transactions generally include one year of software
maintenance and support. Revenue from license agreements, excluding maintenance
revenue included with the license, is recognized upon receipt and acceptance of
a signed contract and delivery of the software, provided the related fee is
fixed and determinable, collectibility of the revenue is probable and the
arrangement does not involve significant customization of the software. Software
license revenue is
26
<PAGE>
particularly dependent on new licenses of the Company's CHANGE MAN and COMPAREX
products. In fiscal 1997, 1998 and in the six months ended July 31, 1998, sales
of CHANGE MAN and COMPAREX together accounted for approximately 72%, 82% and 71%
of the Company's software license revenue, respectively. Any factors adversely
affecting the pricing of, demand for or market acceptance of the Company's
FULL.CYCLE MAINFRAME products, such as competition or technological change,
could materially adversely affect the Company's business, operating results and
financial condition. See "Risk Factors--Dependence on FULL.CYCLE MAINFRAME
Products."
The Company also provides ongoing maintenance, which includes technical
support, version upgrades and enhancements, for an annual fee of approximately
17% of the current list price of the licensed product. The Company recognizes
maintenance revenue over the term of the contracts, typically one year, on a
straight-line basis. Over 95% of the Company's customers who were eligible to
renew their maintenance agreements in calendar year 1997 did so. There can be no
assurance that the Company will maintain this rate of renewal. See "Risk
Factors--Uncertainty as to Future Operating Results."
Professional services revenue are derived from the Company's SER(POWER)
consulting and educational services, including implementation and integration of
licensed software, specialized consulting services such as "best practices"
design, development and deployment of SCM solutions, and education courses for
the Company's products. The Company's professional services are typically billed
on a time and materials basis and revenue is recognized as the related services
are performed.
Historically, the Company's revenue has primarily been attributable to sales
in North America. In fiscal 1997, 1998 and the six months ended July 31, 1998,
revenue attributable to sales in North America accounted for approximately 85%,
85% and 81% of the Company's total revenue, respectively. The Company plans to
expand its international operations significantly, particularly in Europe, as it
believes international markets represent a significant growth opportunity.
Consequently, the Company anticipates that international revenue will increase
as a percentage of total revenue in the future. The Company's expansion of its
international operations will be subject to a variety of risks that could
materially adversely affect the Company's business operating results and
financial condition. See "Risk Factors--International Operations." In North
America, the Company's revenue is generally denominated in United States dollars
while international sales are generally denominated in local currencies,
principally the British pound. As the Company's international sales and
operations expand, it anticipates that its exposure to foreign currency
fluctuations will increase. See "Risk Factors--Currency Fluctuations."
Maintenance revenue and professional services revenue have lower operating
margins than software license revenue. In addition, the Company licenses the
technology for its STARTOOL and STARWARP products and jointly owns the
technology for its SYNCTRAC product and consequently has royalty obligations on
the revenue it recognizes in connection with license and maintenance
transactions involving these products. As a result, the Company's license
revenue for its STARTOOL, STARWARP and SYNCTRAC products has a lower operating
margin than license revenue from other products. The Company expects operating
expenses to increase substantially in the future as the Company continues to
develop new and enhanced versions of its products, including its FULL.CYCLE
DESKTOP product suite, increase its sales and marketing activities, expand its
distribution channels, increase its professional services capabilities and
pursue strategic relationships and acquisitions. Any failure by the Company to
significantly increase revenue as the Company implements these initiatives would
materially adversely affect the Company's business, operating results and
financial condition. See "Risk Factors--Uncertainty as to Future Operating
Results."
27
<PAGE>
HISTORICAL RESULTS OF OPERATIONS
The following table sets forth the historical results of operations for the
Company expressed as a percentage of total revenue. The Company's historical
operating results are not necessarily indicative of the results for any future
period and do not give effect to the acquisition of Optima.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-----------------------------------------------------
FISCAL YEAR SIX MONTHS ENDED
ENDED JANUARY 31, JULY 31,
------------------------------- --------------------
1996 1997 1998 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA
Revenue:
Software licenses............................... 42.8% 47.2% 55.5% 50.1% 52.8%
Maintenance..................................... 52.9 50.0 38.1 43.8 40.9
Professional services........................... 4.3 2.8 6.4 6.1 6.3
--------- --------- --------- --------- ---------
Total revenue................................. 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Operating expenses:
Cost of revenue................................. 31.0 29.8 21.2 22.1 20.2
Sales and marketing............................. 23.3 26.4 24.7 27.3 30.2
Research and development........................ 27.9 24.8 17.2 18.3 11.0
General and administrative...................... 16.1 13.1 10.3 10.2 8.9
Stock-based compensation........................ -- -- 2.7 -- 8.2
--------- --------- --------- --------- ---------
Total operating expenses...................... 98.3 94.1 76.1 77.9 78.5
--------- --------- --------- --------- ---------
Operating income.................................. 1.7 5.9 23.9 22.1 21.5
Interest and other income, net.................... 1.5 0.6 1.0 1.0 1.8
--------- --------- --------- --------- ---------
Income before income taxes........................ 3.2 6.5 24.9 23.1 23.3
Income taxes...................................... 0.6 1.6 10.1 8.3 10.3
--------- --------- --------- --------- ---------
Net income........................................ 2.6% 4.9% 14.8% 14.8% 13.0%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
COMPARISON OF SIX MONTHS ENDED JULY 31, 1997 AND 1998
REVENUE
The Company derives revenue from software licenses, maintenance and
professional services. The Company's total revenue increased 46% from $13.0
million for the six months ended July 31, 1997 to $18.9 million for the six
months ended July 31, 1998.
SOFTWARE LICENSES. Software license revenue increased 54% from $6.5 million
for the six months ended July 31, 1997 to $10.0 million for the six months ended
July 31, 1998, representing 50% and 53% of total revenue, respectively. The
increase in software license revenue is generally attributable to increased
demand for new licenses of FULL.CYCLE MAINFRAME products as a result of greater
customer awareness of and need for third party SCM solutions and an increase in
sales force productivity and headcount. In particular, sales of the COMPAREX
product grew significantly, with software license revenue attributable to
COMPAREX increasing from $2.6 million in the six months ended July 31, 1997 to
$4.5 million in the six months ended July 31, 1998.
MAINTENANCE. Maintenance revenue increased 36% from $5.7 million for the
six months ended July 31, 1997 to $7.7 million for the six months ended July 31,
1998, representing 44% and 41% of total revenue, respectively. The dollar
increase reflects the growth in software license revenue, as new software
licenses generally include one year of maintenance, renewals of maintenance
agreements by existing customers and, to a lesser extent, maintenance price
increases. Maintenance revenue increased at a slower rate than license revenue
because license revenue is generally recognized upon contract signing and
28
<PAGE>
delivery of the software whereas maintenance revenue is deferred and amortized
over the contractual term of the arrangement.
PROFESSIONAL SERVICES. Professional services revenue increased 52% from
$0.8 million for the six months ended July 31, 1997 to $1.2 million for the six
months ended July 31, 1998, representing 6% of total revenue in both periods.
The dollar increase is attributable to greater consulting opportunities
resulting from the Company's expanded customer base and increases in the
Company's consulting service capabilities.
OPERATING EXPENSES
COST OF REVENUE. Cost of revenue consists primarily of salaries, bonuses
and other headcount related costs associated with the Company's professional
services and customer support organizations and royalties associated with the
Company's STARTOOL, STARWARP and SYNCTRAC products. Cost of revenue was $2.9
million and $3.8 million for the six months ended July 31, 1997 and 1998,
representing 22% and 20% of total revenue, respectively. The dollar increase in
cost of revenue is due primarily to increased expenses associated with
professional services revenue, including headcount additions to support such
revenue growth, and increased software license royalties. The decline in cost of
revenue as a percentage of total revenue is attributable to the increase in
higher margin software license revenue as a percentage of total revenue.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses as well as travel, entertainment and marketing
expenses. Sales and marketing expenses were $3.5 million and $5.7 million for
the six months ended July 31, 1997 and 1998, representing 27% and 30% of total
revenue, respectively. These increases are due primarily to the Company's
expansion of its direct sales and marketing organization in these periods and,
to a lesser extent, the development of its telesales efforts. The Company
expects sales and marketing expenses to increase as it continues to hire
additional sales and marketing personnel as the Company transitions away from
relying primarily on third parties to sell and market the Company's products.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries, bonuses and other headcount related costs. Research and
development expenses were $2.4 million and $2.1 million for the six months ended
July 31, 1997 and 1998, representing 18% and 11% of total revenue, respectively.
These reductions in research and development expenses are attributable
principally to the restructuring of compensation arrangements with the Company's
founder and Chief Technology Officer. The Company expects research and
development expenses to increase as the Company continues to hire additional
research and development personnel to develop its FULL.CYCLE DESKTOP product
suite and its SERNET ENTERPRISE products.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, bonuses and other headcount related costs and certain
non-allocable administrative costs, including legal and accounting fees and bad
debts. General and administrative expenses were $1.3 million and $1.7 million
for the six months ended July 31, 1997 and 1998, representing 10% and 9% of
total revenue, respectively. The dollar increase is primarily related to costs
associated with expansion of the Company's administrative infrastructure in
order to support the Company's increased sales, marketing, consulting and
maintenance activities. The Company expects general and administrative expenses
to increase as the Company expands its infrastructure and incurs additional
costs as a result of being a public company.
STOCK-BASED COMPENSATION. In the quarter ended January 31, 1998, the
Company recorded deferred stock-based compensation of $4.0 million in connection
with the issuance of restricted stock and grant of options to purchase common
stock in January 1998. An additional $0.4 million of deferred stock-based
compensation was recorded in the six months ended July 31, 1998 for stock-based
awards granted during this period. Deferred stock-based compensation is
generally being amortized over the 36 to 48 month vesting periods of the related
award. This amortization is being recorded in a manner consistent with
29
<PAGE>
Financial Accounting Standard Board ("FASB") Interpretation No. 28. Of the total
deferred stock-based compensation, approximately $1.6 million was amortized in
the six month period ended July 31, 1998. The Company expects to amortize an
additional $0.9 million in the remainder of fiscal 1999, $0.8 million in fiscal
2000, $0.2 million in fiscal 2001 and $0.1 million in fiscal 2002. See Note 6 of
Notes to Consolidated Financial Statements of SERENA.
INTEREST AND OTHER INCOME, NET
Interest and other income, net is generated primarily from the interest
earned on cash and cash equivalents. Interest and other income, net increased
from $0.1 million in the six month period ended July 31, 1997 to $0.3 million in
the six month period ended July 31, 1998, principally as the result of increased
cash and cash equivalent balances in the latter period.
INCOME TAXES
Income taxes were $1.1 million and $1.9 million for the six months ended
July 31, 1997 and 1998, respectively. The effective tax rates for the six months
ending July 31, 1997 and 1998 were 36% and 44%, respectively. The increase in
the effective tax rate is primarily due to the $1.6 million in nondeductible
stock-based compensation. This nondeductible expense will decline ratably over
the next three years.
COMPARISON OF FISCAL YEARS ENDED JANUARY 31, 1996, 1997 AND 1998
REVENUE
The Company's total revenue was $10.7 million, $17.5 million and $32.1
million in fiscal 1996, 1997 and 1998, respectively, representing year-to-year
increases of 62% between 1996 and 1997 and 84% between 1997 and 1998.
SOFTWARE LICENSES. Software license revenue was $4.6 million, $8.2 million
and $17.8 million in fiscal 1996, 1997 and 1998, representing 43%, 47% and 56%
of total revenue, respectively. The increases are generally attributed to
increased demand for new licenses of FULL.CYCLE MAINFRAME products as a result
of greater customer awareness of and need for third party SCM solutions.
MAINTENANCE. Maintenance revenue was $5.6 million, $8.7 million and $12.3
million in fiscal 1996, 1997 and 1998, representing 53%, 50% and 38% of total
revenue, respectively. The dollar increases reflect both growth in software
license revenue, as new licenses generally include one year of maintenance,
renewals of maintenance agreements by existing customers and, to a lesser
extent, maintenance price increases. Maintenance revenue decreased as a
percentage of total revenues due to the growth in software license revenue which
is generally recognized upon contract signing and delivery of the software
whereas maintenance revenue is deferred and amortized over the contractual term
of the arrangement, usually one year.
PROFESSIONAL SERVICES. Professional services revenue was $0.5 million, $0.5
million and $2.0 million in fiscal 1996, 1997 and 1998, representing 4%, 3% and
6% of total revenue, respectively. The dollar increases are attributable to
greater consulting opportunities resulting from the Company's larger installed
customer base and expanded Company's consulting service capabilities.
OPERATING EXPENSES
COST OF REVENUE. Cost of revenue was $3.3 million, $5.2 million and $6.8
million in fiscal 1996, 1997 and 1998, representing 31%, 30% and 21% of total
revenue, respectively. The dollar increases are due primarily to increased
expenses associated with professional services revenue and maintenance revenue,
including personnel additions to support professional services and maintenance
revenue growth, and software license royalties. The decrease in cost of revenue
as a percentage of total revenues in fiscal 1998 from prior years is due in part
to the $0.3 million and $1.3 million in fees paid by the Company in fiscal 1996
and 1997, respectively, to complete the termination of a third party distributor
agreement for the
30
<PAGE>
Company's COMPAREX product. The decrease in cost of revenue as a percentage of
total revenue is also attributable to the increase in higher margin software
license revenue as a percentage of total revenue.
SALES AND MARKETING. Sales and marketing expenses were $2.5 million, $4.6
million and $7.9 million in fiscal 1996, 1997 and 1998, representing 23%, 26%
and 25% of total revenue, respectively. The dollar increases in each fiscal year
are due primarily to the Company's expansion of its sales organization which
began in fiscal 1998. The dollar increase from fiscal 1996 to fiscal 1997 is
attributable to increased salaries, commissions and profit sharing expenses and
additional marketing expenses.
RESEARCH AND DEVELOPMENT. Research and development expenses were $3.0
million, $4.3 million and $5.5 million in fiscal 1996, 1997 and 1998,
representing 28%, 25% and 17% of total revenue, respectively. The dollar
increases in each fiscal year are due primarily to increased headcount related
costs, including profit sharing expenses and increased bonus compensation to the
Company's founder and Chief Technology Officer and, to a lesser extent, costs
associated with the evaluation of third party software products. Research and
development expenses have decreased as a percentage of total revenue as the
Company's revenue has continued to increase at a faster rate than research and
development expenses have increased.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.7
million, $2.3 million and $3.3 million in fiscal 1996, 1997 and 1998,
representing 16%, 13% and 10% of total revenue, respectively. The dollar
increases in each fiscal year are primarily due to headcount related costs
associated with expansion of the Company's administrative infrastructure in
order to support the Company's increased sales, marketing, professional services
and maintenance activities. The decrease in general and administrative expenses
as a percentage of total revenue is principally attributable to the Company's
revenue growth during this period.
STOCK-BASED COMPENSATION. In the quarter ended January 31, 1998, the
Company recorded aggregate deferred stock-based compensation of $4.0 million in
connection with the issuance of restricted stock and grant of options to
purchase common stock in January 1998. Deferred stock-based compensation is
generally being amortized over the 36 to 48 month vesting periods of the related
awards. This amortization is being recorded in a manner consistent with FASB
Interpretation No. 28. Of the total deferred stock-based compensation,
approximately $0.9 million was amortized in fiscal 1998.
INTEREST AND OTHER INCOME, NET
Interest and other income, net was $0.2 million, $0.1 million and $0.3
million in fiscal 1996, 1997 and 1998, respectively. Interest and other income,
net has fluctuated from period to period based on the Company's cash balances.
INCOME TAXES
Income taxes were $0.1 million, $0.3 million and $3.3 million for fiscal
1996, 1997 and 1998, respectively. The effective tax rate was 19%, 24% and 41%
in fiscal 1996, 1997 and 1998, respectively. The Company's effective income tax
rate has historically benefited from the United States research and
experimentation tax credit and tax benefits generated from export sales made
from the United States. The Company's effective income tax rate has increased
year over year predominantly due to higher marginal tax rates resulting from
substantially higher pretax profits and the recording of $0.9 million in
nondeductible stock-based compensation recorded in the fourth quarter of fiscal
1998.
31
<PAGE>
SELECTED UNAUDITED PRO FORMA QUARTERLY RESULTS OF OPERATIONS
The following table sets forth selected unaudited pro forma condensed
combined statement of income data for the six quarters ended July 31, 1998, both
in dollar amounts and as a percentage of revenue. This information has been
derived from the Company's unaudited pro forma condensed combined statements of
income, giving effect to the Optima acquisition as a purchase as if such
acquisition had occurred as of February 1, 1997. This data should be read in
conjunction with the unaudited Pro Forma Combined Condensed Financial Statements
for the year ended January 31, 1998 and six months ended July 31, 1998 and the
notes thereto included elsewhere in this prospectus. For pro forma purposes,
SERENA's consolidated statement of operations for each of the six quarters ended
July 31, 1998 give effect to the Optima acquisition as if it had occurred on
February 1, 1997. The pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the results of operations or
financial condition that would have been reported if the Optima acquisition had
been consummated at the beginning of the earliest period indicated or that
SERENA or the combined company may report in the future.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
APR. 30, JUL. 31, OCT. 31, JAN. 31, APR. 30, JUL. 31,
1997 1997 1997 1998 1998 1998
----------- ----------- ----------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses.................................. $ 3,514 $ 4,591 $ 5,009 $ 9,848 $ 5,097 $ 6,625
Maintenance........................................ 2,774 3,013 3,275 3,629 3,953 4,477
Professional services.............................. 893 1,384 1,560 1,825 1,785 1,347
----------- ----------- ----------- ----------- ----------- ---------
Total revenue.................................... 7,181 8,988 9,844 15,302 10,835 12,449
----------- ----------- ----------- ----------- ----------- ---------
Operating expenses:
Cost of revenue.................................... 1,527 2,223 2,391 2,844 2,412 2,771
Sales and marketing................................ 2,424 2,628 2,505 4,041 3,097 3,945
Research and development........................... 1,053 1,316 1,406 1,743 1,000 1,073
General and administrative......................... 1,116 1,099 1,018 2,344 1,013 1,067
Stock-based compensation........................... -- -- -- 880 906 652
Amortization of intangible assets.................. 462 462 311 311 261 262
----------- ----------- ----------- ----------- ----------- ---------
Total operating expenses......................... 6,582 7,728 7,631 12,163 8,689 9,770
----------- ----------- ----------- ----------- ----------- ---------
Operating income..................................... 599 1,260 2,213 3,139 2,146 2,679
Interest and other income, net....................... 72 57 88 126 150 193
----------- ----------- ----------- ----------- ----------- ---------
Income before income taxes........................... 671 1,317 2,301 3,265 2,296 2,872
Income taxes......................................... 415 651 956 1,628 1,076 1,345
----------- ----------- ----------- ----------- ----------- ---------
Net income........................................... $ 256 $ 666 $ 1,345 $ 1,637 $ 1,220 $ 1,527
----------- ----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses.................................. 48.9% 51.1% 50.9% 64.4% 47.0% 53.2%
Maintenance........................................ 38.7 33.5 33.3 23.7 36.5 36.0
Professional services.............................. 12.4 15.4 15.8 11.9 16.5 10.8
----- ----- ----- ----- ----- -----
Total revenue.................................... 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- -----
Operating expenses:
Cost of revenue.................................... 21.3 24.7 24.3 18.6 22.2 22.3
Sales and marketing................................ 33.8 29.3 25.4 26.4 28.6 31.7
Research and development........................... 14.7 14.7 14.3 11.4 9.2 8.6
General and administrative......................... 15.5 12.2 10.3 15.3 9.4 8.6
Stock-based compensation........................... -- -- -- 5.8 8.4 5.2
Amortization of intangible assets.................. 6.4 5.1 3.2 2.0 2.4 2.1
----- ----- ----- ----- ----- -----
Total operating expenses......................... 91.7 86.0 77.5 79.5 80.2 78.5
----- ----- ----- ----- ----- -----
Operating income..................................... 8.3 14.0 22.5 20.5 19.8 21.5
Interest and other income, net....................... 1.0 0.6 0.9 0.8 1.4 1.6
----- ----- ----- ----- ----- -----
Income before income taxes........................... 9.3 14.6 23.4 21.3 21.2 23.1
Income taxes......................................... 5.8 7.2 9.7 10.6 9.9 10.8
----- ----- ----- ----- ----- -----
Net income........................................... 3.5% 7.4% 13.7% 10.7% 11.3% 12.3%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>
32
<PAGE>
PRO FORMA QUARTERLY RESULTS
The Company's software license revenue for the quarter ended January 31,
1998 reflects $2.5 million in revenue from a large licensing transaction with
one customer. Professional services revenue for the quarters ended January 31,
1998 and April 30, 1998 reflect increased consulting services resulting from a
single consulting arrangement. Research and development expenses in the pro
forma quarterly results do not differ substantially on a dollar basis from the
Company's historical results because Optima operated as a third-party reseller,
marketing and consulting organization which did not undertake any research and
development efforts. Operating expenses also include the amortization of
intangibles associated with the purchase accounting treatment of the Optima
acquisition totaling $16.2 million, of which $0.6 million and $1.3 million will
be amortized in fiscal 1999 and 2000, respectively. The remaining $14.3 million
will be amortized on a straight-line basis thereafter. The Company's actual
financial statements will reflect the amortization of these intangibles
beginning with the effective date of the Optima acquisition. Quarterly results
beginning with the quarter ended January 31, 1998 also include stock-based
compensation incurred in connection with the issuance of restricted stock and
the grant of certain stock options. The pro forma effective tax rate reflects
the nondeductibility of the amortization of goodwill associated with the Optima
acquisition and the stock-based compensation.
The Company's quarterly operating results have varied significantly in the
past and may vary significantly in the future depending on a number of factors,
many of which are beyond the Company's control. These factors include, among
others, the size, timing and contractual terms of large orders for the Company's
products; the budgeting cycles of the Company's customers and potential
customers; market demand for the Company's software products and services; the
Company's ability to develop, introduce and market new and enhanced versions of
its software on a timely basis; the timing and significance of new software
product announcements or releases by the Company or its competitors; changes in
pricing policies by the Company or its competitors; issues related to the
Company's planned international expansion; the mix of software license revenue
and professional services revenue; and the rate of customer renewal of
maintenance agreements. In additon, license revenues in any quarter are
substantially dependent on orders booked and shipped in the last month or weeks
of that quarter. Due to these and other factors, quarterly revenues and
operating results are not predictable with any significant degree of accurancy.
See "Risk Factors--Potential Fluctuations in Quarterly Results."
The Company experienced and expects to continue to experience seasonality in
sales of its software products. The Company's revenue and operating results in
the quarter ending January 31 are typically higher relative to other quarters,
because many customers make purchase decisions based on their calendar year-end
budgeting requirements. In addition, the January quarter tends to reflect the
effect of the incentive compensation structure for the Company's sales
organization, which is based on satisfaction of fiscal year-end quotas. As a
result, the Company has historically experienced a substantial decline in
revenue in the first quarter of each fiscal year relative to the preceding
quarter. The Company is currently attempting to expand its presence in
international markets, particularly in Europe. The Company expects the quarter
ending October 31 to reflect the effects of summer slowing of international
business activity and spending activity generally associated with that time of
year, particularly in Europe. To the extent that the Company's revenue in Europe
or other parts of the world increase in future periods, the Company expects its
period-to-period revenue to reflect any seasonal buying patterns in these
markets.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations and met its
capital expenditure requirements through cash flows from operations. At July 31,
1998, the Company had $15.7 million in cash and cash equivalents. Cash flows
provided by operating activities were $1.5 million, $2.6 million, $5.7 million
and $7.3 million in fiscal 1996, 1997 and 1998, and the six months ended July
31, 1998, respectively. The Company's cash flows provided by operating
activities exceeded net income during each of these periods principally due to
cash collections in advance of revenue recognition for maintenance contracts and
the
33
<PAGE>
inclusion of noncash expenses, such as depreciation and stock-based compensation
in net income, partially offset by growth in accounts receivable during most
periods. Cash used in investing activities were predominantly related to the
purchase of computer equipment and office furniture and equipment and totaled
$0.6 million, $1.4 million, $0.0 million and $0.7 million in fiscal 1996, 1997
and 1998, and the six months ended July 31, 1998, respectively. Cash used in
financing activities related to the repurchase of common stock in fiscal 1997
from a founder and totaled $0.7 million in fiscal 1998. There were no financing
activities in fiscal 1996 or 1997 or, as of the date of this prospectus, in
fiscal 1999.
At July 31, 1998, the Company did not have any material commitments for
capital expenditures and has no revolving credit agreement or other term loan
agreements with any bank or other financial institution.
At July 31, 1998, the Company had working capital of $10.9 million and
accounts receivable, net of allowances, of $6.2 million. Total deferred revenue
increased to $9.5 million at July 31, 1998 from $7.9 million at January 31, 1998
primarily as a result of increased billings of maintenance fees.
The Company believes that the net proceeds from the offering and cash from
operations will satisfy the Company's working capital and capital expenditure
requirements for at least the next twelve months.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
The FASB recently issued Statement of Financial Accounting Standards
("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
SFAS No. 133 addresses the accounting for derivative instruments, including
derivative instruments embedded in other contracts. Under SFAS No. 133, entities
are required to carry all derivative instruments in the balance sheet at fair
value. The accounting for changes in the fair value (i.e. gains or losses) of a
derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and, if so, the reason for holding it. The
Company must adopt SFAS No. 133 by October 1, 1999. The Company does not
anticipate that SFAS No. 133 will have an impact on its financial statements.
YEAR 2000 COMPLIANCE
Many computer systems and software products are coded to accept only two
digit entries in the date code field. These date code fields will need to accept
four digit entries to distinguish 21st century dates from 20th century dates. As
a result, many companies' software and computer systems may need to be upgraded
or replaced in order to comply with such Year 2000 requirements.
In the ordinary course of its business, the Company tests and evaluates its
software products. The Company believes that its software products are generally
Year 2000 compliant, meaning that the use or occurrence of dates on or after
January 1, 2000 will not materially affect the performance of such software
products or the ability of such products to correctly create, store, process and
output information of data involving dates. However, the Company may learn that
certain of its software products do not contain all necessary software routines
and codes necessary for the accurate calculation, display, storage and
manipulation of data involving dates. In addition, in certain cases, the Company
has warranted that the use or occurrence of dates on or after January 1, 2000
will not adversely affect the performance of its products with respect to four
digit date dependent data or the ability to create, store, process and output
information related to such data. If any of the Company's licensees experience
Year 2000 problems as a result of their use of the Company's software products,
those licensees could assert claims for damages.
The Company uses third party equipment and software that may not be Year
2000 compliant. The Company is conducting a review of products provided by
outside vendors to determine if their products are Year 2000 compliant. This
review has not been completed. However, the Company has sought assurances from
the suppliers of all third party software that the Company believes is critical
to its business that their software is Year 2000 compliant. If this third party
equipment or software does not operate properly
34
<PAGE>
with regard to the Year 2000, the Company may incur unexpected expenses to
remedy any problems. Such costs may materially adversely affect the Company's
business, operating results and financial condition. In addition, if the
Company's key systems, or a significant number of its systems, failed as a
result of Year 2000 problems the Company could incur substantial costs and
disruption of its business. The Company may also experience delays in
implementing Year 2000 compliant software products.
The Company is still reviewing the impact the Year 2000 issue will have on
its internal software and information systems. The Company plans to take
necessary actions based on the results of such analysis. The Company has not yet
determined the costs related to achieving Year 2000 compliance. To date such
costs have not been material, and the Company does not believe such costs will
be material in the future. If these costs are material, they will materially
adversely affect the Company's business, operating results and financial
condition.
In addition, the purchasing patterns of the Company's customers and
potential customers may be affected by Year 2000 issues. Many companies are
spending significant resources to correct their current software systems for
Year 2000 compliance. While sales of certain of the Company's products, in
particular STARTOOL, STARWARP and COMPAREX, have benefited from increased
customer spending on Year 2000 readiness, the Company believes sales of its
other FULL.CYCLE MAINFRAME products have been and will continue to be adversely
affected by customer focus on Year 2000 issues. Market acceptance of the
Company's products to address general IT business needs as well as resolution of
specific business issues such as Year 2000 readiness is critical to the
Company's business and future success.
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BUSINESS
THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS RELATING
TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY, WHICH
INVOLVES RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company is a leading provider of software change management ("SCM")
products and services for managing and controlling change throughout the
software application life cycle. In the Company's 18 year history, the Company
has developed substantial technological expertise in the design and
implementation of robust, flexible and reliable SCM solutions. The Company's SCM
solutions are designed to improve customer's return on information technology
("IT") IT investment by increasing programmer productivity and reducing
application development and IT infrastructure maintenance costs. As of October
31, 1998, the Company's products have been installed in over 2,000 data centers
worldwide and its customers include 36 of the Fortune 50 companies such as Chase
Manhattan, Citigroup, General Electric, IBM, MetLife, Merrill Lynch and
Prudential.
INDUSTRY BACKGROUND
The evolution of enterprise computing from centralized, mainframe-based
computing to distributed, client/server computing has added substantial
complexity in recent years to the management of IT infrastructures. Today's IT
environment is characterized by distributed information systems, applications
and networks, comprising a wide range of hardware platforms, operating systems,
databases, development tools, networking protocols, and packaged and internally
developed software. This distributed computing environment has fueled a
proliferation of applications disseminated throughout the enterprise as
departments and individual users have been empowered to independently sponsor
applications. These often disparate applications must be continually maintained
and often reprogrammed to be compatible with emerging technologies. The advent
of the Internet, intranets and extranets has added further complexity by
stimulating the development of new applications, extending the reach of
applications throughout and beyond the enterprise while introducing additional
networking requirements.
In connection with the developments associated with the distributed
computing environment, the mainframe has continued to be a critical component of
IT infrastructures. Many IT organizations maintain mission-critical applications
on the mainframe because of its unmatched performance, reliability and security.
International Data Corporation ("IDC"), a leading IT research firm, reports in a
recent survey that a majority of IT system managers surveyed will continue to
deploy new applications on mainframes when appropriate. In addition, the
exponential growth of Internet-based applications has fueled a dramatic increase
in the volume of traffic and transactions processed, requiring extensive
processing capacity and high levels of availability. IT managers are realizing
the benefits of reinvesting in mainframes to address the need for high
performance servers as Internet usage increases.
Successful management of IT infrastructures requires the ability to manage
rapid and unpredictable technological change within increasingly complex and
heterogeneous computing environments. Business issues such as competitive
pressures, short time-to-market windows, regulatory changes and Year 2000 and
European Monetary Union ("EMU") conversions introduce additional requirements
for change within IT infrastructures.
A key challenge for IT organizations is managing software change throughout
the enterprise, including new version releases, "bug fixes," upgrades and
application introductions. Any software change, if not managed effectively, has
the potential to cause system outages or corrupt data which could result in
disruption throughout the enterprise and lost business. For example, a single,
undetected error in a software update could have catastrophic results in such
mission-critical systems as airline flight planning
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and securities trading. Change in software applications can occur at all phases
of the software application life cycle, from design and analysis to development,
through testing, production and into post-deployment support and maintenance.
Policies and practices for managing and controlling change throughout the
software application life cycle include: (a) tracking and auditing application
modifications; (b) integrating application components throughout the
development, testing and production processes; (c) managing multiple application
versions to ensure the integrity of changes; (d) managing concurrent development
efforts by parallel programming teams; (e) identifying and implementing common
changes across applications and systems; (f) establishing approval and
dependency processes; (g) controlling the deployment of applications into the
existing IT environment; (h) linking the pre- and post-deployment phases through
sophisticated feedback loops; and (i) controlling application restoration and
de-installation.
Historically, organizations have attempted to address their SCM requirements
internally either with paper based, manually implemented policies and procedures
or by developing their own software solutions. These internal solutions
generally require substantial IT resources, have lengthy implementation cycles,
frequently fail and are not cost effective. To overcome the costs and risks
associated with internally developed software change management solutions, many
organizations are now seeking commercially developed SCM solutions that enable
them to cost effectively manage and control change throughout the software
application life cycle and across the enterprise. The Company believes
sophisticated SCM solutions are required as organizations face increasingly
complex and distributed IT infrastructures, limited IT resources, remote IT
project teams and tight budget constraints. Ovum, a provider of independent IT
computing research, estimates that the global market for SCM products and
services in 1998 will exceed $1 billion and will grow at a compound annual rate
of 34% to reach $3.4 billion by 2002. The Company believes that a successful SCM
solution must incorporate broad functionality and flexibility, be easy to use
and implement, promote best practices development and implementation and improve
return on IT investment.
THE SERENA SOLUTION
SERENA provides a full suite of software change management products and
services for managing and controlling change throughout the software application
life cycle. Throughout its 18 year history, the Company has developed
substantial technological expertise in the design and implementation of robust,
flexible and reliable SCM solutions. The Company's FULL.CYCLE MAINFRAME products
have been installed in more than 2,000 data centers worldwide and its customers
include 36 of the Fortune 50 companies. This product suite automates the
management of the software application life cycle and creates an IT environment
that facilitates parallel development efforts, improves process consistency,
enhances software integrity and protects valuable software assets. In addition,
the adaptability of the Company's FULL.CYCLE MAINFRAME product suite combined
with the Company's comprehensive SER(POWER) consulting services enable customers
to customize the Company's products to fully address their specific SCM
requirements. The Company's products and services are designed to improve
customers' return on IT investments by increasing programmer productivity and
reducing application development and IT infrastructure maintenance costs.
BROAD FUNCTIONALITY. The Company's FULL.CYCLE MAINFRAME product suite
provides customers with a wide range of SCM functionality for large scale,
complex computing environments. This product suite supports a comprehensive set
of software application development and life cycle management functions,
including change detection and tracking through application development, testing
and production; concurrent development, merging and reconciliation capabilities;
impact analysis; online approvals; test data generation; test results
comparison; and file and data management and synchronization.
HIGH LEVEL OF ADAPTABILITY, EASE OF USE AND IMPLEMENTATION. The FULL.CYCLE
MAINFRAME product suite provides configuration flexibility to enable easy and
quick implementation within customers' IT
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environments. This product suite integrates with existing IT applications,
systems, development tools, operating systems, databases, programming languages,
security systems, libraries and inventory lists. The FULL.CYCLE MAINFRAME
products are highly adaptable to customer's SCM processes and procedures and can
be customized for specific customer requirements. In contrast, the Company
believes that most other commercially available SCM products are inflexible and
require IT organizations to modify their current IT environments, requiring
substantial IT resources and lengthy implementation cycles.
COMPREHENSIVE CONSULTING SERVICES. The Company complements its product
offerings with its comprehensive SER(POWER) consulting services, which leverage
the Company's expertise in the design and implementation of SCM solutions.
Through the identification of products, methods and procedures that address
specific customer SCM requirements, the Company's consultants help clients
design and implement best practice change and configuration management.
IMPROVED RETURN ON IT INVESTMENT. The FULL.CYCLE MAINFRAME product suite
automates the software application life cycle, streamlining the process of
administering change and moving changes through an IT organization and allowing
incremental changes to be efficiently processed. By managing and controlling
change more effectively and efficiently, the FULL.CYCLE MAINFRAME product suite
enables customers to reduce application development costs and improve the
quality of new releases by quickly implementing applications, reducing
programmer downtime, shortening approval time, eliminating manual errors and
improving application testing and debugging.
STRATEGY
The Company's objective is to be the leader in providing SCM products and
services for managing and controlling change throughout the software application
life cycle and across the enterprise. Key components of the Company's strategy
include:
MAINTAIN TECHNOLOGY LEADERSHIP. The Company is a technology leader in
providing robust, flexible and reliable SCM solutions for the mainframe. To
strengthen and extend the Company's SCM solutions, the Company plans to continue
to invest in research and development to expand the features and functionality
of its mainframe product suite.
EXTEND SCM SOLUTIONS ACROSS THE ENTERPRISE. The Company is developing
FULL.CYCLE DESKTOP, an integrated SCM product suite for the desktop, which will
incorporate the proprietary technology and expertise found in the Company's
FULL.CYCLE MAINFRAME products. The Company anticipates introducing the first of
its FULL.CYCLE DESKTOP products, DETECT+RESOLVE, in the first half of calendar
1999 and plans to release an initial version of other FULL.CYCLE DESKTOP
products by the end of calendar 1999. Additionally, the Company intends to use
its SERNET technology to link the Company's SCM solutions across customers'
mainframe and desktop environments. The Company plans to enhance its mainframe
and desktop product suites by adding new features and integrating its solutions
with leading help desk, software distribution and management frameworks in order
to link the Company's SCM solutions to the post-deployment phase of the software
application life cycle.
LEVERAGE CUSTOMER BASE. The Company's software products have been installed
in over 2,000 data centers worldwide, and its customers include 36 of the
Fortune 50 companies. Most of the Company's customers are large, sophisticated
organizations with complex information systems in distributed computing
environments. The Company intends to make additional sales of its products,
options and services to its existing customers to help them meet their changing
SCM requirements and expanding computer capacity needs. In particular, the
Company plans to broaden its telesales efforts to reduce sales cycles and
provide a more rapid response to customer product requests.
CONTINUE TO EXPAND PROFESSIONAL SERVICES OFFERINGS. The complex and
strategic nature of software change management provides the Company with a
significant opportunity to consult with customers to
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help them successfully develop, implement and execute the Company's and SCM
solutions. The Company intends to expand its SER(POWER) professional services
offerings for the mainframe to include services for applications and systems on
the desktop platform.
EXPAND GLOBAL SALES. The Company believes that international markets and
companies within the Global 2000 represent a significant growth opportunity as
businesses increasingly recognize the need for effective SCM solutions. The
Company intends to expand the scope of its international operations,
particularly in Europe, and has established a subsidiary in the United Kingdom
and is in the process of establishing an additional subsidiary in Germany.
PURSUE STRATEGIC RELATIONSHIPS AND ACQUISITIONS. The Company continues to
pursue strategic relationships that will augment or expand the Company's SCM
product offerings and distribution channels. In particular, the Company intends
to extend its product offerings and distribution channels by partnering with
leading help desk management, software distribution and system framework
providers. In addition, the Company intends to evaluate strategic acquisition or
investment opportunities for products and technologies that complement or extend
its existing product suites or that offer access to additional distribution
channels. The acquisition of Optima, for example, significantly broadens the
Company's professional services and sales and marketing organizations and
enables the Company to market CHANGE MAN as part of its FULL.CYCLE MAINFRAME
product suite.
PRODUCTS
The Company develops, markets and supports a full suite of mainframe SCM
products for managing and controlling change throughout the software application
life cycle. SERENA's current product offerings support the industry standard IBM
mainframe platforms, including MVS, and are marketed under the brand name
FULL.CYCLE MAINFRAME. This product suite automates the software application life
cycle and creates an IT environment that facilitates parallel development
efforts, improves process consistency, enhances software integrity and protects
valuable software assets. The Company's products significantly improve
programmer productivity, reduce software application development costs and
improve customers' return on IT investments.
In addition, the Company is developing a SCM product suite for the desktop
environment that will support Microsoft Windows 95/98/NT desktop platforms.
These products will be marketed under the brand name FULL.CYCLE DESKTOP.
Together the FULL.CYCLE MAINFRAME and FULL.CYCLE DESKTOP products will be
marketed under the brand name FULL.CYCLE ENTERPRISE.
Customers typically purchase the Company's FULL.CYCLE MAINFRAME products
under MIPS-based, perpetual licenses. List prices for the Company's FULL.CYCLE
MAINFRAME products, which include one year of software maintenance and support,
range from $20,000 to $800,000.
The following products comprise the FULL.CYCLE Mainframe product suite:
<TABLE>
<S> <C> <C> <C>
- - - - ---------------------------------------------------------------------------------------------
YEAR PRODUCT
<CAPTION>
FIRST LAST
PRODUCT NAME INTRODUCED RELEASED BRIEF DESCRIPTION
<S> <C> <C> <C>
CHANGE MAN 1988 1997 Provides automated infrastructure to control and manage
software change
COMPAREX 1981 1998 Performs data comparison for application testing and
software quality
CDF 1994 1997 Merges versions of programs to enable concurrent
development
STARTOOL 1989 1998 Facilitates complex file and data management tasks
STARWARP 1997 1998 Addresses data aging problems by converting data to new
formats
SYNCTRAC 1993 1998 Detects, tracks and synchronizes changes in MVS data sets
</TABLE>
39
<PAGE>
CHANGE MAN, the Company's flagship product, is a comprehensive SCM solution
that provides an automated infrastructure to help customers manage and control
change throughout the software application life cycle. CHANGE MAN manages change
by coupling application development and production control. It provides
developers and their managers with the assurance of technological control and
integrity throughout the development process enabling them to focus on software
quality and production reliability. CHANGE MAN automates the entire software
application life cycle, providing impact analysis, version control, promotion of
fixed code into production, online management of approvals and authorizations,
management of parallel development efforts, code freezing to prevent further
development while testing, auditing and automating the backout of changes. By
using CHANGE MAN customers can improve programmer productivity, reduce
production downtime, ensure approval integrity, improve application
availability, accommodate multiple testing levels, eliminate manual errors and
shorten approval time. CHANGE MAN is a flexible, compatible SCM solution that
supports multiple operating systems and database platforms and integrates easily
with customers' existing IT environments by using standard IBM programming
languages, working with existing customer security systems, libraries and
inventory lists.
COMPAREX is a comparison SCM product used for efficient application testing
and software quality assurance. COMPAREX performs fast, accurate, single-step
comparisons of the contents of libraries, directories, files or databases by
performing line-by-line byte-level comparisons. It supports a variety of data
types, provides sophisticated comparison algorithms for both data and text,
minimizes the scope of comparisons by utilizing keywords to compare specific
portions of a file, provides direct interfaces to most major databases, and
produces detailed reports on the comparison differences. COMPAREX provides
increased flexibility, accuracy and control of change testing by enabling the
comparison of data in dissimilar positions, providing single-step direct
database comparisons, eliminating time-consuming manual change verifications and
providing detailed audit trails. Its flexibility to handle any type of
comparison problem enables COMPAREX to be used in the testing and validation
phase of a wide range of application development projects, including Year 2000
and EMU conversions.
CONCURRENT DEVELOPMENT FACILITY (CDF) facilitates the management of multiple
versions of software by providing a comprehensive comparison tool that can merge
up to eight versions of source code into a single version, and produces a report
that compares the different versions and clearly identifies differences and
conflicts. CDF can reduce application development costs by enabling parallel
programming teams to work on the same parts of an application concurrently. By
merging the different versions of a program's source code to provide a
consolidation of each team's changes, CDF greatly reduces implementation time
and improves the quality of new releases. CDF can be closely integrated with
CHANGE MAN to provide enhanced concurrent development capabilities.
STARTOOL is used for complex file and data management tasks and has
extensive editing tools. STARTOOL provides a comprehensive workbench of
utilities that may be used for application and system testing or conversion and
recovery support. STARTOOL enables users to locate and replace data and data
sets, automatically track changes to applications or systems, recreate lost
source code and diagnose and map recovery strategies for file-related problems.
STARTOOL expedites the testing of modified programs by creating test data
without requiring the rewrite or debugging of one-time programs or the use of
batch utilities.
STARWARP addresses data aging by providing a method for converting or
"warping" data stored in a particular format, including dates, currency and
other business fields into new formats. For example, STARWARP enables over 400
date fields to be converted into new formats to resolve Year 2000 issues.
STARWARP minimizes the need to write batch programs for each file-aging
situation and enables programmers to create test data by automating the process
of specifying default values for data fields.
SYNCTRAC detects, tracks and synchronizes change in multiple environments to
improve system integrity and recoverability. SYNCTRAC provides centralized
control to software change implementation and distribution after applications
are initially deployed. SYNCTRAC speeds development and problem resolution by
detecting, reporting and recovering from changes across local and remote
environments. SYNCTRAC provides
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configuration security for the production environment by using fingerprinting
technology to audit and track changes enabling system programmers to repair
unauthorized changes and to facilitate the replication of authorized changes to
remote environments.
PRODUCTS UNDER DEVELOPMENT
The Company is leveraging the proprietary technology and expertise
incorporated in its mainframe SCM product suite to develop an integrated SCM
product suite for the desktop. The Company's FULL.CYCLE DESKTOP product suite
will support the Windows 95/98/NT desktop platforms and is designed to be
integrated with leading third party software distribution, desktop management
and help desk software products. With its FULL.CYCLE MAINFRAME and FULL.CYCLE
DESKTOP product suites, the Company will be able to provide customers a complete
SCM solution across an IT enterprise. DETECT+RESOLVE, the first of the Company's
FULL.CYCLE DESKTOP products, will remotely detect software configuration
problems on the desktop and resolve the problems automatically over the network
with functionality similar to SYNCTRAC. The FULL.CYCLE DESKTOP product suite
will also include a comprehensive desktop SCM product with functionality similar
to CHANGE MAN; a comparison product used for efficient application testing and
software quality assurance with functionality similar to COMPAREX; and a version
merging product having the reconciliation capabilities needed in collaborative
development efforts with functionality similar to CDF. The Company anticipates
releasing DETECT + RESOLVE within the first half of calendar 1999 and plans to
introduce an initial version of other FULL.CYCLE DESKTOP products by the end of
calendar 1999. The Company may be unable, for technological or other reasons, to
develop and introduce these products in a timely manner. Any failure by the
Company to successfully develop, market, sell and support the FULL.CYCLE DESKTOP
would have a material adverse effect on the Company's business, operating
results and financial condition. See "Risk Factors--Product Expansion to the
Desktop Platform" and "--Product Development Delays."
TECHNOLOGY
SERNET, the core enabling technology for the Company's product suites,
provides a platform for the continued enhancement of the Company's existing
products and the rapid development of future products. SERNET serves as a
repository for the Company's key technologies and provides the Company's product
suites with a common, stable infrastructure, a set of common services for
product suite integration, an open application programming interface ("API") for
third party integration, a communications module for cross platform
interconnectivity and a common set of modules including licensing management,
file access and security. Although SERNET has existed for some time as an
embedded technology in many of the FULL.CYCLE MAINFRAME products, the Company is
currently developing three stand alone products that will be marketed under the
brand name SERNET ENTERPRISE. SERNET CONNECT, SERNET MAINFRAME and SERNET
DESKTOP will use the SERNET technology to facilitate interaction among the
Company's FULL.CYCLE MAINFRAME and FULL.CYCLE DESKTOP product suites. The SERNET
ENTERPRISE products will be designed to integrate with customer and third party
technology where interconnectivity is required. The Company currently expects an
initial version of each SERNET ENTERPRISE product to be released in the first
half of calendar 1999.
The following diagram illustrates the Company's FULL.CYCLE ENTERPRISE SCM
environment which will be comprised of the FULL.CYCLE MAINFRAME product suite,
the planned FULL.CYCLE DESKTOP product suite and the SERNET CONNECT
communications module:
Graphic depicting the Company's FULL.CYCLE Enterprise SCM environment which is
comprised of the FULL.CYCLE MAINFRAME and FULL.CYCLE DESKTOP product suites and
the SERNET Communication module. Three cylinders appear in a column on the left
edge of the graphic with "Source" "Load" and "Data" printed on them
respectively. Each cyclinder is connected from its right side to a figure
labeled "Mainframe". The Mainframe figure is connected from its right side to a
figure labeled "Window Internet." The Window Intranet figure is connected from
its right side to a figure labeled "Desktop" with
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"Client or Server" appearing beneath the desktop figure. The desktop figure is
connected on its right side to three cylinders appearing in a column on the
right edge of the graphic with "Source", "Executable" and "Data" printed on
them. The large rectangle on the left is labeled "FULL.CYCLE TM Mainframe" and
contains a circle labeled "SERNET Mainframe." To the left of the circle appear
the Company's FULL.CYCLE Mainframe product names: Change Man, COMPAREX, CDF,
SyncTrac, StarTool and StarWarp. The large rectangle on the right is labeled
"FULL CYCLE Desktop" and contains a circle labeled "SERNET Desktop" intended to
indicate the Company's 14 Development desktop SCM product suite. To the right of
the circle appear the Company's FULL.CYCLE Desktop product names: Change,
Compare, Merge + Reconcile and Detect + Resolve. Below the large rectangle on
the right "UNDER DEVELOPMENT" appears in all capital letters is underlined. The
bottom half of the graphic is composed of two large rectangles on the left and
right side of the bottom of the graphic connected by a thin rectangle labeled
"SERNET Connect".
In addition to SERNET, the Company has developed a number of other SCM
technologies, including:
- A comparison engine detecting differences and tracking changes as
small as individual bit values. This technology enables customers to
compare extremely large volumes of data rapidly from a diverse set of
sources including databases, indexed files and flat file structures.
- A merge engine processing changes made to the same source code program
by different development teams that enables parallel development teams
to apply changes to an application concurrently, while determining
whether the changes are compatible.
- A fingerprinting technology enabling application or system changes to
be detected with a high level of granularity by reducing each data
file in a system to a unique eight-byte token or "fingerprint" which
changes if any bit is altered. Fingerprinting allows programmers and
systems managers to quickly determine which changes have led to
operational errors, thereby facilitating timely problem detection and
resolution.
- An object factory technology consolidating desktop components into
single objects and collecting them in class libraries, allowing for
code re-use and enabling customers to develop inventories containing
proven, tested and reliable codes, thereby facilitating the rapid
development and deployment of products to the desktop. The object
factory technology has an open API structure of class libraries that
can be incorporated with original equipment manufacturer ("OEM") tool
kits.
PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
The Company's services group provides technical consulting, education,
customer support and product maintenance to help customers maximize the
utilization of the Company's FULL.CYCLE MAINFRAME products. The Company offers
its consulting and education services under the SER(POWER) brand name.
CONSULTING. The Company provides a comprehensive range of consulting
services to its customers. The Company's consultants review customers' existing
IT systems and applications and make recommendations for changing those systems
and applications and customizing the Company's SCM products so that customers
can fully realize the benefits of the FULL.CYCLE MAINFRAME products. In addition
to helping customers customize, install and deploy the Company's software
products, consulting services may also include process reengineering and
developing interfaces with customers' databases, third party proprietary
software repositories or fourth generation code generators.
The Company also offers customers more specialized consulting services.
These specialized consulting services expand the Company's SER(POWER) service
offerings to include the Company's BEST PRACTICES CONSULTING SERVICES, which
provide customers with expertise and assistance in defining and developing a
best practice change and configuration management architecture and in
identifying corresponding products, methods and procedures. In addition, the
Company's YEAR 2000 SERVICES and EUROPEAN MONETARY UNION
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<PAGE>
SERVICES assist customers in achieving Year 2000 and EMU conversion readiness.
The Company's consultants work with customers' IT organizations to identify and
prioritize the critical success factors that are required for effective Year
2000 and EMU conversion solutions, to manage corresponding system and
application changes and to automate the necessary testing processes. The
Company's consulting services are typically billed on a time and materials
basis.
EDUCATION. The Company offers hands-on training courses for the
implementation and administration of its products. Product training is provided
on a periodic basis at the Company's headquarters in Burlingame, California, at
its offices in London and also at customer sites throughout the United States
and Europe. The Company also offers custom course development and CD-ROM based
multimedia education for certain of its products. The Company bills its
education services on a per class basis.
CUSTOMER SUPPORT AND PRODUCT MAINTENANCE. The Company has a staff of
customer service personnel who provide technical support to customers. The
Company offers technical support services 24 hours a day, seven days a week via
its Internet site, toll free telephone lines, electronic mail, bulletin board
service and facsimile lines. Customers are notified about the availability of
regular maintenance and enhancement releases via Internet-based electronic mail.
Initial product license fees include one year of product software maintenance
and support. Thereafter, customers are entitled to receive software updates,
maintenance releases and technical support for an annual maintenance fee
equivalent to approximately 17% of the current list price of the licensed
product. Over 95% of the Company's customers who were eligible to renew their
maintenance agreements during calendar year 1997 did so. There can be no
assurance that the Company will maintain this rate of renewal. See "Risk
Factors--Uncertainty as to Future Operating Results."
RESEARCH AND DEVELOPMENT
The Company believes that the ability to introduce new and enhanced products
to customers will be a key factor for future success. As part of its efforts to
generate ideas for enhancing its existing products and for developing new ones,
the Company maintains an ongoing dialogue with its customers who are continually
facing new SCM challenges in their evolving IT environments. The Company has
devoted and expects to continue to devote significant resources to developing
new and enhanced products, including the FULL.CYCLE DESKTOP and SERNET
ENTERPRISE product suites.
Most of the Company's technical personnel have been employed by the Company
for a substantial length of time and their significant knowledge base
contributes to the Company's ability to understand and address customers' SCM
requirements. The Company believes that attracting and retaining talented
software developers who understand the customers' problems is an important
component of the Company's product development activities. The Company
encourages its developers to assume responsibility for the design and delivery
of their products through its product authorship incentive program that rewards
the Company's developers with commissions based on the market success of the
applications they design, write, market and support. Competition for developers
is intense and any failure by the Company to continue to attract and retain
qualified personnel could have a material adverse effect on the Company's
business, operating results and financial condition. See "Risk Factors--Ability
to Recruit Personnel."
The Company's research and development expenses were $3.0 million, $4.3
million, $5.5 million and $2.1 million in fiscal 1996, 1997 and 1998 and the six
months ended July 31, 1998, representing 28%, 25%, 17% and 11% of total
revenues, respectively. The reduction in research and development expenses for
the six months ended July 31, 1998, is attributable principally to the
restructuring of compensation arrangements with the Company's founder and Chief
Technology Officer. The Company expects the research and development expenses
will increase as the Company hires additional research and development personnel
to develop its FULL.CYCLE DESKTOP and SERNET ENTERPRISE products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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The Company believes that its ability to develop and introduce enhancements
to its products and new products on a timely basis is a key success factor. The
Company expects that it will have to respond quickly to rapid technological
change, changing customer needs, frequent new product introductions and evolving
industry standards that may render existing products and services obsolete. The
Company has in the past devoted and expects in the future to continue to devote
a significant amount of resources to developing new and enhanced products. The
Company currently has a number of product development initiatives underway.
There can be no assurance that any enhanced products, new products or product
suites will be embraced by existing or new customers. The failure of these
products to achieve market acceptance would have a material adverse effect on
the Company's business, operating results and financial condition. See "Risk
Factors--Evolving Technology Standards."
CUSTOMERS
As of October 31, 1998, SERENA had licensed its SCM products for use in over
2,000 data centers worldwide and its customers include 36 of the Fortune 50
companies. The following is a representative list of the Company's customers
that have purchased at least $100,000 in software licenses, maintenance and
professional services since the beginning of fiscal 1998:
<TABLE>
<S> <C>
ABN AMRO Service Company, Inc. State of California, Health & Welfare
Aegon USA, Inc. Agency Data Center
Aetna Life Insurance Company International Business Machines
Affiliated Computer Services, Inc. Corporation
American Express Financial Corp. Integrated Systems Solution
Ameritech Services, Inc. Corporation
Ames Department Stores, Inc. Manulife Financial
Automatic Data Processing, Inc. MCI WorldCom Communications
Bank of Nova Scotia Merrill Lynch & Co. Inc.
Bear Stearns & Co. Inc. Metropolitan Life Insurance Company
BellSouth Information Services National City Corp.
CGI Telecom Information and Services, Inc. NationsBanc Services, Inc.
The Chase Manhattan Corporation Policy Management Systems Corporation
Citigroup, Inc. The Prudential Insurance Company of
Computer Sciences Corporation America
Credit Communal de Belgique Rensselaer County Industries
Credit Suisse First Boston Corporation Salomon Smith Barney Inc.
First Union National Bank Sears Canada Inc.
Fortis Inc. U.S. Sprint Communications Company,
The Franklin Mint L.P.
General Electric Company Toyota Motor Sales, USA, Inc.
Hartford Fire Insurance Company Washington Mutual, Inc.
Wells Fargo Bank, N.A.
Zurich Insurance Company
</TABLE>
The following are examples of customers who use the Company's products and
professional services for managing enterprise level, mission-critical
applications for large organizations.
CREDIT COMMUNAL DE BELGIQUE ("CREDIT COMMUNAL") is the Belgian banking
institution of the Dexia Group, a leader in the financing of public service
facilities in Europe, composed of Credit Local de France, Credit Communal,
Banque International a Luxembourg and Dexia Public & Project Finance
International Bond. Credit Communal sought an SCM solution that could
standardize its software application development procedures, provide versioning
capability and enable concurrent development efforts by multiple programming
teams. Credit Communal chose CHANGE MAN because of its broad functionality, ease
of use and implementation, adaptability and customization capabilities to
address specific SCM requirements. CHANGE MAN provides Credit Communal with an
automated software change infrastructure enabling Credit Communal to better
manage and control its software application development environments.
Additionally,
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<PAGE>
Credit Communal has integrated CDF with CHANGE MAN to provide enhanced
concurrent development capabilities and has integrated SYNCTRAC to manage and
synchronize software in their production and test systems. Credit Communal also
uses these products for Year 2000 and EMU readiness.
FIRST UNION NATIONAL BANK ("FIRST UNION"), headquartered in Charlotte, North
Carolina, is a commercial bank serving more than 16 million customers. Before
purchasing CHANGE MAN, First Union used an internally developed SCM solution
which did not have versioning or concurrent development capabilities. First
Union chose CHANGE MAN because of its broad functionality, ease of use and
implementation and versioning and concurrent capabilities. CHANGE MAN has
improved First Union's control of its software application development process
including synchronizing source to load modules and protecting source code. First
Union also uses COMPAREX and CDF to increase programmer productivity by
identifying differences between versions of code.
SALES AND MARKETING
In North America, the United Kingdom and Germany, the Company markets its
software primarily through its direct sales organization. The Company's North
American sales organization includes personnel in the metropolitan areas of
Boston, Chicago, Los Angeles, New York, Sacramento, San Francisco and Toronto.
The Company's direct sales force works closely with customers to understand
and address their SCM needs. In particular, the Company plans to broaden its
telesales efforts to reduce sales cycles and provide a rapid response to
customer product requests.
In addition to its direct sales and telesales efforts, the Company has
established relationships with distributors and resellers located in North
America, Europe, Israel and South Africa. In addition to marketing and selling
the Company's software, these distributors and resellers provide technical
support as well as educational and consulting services.
The Company markets its products through seminars, industry conferences,
trade shows, advertising, direct mailing efforts and the Company's Internet
site. In addition, the Company has developed programs that promote an active
exchange of information between the Company and its existing customers. These
programs include customer meetings with the Company's senior management at its
Executive Briefing Center and focus group meetings with customers to evaluate
product positioning. The Company plans to continue to expand its marketing
organization to broaden the Company's market presence.
COMPETITION
The market for the Company's products is highly competitive and diverse. The
technology for SCM products may change rapidly. New products are frequently
introduced and existing products are continually enhanced. Competitors vary in
size and in the scope and breadth of the products and services that they offer.
Many of the Company's current and potential competitors have greater financial,
technical, marketing and other resources than the Company has. As a result, they
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements. They may also be able to devote greater resources to
the development, promotion and sale of their products than the Company can. The
Company may not be able to compete successfully against current and future
competitors.
EXISTING COMPETITION. The Company faces competition from a number of
sources, including:
- Customers' internal IT departments
- Providers of SCM products that compete directly with the Company's
CHANGE MAN and COMPAREX products such as Computer Associates, PLATINUM
technology, IBM and smaller private companies
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<PAGE>
- Providers of SCM application development programmer productivity and
system management products such as Compuware, Microsoft, IBM and
smaller private companies
FUTURE COMPETITION. Barriers to entry in the software market are relatively
low. As a result, the Company may face competition in the future from
established companies who have not previously entered the mainframe SCM market
or from emerging, entrepreneurial software companies. These companies may not
only develop their own mainframe SCM solutions, but they may also acquire or
establish cooperative relationships with the Company's current competitors,
including cooperative relationships between large, established companies and
smaller private companies. Because larger companies have significant financial
and organizational resources available, they may be able to quickly penetrate
the mainframe SCM market through acquisitions or strategic relationships and may
be able to leverage the technology and expertise of smaller companies and
develop successful SCM products for the mainframe. The Company expects that the
software industry, in general, and providers of SCM solutions, in particular,
will continue to consolidate. It is possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share.
The Company's ability to sell its products also depends, in part, on the
compatibility of its products with other third-party products, particularly
those provided by IBM. Developers of these third-party products may change their
products so that they will no longer be compatible with our products. These
third-party developers may also decide to bundle their products with other SCM
products for promotional purposes. This could materially adversely affect the
Company's business and future operating results.
The Company anticipates that it will also face significant competition as it
develops, markets and sells its FULL.CYCLE DESKTOP products. The Company does
not have experience in developing, selling, marketing or supporting desktop
products since all of its products to date have been designed to support the
mainframe. Penetrating the existing desktop SCM market will be difficult.
Competitors in the desktop market include PLATINUM technology, Micro
Focus/INTERSOLV, Microsoft, Novadigm, Novell, Rational Software and smaller
private companies.
INTELLECTUAL PROPERTY
The Company's success will be heavily dependent upon proprietary technology.
The Company relies primarily on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. Such laws provide only limited protection. The
Company submitted four patent applications for its technology in 1998 and each
of these applications is still pending. These patents may never be issued. Even
if these patents are issued, they may not provide sufficiently broad protection
or they may not prove enforceable in actions against alleged infringors. Despite
precautions that the Company takes, it may be possible for unauthorized third
parties to copy aspects of the Company's current or future products or to obtain
and use information that the Company regards as proprietary. In particular, the
Company may provide its licensees with access to its data model and other
proprietary information underlying its licensed applications. Such means of
protecting the Company's proprietary rights may not be adequate. Additionally,
the Company's competitors may independently develop similar or superior
technology. Policing unauthorized use of software is difficult and some foreign
laws do not protect the Company's proprietary rights to the same extent as
United States laws. Litigation may be necessary in the future to enforce the
Company's intellectual property rights, to protect its trade secrets or to
determine the validity and scope of the proprietary rights of others. Litigation
could result in substantial costs and diversion of the Company's resources and
could materially adversely affect the Company's business, operating results, and
financial condition.
Third parties may claim that the Company's current or future products
infringe their proprietary rights. In September 1998, Compuware Corporation
filed a lawsuit against the Company alleging copyright infringement, trade
secret misappropriation and various tort claims related to the sale of our
STARTOOL and STARWARP products. Due to the nature of litigation generally and
because the lawsuit is at an early stage,
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<PAGE>
the Company cannot ascertain the availability of injunctive relief or other
equitable remedies or estimate the total expenses, possible damages or
settlement value, if any, that may ultimately be incurred with Compuware's
claim. However, the Company may receive additional claims in the future and any
such claims could affect the Company's relationships with existing customers and
may prevent future customers from licensing its products. Because the Company is
dependent upon a limited number of products, any such claims, including the
Compuware claim, with or without merit, could be time consuming, result in
costly litigation, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Royalty or license agreements may not be
available on acceptable terms or at all. The Company expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the software industry segment grows and
the functionality of products in different industry segments overlaps. As a
result of these factors, infringement claims could materially adversely affect
the Company's business, operating results and financial condition. See
"Litigation" and "Risk Factors--Risks of Infringement."
The Company licenses its STARTOOL and STARWARP products on an exclusive,
world-wide basis from A. Bruce Leland, one of its employees. Mr. Leland holds
all proprietary rights with respect to the STARTOOL and STARWARP technology,
including any derivative works or enhancements of the existing STARTOOL and
STARWARP products. Sales of STARTOOL accounted for 12% and 10% of the Company's
software licensing revenue for fiscal 1998 and for the six months ended July 31,
1998, respectively. Licenses of STARWARP accounted for 9% of the Company's
software licensing revenue for six months ended July 31, 1998 and did not
account for any software license revenues in fiscal 1998. Although Mr. Leland
has been employed with SERENA since February 1989, Mr. Leland may not remain
with the Company in the future. The Company's licenses to copy, market and
distribute STARTOOL and STARWARP are exclusive, worldwide and nontransferable.
The Company pays royalties of approximately 36% on net revenue recognized from
license and maintenance agreements related to STARTOOL and STARWARP. The
Company's licenses for these products are terminable by Mr. Leland upon 30 days
notice in the event certain conditions occur, including if the Company fails to
pay royalties on a timely basis or otherwise materially breaches the license
agreement. The Company owns the trademarks for both STARTOOL and STARWARP.
The Company shares ownership rights in its SYNCTRAC technology for mainframe
platforms with High Power Software ("HPS"), a developer of data protection
software for the mainframe. Sales of the SYNCTRAC product accounted for 3% and
4% of the Company's software license revenue in fiscal 1998 and in the six
months ended July 31, 1998, respectively. HPS receives 50% of all software
license revenue and maintenance revenue derived from licenses of the SYNCTRAC
product for mainframe platforms. Although the Company has had primary
responsibility for marketing, licensing and supporting SYNCTRAC, HPS has the
ability to jointly direct marketing, sales and support efforts regarding the
product. The Company owns the SYNCTRAC technology for deployment on
non-mainframe platforms and does not share this ownership with HPS or any other
third party.
If the Company's licenses for its STARTOOL and STARWARP technologies
terminated or its relationship with HPS worsened with regard to the joint
direction of marketing, sales and support efforts for SYNCTRAC, this could
materially adversely affect the Company's business, operating results and
financial condition. See "Risk Factors--Reliance on Licensed or Jointly Owned
Technology."
LITIGATION
In September 1998, Compuware Corporation ("Compuware") filed suit against
the Company in the United States District Court for the Eastern District of
Michigan seeking unspecified compensatory damages, costs and attorneys fees, and
injunctive relief based on allegations of copyright infringement, trade secret
misappropriation and various tort claims related to the Company's sale of its
STARTOOL and STARWARP products. Compuware served the complaint on the Company on
November 18, 1998.
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<PAGE>
Due to the nature of litigation generally and because the lawsuit brought by
Compuware is at an early stage, the Company's management cannot ascertain the
availability of injunctive relief or other equitable remedies or estimate the
total expenses, possible damages or settlement value, if any, that may
ultimately be incurred in connection with Compuware's suit. However, management
believes, based on the advice of counsel, that it has meritorious defenses to
the allegations contained in Compuware's complaint. The Company believes that
this matter will not have a material adverse effect on the results of operations
or financial condition of the Company. This litigation could be time consuming
and costly, and there can be no assurance that the Company would necessarily
prevail given the inherent uncertainties in litigation. In the event that the
Company does not prevail in litigation, the Company could be prevented from
selling its STARTOOL and STARWARP products or be required to enter into royalty
or licensing agreements or pay monetary damages. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the Company
or at all. In the event of a successful claim against the Company, the Company's
business, operating results or financial condition could be materially adversely
affected.
EMPLOYEES
As of October 31, 1998, SERENA had 186 full-time employees, 30 of whom were
engaged in research and development, 62 in sales and marketing, 64 in
consulting, education and customer and document support, and 30 in finance,
administration and operations. The Company's future performance depends in
significant part upon the continued service of its key technical, sales and
senior management personnel. The loss of the services of one or more of the
Company's key employees could materially adversely affect the Company's
business, operating results and financial condition. The Company's future
success also depends on its continuing ability to attract, train and retain
highly qualified technical, sales and managerial personnel. Competition for such
personnel is intense, and the Company may not be able to retain its key
personnel in the future. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be good.
FACILITIES
The Company's principal administrative, sales, marketing, consulting,
education, customer support and research and development facilities are located
at its headquarters in Burlingame, California. The Company currently occupies an
aggregate of approximately 26,000 square feet of office space in the Burlingame
facility under the terms of various leases, the first of which terminates,
unless renewed, in December 2001. Management believes its current facilities
will be adequate to meet its needs for at least the next twelve months. The
Company believes that suitable additional facilities will be available in the
future as needed on commercially reasonable terms.
The Company also leases office space for sales and marketing in Sacramento,
California and Atlanta, Georgia, has a subsidiary in the United Kingdom and is
in the process of establishing an additional subsidiary in Germany.
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MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of the date of this
prospectus.
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - - ------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Douglas D. Troxel................... 53 Chairman of the Board and Chief Technology
Officer
Richard A. Doerr.................... 55 President, Chief Executive Officer and Director
Marianne M. Elkholy................. 47 Vice President, Worldwide Marketing
Kevin C. Parker..................... 42 Vice President, Research and Development
Robert I. Pender, Jr................ 41 Vice President, Finance and Administration,
Chief
Financial Officer and Secretary
Sydney S. Phelan.................... 47 Vice President, North American Consulting
Roger A. Richardson................. 37 Vice President, International Operations
Anthony G. Stayner.................. 42 Vice President, Services
Vita A. Strimaitis.................. 38 Vice President, General Counsel and Assistant
Secretary
Mark E. Woodward.................... 40 Vice President, Sales
Alan H. Hunt........................ 56 Director
</TABLE>
In addition to the directors named above, prior to the sales of shares under
this offering, the Company intends to add to the Company's Board of Directors at
least one other director, in addition to Alan H. Hunt, who will be neither
employed by the Company nor affiliated with the Company's principal
stockholders. The Company's Audit and Compensation Committees, which will be
established prior to the completion of this offering, will be comprised of at
least two outside directors.
DOUGLAS D. TROXEL is the founder of the Company and has served as the
Chairman of its Board of Directors since April 1980 and as its Chief Technology
Officer since April 1997. From June 1980 to April 1997, Mr. Troxel served as the
President and Chief Executive Officer of the Company. Mr. Troxel holds a B.S. in
mathematics from Iowa State University.
RICHARD A. DOERR has served as the Company's President, Chief Executive
Officer and as a member of its Board of Directors since April 1997. From April
1995 until October 1996, Mr. Doerr was Vice President of Sales, Service and
Distribution for Wall Data Incorporated, a software connectivity company. From
October 1991 until October 1994, Mr. Doerr was Vice President, Worldwide
Operations for Oracle Corporation, a developer of relational database management
software. From August 1986 until October 1991, Mr. Doerr was Vice President,
Western Area and U.S. Healthcare Industry for Digital Equipment Corporation, a
developer of networking solutions for computer environments. Mr. Doerr holds a
B.S. from California Polytechnic State University.
MARIANNE M. ELKHOLY has served as the Company's Vice President, Marketing
since October 1997. From April 1997 until August 1997, Ms. Elkholy was Vice
President, Marketing for Virtual Integration Technology, Inc., a developer of
data warehousing and information delivery solutions. From March 1994 until
February 1997, Ms. Elkholy was Executive Director of Marketing for Informix
Corporation, a developer of relational database management software. From March
1990 until March 1994, Ms. Elkholy was a Director of Marketing for Oracle
Corporation, a developer of relational database management software. Ms. Elkholy
holds a B.S. and an M.S. in mathematics from Marywood College.
KEVIN C. PARKER has served as the Company's Vice President, Research and
Development since November 1998. From October 1997 until November 1998, Mr.
Parker served as the Company's Director of Technology Development. From November
1995 until April 1997, Mr. Parker was Director of Product Development for
Command Technology Corporation, a developer of mainframe-style programmer's
tools.
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<PAGE>
From November 1989 until November 1995, Mr. Parker was Managing Director of IT
Independent Training Limited, a developer of software training products.
ROBERT I. PENDER, JR. has served as the Company's Vice President, Finance
and Administration, Chief Financial Officer and Secretary since December 1997.
From December 1996 until August 1997, Mr. Pender was Vice President, Finance of
Mosaix, Inc., a customer interaction software company. From April 1993 until
December 1996, Mr. Pender served in a variety of positions, most recently as
Chief Financial Officer, with ViewStar Corporation, a client/server workflow
software company that was acquired by Mosaix, Inc. in December 1996. Mr. Pender
holds a B.A. in accounting from Baylor University and an M.S. in financial
planning and tax from Golden Gate University.
SYDNEY S. PHELAN has served as the Company's Vice President, North American
Consulting Services since September 1998. From August 1992 until September 1998,
Ms. Phelan was a Vice President with Optima Software, Inc., a distributor of
change management software that was acquired by the Company in September 1998.
Ms. Phelan holds a B.A. in English and psychology from the University of
Connecticut.
ROGER A. RICHARDSON has served as the Company's Vice President,
International Operations since May 1998. From February 1997 until October 1997,
Mr. Richardson was Director of European Operations for True Software Inc., a
developer of software change management products. From February 1996 until
January 1997, Mr. Richardson was a director with Sequalogic Plc, a contract
agency. From April 1993 until January 1996, Mr. Richardson held various business
management positions, most recently as Vice President, Northern Europe, at
Legent, Inc., a developer of software change management products.
ANTHONY G. STAYNER has served as the Company's Vice President, Services
since September 1998. From June 1998 until September 1998, Mr. Stayner served as
the Company's Vice President, Professional Services. From February 1996 until
January 1998, Mr. Stayner was Director of Product Marketing, Services Business
Unit for Network Associates, Inc., a network security and performance management
company. From November 1994 until February 1996, Mr. Stayner was the Principal
for Stayner & Associates, a marketing and management consulting services firm.
From March 1992 until November 1994, Mr. Stayner was the Vice President of
Marketing for Common Ground Software, a developer of software for the
distribution of electronic documents across multiple platforms. Mr. Stayner
holds a B.A. in economics and mathematics from the University of California,
Davis, a J.D. from the University of California, Berkeley and a M.B.A. from
Stanford University.
VITA A. STRIMAITIS has served as the Company's Vice President, General
Counsel and Assistant Secretary since July 1997. Ms. Strimaitis also served as
the Company's Director of Licensing from September 1996 until July 1997. From
April 1995 until February 1996, Ms. Strimaitis was Vice President and General
Counsel for Financial Benefit Group, an annuity insurance company. From August
1994 until April 1995, Ms. Strimaitis was a Senior Corporate Attorney for
Uniforce Staffing Services, a professional services resources company. From June
1986 until January 1993, Ms. Strimaitis was Assistant General Counsel and
Corporate Secretary for Pioneer Financial Services, Inc., an insurance holding
company. Ms. Strimaitis holds a B.A. in political science and psychology from
Loyola University and a J.D. from Northern Illinois University College of Law.
MARK E. WOODWARD has served as the Company's Vice President, Sales since
November 1998. From August 1997 until November 1998, Mr. Woodward was Senior
Vice President, Sales for Live Picture, Inc., a developer of Internet imaging
technology. From August 1995 until August 1997, Mr. Woodward was Vice President,
Sales for McAfee Associates, a network management firm. From March 1989 until
August 1995, Mr. Woodward was Vice President, Sales for Legent Inc., a developer
of software change management products.
ALAN H. HUNT has served as a member of the Company's Board of Directors
since February 1998. From October 1995 to January 1998, Mr. Hunt was the
President and Chief Executive Officer and a member of the Board of Directors of
Peregrine Systems, Inc., a provider of infrastructure management
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software solutions. From July 1994 until November 1995, Mr. Hunt was President
and Chief Executive Officer and a member of the Board of Directors of XVT
Software Inc., a development tools software company. From March 1991 until May
1994, Mr. Hunt was Senior Vice President of Sales and Marketing (North America)
for BMC Software, Inc., a vendor of software system utilities for IBM mainframe
computing environments. Mr. Hunt holds a B.S. in business administration and
industrial management from San Jose State College.
BOARD COMMITTEES
Prior to the completion of this offering, the Company will establish an
Audit Committee and a Compensation Committee. The Audit Committee will review
the internal accounting procedures of the Company and consult with and review
the services provided by the Company's independent accountants. The Compensation
Committee will review and recommend to the Board of Directors the compensation
and benefits of all officers of the Company and will establish and review
general policies relating to compensation and benefits of employees of the
Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee will be responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company and administering various incentive compensation and
benefit plans. The Compensation Committee will consist of two outside directors.
Alan H. Hunt is currently the Company's only outside director. The Company
expects to appoint at least one additional outside director prior to the
completion of this offering. Richard A. Doerr, President, Chief Executive
Officer and a director of the Company, will participate in all discussions and
decisions regarding salaries and incentive compensation for all employees and
consultants of the Company, except that he will be excluded from discussions
regarding his own salary and incentive compensation.
DIRECTOR COMPENSATION
The Company reimburses each member of the Company's Board of Directors for
out-of-pocket expenses incurred in connection with attending board meetings. No
member of the Company's Board of Directors currently receives any additional
cash compensation. At the time Mr. Hunt became a member of the Board of
Directors, the Company granted Mr. Hunt 56,250 shares of Common Stock pursuant
to a restricted stock purchase agreement at a purchase price per share of $1.44.
Under the terms of that agreement, the Company has a right to repurchase any
unvested shares in the event Mr. Hunt's membership in the Board of Directors
should terminate. One quarter of Mr. Hunt's shares will vest upon the first
anniversary of his membership on the Board of Directors, and the remaining
shares will vest monthly thereafter. See "Certain Transactions."
The Company's 1999 Director Option Plan (the "Director Plan") provides that
options will be granted to non-employee directors, other than non-employee
directors who hold or are affiliated with a holder of three percent of the
Company's outstanding Common Stock, pursuant to an automatic nondiscretionary
grant mechanism. Each new non-employee director is automatically granted an
option to purchase 25,000 shares of Common Stock at the time he or she is first
elected to the Board of Directors. Each non-employee director will subsequently
be granted an option to purchase 5,000 shares of Common Stock at the beginning
of each fiscal year. Each such option will be granted at the fair market value
of the Common Stock on the date of grant. Options granted to non-employee
directors under the Director Plan will become exercisable over four years, with
one quarter of the shares subject to the option vesting after one year and the
remaining shares vesting in monthly installments thereafter. See "Stock
Plans--1999 Director Option Plan."
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EXECUTIVE COMPENSATION
The following table and footnotes thereto set forth in summary form
information concerning the compensation awarded to, earned by, or paid for
services rendered to the Company in all capacities during the fiscal year ended
January 31, 1998 by (i) the Company's President and Chief Executive Officer;
(ii) the Company's executive officers whose salary and bonus for fiscal 1998
exceeded $100,000 and who served as an executive officer of the Company during
such fiscal year; and (iii) the Company's Vice President, Worldwide Marketing
and its Vice President, Finance and Administration, Chief Financial Officer and
Secretary (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
--------------------------------
ANNUAL COMPENSATION (1) RESTRICTED SECURITIES
-------------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS AWARDS OPTIONS (#) COMPENSATION
- - - - ------------------------------ ----------- -------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE OFFICERS
Richard A. Doerr (2).......... $ 156,154 $ 429,620(9) $1,334,250(12) -- $ 2,346(13)
President and Chief
Executive Officer
Douglas D. Troxel (3)......... 324,000 1,063,500(10) -- -- 31,619(14)
Chief Technology Officer
Marianne M. Elkholy (4)....... 50,000(8) 42,500(11) 184,500(12) -- 1,692(15)
Vice President, World Wide
Marketing
Robert I. Pender, Jr. (5)..... 25,000(8) 15,000(10) 184,500(12) -- 534(16)
Vice President, Finance and
Administration, Chief
Financial Officer and
Secretary
Vita A. Strimaitis (6)........ 138,483 50,000(9) 137,250(12) -- 5,094(17)
Vice President, General
Counsel and Assistant
Secretary
FORMER EXECUTIVE OFFICERS
Athena Troxel (7)............. 96,000 20,603(9) -- -- 3,974(18)
Chief Financial Officer and
Secretary
</TABLE>
- - - - ------------------------------
(1) Other than the salary and bonus described herein, the Company did not pay
any executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such
executive officer's salary and bonus during fiscal 1998.
(2) Mr. Doerr became President and Chief Executive Officer of SERENA in April
1997.
(3) Mr. Troxel is SERENA's Chairman and founder and became its Chief Technology
Officer in April 1997. Prior to April 1997, Mr. Troxel served as the
Company's Chief Executive Officer in addition to its Chairman.
(4) Ms. Elkholy became SERENA's Vice President, Worldwide Marketing in October
1997.
(5) Mr. Pender became SERENA's Vice President, Finance and Administration,
Chief Financial Officer and Secretary in December 1997.
(6) Ms. Strimaitis became SERENA's Vice President, General Counsel and
Assistant Secretary in July 1997. From September 1996 to July 1997, Ms.
Strimaitis served as the Company's Director of Licensing.
(7) Ms. Troxel resigned from her position as the Company's Secretary and Chief
Financial Officer in April 1997.
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<PAGE>
(8) Represents salary paid in fiscal 1998. For fiscal 1999 Ms. Elkholy and Mr.
Pender are scheduled to receive an annual salary of $150,000 (subject to
adjustment in connection with the Company's salary review process).
(9) Bonus compensation earned in fiscal 1998 but paid in fiscal 1999.
(10) Bonus compensation earned and paid in fiscal 1998.
(11) Bonus compensation consists of $10,000 earned and paid in fiscal 1998 and
$32,500 earned in fiscal 1998 but paid in fiscal 1999.
(12) In January 1998, Mr. Doerr, Ms. Elkholy, Mr. Pender and Ms. Strimaitis
purchased 1,334,250, 184,500, 184,500 and 137,250 shares of common stock,
respectively, at a purchase price of $1.00 per share under the Company's
Amended and Restated 1997 Stock Option and Incentive Plan. Mr. Doerr's
shares vest over three years with one-third of his shares vesting on the
first anniversary of his initial employment date and the remaining shares
vesting monthly thereafter. The shares issued to the officers other than Mr.
Doerr vest over four years with one-quarter of the shares vesting on the
first anniversary of the executive officer's initial employment date and the
remaining shares vesting monthly thereafter. See "--Employment Agreements
and Change in Control Arrangements" and "Certain Transactions."
(13) Represents $1,333 in matching contributions under the Company's 401(k) plan
and $1,013 in group life insurance excess premiums paid by the Company.
(14) Represents $5,190 in matching contributions under the Company's 401(k)
plan, $20,528 in group life insurance excess premiums and $5,901 in personal
car expenses paid by the Company.
(15) Represents $1,500 in matching contributions under the Company's 401(k) plan
and $192 in group life insurance excess premiums paid by the Company.
(16) Represents $500 in matching contributions under the Company's 401(k) plan
and $34 in group life insurance excess premiums paid by the Company.
(17) Represents $4,975 in matching contributions under the Company's 401(k) plan
and $119 in group life insurance excess premiums paid by the Company.
(18) Represents $3,640 in matching contributions under the Company's 401(k) plan
and $334 in group life insurance excess premiums.
INCENTIVE STOCK PLANS
1997 PLAN. The Company's Amended and Restated 1997 Stock Option Plan (the
"1997 Plan") was initially adopted by the Board of Directors and approved by the
Company's stockholders in October 1997. In connection with this offering, the
Board of Directors and stockholders approved the amendment and restatement of
the 1997 Plan in November 1998. The 1997 Plan provides for the grant to
employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and for
the grant to employees, directors and consultants of nonstatutory stock options
and stock purchase rights ("SPRs"). Unless terminated sooner, the 1997 Plan will
terminate automatically in November 2007. As of October 31, 1998, a total of
2,153,250 shares of common stock were reserved for issuance pursuant to the 1997
Plan, of which options to acquire 796,860 shares were issued and outstanding as
of that date. Additionally, 1,896,750 shares had been previously issued pursuant
to SPR's. In November 1998, the Company's Board of Directors approved an
increase of 500,000 shares reserved under the 1997 Plan. The 1997 Plan provides
for annual increases in the number of shares available for issuance thereunder,
on the first day of each fiscal year, equal to the lesser of (i) 2 1/2% of the
outstanding shares of common stock on the last day of the prior fiscal year or
(ii) such amount as may be determined by the Board. The first such annual
increase will be effective at the beginning of fiscal year 2001.
The 1997 Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator"), which committee shall, in the
case of options intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The 1997 Plan is
presently administered by the Board of Directors. The Administrator has the
power to determine the terms of the
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<PAGE>
options or SPRs granted, including the exercise price, the number of shares
subject to each option or SPR, the exercisability thereof, and the form of
consideration payable upon such exercise. In addition, the Administrator has the
authority to amend, suspend or terminate the 1997 Plan, provided that no such
action may affect any share of common stock previously issued and sold or any
option previously granted under the 1997 Plan.
Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within three months of the end of optionee's status as an
employee or consultant of the Company, or within 12 months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's ten year term. In the case of SPRs, unless the Administrator
determines otherwise, the restricted stock purchase agreement entered in
connection with the exercise of the SPR shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for shares repurchased pursuant to restricted
stock purchase agreements shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator. The
exercise price of all incentive stock options granted under the 1997 Plan must
be at least equal to the fair market value of the Common Stock on the date of
grant. The exercise price of nonstatutory stock options and SPRs granted under
the 1997 Plan is determined by the Administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must at least be equal to the fair market value of the common stock on the
date of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the Company's outstanding capital
stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other options
granted under the 1997 Plan may not exceed ten years.
The 1997 Plan provides that in the event of a merger or consolidation of the
Company with or into another corporation, a sale of substantially all of the
Company's assets or certain other changes in control of the Company, the
optionee shall have the right to exercise all of the optioned stock, including
shares as to which it would not otherwise be exercisable.
1999 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1999 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
November 1998 and approved by the stockholders in November 1998. The Purchase
Plan will become effective simultaneously with the effectiveness of this
offering. A total of 225,000 shares of common stock has been reserved for
issuance under the Purchase Plan. In addition, the Purchase Plan provides for
annual increases in the number of shares available for issuance under the
Purchase Plan, on the first day of each fiscal year, equal to the lesser of (i)
1% of the outstanding shares of common stock on the last day of the prior fiscal
year or (ii) such amount as may be determined by the Board. The first such
annual increase will be effective at the beginning of fiscal year 2001.
The 1999 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains consecutive, overlapping
24 month offering periods. The offering periods generally start on the first
trading day on or after December 1 and June 1 of each year, except for the first
such offering period will commence on the first trading day on or after the
effective date of this offering and will end on the last trading day on or
before February 28, 2001.
Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. Any employee (i) who immediately
after grant owns stock possessing 5% or more of the total combined voting power
or value of all classes of the capital stock of the Company or (ii) whose rights
to purchase
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stock under all employee stock purchase plans of the Company accrues at a rate
which exceeds $25,000 worth of stock for each calendar year may be not be
granted an option to purchase stock under the 1999 Purchase Plan. The 1999
Purchase Plan permits participants to purchase Common Stock through payroll
deductions of up to 10% of the participant's "compensation." Compensation is
defined as the participant's base straight time gross earnings, bonuses and
commissions but excludes payments for overtime, profit sharing payments, shift
premium payments, incentive compensation and incentive payments. The maximum
number of shares a participant may purchase during a single offering period is
25,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each offering period. The price of stock
purchased under the 1999 Purchase Plan is 85% of the lower of the fair market
value of the common stock at the beginning or end of the offering period.
Participants may end their participation at any time during an offering period,
and they will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with the Company.
Rights granted under the 1999 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides
that, in the event of a merger of the Company with or into another corporation
or a sale of substantially all of the Company's assets, each outstanding option
may be assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened, and a new exercise date will
be set. The 1999 Purchase Plan will terminate in November 2009. The Board of
Directors has the authority to amend or terminate the 1999 Purchase Plan, except
that, subject to certain exceptions described in the Purchase Plan, no such
action may adversely affect any outstanding rights to purchase stock under the
1999 Purchase Plan.
1999 DIRECTOR OPTION PLAN. Non-employee directors are entitled to
participate in the 1999 Director Option Plan (the "Director Plan"). The Director
Plan was adopted by the Board of Directors in November 1998 and approved by the
stockholders in November 1998, but it will not become effective until the date
of this offering. The Director Plan has a term of ten years, unless terminated
sooner by the Board. A total of 150,000 shares of common stock have been
reserved for issuance under the Director Plan. In addition, the Director Plan
provides for an annual increase, on the first day of each fiscal year, equal to
the lesser of (i) 1/2% of the outstanding shares of common stock on the last day
of the prior fiscal year or (ii) such amount as may be determined by the Board.
The first such annual increase will become effective at the beginning of fiscal
year 2001.
The Director Plan provides for the automatic grant of 25,000 shares of
common stock (the "First Option") to each non-employee director at the time he
or she is first elected to the Board of Directors. He or she shall automatically
be granted a subsequent option to purchase 5,000 shares (a "Subsequent Option")
each year on the date of the annual stockholder's meeting of the Company, if on
such date he or she shall have served on the Board for at least six months. Each
First Option and each Subsequent Option shall have a term of 10 years and the
shares subject to the option shall vest over four years, with one quarter of the
shares subject to option vesting after one year and the remaining shares vesting
in monthly installments thereafter. The exercise price of all Options shall be
100% of the fair market value per share of the common stock, generally
determined with reference to the closing price of the common stock as reported
on the Nasdaq National Market on the date of grant.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option shall become fully vested and exercisable
for a period of 30 days from the date the Board notifies the optionee of the
option's full exercisability, after which period the option shall terminate.
Options granted under the Director Plan must be exercised within three months of
the end of the optionee's tenure as a director of the Company, or within 12
months after such director's termination by death or disability, but in no event
later than the expiration of the option's ten year term. No option
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<PAGE>
granted under the Director Plan is transferable by the optionee other than by
will or the laws of descent and distribution, and each option is exercisable,
during the lifetime of the optionee, only by such optionee.
401(k) PLAN. The Company has adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") for eligible U.S. employees. Eligible
employees may elect to defer a percentage of their eligible compensation in the
401(k) Plan, subject to the statutorily prescribed annual limit. The Company may
make matching contributions on behalf of all participants in the 401(k) Plan in
an amount determined by the Company's Board of Directors. The Company may also
make additional discretionary profit sharing contributions in such amounts as
determined by the Board of Directors, subject to statutory limitations. Matching
and profit-sharing contributions, if any, are subject to a vesting schedule; all
other contributions are at all times fully vested. The 401(k) Plan, and the
accompanying trust, is intended to qualify under Sections 401(k) and 501 of the
Internal Revenue Code of 1986, as amended, so that contributions by employees or
by the Company to the 401(k) Plan, and income earned (if any) on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the assets of the 401(k) Plan in any of a number of
investment options.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
On April 21, 1997, the Company entered into an at-will employment agreement
with Richard A. Doerr, the Company's President, Chief Executive Officer and a
member of its Board of Directors. The employment agreement provides for Mr.
Doerr to receive an annual base salary of $200,000, subject to annual review for
increases, and an annual cash bonus based on the achievement of individual and
Company performance objectives. In the event Mr. Doerr is terminated without
cause, Mr. Doerr will be entitled to receive severance payments equal to six
month's base salary. Pursuant to the employment agreement, in January 1998, Mr.
Doerr and the Company entered into a restricted stock purchase agreement under
which Mr. Doerr purchased 1,334,250 shares of the Company's common stock under
the 1997 Plan at a purchase price of $1.00 per share. Mr. Doerr paid the
purchase price for his restricted shares in the form of a full recourse
promissory note secured by the purchased common stock. The promissory note bears
interest at an annual rate of 5.9%. The Company holds a repurchase option on the
unvested shares should Mr. Doerr terminate his employment with SERENA. This
repurchase right lapses with respect to one third of the shares subject to the
agreement on the first year anniversary of the purchase date and lapses with
respect to the remaining shares on a monthly basis over the succeeding two
years. In the event of a change in control transaction, the Company's right to
repurchase any unvested shares will lapse.
The Company and Douglas D. Troxel, SERENA's founder, Chief Technology
Officer and the Chairman of its Board of Directors are parties to an employment
agreement that automatically renews each June unless Mr. Troxel is terminated
for cause by the Company.
In January 1998, Marianne M. Elkholy, the Company's Vice President,
Worldwide Marketing, Robert I. Pender, Jr. the Company's Vice President, Finance
and Administration, Chief Financial Officer and Secretary, and Vita A.
Strimaitis, the Company's Vice President, General Counsel and Assistant
Secretary, purchased 184,500, 184,500 and 137,250 shares of common stock,
respectively, at a purchase price of $1.00 per share under restricted stock
purchase agreements. Each executive officer paid the purchase price for his or
her shares in the form of full recourse promissory notes secured by the
purchased common stock. These promissory notes bear interest at the annual rate
of 5.9%. The Company holds a repurchase option on unvested shares should the
individual executive officers terminate their relationship with SERENA. This
repurchase right lapses with respect to one quarter of the shares subject to the
agreements on the first anniversary of their hire date, and the remaining
three-quarters of the shares vest on a monthly basis over the succeeding three
years. In the event of a change in control transaction, the Company's right to
repurchase unvested shares will lapse.
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<PAGE>
Under the 1997 Plan, in the event of a change of control transaction,
vesting of options and restricted stock issued under the 1997 Plan will
automatically accelerate such that options will become fully exercisable,
including with respect to shares for such options which would otherwise be
unvested, and any outstanding repurchase options relating to restricted stock
will lapse. See "Stock Plans--1997 Stock Option Plan."
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i) any
breach of their duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify its directors and executive officers and may indemnify
its other officers and employees and other agents to the fullest extent
permitted by law. The Company believes that indemnification under its Bylaws
covers at least negligence and gross negligence on the part of indemnified
parties. The Company's Bylaws also permit it to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in such capacity, regardless of whether the Bylaws would
permit indemnification.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the Company's
Bylaws. These agreements, among other things, provide for indemnification of the
Company's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
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<PAGE>
CERTAIN TRANSACTIONS
Pursuant to an Agreement and Plan of Reorganization dated as of September
23, 1998, the Company acquired Optima. In connection with the acquisition, the
Company issued 3,187,500 shares of its common stock, for an aggregate
consideration of $15,937,500, in exchange for all of Optima's issued and
outstanding common stock. The terms of the Company's acquisition of Optima,
including the aggregate consideration paid, were determined by negotiations
among officers of the Company and Optima, including the companies' respective
financial and accounting advisors. Douglas D. Troxel, SERENA's founder, Chief
Technology Officer and the Chairman of its Board of Directors, held 15% of the
outstanding shares of Optima prior to the acquisition. Pursuant to the
reorganization, Mr. Troxel was issued 478,125 shares of SERENA common stock for
an aggregate consideration of $2,390,625. Donald A. Murphy, who served as
President and Chief Executive Officer of Optima and held 70% of Optima's common
stock prior to the acquisition, was issued, 2,231,250 shares of SERENA common
stock in the name of the Murphy Family Trust for an aggregate consideration of
$11,156,250. By virtue of the Optima acquisition, Mr. Murphy and the Murphy
Family Trust became beneficial owners of more than 5% of SERENA's outstanding
common stock. Of the 2,231,250 shares of SERENA common stock issued to the
Murphy Family Trust, 367,500 are subject to an escrow arrangement in favor of
the Company to satisfy any breaches of representations and warranties made by
Optima or certain of its shareholders under the reorganization agreement. The
escrow terminates in March 2000.
Prior to SERENA's acquisition of Optima in September 1998, Optima was the
primary distributor of the Company's flagship CHANGE MAN product for over ten
years. Pursuant to a distribution agreement between Optima and the Company,
Optima, or its subdistributors, licensed and sold maintenance contracts for
CHANGE MAN to end-user customers. For fiscal 1995, 1996 and 1997, and the six
months ended July 31, 1998, Optima recorded an aggregate of $7,076,889,
$11,007,066, $16,946,652 and $9,185,549, respectively, in software license
revenue and maintenance revenue from transactions related to licenses of and
maintenance agreements for CHANGE MAN. The Company was entitled to royalties of
40% and 75% based upon Optima's initial sales of software licenses and
maintenance renewal agreements, respectively. For the years ended December 31,
1995, 1996, and 1997, Optima's royalty expenses were $3,809,276, $5,856,783, and
$9,088,801, respectively. Mr. Troxel and Mr. Murphy held 15% and 70%,
respectively, of the outstanding shares of common stock of Optima prior to the
acquisition.
In March 1996, the Company made an unsecured loan in the principal amount of
$250,000 to Mr. Troxel. The loan accrued interest at the rate of 10.5% per year
and was repaid in full in October 1998. In November 1996, the Company made an
additional loan of $500,000 to Mr. Troxel. The loan accrued interest at a rate
of 10% and was repaid in full in July 1997. In July 1998, the Company made an
additional loan to Mr. Troxel in the principal amount of $600,000. The loan is
secured by shares of Company common stock held by Mr. Troxel. The loan accrues
interest at the rate of 5.56% per year. The principal and accrued interest on
the note are due and payable in three equal installments of $222,641. Each
installment is to be paid on the annual anniversary of the funding of the loan.
Mr. Troxel's loan will become due and payable 270 days after the closing of the
Company's initial public offering of its common stock to the extent of any
proceeds Mr. Troxel receives as a selling stockholder in the offering, up to the
full amount of principal and interest then outstanding.
The Company has entered into employment agreements with Richard A. Doerr,
SERENA's President and Chief Executive Officer, and Mr. Troxel. In addition, the
Company is a party to restricted stock agreements with certain of its executive
officers pursuant to which the officers of the Company purchased an aggregate of
1,840,500 shares of its common stock under the 1997 Plan in consideration of the
delivery of full recourse promissory notes to the Company by such officers. See
"Management--Employment Agreements and Change in Control Arrangements."
In connection with his appointment to the Company's Board of Directors, Alan
H. Hunt entered into a restricted stock purchase agreement with the Company in
April 1998 to purchase 56,250 shares of
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common stock at a per share purchase price of $1.44. Mr. Hunt paid the purchase
price of $81,250 for these shares in the form of a full recourse promissory note
secured by the purchased common stock. The promissory note bears interest at an
annual rate of 5.9%. The Company holds a repurchase option on any unvested
shares that becomes exercisable in the event Mr. Hunt ceases to be a member of
the Company's Board of Directors. The repurchase right lapses with respect to
one quarter of the shares on the first anniversary of the purchase date and with
respect to the remaining shares, monthly thereafter. In the event of a change in
control transaction, the Company's right to repurchase the unvested shares shall
lapse.
In March 1997, in connection with Athena P. Troxel's resignation of her
position as the Company's Chief Financial Officer and Corporate Secretary, the
Company repurchased 630,000 shares of common stock from Ms. Troxel for an
aggregate purchase price of $700,000. The terms of the repurchase were
determined in an arm's length transaction based on a valuation prepared by an
independent appraiser. Ms. Troxel continues to hold more than five percent of
the outstanding shares of the Company's common stock. Ms. Troxel was formerly
married to Douglas D. Troxel, the Company's founder, Chief Technology Officer
and Chairman of its Board of Directors.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's common stock as of October 31, 1998 by (i) each
person or entity who is known by the Company to own beneficially more than 5% of
the Company's outstanding common stock; (ii) each of the Named Executive
Officers; (iii) each director of the Company; (iv) all directors and executive
officers as a group; and (v) all other selling stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING (2) NUMBER OF AFTER OFFERING (2)
------------------- SHARES BEING -------------------
NAME AND ADDRESS (1) NUMBER PERCENT OFFERED NUMBER PERCENT
- - - - ----------------------------------- ---------- ------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
Murphy Family Trust (3).......... 2,231,250 11.0% 1,070,588 1,160,662 4.8%
CURRENT EXECUTIVE OFFICERS AND
DIRECTORS
Douglas D. Troxel (4)............ 14,086,125 69.7 200,000 13,886,125 57.4
Richard A. Doerr (5)............. 1,334,250 6.6 -- 1,334,250 5.5
Marianne M. Elkholy (6).......... 184,500 * -- 184,500 *
Robert I. Pender, Jr. (7)........ 184,500 * -- 184,500 *
Vita A. Strimaitis (8)........... 137,250 * -- 137,250 *
Alan H. Hunt (9)................. 56,250 * -- 56,250 *
All directors and executive
officers as a group (11
persons)....................... 15,982,875 79.1 200,000 15,782,875 65.2
FORMER EXECUTIVE OFFICERS
Athena Troxel (10)............... 1,512,000 7.5 500,000 1,012,000 4.2
OTHER SELLING STOCKHOLDERS
- - - - -----------------------------------
Roseann P. Geyer (11)............ 478,125 2.4 229,412 248,713 1.0
</TABLE>
- - - - ------------------------------
* Less than 1%
(1) Unless otherwise indicated, the address for each listed 5% stockholder is
c/o SERENA Software, Inc., 500 Airport Boulevard, 2nd Floor, Burlingame,
California 94010-1904. Except as otherwise indicated, and subject 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 held
by them.
(2) Applicable percentage ownership is based on 20,204,250 shares of common
stock outstanding as of October 31, 1998 and 24,204,250 shares immediately
following the completion of this offering, together with applicable options
for such stockholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities, subject to community
property laws, where applicable. Shares of common stock subject to options
that are presently exercisable or exercisable within 60 days of October 31,
1998 are deemed to be beneficially owned by the person holding such options
for the purpose of computing the percentage of ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
of any other person. To the extent that any shares are issued upon exercise
of options, warrants or other rights to acquire the Company's capital stock
that are presently outstanding or granted in the future or reserved for
future issuance under the Company's stock plans, there will be further
dilution to new public investors.
(3) Includes 367,500 shares of common stock that are subject to an escrow in
favor of the Company to satisfy any breaches of representations and
warranties made by Optima or certain of its shareholders in connection with
the Company's September 1998 acquisition of Optima. Such escrow will expire
in March 2000. Donald A. Murphy and Pamela J. Murphy are trustees for the
Murphy Family Trust. See "Certain Transactions."
(4) Includes 12,258,000 shares of common stock held by Mr. Troxel as trustee of
the Troxel Living Trust and 1,350,000 shares of common stock held by Mr.
Troxel as a general partner for Troxel Investments, L.P. Mr. Troxel is
SERENA's founder, Chief Technology Officer and Chairman of its Board of
Directors.
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(5) Includes 1,334,250 shares of common stock subject to a restricted purchase
stock agreement, of which 667,125 shares were unvested and subject to the
Company's repurchase option as of October 31, 1998 should Mr. Doerr's
employment with the Company terminate. Mr. Doerr is SERENA's President and
Chief Executive Officer and a member of its Board of Directors. See
"Management--Employment Agreements and Change in Control Arrangements."
(6) Includes 184,500 shares of common stock subject to a restricted stock
purchase agreement, of which 134,531 shares were unvested and subject to the
Company's repurchase option as of October 31, 1998 should Ms. Elkholy's
employment with the Company terminate. Ms. Elkholy is SERENA's Vice
President, Worldwide Marketing. See "Management--Employment Agreements and
Change in Control Arrangements."
(7) Includes 184,500 shares of common stock subject to a restricted stock
purchase agreement, all of which were unvested and subject to the Company's
repurchase option as of October 31, 1998 should Mr. Pender's employment with
the Company terminate. Mr. Pender is SERENA's Vice President, Finance and
Administration, Chief Financial Officer and Secretary. See
"Management--Employment Agreements and Change in Control Arrangements."
(8) Includes 137,250 shares of common stock subject to a restricted stock
purchase agreement, of which 94,359 shares were unvested and subject to the
Company's repurchase option as of October 31, 1998 should Ms. Strimaitis'
employment with the Company terminate. Ms. Strimaitis is SERENA's Vice
President, General Counsel and Assistant Secretary. See
"Management--Employment Agreements and Change in Control Arrangements."
(9) Includes 56,250 shares of common stock subject to a restricted purchase
stock agreement, all of which are unvested and subject to the Company's
repurchase option as of October 31, 1998 should Mr. Hunt's membership on the
Company's Board of Directors terminate. See "Management--Employment
Agreements and Change in Control Arrangements."
(10) Ms. Troxel resigned as SERENA's Corporate Secretary and Chief Financial
Officer in March 1997.
(11) Includes 78,750 shares of common stock that are subject to an escrow in
favor of the Company to satisfy any breaches of representations and
warranties Optima or certain of its shareholders made in connection with the
Company's September 1998 acquisition of Optima. Such escrow will expire in
March 2000.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, the Company will be authorized to
issue 60,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares
of undesignated preferred stock, $0.001 par value. Immediately after the
completion of this offering, the Company estimates there will be an aggregate of
24,204,250 shares of common stock outstanding and no shares of preferred stock
will be issued and outstanding. In addition, as of October 31, 1998, 796,860
shares of common stock will be issuable upon exercise of outstanding options at
that time.
The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Amended and Restated Certificate of Incorporation and Bylaws and by the
provisions of applicable Delaware law.
The Amended and Restated Certificate of Incorporation and Bylaws contain
certain provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring, or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved by
the Board of Directors.
COMMON STOCK
As of October 31, 1998 there were 20,204,250 shares of common stock
outstanding which were held by nine stockholders. Holders of common stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of common stock do not have cumulative voting rights, and,
therefore, holders of a majority of the shares voting for the election of
directors can elect all of the directors. In such event, the holders of the
remaining shares will not be able to elect any directors.
Holders of the common stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or paid
cash dividends on its capital stock, expects to retain future earnings, if any,
for use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future. In the event of the
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets legally available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of any holders of preferred stock then outstanding.
PREFERRED STOCK
Effective upon the closing of this offering, the Company will be authorized
to issue 5,000,000 shares of undesignated preferred stock. The Board of
Directors has the authority to issue the preferred stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting a series or the designation of such series, without any
further vote or action by the Company's stockholders. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely affect the market price of, and the
voting and other rights of, the holders of common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. The Company has no current plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
In connection with SERENA's September 1998 acquisition of Optima, the
Company entered into a registration right agreement with certain shareholders of
Optima who received an aggregate of 2,709,375 shares of common stock of the
Company in exchange for their shares of Optima common stock. Pursuant to the
registration rights agreement, such shareholders are entitled to certain rights
with respect to the
62
<PAGE>
registration of such shares under the Securities Act. If the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders, such shareholders are
entitled to notice of such registration and to include shares of common stock in
such registration at the Company's expense. Additionally, such shareholders may
require the Company to file additional registration statements on Form S-3 at
the Company's expense. All of these registration rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in such registration.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS
Under Delaware law, all stockholder actions must be effected at a duly
called annual or special meeting or by written consent. The Company's Bylaws
provide that, except as otherwise required by law, special meetings of the
stockholders can only be called by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer of the Company or stockholders
holding shares in the aggregate entitled to cast not less than 10% of the votes
at such meeting. In addition, the Company's Bylaws establish an advance notice
procedure for stockholder proposals to be brought before an annual meeting of
stockholders, including proposed nominations of persons for election to the
Board. Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before the meeting by
or at the direction of the Board of Directors or by a stockholder who was a
stockholder of record on the record date for the meeting, who is entitled to
vote at the meeting and who has delivered timely written notice in proper form
to the Company's Secretary of the stockholder's intention to bring such business
before the meeting.
The foregoing provisions of the Company's Amended and Restated Certificate
of Incorporation and Bylaws are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions which may involve an actual or threatened change of control of the
Company. Such provisions are designed to reduce the vulnerability of the Company
to an unsolicited acquisition proposal and, accordingly, could discourage
potential acquisition proposals and could delay or prevent a change in control
of the Company. Such provisions are also intended to discourage certain tactics
that may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the Company's
shares that could result from actual or rumored takeover attempts. These
provisions may also have the effect of preventing changes in the management of
the Company. See "Risk Factors--Antitakeover Effects of Certain Charter
Provisions."
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, from engaging,
under certain circumstances in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder became an
interested stockholder. For purposes of the Antitakeover Law, a "business
combination" includes, among other things, a merger or consolidation involving
the Company and the interested shareholder and the sale of more than ten percent
(10%) of the Company's assets. In general, the Antitakeover Law defines an
"interested stockholder" as any entity or person beneficially owning 15% or more
the outstanding voting stock of the Company and any entity or person affiliated
with or controlling or controlled by such entity or person. A Delaware
corporation may "opt out" of the Antitakeover Law with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from amendments approved by the
holders of at least a majority of the Company's outstanding voting shares. The
Company has not "opted out" of the provisions of the Antitakeover Law. See "Risk
Factors--Antitakeover Effects of Delaware Law."
63
<PAGE>
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, LLC.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock, and
there can be no assurance that a significant public market for the common stock
will develop or be sustained after this offering. Sales of substantial amounts
of common stock in the public market could adversely affect the market price of
the common stock and could impair the Company's future ability to raise capital
through the sale of its equity securities.
Upon completion of this offering, the Company will have outstanding
24,204,250 shares of Common Stock based upon shares outstanding at October 31,
1998 (assuming no exercise of the Underwriters' over-allotment option).
Excluding to the 6,000,000 shares of common stock offered hereby (assuming no
exercise of the Underwriters' over-allotment option), as of the effective date
of the Registration Statement (the "Effective Date"), there will be 18,204,250
shares of common stock outstanding, all of which are "restricted" shares (the
"Restricted Shares") under the Securities Act of 1933, as amended (the
"Securities Act"). All Restricted Shares are subject to lock-up agreements with
the underwriters pursuant to which the holders of the Restricted Shares have
agreed not to sell, pledge or otherwise dispose of such shares for a period of
180 days after the date of this prospectus. Beginning 180 days after the
Effective Date, approximately 16,516,750 additional Restricted Shares will
become eligible for sale in the public market when the underwriter's lock-up
agreements expire (unless the underwriters elect, in their sole discretion, the
earlier release of such shares from the lock-up agreement). Of the 16,516,750
Restricted Shares that will become available at 180 days after Effective Date,
1,896,750 shares were issued to certain officers and directors of the Company
pursuant to restricted stock agreements under the 1997 plan of which
approximately 782,391 shares will remain subject to stock repurchase rights in
favor of the Company on the Effective Date should such officers or directors
terminate their relationship with SERENA. These repurchase rights will lapse
ratably over time. In addition to the Restricted Shares described above, after
such 180th day, approximately 1,687,500 additional Restricted Shares, all of
which were issued in connection with the Company's September 1998 acquisition of
Optima, will become available for sale at various times pursuant to Rule 144.
Most of the Restricted Shares that will become available for sale in the public
market beginning 180 days after the Effective Date will be subject to certain
volume and other resale restrictions pursuant to Rule 144 because the holders
are affiliates of the Company. Hambrecht & Quist may release the shares subject
to the lock-up agreements in whole or in part at any time with or without
notice.
In general, under Rule 144, an affiliate of the Company, or person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year, will be entitled to sell in any three-month period
a number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of the Common Stock (approximately 242,000 shares immediately
after this offering) or (ii) the average weekly trading volume during the four
calendar weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission (the "Commission" or the "SEC"). Sales
pursuant to Rule 144 are subject to certain requirements relating to manner of
sale, notice and availability of current public information about the Company. A
person (or persons whose shares are aggregated) who is not deemed to have been
an affiliate of the Company at any time during the 90 days immediately preceding
the sale and who has beneficially owned his or her shares for at least two years
is entitled to sell such shares pursuant to Rule 144(k) without regard to the
limitations described above. Under Rule 701, shares issued under certain
compensatory stock-based plans or agreements, such as the Company's option plan,
may be resold under Rule 144 by non-affiliates subject only to the manner of
sale requirements, and by affiliates without regard to the two-year holding
period requirements, commencing 90 days after the date of this offering.
As of October 31, 1998, 2,153,250 shares were reserved for issuance under
the 1997 Plan, of which options to purchase 796,860 shares were then outstanding
and of which no options were then exercisable. In addition, an aggregate of
1,896,750 Restricted Shares had been issued to certain executive officers and
64
<PAGE>
directors of the Company under the 1997 Plan. In November 1998, the Company's
board of directors approved (i) an increase of 500,000 shares reserved under the
1997 Plan; (ii) a reserve of 150,000 shares for options to be granted under the
Director Option Plan; and (iii) a reserve of 225,000 shares for options to be
granted under the Purchase Plan. See "Management--Incentive Stock Plans." The
Company intends to file, within 180 days after the date of this prospectus, a
Form S-8/S-3 registration statement under the Securities Act to register shares
issued pursuant to restricted stock purchase agreements under the 1997 Plan,
shares issued in connection with option exercises and shares reserved for
issuance under all stock plans. Beginning 180 days after the Effective Date,
approximately 253,267 shares issuable upon the exercise of vested options will
become eligible for sale and 1,114,359 shares issued pursuant to restricted
stock agreements under to the 1997 Plan which will no longer be subject to a
repurchase option and will be eligible for resale. Shares of Common Stock issued
pursuant to the restricted stock agreements under the 1997 Plan or upon exercise
of options after the effective date of the Form S-8/S-3 will be available for
sale in the public market, subject to Rule 144 volume limitations applicable to
affiliates and lock-up agreements.
LOCK-UP AGREEMENTS
All officers and directors and certain holders of common stock and options
to purchase common stock have agreed pursuant to certain "lock-up" agreements
that they will not offer, sell, contract to sell, pledge, grant any option to
sell, or otherwise dispose of, directly or indirectly, any shares of common
stock or securities convertible or exchangeable for common stock, or warrants or
other rights to purchase common stock for a period of 180 days after the
transfer or date of this prospectus without the prior written consent of
Hambrecht & Quist LLC.
65
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Hambrecht & Quist LLC, SG Cowen Securities Corporation, and SoundView Technology
Group, Inc., have severally agreed to purchase from the Company and the selling
stockholders the following respective numbers of shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- - - - ------------------------------------------------------------ -------------
<S> <C>
Hambrecht & Quist LLC.......................................
SG Cowen Securities Corporation.............................
SoundView Technology Group, Inc.............................
-------------
Total....................................................... 6,000,000
-------------
-------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and the selling
stockholders, their counsel and the independent auditors. The nature of the
Underwriters' obligation is such that they are committed to purchase all shares
of common stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of common stock directly to the
public at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this prospectus, to purchase up to 900,000
additional shares of common stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of common stock to be purchased by it shown in the
above table bears to the total number of shares of common stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of common stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and selling stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The Company, the selling stockholders, and certain other stockholders of the
Company, including executive officers and directors, who will own in the
aggregate shares of common stock after the offering, have agreed that they
will not, without the prior written consent of Hambrecht & Quist LLC, offer,
sell or otherwise dispose of any shares of common stock, options or warrants to
acquire shares of
66
<PAGE>
common stock or securities exchangeable for or convertible into shares of common
stock owned by them during the 180-day period following the date of this
prospectus. The Company has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that the
Company may issue shares upon the exercise of options granted prior to the date
hereof, and may grant additional options under its stock option plans, provided
that, without the prior written consent of Hambrecht & Quist LLC, such
additional options shall not be exercisable during such period.
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of common stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq National Market, in the over-the counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
Prior to the offering, there has been no public market for the common stock.
The initial public offering price for the common stock will be determined by
negotiation among the Company, the selling stockholders and the Representatives.
Among the factors to be considered in determining the initial public offering
price are prevailing market and economic conditions, revenues and earnings of
the Company, market valuations of other companies engaged in activities similar
to the Company, estimates of the business potential and prospects of the
Company, the present state of the Company's business operations, the Company's
management and other factors deemed relevant. The estimated initial public
offering price range set forth on the cover of this preliminary prospectus is
subject to change as a result of market conditions or other factors.
67
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters will be passed upon for the Underwriters
by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park,
California.
EXPERTS
The consolidated financial statements and schedule of SERENA Software, Inc.
as of January 31, 1997 and 1998, and for each of the years in the three-year
period ended January 31, 1998, and the financial statements of Optima Software,
Inc. as of December 31, 1996 and 1997, and for each of the years in the
three-year period ended December 31, 1997, included herein and in the
registration statement are included in reliance upon the forms of report and
report of KPMG Peat Marwick LLP, independent auditors, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
CHANGE IN AUDITORS
PricewaterhouseCoopers LLP was previously the principal accountants for the
Company. On March 15, 1998, PricewaterhouseCoopers LLP's appointment as
principal accountants was terminated and KPMG Peat Marwick LLP was engaged to
audit the Company's and its subsidiaries' consolidated financial statements. The
Board of Directors has approved the appointment of KPMG Peat Marwick LLP as
principal accountants for the Company.
In connection with the audit for the fiscal year ended January 31, 1997 and
the subsequent interim period through March 15, 1998, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to the subject
matter of the disagreement.
The audit report of PricewaterhouseCoopers LLP on the consolidated financial
statements of the Company and its subsidiaries as of and for the year ended
January 31, 1997 did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles.
ADDITIONAL SERENA INFORMATION
SERENA has filed with the SEC a registration statement on Form S-1 with
respect to the common stock offered hereby. This prospectus, which constitutes a
part of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits and schedules which are part
of the registration statement. For further information with respect to SERENA
and the common stock, reference is made to the registration statement and the
exhibits and schedules thereto. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our Web site at http://www.serena.com or the SEC's Web site at
http://www.sec.gov.
Upon completion of this offering, SERENA will become subject to the
information and periodic reporting requirements of the Securities and Exchange
Act, as amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the SEC. Such periodic reports, proxy
statements and other information will be available for inspection and copying at
the SEC's public reference rooms, SERENA's Web site and the Web site of the SEC
referred to above.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SERENA SOFTWARE, INC. CONSOLIDATED FINANCIAL STATEMENTS
Form of Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets........................................................ F-3
Consolidated Statements of Income.................................................. F-4
Consolidated Statements of Stockholders' Equity.................................... F-5
Consolidated Statements of Cash Flows.............................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
OPTIMA SOFTWARE, INC. FINANCIAL STATEMENTS
Independent Auditors' Report....................................................... F-17
Balance Sheets..................................................................... F-18
Statements of Income and Retained Earnings......................................... F-19
Statements of Cash Flows........................................................... F-20
Notes to Financial Statements...................................................... F-21
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Condensed Combined Balance Sheets.................................................. F-27
Condensed Combined Statements of Income............................................ F-28
Notes to Pro Forma Financial Statements............................................ F-30
</TABLE>
F-1
<PAGE>
FORM OF INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
SERENA Software, Inc.
When the reincorporation referred to in Note 4(b) of the Notes to
Consolidated Financial Statements has been consummated, we will be in a position
to render the following report.
KPMG PEAT MARWICK LLP
We have audited the accompanying consolidated balance sheets of
SERENA Software, Inc. and subsidiaries as of January 31, 1997 and 1998,
and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the years in the three-year period ended
January 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of SERENA Software, Inc. and its subsidiaries as of January 31,
1997 and 1998, and the results of their operations and their cash flows
for each of the years in the three-year period ended January 31, 1998,
in conformity with generally accepted accounting principles.
September 4, 1998, except as to Note 4(b),
which is as of November 19, 1998
F-2
<PAGE>
SERENA SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
--------------------------- JULY 31,
1997 1998 1998
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 4,030,890 $ 9,024,015 $ 15,664,878
Accounts receivable, net of allowance of $30,000, $197,000 and
$251,000, in fiscal 1997, 1998 and 1999, respectively............. 2,543,806 8,964,905 6,201,706
Due from principal stockholder...................................... 575,529 90,115 181,504
Prepaid expenses and other current assets........................... 374,468 729,205 937,494
------------ ------------- -------------
Total current assets.............................................. 7,524,693 18,808,240 22,985,582
Property and equipment, net........................................... 1,311,168 1,389,843 1,307,316
Due from principal stockholder........................................ 174,471 108,640 530,446
Other assets.......................................................... 222,679 259,798 271,506
------------ ------------- -------------
$ 9,233,011 $ 20,566,521 $ 25,094,850
------------ ------------- -------------
------------ ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 258,417 $ 455,015 $ 527,141
Income taxes payable................................................ 142,297 707,934 --
Accrued expenses.................................................... 1,891,219 4,567,009 4,004,413
Deferred revenue.................................................... 4,614,699 6,136,460 7,564,975
------------ ------------- -------------
Total current liabilities......................................... 6,906,632 11,866,418 12,096,529
Deferred revenue, net of current portion.............................. 280,565 1,715,349 1,981,991
------------ ------------- -------------
Total liabilities................................................. 7,187,197 13,581,767 14,078,520
------------ ------------- -------------
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no
shares issued and outstanding..................................... -- -- --
Common stock, $0.001 par value; 60,000,000 shares authorized;
15,750,000, 16,960,500 and 17,016,750 shares issued and
outstanding in fiscal 1997, 1998 and 1999, respectively........... 15,750 16,961 17,017
Additional paid-in capital.......................................... (14,747) 5,102,542 5,601,299
Notes receivable from stockholders.................................. -- (1,840,500) (1,921,500)
Deferred stock-based compensation................................... -- (3,098,197) (1,957,917)
Accumulated other comprehensive losses.............................. (28,603) (30,604) (28,410)
Retained earnings................................................... 2,073,414 6,834,552 9,305,841
------------ ------------- -------------
Total stockholders' equity........................................ 2,045,814 6,984,754 11,016,330
------------ ------------- -------------
$ 9,233,011 $ 20,566,521 $ 25,094,850
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SERENA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31,
FISCAL YEAR ENDED JANUARY 31,
------------------------------------------- ----------------------------
1996 1997 1998 1997 1998
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses................... $ 4,605,844 $ 8,228,650 $ 17,838,946 $ 6,503,984 $ 9,988,727
Maintenance......................... 5,679,303 8,730,172 12,257,724 5,688,394 7,734,534
Professional services............... 458,814 495,251 2,050,366 786,640 1,192,577
------------- ------------- ------------- ------------- -------------
Total revenue..................... 10,743,961 17,454,073 32,147,036 12,979,018 18,915,838
------------- ------------- ------------- ------------- -------------
Operating expenses:
Cost of revenue..................... 3,330,363 5,206,961 6,813,240 2,872,048 3,816,130
Sales and marketing................. 2,504,664 4,605,138 7,946,797 3,538,200 5,706,702
Research and development............ 2,997,889 4,320,905 5,517,787 2,369,083 2,073,228
General and administrative.......... 1,727,305 2,295,586 3,295,842 1,327,718 1,692,181
Stock-based compensation............ -- -- 879,803 -- 1,558,093
------------- ------------- ------------- ------------- -------------
Total operating expenses.......... 10,560,221 16,428,590 24,453,469 10,107,049 14,846,334
------------- ------------- ------------- ------------- -------------
Operating income.................. 183,740 1,025,483 7,693,567 2,871,969 4,069,504
Interest and other income, net........ 159,973 115,223 321,061 130,320 343,514
------------- ------------- ------------- ------------- -------------
Income before income taxes........ 343,713 1,140,706 8,014,628 3,002,289 4,413,018
Income taxes.......................... 66,218 278,332 3,253,490 1,081,503 1,941,729
------------- ------------- ------------- ------------- -------------
Net income........................ 277,495 862,374 4,761,138 1,920,786 2,471,289
Translation adjustment................ 4,904 (25,782) (2,001) (444) 2,194
------------- ------------- ------------- ------------- -------------
Comprehensive income.............. $ 282,399 $ 836,592 $ 4,759,137 $ 1,920,342 $ 2,473,483
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per share:
Basic............................... $ 0.02 $ 0.05 $ 0.31 $ 0.12 $ 0.16
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Diluted............................. $ 0.02 $ 0.05 $ 0.31 $ 0.12 $ 0.15
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Shares used to compute net income per
share:
Basic............................... 15,750,000 15,750,000 15,247,750 15,375,500 15,638,930
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Diluted............................. 15,750,000 15,750,000 15,272,189 15,375,500 16,360,793
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SERENA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED JULY
31, 1998
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1998 IS UNAUDITED)
<TABLE>
<CAPTION>
NOTES ACCUMULATED
COMMON STOCK ADDITIONAL DEFERRED RECEIVABLE OTHER TOTAL
---------------------- PAID-IN STOCK-BASED FROM COMPREHENSIVE RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS LOSSES EARNINGS EQUITY
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
January 31,
1995.......... 15,750,000 $ 15,750 $ (14,747 ) $ -- $ -- $ (7,726) $ 933,545 $ 926,822
Net income...... -- -- -- -- -- -- 277,495 277,495
Translation
adjustment.... -- -- -- -- -- 4,905 -- 4,905
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
Balances as of
January 31,
1996.......... 15,750,000 15,750 (14,747 ) -- -- (2,821) 1,211,040 1,209,222
Net income...... -- -- -- -- -- -- 862,374 862,374
Translation
adjustment.... -- -- -- -- -- (25,782) -- (25,782)
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
Balances as of
January 31,
1997.......... 15,750,000 15,750 (14,747 ) -- -- (28,603) 2,073,414 2,045,814
Repurchase of
common
stock......... (630,000) (630) (699,370 ) -- -- -- -- (700,000)
Issuance of
restricted
common stock
for notes
receivable.... 1,840,500 1,841 5,519,659 (3,681,000) (1,840,500) -- -- --
Deferred
stock-based
compensation
related to
grants of
stock
options....... -- -- 297,000 (297,000) -- -- -- --
Amortization of
deferred
stock-based
compensation... -- -- -- 879,803 -- -- -- 879,803
Net income...... -- -- -- -- -- -- 4,761,138 4,761,138
Translation
adjustment.... -- -- -- -- -- (2,001) -- (2,001)
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
Balances as of
January 31,
1998.......... 16,960,500 16,961 5,102,542 (3,098,197) (1,840,500) (30,604) 6,834,552 6,984,754
Issuance of
restricted
common stock
for note
receivable.... 56,250 56 238,757 (157,813) (81,000) -- -- --
Deferred
stock-based
compensation
related to
grants of
stock
options....... -- -- 260,000 (260,000) -- -- -- --
Amortization of
deferred
stock-based
compensation... -- -- -- 1,558,093 -- -- -- 1,558,093
Net income...... -- -- -- -- -- -- 2,471,289 2,471,289
Translation
adjustment.... -- -- -- -- -- 2,194 -- 2,194
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
Balances as of
July 31,
1998.......... 17,016,750 $ 17,017 $5,601,299 $(1,957,917) $(1,921,500) $ (28,410) $9,305,841 $11,016,330
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
---------- ---------- ---------- ------------ ------------- ------------- ---------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SERENA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31,
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------- ---------------------------
1996 1997 1998 1997 1998
------------ ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 277,495 $ 862,374 $ 4,761,138 $ 1,920,788 $ 2,471,289
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation......................................... 218,083 327,648 430,664 201,595 266,620
Deferred income taxes................................ (51,429) 2,208 (462,876) -- --
Gain on sale of property and equipment............... -- -- 58,130 -- --
Amortization of deferred stock-based compensation.... -- -- 879,803 -- 1,558,093
Changes in operating assets and liabilities:
Accounts receivable................................ (1,144,500) (98,782) (6,421,099) (1,716,273) 2,763,199
Prepaid expenses and other assets.................. 89,768 (130,210) 71,020 4,106 (219,997)
Accounts payable................................... 115,198 (25,094) 196,598 124,063 72,126
Income taxes payable............................... -- 142,297 565,637 536,213 (707,934)
Accrued expenses................................... 911,680 154,877 2,675,790 (574,604) (562,596)
Deferred revenue................................... 1,080,883 1,407,578 2,956,545 480,505 1,695,157
------------ ------------ ------------ ------------ -------------
Net cash provided by operating activities........ 1,497,178 2,642,896 5,711,350 976,393 7,335,957
------------ ------------ ------------ ------------ -------------
Cash flows used in investing activities:
Purchases of property and equipment.................... (614,620) (676,420) (567,469) (188,120) (184,093)
Issuance of notes due from stockholder................. -- (750,000) (130,000) (130,000) (600,000)
Payment of notes due from stockholder.................. -- -- 681,245 677,984 86,805
------------ ------------ ------------ ------------ -------------
Net cash used by investing activities............ (614,620) (1,426,420) (16,224) 359,864 (697,288)
------------ ------------ ------------ ------------ -------------
Cash flows from financing activities--repurchase of
common stock........................................... -- -- (700,000) (700,000) --
------------ ------------ ------------ ------------ -------------
Effect of exchange rate changes on cash.................. 4,905 (25,782) (2,001) (444) 2,194
------------ ------------ ------------ ------------ -------------
Net increase in cash and cash equivalents................ 887,463 1,190,694 4,993,125 635,813 6,640,863
Cash and cash equivalents at beginning of period......... 1,952,733 2,840,196 4,030,890 4,030,890 9,024,015
------------ ------------ ------------ ------------ -------------
Cash and cash equivalents at end of period............... $ 2,840,196 $ 4,030,890 $ 9,024,015 $ 4,666,703 $ 15,664,878
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Supplemental disclosures of cash flow information:
Income taxes paid........................................ $ 62,083 $ 119,200 $ 3,106,632 $ 498,635 $ 2,676,500
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Noncash investing and financing activity--restricted
stock issued in exchange for notes receivable.......... $ -- $ -- $ 1,840,500 $ -- $ 81,000
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
SERENA Software, Inc. (the "Company") is a leading provider of software
change management products and services for managing and controlling
change throughout the software application lifecycle. Its principal
markets are North America and Europe. Export sales represented
approximately 19%, 15%, and 15% of revenue for the fiscal years ended
January 31, 1996, 1997, and 1998, respectively.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
(c) FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's U.K. subsidiary is the British
pound. This foreign subsidiary's financial statements are translated
using current exchange rates for balance sheet accounts and average
rates for income statement accounts. Translation adjustments are
recorded in stockholders' equity. Foreign currency transaction gains and
(losses) are included in other income, and totaled $(26,000), $(5,000),
and $74,000 in fiscal 1996, 1997, and 1998, respectively.
(d) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
remaining maturities of three months or less at the date of purchase to
be cash equivalents. As of January 31, 1997 and 1998, cash equivalents
consisted of commercial paper and money market funds.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets,
generally three to five years. Recoverability of property and equipment
is measured by comparison of the carrying amount to future net cash
flows the property and equipment are expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is
measured as the difference between the carrying amount of the property
and equipment and its fair value. To date, the Company has made no
adjustments to the carrying values of its long-lived assets.
(f) SOFTWARE DEVELOPMENT COSTS
Development costs related to software products are expensed as incurred
until technological feasibility of the product has been established.
Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs
incurred by the Company between completion of the working model and the
point at which the product is ready for general release have not been
significant, and, accordingly, no costs have been capitalized.
F-7
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
(g) INCOME TAXES
Income taxes are recorded using the asset and liability method. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(h) CONCENTRATIONS OF CREDIT RISK
Financial instruments, potentially subjecting the Company to
concentrations of credit risk, consist primarily of temporary cash
investments and accounts receivable. The Company places its temporary
cash investments with two major financial institutions. The Company
maintains an allowance for potential credit losses on customer accounts.
For the fiscal years ended January 31, 1996, 1997, and 1998, Optima
Software, Inc. (Optima), a distributor, accounted for 36%, 31%, and 27%
of revenues, respectively. Optima accounted for 33% and 19% of accounts
receivable as of January 31, 1997 and 1998, respectively. The Company's
principal stockholder owns 15% of the capital stock of Optima.
(i) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash and cash equivalents, accounts
receivable, and accounts payable approximate their respective carrying
amounts.
(j) USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(k) REVENUE RECOGNITION
The Company sells its products to its distributors and end users under
license agreements. Each new license includes maintenance and
enhancements for a one-year period. Revenue from these agreements,
excluding initial maintenance revenue included with the license, is
recognized upon receipt and acceptance of a signed contract and delivery
of the software, provided the related fee is fixed and determinable,
collectibility of the revenue is probable and the arrangement does not
involve significant customization of the software. If an acceptance
period is required, revenue is recognized upon the earlier of customer
acceptance or the expiration of the acceptance period, as defined in the
applicable software license agreement.
F-8
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The Company recognizes maintenance revenue ratably over the life of the
related contract, generally 12 months. Maintenance contracts on
perpetual licenses are available annually. The Company typically
invoices and collects maintenance revenue on an annual basis at the
anniversary date of the license. Service and other revenue includes fees
derived from the delivery of training, installation, and consulting
services. Revenue from training, installation, and consulting services
is recognized as the related services are performed. Deferred revenue
represents amounts received by the Company in advance of product
delivery or service performance.
(l) STOCK-BASED COMPENSATION
The Company uses the intrinsic value method to account for stock-based
compensation. The Company amortizes deferred stock-based compensation in
accordance with Financial Accounting Standards Board ("FASB")
Interpretation No. 28.
(m) NET INCOME PER SHARE
Basic net income per share is computed using the weighted-average number
of shares of common stock. Diluted net income per share is computed
using the weighted-average number of shares of common stock outstanding
and, when dilutive, common equivalent shares from restricted stock and
options to purchase common stock using the treasury stock method.
(n) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSSES)
Accumulated other comprehensive income (losses) consists entirely of
cumulative translation adjustments resulting from the Company's
application of its foreign currency translation policy. The tax effects
of translation adjustments were not significant during any of the
periods presented.
(o) RECENT ACCOUNTING PRONOUNCEMENTS
The FASB recently issued Statement of Financial Accounting Standards
("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS No. 133 addresses the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts. Under SFAS No. 133, entities are required to carry all
derivative instruments in the balance sheet at fair value. The
accounting for changes in the fair value of a derivative instrument
depends on whether it has been designated and qualifies as part of a
hedging relationship and, if so, the reason for holding it. The Company
must adopt SFAS No. 133 by October 1, 1999. The Company does not
anticipate that SFAS No. 133 will have an effect on its financial
statements.
F-9
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Computers and equipment................. $ 1,856,513 $ 1,714,960
Furniture and fixtures.................. 350,991 399,145
Automobiles............................. 107,110 107,110
------------- -------------
2,314,614 2,221,215
Less accumulated depreciation........... 1,003,446 831,372
------------- -------------
$ 1,311,168 $ 1,389,843
------------- -------------
------------- -------------
</TABLE>
(3) ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Profit sharing.......................... $ 665,054 $ 1,443,014
Management incentive bonuses............ 420,500 693,500
Payroll-related items................... 143,399 242,365
Commissions............................. 157,088 592,527
Other................................... 505,178 1,595,603
------------- -------------
$ 1,891,219 $ 4,567,009
------------- -------------
------------- -------------
</TABLE>
(4) STOCKHOLDERS' EQUITY
(a) REPURCHASE OF COMMON STOCK
In April 1997, the Company repurchased 630,000 shares of its common
stock for cash at a price of $1.11 per share from a founder.
(b) STOCK SPLITS AND REINCORPORATION
In June 1997, the Company's Board of Directors authorized a 70,000 to 1
stock split. In July 1998 and again in November 1998, the Company's
Board of Directors authorized a 3-for-2 stock split. In November 1998,
the Board of Directors approved the reincorporation of the Company in
the State of Delaware. Share information has been restated in the
accompanying consolidated financial statements to reflect the
reincorporation and stock splits for all periods presented.
F-10
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(4) STOCKHOLDERS' EQUITY (CONTINUED)
(c) RESTRICTED STOCK AGREEMENTS
In January 1998, the Company issued 1,840,500 shares of restricted
common stock to certain officers at $1.00 per share in exchange for full
recourse notes. In March 1998, the Company issued 56,250 shares of
restricted common stock to a director at $1.44 per share in exchange for
a full recourse note. Restrictions lapse over three or four years,
depending upon the individual, based on continued employment or service
on the Board of Directors. In the event an employee is terminated or the
director leaves the service of the Board, the Company has the right to
repurchase, for a price equal to the individual's original purchase
price, any remaining restricted shares held by the individual.
In connection with restricted common stock issued in January 1998, the
Company recorded deferred stock-based compensation of $3,681,000
representing the difference between the issuance price and the fair
value of the Company's common stock at the date of issuance. An
additional $157,813 of deferred stock-based compensation was recorded
for the March 1998 issuance. These amounts are being amortized over the
restriction period of the individual shares. Stock-based compensation
related to restricted common stock of $865,228 and $1,407,712 was
recognized during the fiscal year ended January 31, 1998 and the six
months ended July 31, 1998, respectively.
(d) NET INCOME PER SHARE
The following is a reconciliation of the shares used in the computation
of basic and diluted net income per share:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JANUARY 31, JULY 31,
--------------------------------------------- -----------------------------
1996 1997 1998 1997 1998
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic net income per
share--weighted average
number of common shares
outstanding................. 15,750,000 15,750,000 15,247,750 15,375,500 15,638,930
Effect of potentially dilutive
securities outstanding--
restricted stock and
options..................... -- -- 24,439 -- 721,863
------------- ------------- ------------- ------------- -------------
Shares used in diluted net
income per share
computation................. 15,750,000 15,750,000 15,272,189 15,375,500 16,360,793
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
F-11
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(5) INCOME TAXES
Income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal............................... $ 114,504 $ 267,376 $ 3,135,927
State................................. 1,279 3,171 554,436
Foreign............................... 1,864 5,577 26,003
------------- ------------- -------------
117,647 276,124 3,716,366
------------- ------------- -------------
Deferred:
Federal............................... (22,765) (9,427) (361,220)
State................................. (29,906) 8,433 (101,656)
Foreign............................... 1,242 3,202 --
------------- ------------- -------------
(51,429) 2,208 (462,876)
------------- ------------- -------------
Total income taxes.................. $ 66,218 $ 278,332 $ 3,253,490
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The Company's effective tax rate differs from the statutory federal
income tax rate of 34% primarily due to the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Tax expense at federal statutory rate... $ 116,863 $ 387,839 $ 3,024,106
Research and experimentation credit..... (52,836) (158,663) (233,996)
State tax, net of federal benefit....... (18,894) 7,659 298,833
Foreign sales corporation benefit....... -- -- (53,208)
Other................................... 21,085 41,497 217,755
------------- ------------- -------------
Total income taxes.................. $ 66,218 $ 278,332 $ 3,253,490
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-12
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(5) INCOME TAXES (CONTINUED)
The Company's net deferred tax assets are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 31,
---------------------------------------------
1996 1997 1998
------------- ------------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts..... $ -- $ -- $ 83,143
Accrued expenses.................... -- -- 321,911
Cash to accrual adjustments......... 213,833 234,525 274,643
State taxes......................... -- -- 111,608
Other............................... 93,197 70,297 24,411
------------- ------------- -------------
Total deferred tax asset........ 307,030 304,822 815,716
Deferred tax liability--property and
equipment............................. -- -- (48,018)
------------- ------------- -------------
Net deferred tax asset.............. $ 307,030 $ 304,822 $ 767,698
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Management believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to realize the
net deferred tax assets.
(6) EMPLOYEE BENEFIT PLANS
(a) RETIREMENT PLAN
The Company has a defined contribution retirement plan for all eligible
employees. Participants may make contributions to the plan in accordance
with provisions of the plan. The Company may make discretionary
contributions to the plan. For the years ended January 31, 1996, 1997,
and 1998, the Company made contributions of $98,554, $196,329, and
$285,486, respectively. Such contributions generally vest over six
years.
(b) STOCK OPTION PLAN
In October 1997, the Company's Board of Directors approved the Company's
1997 Stock Option and Incentive Plan (the Plan). The Plan allows for
grants to officers, directors and employees of the Company incentive
stock options, nonqualified stock options and restricted stock. Options
are generally granted for a 10-year term (5 years if the employee is
more than a 10% shareholder) and generally vest over 4 years. Options
are generally granted at fair market value (110% of fair market value if
optionee is a more than a 10% shareholder), as determined by the Board
of Directors. Restricted stock may be granted pursuant to the Plan, as
evidenced by agreement and determined by the Board of Directors.
The Plan automatically terminates in September 2007. Each option and
award granted under the Plan will remain in effect until such option or
award has been satisfied by the issuance of shares or terminated in
accordance with its terms and the terms of the Plan.
F-13
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(6) EMPLOYEE BENEFIT PLANS (CONTINUED)
Stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES WEIGHTED- GRANT DATE
AVAILABLE FOR OPTIONS AVERAGE FAIR VALUE
GRANT OUTSTANDING EXERCISE PRICE PER SHARE
------------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Shares reserved......................... 3,375,000 --
Restricted stock issued--Note 4(c)...... (1,840,500) --
Granted with an exercise price below the
fair value of common stock............ (204,750) 204,750 $1.00 $3.00
------------- -----------
Balances as of January 31, 1998......... 1,329,750 204,750 1.00 3.00
Authorized.............................. 675,000 --
Restricted stock issued--Note 4(c)...... (56,250) --
Granted with an exercise price below the
fair value of common stock
(unaudited)........................... (101,250) 101,250 1.54 4.11
Granted with an exercise price equal to
the fair value of common stock
(unaudited)........................... (551,610) 551,610 4.67 4.67
Cancelled............................... 56,250 (56,250) 1.00
------------- -----------
Balances as of July 31, 1998
(unaudited)........................... 1,351,890 801,360 3.59 4.29
------------- -----------
------------- -----------
</TABLE>
In connection with options granted in January 1998, the Company has
recorded deferred stock-based compensation of $297,000 representing the
difference between the exercise price and the fair value of the
Company's common stock at the date of grant. An additional $260,000 of
deferred stock-based compensation was recorded for options issued during
the six months ended July 31, 1998. The amount is being amortized over
the vesting period of the individual options, generally 4 years.
Stock-based compensation related to options to purchase common stock of
F-14
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(6) EMPLOYEE BENEFIT PLANS (CONTINUED)
$14,575 and $150,381 was recognized during the fiscal year ended January
31, 1998 and six months ended July 31, 1998, respectively.
Had compensation expense for the Company's stock-based compensation
plans, including the restricted stock discussed in Note 4(c), been
determined consistent with SFAS No. 123 using the minimum value
option-pricing model, the Company's net income in fiscal 1998 would not
have been materially affected. Assumptions used for fiscal 1998 were as
follows: no expected dividends; an average risk-free interest rate of
5.9%; and an average expected restricted stock or option term of 4.5
years. As of January 31, 1998, the weighted average exercise price and
weighted-average remaining contractual life of outstanding options was
$1.00 and 4.4 years, respectively. As of January 31, 1998, none of the
outstanding options were exercisable. The weighted-average fair value of
options granted in 1998 was $2.00 per share.
(7) COMMITMENTS
(a) LEASES
The Company has noncancelable operating lease agreements for office
space that expire in 2001 and 2002. Minimum lease payments for the five
succeeding years are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING JANUARY 31,
- - - - ----------------------------------------
<S> <C>
1999.................................... $ 532,228
2000.................................... 602,415
2001.................................... 597,085
2002.................................... 681,517
2003.................................... 379,880
-------------
$ 2,793,125
-------------
-------------
</TABLE>
Rent expense was $261,766, $357,262 and $454,087 for the fiscal years
ended January 31, 1996, 1997, and 1998, respectively.
(b) LICENSING AND OTHER AGREEMENTS
The Company has commitments under licensing agreements that provide for
royalty payments based on revenues of certain products. For the fiscal
years ended January 31, 1996, 1997, and 1998, the Company's royalty
expense under these license agreements was $1,276,843, $1,425,918, and
$2,075,083, respectively.
The Company had a Marketing Agreement with Sterling Software, Inc.
(Sterling). Pursuant to the Marketing Agreement, Sterling was granted
the exclusive right to market and sell the Company's COMPAREX software
product and was obligated to pay the Company a royalty of 50% of all
license and maintenance revenues. Pursuant to a Termination Agreement
dated September 20, 1995, Sterling forfeited all rights relating to the
Company's COMPAREX software product. The
F-15
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FISCAL YEARS ENDED JANUARY 31, 1996, 1997, AND 1998 AND SIX MONTHS ENDED
JULY 31, 1997 AND 1998
(INFORMATION AS OF JULY 31, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JULY 31, 1997 AND 1998 IS UNAUDITED)
(7) COMMITMENTS (CONTINUED)
Company was obligated to pay Sterling a certain percentage of maintenance
revenues related to maintenance agreement renewals for existing Sterling
customers through September 1996. In addition, pursuant to an amended
Termination Agreement, dated September 30, 1996, the Company paid
Sterling $1,250,000, representing payment in full for all maintenance
renewals in lieu of any further payments, as set forth in the original
Termination Agreement. The Company recorded the termination payment as a
cost of revenue in the year ended January 31, 1997.
(8) DUE FROM PRINCIPAL STOCKHOLDER
In March 1996, the Company advanced $250,000 to its principal
stockholder and received an unsecured promissory note to be paid in
three equal annual installments of principal and interest on March 15,
1997, March 15, 1998, and March 15, 1999, with a stated interest rate of
10% per annum. As of January 31, 1997 and 1998, $272,969 and $189,905,
respectively, of principal and accrued interest was outstanding.
In November 1996, the Company advanced $500,000 to its principal
stockholder in exchange for an unsecured promissory note due upon the
earlier of the sale of his residence or November 13, 1997, with a stated
interest rate of 10% per annum. As of January 31, 1997, $510,883 of
principal and accrued interest was outstanding. Principal and accrued
interest was paid in full during fiscal 1998.
In July 1998, the Company advanced $600,000 to its principal stockholder
in exchange for a promissory note secured by shares of the Company's
common stock. The loan accrues interest at 5.56%. The principal and
interest are due and payable in three equal installments of $222,641
payable on the annual anniversary of the funding of the loan.
Interest income on amounts due from the principal stockholder was
$33,852 and $35,769 for fiscal 1997 and 1998, respectively.
(9) SUBSEQUENT EVENTS (UNAUDITED)
On September 25, 1998, the Company acquired all of the outstanding
shares of Optima in exchange for the issuance of 3,187,500 shares of the
Company's common stock. The acquisition will be accounted for by the
purchase method of accounting. Optima will function as a wholly owned
subsidiary of the Company. Optima is the primary distributor of the
Company's CHANGE MAN software product.
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Optima Software, Inc.
We have audited the accompanying balance sheets of Optima Software, Inc.
as of December 31, 1996 and 1997, and the related statements of income and
retained earnings and cash flows for each of the years in the three-year period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Optima Software,
Inc. as of December 31, 1996 and 1997, and the results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Mountain View, California
October 16, 1998
F-17
<PAGE>
OPTIMA SOFTWARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997 JUNE 30, 1998
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 1,645,467 $ 1,439,613 $ 3,408,156
Accounts receivable.................................................. 2,993,583 5,513,058 3,928,437
Prepaid expenses and other current assets............................ 3,874 43,982 79,633
------------ ------------ -------------
Total current assets............................................... 4,642,924 6,996,653 7,416,226
Property and equipment, net............................................ 43,229 122,679 142,884
Other assets........................................................... 88,886 121,807 177,087
------------ ------------ -------------
$ 4,775,039 $ 7,241,139 $ 7,736,197
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities--accounts payable and accrued expenses............. $ 2,035,853 $ 3,347,135 $ 2,948,003
------------ ------------ -------------
Commitments
Shareholders' equity:
Common stock, no par value; 1,000 shares authorized, issued and
outstanding in 1996 and 1997....................................... 130,000 130,000 130,000
Retained earnings.................................................... 2,609,186 3,764,004 4,658,194
------------ ------------ -------------
Total shareholders' equity......................................... 2,739,186 3,894,004 4,788,194
------------ ------------ -------------
$ 4,775,039 $ 7,241,139 $ 7,736,197
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
OPTIMA SOFTWARE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------- ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Distributed software products........ $ 7,076,889 $ 11,007,066 $ 16,946,652 $ 6,937,020 $ 9,185,549
Professional services................ 944,102 1,703,178 3,612,152 1,489,881 2,319,781
------------ ------------- ------------- ------------ -------------
Total revenue...................... 8,020,991 12,710,244 20,558,804 8,426,901 11,505,330
------------ ------------- ------------- ------------ -------------
Operating expenses:
Cost of revenue...................... 4,810,550 7,195,065 11,419,924 4,686,240 7,052,261
Sales and marketing.................. 1,497,113 2,224,703 3,650,997 1,398,726 1,228,303
General and administrative........... 946,244 1,404,149 2,281,320 917,727 494,486
------------ ------------- ------------- ------------ -------------
Total operating expenses........... 7,253,907 10,823,917 17,352,241 7,002,693 8,775,050
------------ ------------- ------------- ------------ -------------
Operating income................... 767,084 1,886,327 3,206,563 1,424,208 2,730,280
Interest and other income, net......... 5,041 87,755 139,387 40,661 76,544
------------ ------------- ------------- ------------ -------------
Income before income taxes......... 772,125 1,974,082 3,345,950 1,464,869 2,806,824
Income taxes........................... 31,219 81,757 186,132 106,308 103,301
------------ ------------- ------------- ------------ -------------
Net income......................... 740,906 1,892,325 3,159,818 1,358,561 2,703,523
Retained earnings at beginning of
period............................... 494,017 829,445 2,609,186 2,609,186 3,764,004
Dividends paid......................... (405,478) (112,584) (2,005,000) (1,355,000) (1,809,333)
------------ ------------- ------------- ------------ -------------
Retained earnings at end of period..... $ 829,445 $ 2,609,186 $ 3,764,004 $ 2,612,747 $ 4,658,194
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
Unaudited pro forma information:
Income before income taxes, as
reported........................... 772,125 1,974,082 3,345,950 1,464,869 2,806,824
Pro forma income taxes............... 321,192 849,419 1,424,973 623,858 1,192,900
------------ ------------- ------------- ------------ -------------
Pro forma net income............... $ 450,933 $ 1,124,663 $ 1,920,977 $ 841,011 $ 1,613,924
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
OPTIMA SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- --------------------------
1995 1996 1997 1997 1998
---------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 740,906 $ 1,892,325 $ 3,159,818 $ 1,358,561 $ 2,703,523
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation.......................... 40,537 47,403 43,949 21,833 21,596
Changes in operating assets and
liabilities:
Accounts receivable................. (719,057) (1,082,937) (2,519,475) (308,189) 1,584,621
Prepaid expenses and other assets... (10,053) (1,470) (31,841) (19,276) (90,301)
Accounts payable and accrued
expenses.......................... 322,129 561,020 1,311,282 655,989 (399,132)
Deferred revenues................... 50,000 (50,000) -- 57,253 --
---------- ------------ ------------ ------------ ------------
Net cash provided by operating
activities...................... 424,462 1,366,341 1,963,733 1,766,171 3,820,307
---------- ------------ ------------ ------------ ------------
Cash flows used in investing activities:
Purchase of property and equipment...... (52,380) (33,882) (123,399) (20,224) (41,801)
Issuance of notes receivable............ -- -- (41,188) -- (630)
Payment of notes due from shareholder... (92,528) (144,003) -- -- --
---------- ------------ ------------ ------------ ------------
Net cash used in investing
activities...................... (144,908) (177,885) (164,587) (20,224) (42,431)
---------- ------------ ------------ ------------ ------------
Cash flows from financing activities--
payment of dividends.................... (405,478) (112,584) (2,005,000) (1,355,000) (1,809,333)
---------- ------------ ------------ ------------ ------------
Net change in cash and cash equivalents... (125,924) 1,075,872 (205,854) 390,947 1,968,543
Cash and cash equivalents at beginning of
period.................................. 695,519 569,595 1,645,467 1,645,467 1,439,613
---------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of
period.................................. $ 569,595 $ 1,645,467 $ 1,439,613 $ 2,036,414 $ 3,408,156
---------- ------------ ------------ ------------ ------------
---------- ------------ ------------ ------------ ------------
Supplemental disclosures of cash flow
information--income taxes paid........ $ 15,862 $ 80,163 $ 181,535 $ 106,308 $ 103,301
---------- ------------ ------------ ------------ ------------
---------- ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
OPTIMA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Optima Software, Inc. (the "Company") is the primary distributor of
SERENA Software, Inc.'s ("SERENA") CHANGE MAN product. Its principal
markets are North America, Europe, and Asia. Foreign sales represented
approximately 13%, 12%, and 14% of revenue for the years ended December
31, 1995, 1996, and 1997, respectively.
(b) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
remaining maturities of three months or less at the date of purchase to
be cash equivalents. As of December 31, 1996 and 1997, cash equivalents
consisted of treasury bills and money market funds.
(c) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
double-declining balance method over the estimated useful lives of the
assets, generally three to seven years. Recoverability of property and
equipment is measured by comparing its carrying amount to the future net
cash flows expected to be generated. If such assets are considered to be
impaired, the impairment recognized is measured as the difference between
the carrying amount of the property and equipment and its fair value. To
date, the Company has made no adjustments to the carrying values of its
long-lived assets.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash and cash equivalents, accounts
receivable, and accounts payable approximate their respective carrying
amounts.
(e) USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(f) REVENUE RECOGNITION
Revenue from the resale of software licenses and maintenance is
recognized upon receipt and acceptance of a signed contract and delivery
of the software, provided the fee is fixed and determinable,
collectibility of the revenue is probable and the arrangement does not
involve significant customization of the software. If an acceptance
period is required, revenues are recognized upon the earlier of customer
acceptance or the expiration of the acceptance period, as defined in the
applicable software license agreement. Maintenance is provided by the
licensor and the Company does not incur any costs, other than the royalty
paid to the licensor, associated with the performance of maintenance
contracts.
F-21
<PAGE>
OPTIMA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Professional services revenue includes fees derived from the delivery of
training, installation, and consulting services. Revenue from training,
installation, and consulting services is recognized as the related
services are performed. Deferred revenue represents payments received by
the Company in advance of product delivery or service performance.
(g) INCOME TAXES
The Company has elected to be taxed for Federal and state income tax
purposes as a Subchapter S corporation under the Internal Revenue Code of
1986, as amended, and under certain comparable state tax laws. As a
result, earnings are taxed directly to the Company's shareholders at
applicable Federal and state income tax rates. Unaudited pro forma
information has been included in the statements of income and retained
earnings and the notes to financial statements setting forth income taxes
and net income as if the Company had been fully subject to tax during the
periods presented.
(h) CONCENTRATIONS OF CREDIT RISK
Financial instruments, potentially subjecting the Company to
concentrations of credit risk, consist primarily of temporary cash
investments and accounts receivable. The Company places its temporary
cash investments with two major financial institutions. The Company
maintains an allowance as needed for potential credit losses on customer
accounts. Credit losses have not been significant during all periods
presented.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Computers and equipment................................. $ 120,029 $ 167,403
Furniture and fixtures.................................. 43,078 97,688
Automobiles............................................. 21,863 21,863
--------- ---------
184,970 286,954
Less accumulated depreciation........................... 141,741 164,275
--------- ---------
$ 43,229 $ 122,679
--------- ---------
--------- ---------
</TABLE>
F-22
<PAGE>
OPTIMA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
(3) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Commissions............................. $ 203,437 $ 592,101
Royalties............................... 1,522,429 2,333,249
Other................................... 309,987 421,785
------------- -------------
$ 2,035,853 $ 3,347,135
------------- -------------
------------- -------------
</TABLE>
(4) INCOME TAXES
The Company has elected to be taxed as a Subchapter S corporation for
Federal and certain state income tax purposes, whereby income is taxed to
the individual shareholders. California imposes a 1.5% minimum franchise tax
on Subchapter S corporations. Accordingly, only state income tax has been
provided for in the accompanying financial statements. The following table
sets forth income taxes on a pro forma basis as if the Company had been a C
corporation during the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Pro forma income taxes:
Current
Federal............................................. $ 288,055 $ 724,939 $ 1,283,473
State............................................... 71,054 177,201 305,413
---------- ---------- ------------
Total current..................................... 359,109 902,140 1,588,886
---------- ---------- ------------
Deferred
Federal............................................. $ (33,493) $ (48,406) $ (137,936)
State............................................... (4,424) (4,315) (25,977)
---------- ---------- ------------
Total deferred.................................... (37,917) (52,721) (163,913)
---------- ---------- ------------
Total pro forma income taxes...................... $ 321,192 $ 849,419 $ 1,424,973
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
F-23
<PAGE>
OPTIMA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
(4) INCOME TAXES (CONTINUED)
The following tabulation reconciles the expected pro forma federal income
tax expense (computed by multiplying the Company's income before taxes by
34%) to the Company's unaudited pro forma income tax expense for the periods
presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Expected pro forma income tax expense............................. $ 262,523 $ 671,188 $ 1,137,623
State income taxes, net of federal tax effect..................... 66,066 168,868 277,433
Other............................................................. (7,397) 9,363 9,917
---------- ---------- ------------
$ 321,192 $ 849,419 $ 1,424,973
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the unaudited pro forma deferred tax assets and deferred tax
liabilities as of December 31, 1995, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Pro forma deferred tax assets:
Property and equipment, principally due to differences in
depreciation...................................................... $ 1,053 $ 1,096 $ 998
Reserves and accruals............................................... 16,278 37,752 172,353
State income taxes.................................................. 20,586 51,790 81,200
--------- --------- ----------
Total deferred tax assets......................................... $ 37,917 $ 90,638 $ 254,551
--------- --------- ----------
--------- --------- ----------
</TABLE>
(5) EMPLOYEE BENEFIT PLANS
RETIREMENT PLAN
The Company has a defined contribution retirement plan for all eligible
employees. Participants may make contributions to the plan in accordance
with provisions of the plan. The Company may make discretionary
contributions to the plan. For the years ended December 31, 1995, 1996, and
1997, the Company made contributions of $100,141, $116,023, and $183,493,
respectively. Such contributions generally vest over six years.
F-24
<PAGE>
OPTIMA SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)
(6) COMMITMENTS
(a) LEASES
The Company has a noncancelable operating lease agreement for office
space that expires in 2002. Minimum lease payments for the five
succeeding years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- - - - ------------------------------------------------------------------
<S> <C>
1998.............................................................. $ 143,664
1999.............................................................. 143,664
2000.............................................................. 150,672
2001.............................................................. 150,672
2002.............................................................. 113,004
---------
$ 701,676
---------
---------
</TABLE>
Rent expense was $78,727, $89,833, $91,646 and for the years ended
December 31, 1995, 1996, and 1997, respectively.
(b) LICENSING AND OTHER AGREEMENTS
The Company has a Marketing Agreement with SERENA. The principal
stockholder of SERENA owns 15% of the capital stock of the Company.
Pursuant to the Marketing Agreement, the Company was granted the
exclusive right to market and sell SERENA's CHANGE MAN software product.
SERENA is entitled to royalties of 40% and 75% upon initial sales of
software licenses and maintenance and renewal maintenance, respectively.
For the years ended December 31, 1995, 1996, and 1997, royalties under
this license agreement were $3,809,276, $5,856,783, and $9,088,801,
respectively.
(7) SUBSEQUENT EVENT
On September 25, 1998, SERENA acquired all of the outstanding shares of the
Company in exchange for 3,187,500 shares of SERENA's common stock.
F-25
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements
presented below are derived from the historical consolidated financial
statements of SERENA Software, Inc. ("SERENA") and Optima Software, Inc.
("Optima"). The unaudited pro forma condensed combined balance sheet as of July
31, 1998, gives effect to the acquisition by SERENA of all the issued and
outstanding shares of capital stock of Optima as if the acquisition had occurred
on such date. The unaudited pro forma condensed combined statements of income
for the fiscal year ended January 31, 1998, and for the six months ended July
31, 1998, give effect to the acquisition of Optima as if it had occurred on
February 1, 1997. For purposes of the unaudited pro forma condensed combined
statements of income for the fiscal year ended January 31, 1998, SERENA's
results of operations for such period have been combined with Optima's results
of operations for the year ended December 31, 1997. The unaudited pro forma
condensed combined statements of income for the six months ended July 31, 1998,
combine both SERENA's and Optima's results of operations for such period.
The unaudited pro forma condensed combined financial statements give
effect to the acquisition under the purchase method of accounting. The fair
value of the consideration paid has been allocated to the assets and liabilities
acquired based upon the fair values of such assets at the date of acquisition
and may be revised for a period of up to one year from the date of acquisition.
The preliminary estimates and assumptions as to the value of the assets and
liabilities of Optima to the combined company is based upon information
available at the date of preparation of these unaudited pro forma condensed
combined financial statements, and will be adjusted upon final allocation of
purchase price within one year from the acquisition date. The items awaiting
final allocation include noncurrent asset valuations and certain valuation
allowances and accruals. It is anticipated, however, that the final allocation
of the purchase price will not differ materially from the preliminary
allocation.
The unaudited pro forma condensed combined financial statements do not
purport to represent what SERENA's results of operations or financial condition
would have actually been or what operations would be if the transactions that
give rise to the pro forma adjustments had occurred on the dates assumed and are
not indicative of future results. The unaudited pro forma condensed combined
financial statements below should be read in conjunction with the historical
consolidated financial statements and related notes thereto of SERENA and Optima
included elsewhere herein.
F-26
<PAGE>
SERENA SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA PRO FORMA
SERENA OPTIMA ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 15,665 $ 3,368 $ (3,400)(1) $ 15,633
Accounts receivable, net of allowances........ 6,202 2,957 (1,587)(2) 7,572
Due from principal stockholder................ 182 -- 182
Prepaid expenses and other current assets..... 937 90 1,027
----------- ----------- ------------- -----------
Total current assets........................ 22,986 6,415 (4,987) 24,414
Property and equipment, net..................... 1,307 139 1,446
Due from principal stockholder.................. 530 -- 530
Other assets.................................... 272 167 16,043(3) 16,482
----------- ----------- ------------- -----------
Total assets................................ $ 25,095 $ 6,721 $ 11,056 $ 42,872
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 527 $ 28 $ 555
Note payable to stockholders.................. -- -- $ 1,350(1) 1,350
Income tax payable............................ -- 39 39
Accrued expenses.............................. 4,005 2,009 (1,587)(2) 4,427
Deferred revenue.............................. 7,565 -- 7,565
----------- ----------- ------------- -----------
Total current liabilities................... 12,097 2,076 (237) 13,936
Deferred revenue, net of current portion........ 1,982 -- 1,982
----------- ----------- ------------- -----------
Total liabilities........................... 14,079 2,076 (237) 15,918
----------- ----------- ------------- -----------
Commitments
Stockholders' equity:
Common stock.................................. 17 130 (126)(3) 21
Additional paid-in capital.................... 5,601 -- 15,934(3) 21,535
Notes receivable from stockholders............ (1,922) -- (1,922)
Deferred stock-based compensation............. (1,958) -- (1,958)
Accumulated other comprehensive losses........ (28) -- (28)
Retained earnings............................. 9,306 4,515 (4,750)(1) 9,306
235(3)
----------- ----------- ------------- -----------
Total stockholders' equity.................. 11,016 4,645 11,293 26,954
----------- ----------- ------------- -----------
Total liabilities and stockholders'
equity.................................... $ 25,095 $ 6,721 $ 11,056 $ 42,872
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
F-27
<PAGE>
SERENA SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FISCAL YEAR ENDED JANUARY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------- PRO FORMA PRO FORMA
SERENA OPTIMA ADJUSTMENTS COMBINED
------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Revenue:
Software licenses................ $17,839 $16,946 $ (4,690)(4) $22,962
(204)(5)
(6,929)(6)
Maintenance...................... 12,258 -- 433(6) 12,691
Professional services............ 2,050 3,612 5,662
------- ------- ------------- ---------
Total revenue.................. 32,147 20,558 (11,390) 41,315
------- ------- ------------- ---------
Operating expenses:
Cost of revenue.................. 6,813 11,420 (9,044)(4) 8,985
(204)(5)
Sales and marketing.............. 7,947 3,651 11,598
Research and development......... 5,518 -- 5,518
General and administrative....... 3,296 2,281 5,577
Stock-based compensation......... 880 -- 880
Amortization of intangible -- -- 1,546(7) 1,546
assets.........................
------- ------- ------------- ---------
Total operating expenses....... 24,454 17,352 (7,702) 34,104
------- ------- ------------- ---------
Operating income............... 7,693 3,206 (3,688) 7,211
Other income, net.................. 321 140 (118)(8) 343
------- ------- ------------- ---------
Income before income taxes..... 8,014 3,346 (3,806) 7,554
Income taxes....................... 3,253 186 211(9) 3,650
------- ------- ------------- ---------
Net income..................... $4,761 $3,160 $ (4,017) $ 3,904
------- ------- ------------- ---------
------- ------- ------------- ---------
Net income per share:
Basic............................ $ 0.31 $ 0.21
------- ---------
------- ---------
Diluted.......................... $ 0.31 $ 0.21
------- ---------
------- ---------
Shares used to compute net income
per share:
Basic............................ 15,248 18,436
------- ---------
------- ---------
Diluted.......................... 15,272 18,460
------- ---------
------- ---------
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
F-28
<PAGE>
SERENA SOFTWARE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JULY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA PRO FORMA
SERENA OPTIMA ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue:
Software licenses............................. $ 9,988 $ 8,321 $ (1,472)(4) $ 11,722
(276)(5)
(4,839)(6)
Maintenance................................... 7,735 -- 695(6) 8,430
Professional services......................... 1,193 1,939 3,132
----------- ----------- ------------- -----------
Total revenue............................... 18,916 10,260 (5,892) 23,284
----------- ----------- ------------- -----------
Operating expenses:
Cost of revenue............................... 3,816 6,623 (4,980)(4) 5,183
(276)(5)
Sales and marketing........................... 5,707 1,335 7,042
Research and development...................... 2,073 -- 2,073
General and administrative.................... 1,692 388 2,080
Stock-based compensation...................... 1,558 -- 1,558
Amortization of intangible assets............. -- -- 523(7) 523
----------- ----------- ------------- -----------
Total operating expenses.................... 14,846 8,346 (4,733) 18,459
----------- ----------- ------------- -----------
Operating income............................ 4,070 1,914 (1,159) 4,825
Other income, net............................... 343 91 (91)(8) 343
----------- ----------- ------------- -----------
Income before income taxes.................. 4,413 2,005 (1,250) 5,168
Income taxes.................................... 1,942 100 379(9) 2,421
----------- ----------- ------------- -----------
Net income.................................. $ 2,471 $ 1,905 $ (1,629) $ 2,747
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Net income per share:
Basic......................................... $ 0.16 $ 0.15
----------- -----------
----------- -----------
Diluted....................................... $ 0.15 $ 0.14
----------- -----------
----------- -----------
Shares used to compute net income per share:
Basic......................................... 15,639 18,827
----------- -----------
----------- -----------
Diluted....................................... 16,361 19,549
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
F-29
<PAGE>
SERENA SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
PRO FORMA CONDENSED COMBINED BALANCE SHEET:
(1) To record distributions to Optima's shareholders declared prior to the
acquisition date.
(2) To eliminate intercompany balances related to royalties.
(3) To record SERENA's acquisition of Optima whereby SERENA issued 3,187,500
shares of its own common stock valued at $5.00 per share in exchange for all
the outstanding capital stock of Optima.
The allocation of the purchase price for pro forma purposes was as
follows:
<TABLE>
<S> <C>
Allocation of purchase price:
Net tangible liabilities......................................... $ (105)
Work-force-in-place(a)........................................... 300
Noncompete agreement(b).......................................... 200
Goodwill(c)...................................................... 15,543
---------
Total purchase price........................................... $ 15,938
---------
---------
</TABLE>
----------------------------
(a) Work-force-in-place, consisting principally of Optima's sales force,
was valued on a replacement cost basis and will be amortized over a
six-month period, the period of time SERENA estimates would be required
to hire, train, and achieve full productivity for a replacement work
force.
(b) The noncompete agreement was entered into with an Optima officer and
founder who will not continue with the combined company. The noncompete
agreement was valued based on his anticipated salary and benefits for the
period of the agreement and will be amortized over the one-year term of
the agreement.
(c) Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired and will be amortized over 15 years.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME:
(4) To eliminate intercompany software licence royalty revenue recorded by
SERENA and intercompany royalty expense recorded by Optima.
(5) To eliminate Optima's software license revenues against SERENA's royalty
expense with respect to certain sales transactions initiated by a foreign
subsidiary of SERENA's and to which Optima was entitled royalties.
(6) To conform Optima's revenue recognition policy for maintenance to SERENA's.
(7) To record the amortization of intangible assets resulting from the
allocation of the purchase price.
(8) To record a reduction in interest income for the distribution to Optima
shareholders paid prior to the acquisition date.
(9) To record income taxes for Optima as if it were a C corporation during the
periods presented and for the tax effect of the various pro forma
adjustments set forth above. This adjustment is based on a combined
effective Federal and state statutory rate of 48.3% and 46.8% during the
fiscal year ended January 31, 1998 and six months ended July 31, 1998,
respectively.
F-30
<PAGE>
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
6,000,000 SHARES
[LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
HAMBRECHT & QUIST
SG COWEN
SOUNDVIEW TECHNOLOGY GROUP
---------
, 1998
--------------
YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES
TO PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF
THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.
UNTIL , 1998, ALL DEALERS THAT BUY, SELL OR TRADE IN OUR
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................. $ 21,100
NASD filing fee................................................... 8,090
Nasdaq National Market listing fee................................ 95,000
Printing and engraving costs...................................... 175,000
Legal fees and expenses........................................... 250,000
Accounting fees and expenses...................................... 250,000
Blue Sky fees and expenses........................................ 5,000
Transfer Agent and Registrar fees................................. 10,000
Miscellaneous expenses............................................ 30,000
---------
Total........................................................... $ 844,190
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a
corporation to include in its charter documents, and in agreements between the
corporation and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article X of the Registrant's Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification
of officers, directors and third parties acting on behalf of the Registrant if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued unregistered
securities to a limited number of persons, as described below. None of these
transactions involved any underwriters, underwriting discounts or commissions,
or any public offering, and the Registrant believes that each transaction was
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof, Regulation D promulgated thereunder or Rule 701 pursuant
to compensatory benefit plans and contracts relating to compensation as provided
under such Rule 701. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with the Registrant, to information about the Registrant.
II-1
<PAGE>
1. Pursuant to the Registrant's Amended and Restated 1997 Stock Option
and Incentive Plan, from January 1998 to April 1998, the Registrant issued
and sold an aggregate of 1,896,750 shares of common stock to certain of its
officers and directors.
2. Pursuant to an Agreement and Plan of Reorganization, dated September
25, 1998, whereby the Registrant acquired Optima Software, Inc., the
Registrant issued an aggregate of 3,187,500 shares of common stock to the
selling stockholders of Optima Software, Inc.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
1.1 Form of Underwriting Agreement
3.1A Amended Articles of Incorporation of the Registrant, as currently in effect
3.1B Form of Restated Certificate of Incorporation of the Registrant to be filed after
the closing of the offering made under this Registration Statement
3.2A Bylaws of the Registrant, as amended through the date hereof
3.2B Form of Bylaws of the Registrant to be in effect after the closing of the offering
made under this Registration Statement
4.1 Specimen Common Stock Certificate
4.2 Registration Rights Agreement, dated September 25, 1998, by and among the Registrant
and certain shareholders of Optima Software Inc. (related to the Registrant's
acquisition of Optima Software, Inc.)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1 Form of Indemnification Agreement between the Registrant and each of its directors
and officers
10.2A Amended and Restated 1997 Stock Option Plan
10.2B Form of Option Agreement under the Amended and Restated 1997 Stock Option Plan
10.2C Form of Restricted Stock Purchase Agreement under the Amended and Restated 1997
Stock Option Plan
10.3A 1999 Employee Stock Purchase Plan
10.3B Form of Subscription Agreement under the 1999 Employee Stock Purchase Plan
10.4A 1999 Director Plan
10.4B Form of Option Agreement under 1999 Director Plan
10.5 Employment Agreement, dated April 18, 1997 between the Registrant and Richard A.
Doerr
10.6 Employment Agreement, dated June 24, 1980, between the Registrant and Douglas D.
Troxel
10.7 Employment and Software Distribution Agreement, dated October 28, 1993, between the
Registrant and A. Bruce Leland (relating to license of proprietary technology)
10.8 Employment Agreement, dated May 18, 1993, between the Registrant and Steven Smith
(relating to license of proprietary technology)
10.9 Software Agreement, dated July 1, 1991, by and between the Registrant and High Power
Software, Inc. (relating to joint ownership of technology)
10.10A Lease Agreement, dated August 15, 1994, between the Registrant and Water Front
Towers Partners, L.P. (for Burlingame headquarters)
10.10B Addendum to Lease Agreement (for Burlingame headquarters facility), dated November
21, 1994
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
10.10C Second Addendum to Lease Agreement (for Burlingame headquarters) dated November 15,
1994
<C> <S>
10.10D Amendment No. 1 to Lease Agreement (for Burlingame headquarters facility) dated May
21, 1996
10.10E Amendment No. 2 to Lease Agreement (for Burlingame headquarters facility) dated
August 24, 1996
10.10F Amendment No. 3 to Lease Agreement (for Burlingame headquarters facility) dated June
3, 1997
10.10G Amendment No. 4 to Lease Agreement (for Burlingame headquarters facility) dated June
9, 1998
10.11 Lease Agreement between the Registrant and Waterfront Tower Partners, L.P. dated May
18, 1998 (for additional space at Burlingame headquarters facility)
10.12 Form of Restricted Stock Purchase Agreement entered into between the Registrant and
certain of its executive officers
10.13 Secured Promissory Note and Security Agreement between Registrant and Douglas D.
Troxel dated July 22, 1998
16.1 Letter regarding change in certifying accountants
21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors (see Page S-1)
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see Page II-5)
</TABLE>
- - - - ------------------------
* To be filed by amendment
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and
II-3
<PAGE>
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Burlingame, State of
California, on the 23rd day of November, 1998.
<TABLE>
<S> <C> <C>
SERENA SOFTWARE, INC.
By: /s/ RICHARD A. DOERR
-----------------------------------------
Richard A. Doerr, President and Chief
Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard A. Doerr and Robert I. Pender,
Jr. and each of them, his attorneys-in-fact, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, as amended, and all post-effective amendments thereto, and to file the
same, with all exhibits thereto and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - - ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive November 23, 1998
/s/ RICHARD A. DOERR Officer and Director
- - - - ------------------------------ (Principal Executive
(Richard A. Doerr) Officer)
Vice President, Finance November 23, 1998
and Administration, Chief
/s/ ROBERT I. PENDER, JR. Financial Officer
- - - - ------------------------------ (Principal Financial and
(Robert I. Pender, Jr.) Accounting Officer) and
Secretary
/s/ DOUGLAS D. TROXEL Chairman of the Board of November 23, 1998
- - - - ------------------------------ Directors and Chief
(Douglas D. Troxel) Technology Officer
/s/ ALAN H. HUNT
- - - - ------------------------------ Director November 23, 1998
(Alan H. Hunt)
</TABLE>
II-5
<PAGE>
CONSENT OF INDEPENDENT AUDITORS AND
FORM OF REPORT ON FINANCIAL STATEMENT SCHEDULE
We consent to the use of our forms of report and report included herein
and to the reference to our firm under the headings "Experts" and "Selected
Consolidated Financial Data" in the prospectus. When the reincorporation
referred to in Note 4(b) of the Notes to SERENA Software, Inc.'s consolidated
Financial Statements is consummated, we will be in a position to render the
following report on financial statement schedule.
KPMG PEAT MARWICK LLP
The audits referred to in our report dated September 4, 1998, except
as to Note 4(b), which is as of November 19, 1998, included in the
related financial statement schedule as of January 31, 1998, and for
each of the years in the three-year period ended January 31, 1998,
included in the registration statement. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basis consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Mountain View, California
November 20, 1998
S-1
<PAGE>
SCHEDULE II
SERENA SOFTWARE, INC.
--------------
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS--
BEGINNING CHARGED TO BALANCE AT
OF FISCAL COSTS AND DEDUCTIONS-- END OF
DESCRIPTION YEAR EXPENSES WRITEOFFS FISCAL YEAR
- - - - ----------------------------------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Year Ended January 31, 1996:
Allowance for doubtful accounts........ $ 29,800 $ -- $ -- $ 29,800
Year Ended January 31, 1997:
Allowance for doubtful accounts........ $ 29,800 $ -- $ -- $ 29,800
Year Ended January 31, 1998:
Allowance for doubtful accounts........ $ 29,800 $ 200,717 $ (33,035) $ 197,482
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - - - --------- ------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1A Amended Articles of Incorporation of the Registrant, as currently in effect
3.1B Form of Restated Certificate of Incorporation of the Registrant to be filed after
the closing of the offering made under this Registration Statement
3.2A Bylaws of the Registrant, as amended through the date hereof
3.2B Form of Bylaws of the Registrant to be in effect after the closing of the offering
made under this Registration Statement
4.1 Specimen Common Stock Certificate
4.2 Registration Rights Agreement, dated September 25, 1998, by and among the Registrant
and certain shareholders of Optima Software Inc. (related to the Registrant's
acquisition of Optima Software, Inc.)
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
10.1 Form of Indemnification Agreement between the Registrant and each of its directors
and officers
10.2A Amended and Restated 1997 Stock Option Plan
10.2B Form of Option Agreement under the Amended and Restated 1997 Stock Option Plan
10.2C Form of Restricted Stock Purchase Agreement under the Amended and Restated 1997
Stock Option Plan
10.3A 1999 Employee Stock Purchase Plan
10.3B Form of Subscription Agreement under the 1999 Employee Stock Purchase Plan
10.4A 1999 Director Plan
10.4B Form of Option Agreement under 1999 Director Plan
10.5 Employment Agreement, dated April 18, 1997 between the Registrant and Richard A.
Doerr
10.6 Employment Agreement, dated June 24, 1980, between the Registrant and Douglas D.
Troxel
10.7 Employment and Software Distribution Agreement, dated October 28, 1993, between the
Registrant and A. Bruce Leland (relating to license of proprietary technology)
10.8 Employment Agreement, dated May 18, 1993, between the Registrant and Steven Smith
(relating to license of proprietary technology)
10.9 Software Agreement, dated July 1, 1991, by and between the Registrant and High Power
Software, Inc. (relating to joint ownership of technology)
10.10A Lease Agreement, dated August 15, 1994, between the Registrant and Water Front
Towers Partners, L.P. (for Burlingame headquarters)
10.10B Addendum to Lease Agreement (for Burlingame headquarters facility), dated November
21, 1994
10.10C Second Addendum to Lease Agreement (for Burlingame headquarters) dated November 15,
1994
10.10D Amendment No. 1 to Lease Agreement (for Burlingame headquarters facility) dated May
21, 1996
10.10E Amendment No. 2 to Lease Agreement (for Burlingame headquarters facility) dated
August 24, 1996
10.10F Amendment No. 3 to Lease Agreement (for Burlingame headquarters facility) dated June
3, 1997
10.10G Amendment No. 4 to Lease Agreement (for Burlingame headquarters facility) dated June
9, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - - - --------- ------------------------------------------------------------------------------------
<C> <S>
10.11 Lease Agreement between the Registrant and Waterfront Tower Partners, L.P. dated May
18, 1998 (for additional space at Burlingame headquarters facility)
10.12 Form of Restricted Stock Purchase Agreement entered into between the Registrant and
certain of its executive officers
10.13 Secured Promissory Note and Security Agreement between Registrant and Douglas D.
Troxel dated July 22, 1998
16.1 Letter regarding change in certifying accountants
21.1 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors (see Page S-1)
23.3* Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see Page II-5)
</TABLE>
- - - - ------------------------
* To be filed by amendment
<PAGE>
DRAFT
SERENA SOFTWARE, INC.
6,000,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
___________, 1999
HAMBRECHT & QUIST LLC
SG COWEN SECURITIES CORPORATION
SOUNDVIEW TECHNOLOGY GROUP, INC.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
Serena Software, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell 4,000,000 shares of its authorized but
unissued Common Stock, $0.001 par value (herein called the Common Stock), and
certain of the stockholders of the Company named in Schedule II hereto
(herein collectively called the Selling Securityholders) propose to sell an
aggregate of 2,000,000 shares of Common Stock of the Company (said 6,000,000
shares of Common Stock being herein called the Underwritten Stock). The
Company proposes to grant to the Underwriters (as hereinafter defined) an
option to purchase up to 900,000 additional shares of Common Stock (herein
called the Option Stock and with the Underwritten Stock herein collectively
called the Stock). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters
to enter into this Agreement on its behalf and to act for it in the manner
herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called the Commission) a registration
statement on Form S-1 (No. 33-_____), including the related preliminary
prospectus, for the registration under the Securities Act of 1933, as amended
(herein called the Securities Act) of the Stock. Copies of such registration
statement and of each amendment thereto, if any, including the related
preliminary prospectus (meeting the requirements of Rule 430A of the rules
and regulations of the Commission) heretofore filed by the Company with the
Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective,
and any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
Effective Date), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule
462(b) registration statement). The term Prospectus as used in this
Agreement shall mean the prospectus relating to the Stock first filed with
the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing is
required, as included in the Registration Statement)
- - - - ----------------
(1) Plus an option to purchase from the Company up to 900,000 additional shares
to cover overallotments.
<PAGE>
and, in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the
Commission of such supplement or the effectiveness of such amendment) such
prospectus as so supplemented or amended. The term Preliminary Prospectus as
used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to
the use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) The Company hereby represents and warrants as follows:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has full corporate power and authority to own or lease
its properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified as
a foreign corporation and in good standing in all jurisdictions in which the
character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the failure to
be so qualified would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole).
(ii) Except as disclosed in the Prospectus, the Company owns
all of the shares of capital stock of each subsidiary of the Company and each
of the Company's subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has full corporate power and authority to own or lease
its properties and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is duly qualified as
a foreign corporation and in good standing in all jurisdictions in which the
character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the failure to
be so qualified would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole). All of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable, and owned directly by the
Company, fee and clear of all liens, encumbrances, equities or claims.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been
any materially adverse change in the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course
of business, other than as set forth in the Registration Statement and the
Prospectus, and since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries (i) has entered into any
material transaction or incurred any material liability or obligation, direct
or contingent, not referred to in the Registration Statement and the
Prospectus; (ii) has purchased any of its outstanding capital stock, or
declared, paid or otherwise made any dividend or distribution of any kind on
its capital stock; or (iii) has had any material change in the capital stock,
short-term debt or long-term debt of the Company and its consolidated
subsidiaries, taken as a whole, except in each case as described or
specifically contemplated in the Registration Statement and the Prospectus.
(iv) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Stock nor instituted or, to the knowledge of the Company,
threatened instituting proceedings for that purpose. The Registration Statement
and the Prospectus comply, and on the Closing Date (as hereinafter defined) and
any later date on which Option Stock is to be purchased, the Prospectus will
comply, in all material respects, with the provisions of the Securities Act and
the Securities Exchange Act of 1934, as amended (herein called the Exchange Act)
and the rules and regulations of the Commission thereunder; on the Effective
Date, the Registration Statement did not contain any untrue statement of a
material fact and did not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading;
and, on the Effective Date the Prospectus did not and, on the Closing Date
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and any later date on which Option Stock is to be purchased, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that none of the representations and warranties in this subparagraph (iv)
shall apply to statements in, or omissions from, the Registration Statement
or the Prospectus made in reliance upon and in conformity with information
herein or otherwise furnished in writing to the Company by or on behalf of
the Underwriters for use in the Registration Statement or the Prospectus.
(v) The Common Stock (including the Stock to be sold by the
Selling Securityholders) outstanding prior to the issuance of the Common
Stock to be sold by the Company has been duly authorized and is validly
issued, fully paid and non-assessable. Except as set forth in the Prospectus
and other than options to purchase 1,232,400 shares of the Company's Common
Stock granted to employees pursuant to the Company's 1997 Stock Option Plan
(herein referred to as the 1997 Plan) as described in the Prospectus, neither
the Company nor any of its subsidiaries has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. All outstanding
shares of capital stock and options and other rights to acquire capital stock
have been issued in compliance with the registration and qualification
provisions of all applicable securities laws (or applicable exemptions
thereof) and were not issued in violation of any preemptive rights, rights of
first refusal and other similar rights. The Stock to be sold by the Company
has been duly authorized, and when issued and delivered in accordance with
the terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for
the transfer and sale of the Stock to be sold by the Selling Securityholders
or the issuance and sale of the Stock to be sold by the Company as
contemplated herein.
(vi) The authorized capital stock of the Company conforms as
to legal matters in all material respects to the description thereof
contained in the Prospectus. The form of certificates for the Stock conforms
in all material respects to the corporate law of the jurisdiction of the
Company's incorporation.
(vii) Prior to the Closing Date, the Stock to be sold by the
Selling Securityholders, and the Stock to be issued and sold by the Company,
will be authorized for listing by the Nasdaq National Market upon official
notice of issuance.
(viii) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the Registration
Statement ("Company Financial Statements"), present fairly the financial
position and the results of operations of the Company and its subsidiaries,
taken as a whole, at the indicated dates and for the indicated periods. The
consolidated financial statements of Optima Software, Inc., a wholly owned
subsidiary of the Company ("Optima"), together with related notes and
schedules as set forth in the Registration Statement ("Optima Financial
Statements"), present fairly the financial position and the results of
operations of Optima and its subsidiaries, taken as a whole, at the indicated
dates and for the indicated periods. The pro forma condensed combined
consolidated financial statements of the Company, together with related notes
and schedules as set forth in the Registration Statement ("Pro Forma
Financial Statements," which together with the Company Financial Statements
and the Optima Financial Statements, are herein collectively called the
"Financial Statements"), present fairly the financial position and the
results of operations of the Company and its subsidiaries, taken as a whole,
at the indicated dates and for the indicated periods. The Financial
Statements, schedules and related notes have been prepared in accordance with
generally accepted accounting principles, consistently applied through the
period involved, except as may be otherwise stated therein, and all
adjustments necessary for a fair presentation of results for such periods
have been made.
(ix) Neither the Company nor any of its subsidiaries is in
violation or default under any provision of their respective charter
documents or bylaws, as currently in effect, or any indenture, license,
mortgage, lease, franchise, permit, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or their respective properties
is bound or may be affected, except where such violation or default would not
have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
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(x) The Company has full legal right, power and authority
to enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by applicable laws and except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, or by general equitable principles.
(xi) The execution and performance of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of, or violation of, any of the terms or
provisions of, or constitute, either by itself or upon notice or the passage
of time or both, a default under, any indenture, license, mortgage, lease,
franchise, permit, deed of trust or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or their respective properties is bound or may be
affected, except where such breach, violation or default would not have a
materially adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, or violate
any of the provisions of the certificate or articles of incorporation or
bylaws, as applicable, each as amended, of the Company or any of its
subsidiaries or violate any material order, judgment, statute, rule or
regulation applicable to the Company or any of its subsidiaries of any court
or of any regulatory, administrative or governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their respective
properties.
(xii) There are no legal or governmental proceedings pending
or, to the Company's knowledge, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required. The contracts so described in the Prospectus are in full force and
effect on the date hereof except as disclosed therein; and neither the
Company nor any of its subsidiaries nor, to the Company's knowledge any other
party, is in material breach of or default under any of such contracts.
(xiii) The Company and its subsidiaries possess all consents,
approvals, orders, certificates, authorizations and permits issued by, and
has made all declarations and filings with, all appropriate federal, state or
foreign governmental and self-regulatory authorities and all courts and other
tribunals and all required state agencies in connection with applicable
franchise laws, regulations and requirements necessary to conduct their
respective businesses and to own, lease, license and use their properties in
the manner described in the Prospectus, except to the extent that the failure
to obtain or file would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole, and neither the Company nor its
subsidiaries has received any notice of proceedings related to the revocation
or modification of any such consent, approval, order, certificate,
authorization or permit that, singly or in the aggregate, could reasonably be
expected to result in a material adverse change in the condition, financial
or otherwise, or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole.
(xiv) The Company and each of its subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws with
respect to its business as conducted and as proposed to be conducted in the
Registration Statement and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company or its subsidiaries,
taken as a whole. There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
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(xv) Neither the Company nor any of its subsidiaries owns
any real properties. The Company and each of its subsidiaries has good and
marketable title to all personal property that they respectively own free and
clear of all liens, encumbrances and defects except such as are described in
the Registration Statement or the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or its subsidiaries; and
any real property and buildings held under lease by the Company or its
subsidiaries are held under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company or its
subsidiaries.
(xvi) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Stock.
(xvii) The Company and each of its subsidiaries owns or
possesses adequate rights to use, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and,
except as described in the Prospectus, neither the Company nor its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company or its subsidiaries, taken as a whole. Except as disclosed in the
Prospectus, the discoveries, inventions, products or processes of the Company
and its subsidiaries referred to in the Prospectus do not, to the knowledge
of the Company or any of its subsidiaries, infringe or conflict with any
right or patent of any third party, or any discovery, invention, product or
process which is the subject of a patent application filed by a third party,
known to the Company or any of its subsidiaries, which such infringement or
conflict could result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company or its subsidiaries, taken as a whole. The expiration of any patents,
patent rights, trade secrets, trademarks, service marks, trade names,
copyrights or other intellectual property rights would not have a material
adverse effect on the condition, or in the earnings, business or operations
of the Company or its subsidiaries, taken as a whole.
(xviii) The Company is in compliance, in all material
respects, with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined
in ERISA) for with the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV or ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified and nothing has occurred, whether by action or failure to
act, that would cause the loss of such qualification.
(xix) The Company is not and, after giving effect to the
offering and sale of the Stock and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(xx) There is no owner of any securities of the Company who
has any right, not effectively satisfied or waived, to require registration
of any shares of capital stock of the Company in connection with the filing
of the Registration Statement or the sale of any shares thereunder. There
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Stock registered pursuant to the Registration Statement,
except in each case as described in the Prospectus.
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(xxi) The Company and its subsidiaries have complied with all
provisions of Section 517.075, Florida Statutes relating to doing business
with the Government of Cuba or with any person or affiliate located in Cuba.
(xxii) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principals of the United States and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xxiii) No material labor dispute with employees of the
Company or any of its subsidiaries or franchisees exists or to the knowledge
of the Company is imminent, and, without conducting any independent
investigation, the Company is not aware of any written communication of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could result in
any material adverse change in the condition, financial or otherwise, the
earnings, the business or operations of the Company and its subsidiaries,
taken as a whole. The employment of each officer and employee of the Company
and its subsidiaries is terminable at the will of the Company. To its
knowledge, the Company and its subsidiaries have each complied in all
material respects with all applicable state and federal equal employment
opportunity laws and with other laws related to employment. To the Company's
knowledge, no employee of the Company or any of its subsidiaries, nor any
consultant or independent contractor with whom the Company or any of its
subsidiaries has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating
to the right of any such individual to be employed by, or to contract with,
the Company because of the nature of the business to be conducted by the
Company or any of its subsidiaries; and to the Company's knowledge the
continued employment by the Company and its subsidiaries of its present
employees, and the performance of the Company's contracts with its
independent contractors, will not result in any such violation. The Company
and its subsidiaries have not received any notice alleging that any such
violation has occurred. Except as disclosed in the Prospectus, no employee
of the Company or any of its subsidiaries has been granted the right to
continued employment by the Company or to any other material compensation
following termination of employment with the Company. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company or any of its
subsidiaries, nor does the Company have a present intention to terminate the
employment of any of the foregoing.
(xxiv) The Company has not offered, or caused the Underwriters
to offer, Stock to any person by way of directed shares with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the
Company, or (ii) a trade journalist or publication to write or publish
favorable information about the Company or its products.
(xxv) To the Company's knowledge, after due investigation,
each of the Company's products will produce no material, logical or
arithmetic inconsistencies when dealing with leap years or dates beyond the
year 1999. Without limiting the foregoing, to the Company's knowledge, the
Company's services and products will not materially impede the accurate
processing of data, or cause programming or processing errors resulting from
the rollover of two-digit year values to "00" on January 1, 2000. The
foregoing does not constitute a warranty or representation that the Company's
software will be capable of recording, storing, processing, calculating and
displaying correct calendar dates based on software supplied by any party
other than the Company, or that other Company's software will properly
interact with such third party software.
(xxvi) The Company and each of its subsidiaries, taken as a
whole, are insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
business in which it is engaged, and neither the Company nor any of such
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, in each case except as
described in or contemplated by the Prospectus, which cost is material to the
Company and its subsidiaries, taken as a whole.
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(b) Each of the Selling Securityholders hereby represents and
warrants as follows:
(i) Such Selling Securityholder has good and marketable
title to all the shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever, with full right and authority to deliver the
same hereunder, subject, in the case of such Selling Securityholder, to the
rights of ChaseMellon Shareholder Services, LLC, as Custodian (herein called
the Custodian), and that upon the delivery of and payment for such shares of
the Stock hereunder, the several Underwriters will receive good and
marketable title thereto, free and clear of all liens, encumbrances,
equities, security interests and claims whatsoever.
(ii) Such Selling Securityholder has duly authorized,
executed and delivered, in the form heretofore furnished to the Underwriters,
a Custody Agreement and Power of Attorney (the "Custody Agreement and Power
of Attorney") appointing _________ and _________ as attorneys-in-fact
(collectively, the "Attorneys" and individually, an "Attorney") and
appointing ChaseMellon Shareholder Services, LLC as Custodian; the Custody
Agreement and Power of Attorney constitutes a valid and binding agreement on
the part of such Selling Securityholder, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and each of such Selling Securityholder's Attorneys, acting
alone, is authorized to execute and deliver this Agreement and the
certificate referred to in Section 9(e) hereof on behalf of such Selling
Securityholder, to determine (within the limitations therein specified) the
purchase price to be paid by the several Underwriters to such Selling
Securityholder as provided in Section 3 hereof, to authorize the delivery of
the shares of Stock to be sold by such Selling Securityholder under this
Agreement and to duly endorse (in blank or otherwise) the certificate or
certificates representing such Stock or a stock power or powers with respect
thereto, to accept payment therefor, and otherwise to act on behalf of such
Selling Securityholder in connection with this Agreement.
(iii) All consents, approvals, authorizations and orders
required for the execution and delivery by such Selling Securityholder of the
Custody Agreement and Power of Attorney, the execution and delivery by or on
behalf of such Selling Securityholder of this Agreement and the sale and
delivery of the shares of Stock to be sold by such Selling Securityholder
under this Agreement (other than, at the time of the execution hereof, if the
Registration Statement has not yet been declared effective by the issuance of
the order of the Commission declaring the Registration Statement effective
and such consents, approvals, authorizations or orders as may be necessary
under state or other securities or Blue Sky laws) have been obtained and are
in full force and effect; such Selling Securityholder, if other than a
natural person, has been duly organized and is validly existing in good
standing under the laws of the jurisdiction of its organization as the type
of entity that it purports to be; and such Selling Securityholder has full
legal right, power and authority to enter into and perform its obligations
under this Agreement and such Custody Agreement and Power of Attorney, and to
sell, assign, transfer and deliver the Stock to be sold by such Selling
Securityholder under this Agreement.
(iv) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in custody
under a Custody Agreement and Power of Attorney for delivery under this
Agreement with the Custodian; such Selling Securityholder specifically agrees
that the shares of the Stock represented by the certificates so held in
custody for such Selling Securityholder are subject to the interests of the
several Underwriters and the Company, that the arrangements made by such
Selling Securityholder for such custody, including the Power of Attorney
provided for in such Custody Agreement and Power of Attorney, are to that
extent irrevocable, and that the obligations of such Selling Securityholder
shall not be terminated by any act of such Selling Securityholder or by
operation of law, whether by the death or incapacity of such Selling
Securityholder (or, in the case of a Selling Securityholder that is not an
individual, the dissolution or liquidation of such Selling Securityholder) or
the occurrence of any other event; if any such death, incapacity,
dissolution, liquidation or other such event should occur before the delivery
of such shares of the Stock hereunder, certificates for such shares of the
Stock shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, dissolution,
liquidation or other event had not occurred, regardless of whether the
Custodian shall have received notice of such death, incapacity, dissolution,
liquidation or other event.
(v) Such Selling Securityholder will comply with all
agreements and satisfy all conditions on its part to be complied with or
satisfied pursuant to this Agreement on or prior to the Closing Date and
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will advise one of its Attorneys and Hambrecht & Quist LLC prior to the
Closing Date if any statement to be made on behalf of such Selling
Securityholder in the certificate contemplated by Section 9(e) would be
inaccurate if made as of the Closing Date.
(vi) Such Selling Securityholder has not taken and will not
take, directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the price
of the Common Stock to facilitate the sale or resale of the Stock.
(vii) Such Selling Securityholder does not have, or has
waived prior to the date hereof, any preemptive right, co-sale right or right
of first refusal or other similar right to purchase any of the Stock that are
to be sold by the Company to the Underwriters pursuant to this Agreement;
such Selling Securityholder does not have, or has waived prior to the date
hereof, any registration right or other similar right to participate in the
offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Securityholder in
the transactions to which this Agreement relates in accordance with the terms
of this Agreement; and such Selling Securityholder does not own any warrants,
options or similar rights to acquire, and does not have any right or
arrangement to acquire, any capital stock, rights, warrants, options or other
securities from the Company, other than those described in the Registration
Statement and the Prospectus and any document incorporated therein by
reference.
(viii) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Securityholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments or
supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and will not, insofar as it
relates to such Selling Securityholder, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(ix) Such Selling Securityholder has not distributed and
will not distribute any prospectus or other offering material in connection
with the offering and sale of the Stock.
(c) Douglas D. Troxel (the "Founder") hereby represents and
warrants to each Underwriter that the representations and warranties of the
Company set forth in Section 2(a)(iv) above are true and correct.
(d) Each of Athena Troxel, Donald A. Murphy and Pamela J. Murphy
(the "Additional Selling Securityholders") hereby represents and warrants to
each Underwriter that, to each such Additional Selling Securityholder's
knowledge without independent investigation, the representations and
warranties of the Company set forth in Section 2(a)(iv) above are true and
correct.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
4,000,000 shares of the Underwritten Stock to the several Underwriters, each
Selling Securityholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Securityholder, and each of the Underwriters agrees to purchase
from the Company and the Selling Securityholders the respective aggregate number
of shares of Underwritten Stock set forth opposite its name in Schedule I. The
price at which such shares of Underwritten Stock shall be sold by the Company
and the Selling Securityholders and purchased by the several Underwriters shall
be $___ per share. The obligation of each Underwriter to the Company and each
of the Selling Securityholders shall be to purchase from the Company and the
Selling Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the Underwritten
Stock to be sold by each of the Company and the Selling Securityholders pursuant
to this Agreement as the number of shares of the Underwritten Stock set forth
opposite the name of such Underwriter in Schedule I hereto represents of the
total number of shares of the Underwritten Stock to be purchased by all
Underwriters pursuant to this Agreement, as adjusted by you in such manner as
you deem advisable to avoid fractional shares. In making this Agreement, each
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Underwriter is contracting severally and not jointly; except as provided in
paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter
is to purchase only the respective number of shares of the Underwritten Stock
specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail
or refuse (otherwise than for a reason sufficient to justify the termination
of this Agreement under the provisions of Section 8 or 9 hereof) to purchase
and pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice
to purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter
or Underwriters and upon the terms herein set forth, all or any part of the
shares of the Stock which such defaulting Underwriter or Underwriters agreed
to purchase. If the non-defaulting Underwriters fail so to make such
arrangements with respect to all such shares and portion, the number of
shares of the Stock which each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased
on a pro rata basis to absorb the remaining shares and portion which the
defaulting Underwriter or Underwriters agreed to purchase; PROVIDED, HOWEVER,
that the non-defaulting Underwriters shall not be obligated to purchase the
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase if the aggregate number of such shares of the Stock exceeds 10% of
the total number of shares of the Stock which all Underwriters agreed to
purchase hereunder. If the total number of shares of the Stock which the
defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company and the Selling Securityholders shall have the right, within 24 hours
next succeeding the 24-hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to you for purchase of
such shares and portion on the terms herein set forth. In any such case,
either you or the Company and the Selling Securityholders shall have the
right to postpone the Closing Date determined as provided in Section 5 hereof
for not more than seven business days after the date originally fixed as the
Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company and the Selling Securityholders shall make arrangements within the
24-hour periods stated above for the purchase of all the shares of the Stock
which the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company or the Selling
Securityholders to any non-defaulting Underwriter and without any liability
on the part of any non-defaulting Underwriter to the Company or the Selling
Securityholders. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth,
the Company grants an option to the several Underwriters to purchase,
severally and not jointly, up to 900,000 shares in the aggregate of the
Option Stock from the Company at the same price per share as the Underwriters
shall pay for the Underwritten Stock. Said option may be exercised only to
cover over-allotments in the sale of the Underwritten Stock by the
Underwriters and may be exercised in whole or in part at any time (but not
more than once) on or before the thirtieth day after the date of this
Agreement upon written or telegraphic notice by you to the Company setting
forth the aggregate number of shares of the Option Stock as to which the
several Underwriters are exercising the option. Delivery of certificates for
the shares of Option Stock, and payment therefor, shall be made as provided
in Section 5 hereof. The number of shares of the Option Stock to be
purchased by each Underwriter shall be the same percentage of the total
number of shares of the Option Stock to be purchased by the several
Underwriters as such Underwriter is purchasing of the Underwritten Stock, as
adjusted by you in such manner as you deem advisable to avoid fractional
shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters
of the Stock to be purchased by them shall be as set forth in the Prospectus.
The Underwriters may from time to time change the public offering price
after the closing of the initial public offering and increase or decrease the
concessions and discounts to dealers as they may determine.
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(b) The information set forth under "Underwriting" in the
Registration Statement, any Preliminary Prospectus and the Prospectus
relating to the Stock filed by the Company (insofar as such information
relates to the Underwriters) constitutes the only information furnished by
the Underwriters to the Company for inclusion in the Registration Statement,
any Preliminary Prospectus, and the Prospectus, and you on behalf of the
respective Underwriters represent and warrant to the Company that the
statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (if the option granted by Section 3(c) hereof
shall have been exercised not later than 7:00 A.M., San Francisco time, on
the date two business days preceding the Closing Date), and payment therefor,
shall be made at the office of Wilson Sonsini, Goodrich & Rosati, at 7:00
a.m., San Francisco time, on the fourth business day after the date of this
Agreement, or at such time on such other day, not later than seven full
business days after such fourth business day, as shall be agreed upon in
writing by the Company, the Selling Securityholders and you. The date and
hour of such delivery and payment (which may be postponed as provided in
Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of certificates for the shares of Option
Stock, and payment therefor, shall be made at the office of Wilson Sonsini
Goodrich & Rosati, at 7:00 a.m., San Francisco time, on the third business
day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made
to the Company or its order, and payment for the Stock purchased from the
Selling Securityholders shall be made to the Custodian, for the account of
the Selling Securityholders, in each case by one or more certified or
official bank check or checks in same day funds. Such payment shall be made
upon delivery of certificates for the Stock to you for the respective
accounts of the several Underwriters against receipt therefor signed by you.
Certificates for the Stock to be delivered to you shall be registered in such
name or names and shall be in such denominations as you may request at least
one business day before the Closing Date, in the case of Underwritten Stock,
and at least one business day prior to the purchase thereof, in the case of
the Option Stock. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of Lewco
Securities Corporation, 2 Broadway, New York, New York 10004 on the business
day prior to the Closing Date or, in the case of the Option Stock, by 3:00
p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any
later date on which Option Stock is purchased for the account of such
Underwriter. Any such payment by you shall not relieve such Underwriter from
any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDERS.
Each of the Company and the Selling Securityholders respectively covenants
and agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which you shall not previously
have been advised and furnished with a copy or to which you shall have
reasonably objected in writing or which is not in compliance with the
Securities Act or the rules and regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the event
of (i) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, (ii) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement, (iii) the institution or
notice of intended institution of any action or proceeding for that purpose,
(iv) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Stock for sale in any jurisdiction, or
(v) the receipt by it of notice of the initiation or threatening of any
proceeding for such purpose.
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The Company and the Selling Securityholders will make every reasonable effort
to prevent the issuance of such a stop order and, if such an order shall at
any time be issued, to obtain the withdrawal thereof at the earliest possible
moment.
(c) The Company will (i) on or before the Closing Date, deliver to
you a signed copy of the Registration Statement as originally filed and of
each amendment thereto filed prior to the time the Registration Statement
becomes effective and, promptly upon the filing thereof, a signed copy of
each post-effective amendment, if any, to the Registration Statement
(together with, in each case, all exhibits thereto unless previously
furnished to you) and will also deliver to you, for distribution to the
Underwriters, a sufficient number of additional conformed copies of each of
the foregoing (but without exhibits) so that one copy of each may be
distributed to each Underwriter, (ii) as promptly as possible deliver to you
and send to the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably request,
and (iii) thereafter from time to time during the period in which a
prospectus is required by law to be delivered by an Underwriter or dealer,
likewise send to the Underwriters as many additional copies of the Prospectus
and as many copies of any supplement to the Prospectus and of any amended
prospectus, filed by the Company with the Commission, as you may reasonably
request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is necessary,
in the opinion of counsel for the Company or of counsel for the Underwriters,
to supplement or amend the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser of the Stock, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the initial public offering of the
Stock by the Underwriters and during such period, the Underwriters shall
propose to vary the terms of offering thereof by reason of changes in general
market conditions or otherwise, you will advise the Company in writing of the
proposed variation, and, if in the opinion either of counsel for the Company
or of counsel for the Underwriters such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company
will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the Prospectus
or any amended prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in
the qualification of the Stock for offer and sale under the securities or
blue sky laws of such jurisdictions as you may designate and, during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing under
said securities or blue sky laws; PROVIDED, HOWEVER, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not so
qualified. The Company will, from time to time, prepare and file such
statements, reports, and other documents as are or may be required to
continue such qualifications in effect for so long a period as you may
reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof,
the Company will furnish to you, and to each Underwriter who may so request
in writing, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports
filed with the Commission.
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date,
the Company will make generally available to its security holders an earnings
statement in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.
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(i) The Company agrees to pay all costs and expenses incident to
the performance of obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD")
of the Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters of copies of any Preliminary
Prospectus and of the several documents required by paragraph (c) of this
Section 6 to be so furnished, (iii) the printing of this Agreement and
related documents delivered to the Underwriters, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus
referred to in paragraph (d) of this Section 6, (v) the furnishing to you and
the Underwriters of the reports and information referred to in paragraph (g)
of this Section 6 and (vi) the printing and issuance of stock certificates,
including the transfer agent's fees.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel
in qualifying the Stock under state securities or blue sky laws and in the
review of the offering by the NASD.
(k) The Company and each of the Selling Securityholders hereby
agrees that, without the prior written consent of Hambrecht & Quist LLC on
behalf of the Underwriters, the Company or such Selling Securityholder, as
the case may be, will not, for a period of 180 days following the
commencement of the public offering of the Stock by the Underwriters,
directly or indirectly, (i) sell, offer, contract to sell, make any short
sale, pledge, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase
or acquire Common Stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or ownership
of Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise. The foregoing sentence shall not apply to (A) the
Stock to be sold to the Underwriters pursuant to this Agreement (B) shares of
Common Stock issued by the Company upon the exercise of options granted under
the stock option plans of the Company (the "Option Plans"), all as described
in the Preliminary Prospectus, and (C) options to purchase Common Stock
granted under the Option Plans.
(l) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after
written notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(m) The Company is familiar with the Investment Company Act of
1940, as amended, and has in the past conducted its affairs, and will in the
future conduct its affairs, in such a manner to ensure that the Company was
not and will not be an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7,
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning
of Section 15 of the Securities Act from and against any and all losses,
claims, damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Securities Act, the
Exchange Act, or the common law or otherwise, and the Company and the Selling
Securityholders jointly and severally agree to reimburse each such
Underwriter and controlling person for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties,
in
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each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus
or the Prospectus (as amended or as supplemented if the Company shall have
filed with the Commission any amendment thereof or supplement thereto) or the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that (1) the
indemnity agreements of the Company and the Selling Securityholders contained
in this paragraph (a) shall not apply to any such losses, claims, damages,
liabilities or expenses if such statement or omission was made in reliance
upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any
Underwriter for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto, (2) the indemnity agreement contained in this paragraph (a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or
to the benefit of any person controlling such Underwriter) if at or prior to
the written confirmation of the sale of such Stock a copy of the Prospectus
(or the Prospectus as amended or supplemented) was not sent or delivered to
such person and the untrue statement or omission of a material fact contained
in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented) unless the failure is the result of
noncompliance by the Company with paragraph (c) of Section 6 hereof, (3) the
Founder shall only be liable under this paragraph with respect to (A)
information pertaining to the Founder furnished by or on behalf of the
Founder expressly for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto, (B) facts that would constitute a breach of any representation or
warranty of the Founder set forth in Section 2(b) hereof, and (C) facts that
would constitute a breach of any representation or warranty of such Founder
set forth in Section 2(c) hereof, and (4) each of the Additional Selling
Securityholders shall only be liable under this paragraph with respect to (A)
information pertaining to such Additional Selling Securityholder furnished by
or on behalf of such Additional Selling Securityholder expressly for use in
any Preliminary Prospectus or the Registration Statement or the Prospectus or
any such amendment thereof or supplement thereto, (B) facts that would
constitute a breach of any representation or warranty of such Additional
Selling Securityholder set forth in Section 2(b) hereof, and (C) facts that
would constitute a breach of any representation or warranty of such
Additional Selling Securityholder set forth in Section 2(d) hereof. The
indemnity agreements of the Company, the Founder and the Additonal Selling
Securityholders contained in this paragraph (a) and the representations and
warranties of the Company, the Founder and the Additional Selling
Securityholders contained in Section 2 hereof shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of
Section 15 of the Securities Act, and the Selling Securityholders from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or the common law or otherwise and to
reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished
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as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery
of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a)
and (b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in
such paragraphs, it will promptly give written notice (herein called the
Notice) of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in
such paragraphs shall be available to any party who shall fail so to give the
Notice if the party to whom such Notice was not given was unaware of the
action, suit, investigation, inquiry or proceeding to which the Notice would
have related and was prejudiced by the failure to give the Notice, but the
omission so to notify such indemnifying party or parties of any such service
or notification shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution
or otherwise than on account of such indemnity agreement. Any indemnifying
party shall be entitled at its own expense to participate in the defense of
any action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the
indemnifying party or parties, by counsel chosen by such indemnifying party
or parties and reasonably satisfactory to the indemnified party or parties;
PROVIDED, HOWEVER, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or
parties shall be entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the interests of the
indemnified party or parties and (ii) in any event, the indemnified party or
parties shall be entitled to have counsel chosen by such indemnified party or
parties participate in, but not conduct, the defense. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or parties
is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 7 for any legal or other expenses subsequently incurred
by the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding, except that (A) the
indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in
clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized
to be incurred by the indemnified party or parties. If, within a reasonable
time after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Securityholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Stock received by the Company and the
Selling Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price
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of the Stock. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to in the first sentence of
this paragraph (d). The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities, or actions in respect thereof,
referred to in the first sentence of this paragraph (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigation, preparing to defend or defending
against any action or claim which is the subject of this paragraph (d).
Notwithstanding the provisions of this paragraph (d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Stock purchased by such Underwriter. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
in this paragraph (d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it will promptly
give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in paragraph (c) of this Section
7).
(e) Neither the Company nor the Selling Securityholders will,
without the prior written consent of each Underwriter, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not such Underwriter or any person who controls such
Underwriter within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act is a party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional
release of such Underwriter and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(f) The liability of each Selling Securityholder under the
indemnity and reimbursement agreements contained in the provisions of this
Section 7 and Section 11 hereof shall be limited to an amount equal to the
initial public offering price of the stock sold by such Selling
Securityholder to the Underwriters. The Company and the Selling
Securityholders may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts
of such liability for which they each shall be responsible.
(g) The term "jointly and severally" as used in the this Section 7
means that the Company's obligation is joint and several with the obligation
of each of the Selling Securityholders, but that the obligation of a Selling
Securityholder is several and not joint with the obligation of the Company or
any other Selling Securityholder.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i)
the engagement in hostilities or an escalation of major hostilities by the
United States or the declaration of war or a national emergency by the United
States on or after the date hereof, (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, calamity, crisis or
change in economic or political conditions in the financial markets of the
United States would, in the Underwriters' reasonable judgment, make the
offering or delivery of the Stock impracticable, (iii) suspension of trading
in securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, or The
Nasdaq Stock Market, or limitations on prices (other than limitations on
hours or numbers of days of trading) for securities on either such exchange
or system, (iv) the enactment, publication, decree or other
15
<PAGE>
promulgation of any federal or state statute, regulation, rule or order of,
or commencement of any proceeding or investigation by, any court, legislative
body, agency or other governmental authority which in the Underwriters'
reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company, (v) declaration
of a banking moratorium by either federal or New York State authorities or
(vi) the taking of any action by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be
terminated pursuant to this Section 8, there shall be no liability of the
Company or the Selling Securityholders to the Underwriters and no liability
of the Underwriters to the Company or the Selling Securityholders; PROVIDED,
HOWEVER, that in the event of any such termination the Company and the
Selling Securityholders agree to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of
the Company and the Selling Securityholders under this Agreement, including
all costs and expenses referred to in paragraphs (i) and (j) of Section 6
hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to
the performance by the Company and by the Selling Securityholders of all
their respective obligations to be performed hereunder at or prior to the
Closing Date or any later date on which Option Stock is to be purchased, as
the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing the
Stock, all corporate proceedings and other legal matters incident to the
foregoing, and the form of the Registration Statement and of the Prospectus
(except as to the financial statements contained therein), shall have been
approved at or prior to the Closing Date by Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, counsel for the Underwriters.
(c) You shall have received from Wilson Sonsini Goodrich & Rosati,
P.C., counsel for the Company and the Selling Securityholders, an opinion,
addressed to the Underwriters and dated the Closing Date, covering the
matters set forth in Annex A hereto, and if Option Stock is purchased at any
date after the Closing Date, additional opinions from each such counsel,
addressed to the Underwriters and dated such later date, confirming that the
statements expressed as of the Closing Date in such opinions remain valid as
of such later date.
(d) You shall have received opinions of each of English, German
and Canadian counsel, special foreign counsel to the Company, to the effect
that:
(i) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material effect on the Company and its subsidiaries taken as a whole; and
(ii) All of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable, and owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.
(e) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or
16
<PAGE>
affecting the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business, and, since
such dates, except in the ordinary course of business, neither the Company
nor any of its subsidiaries has entered into any material transaction not
referred to in the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein, (iv) neither the
Company nor any of its subsidiaries has any material contingent obligations
which are not disclosed in the Registration Statement and the Prospectus, (v)
there are not any pending or known threatened legal proceedings to which the
Company or any of its subsidiaries is a party or of which property of the
Company or any of its subsidiaries is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus,
(vi) there are not any franchises, contracts, leases or other documents which
are required to be filed as exhibits to the Registration Statement which have
not been filed as required, (vii) the representations and warranties of the
Company herein are true and correct in all material respects as of the
Closing Date or any later date on which Option Stock is to be purchased, as
the case may be, and (viii) there has not been any material change in the
market for securities in general or in political, financial or economic
conditions from those reasonably foreseeable as to render it impracticable in
your reasonable judgment to make a public offering of the Stock, or a
material adverse change in market levels for securities in general (or those
of companies in particular) or financial or economic conditions which render
it inadvisable to proceed.
(f) You shall have received on the Closing Date and on any later
date on which Option Stock is purchased a certificate, dated the Closing Date
or such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company, stating that the respective signers
of said certificate have carefully examined the Registration Statement in the
form in which it originally became effective and the Prospectus contained
therein and any supplements or amendments thereto, and that the statements
included in clauses (i) through (vii) of paragraph (e) of this Section 9 are
true and correct.
(g) You shall have received from KPMG Peat Marwick LLP, a letter
or letters, addressed to the Underwriters and dated the Closing Date and any
later date on which Option Stock is purchased, confirming that they are
independent public accountants with respect to the Company within the meaning
of the Securities Act and the applicable published rules and regulations
thereunder and based upon the procedures described in their letter delivered
to you concurrently with the execution of this Agreement (herein called the
Original Letter), but carried out to a date not more than three business days
prior to the Closing Date or such later date on which Option Stock is
purchased (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing
Date or such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter or to
reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company or any of its subsidiaries which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the Stock
or the purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have received from KPMG Peat Marwick LLP a letter
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of
their examination of the Company's financial statements as at _______, 19___,
did not disclose any weakness in internal controls that they considered to be
material weaknesses.
(i) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in paragraph (f) of Section 6 hereof.
(j) Prior to the Closing Date, the Stock to be issued and sold by
the Company shall have been duly authorized for listing by the Nasdaq
National Market upon official notice of issuance.
(k) On or prior to the Closing Date, you shall have received from all
stockholders and option holders agreements, in form reasonably satisfactory to
Hambrecht & Quist LLC, stating that without the prior written consent of
Hambrecht & Quist LLC on behalf of the Underwriters, such person or entity will
not, for a period of 180 days following the commencement of the public offering
of the Stock by the Underwriters, directly or indirectly, (i) sell, lend, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase,
17
<PAGE>
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for or any
rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP, counsel for the Underwriters, shall be satisfied that they
comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; PROVIDED, HOWEVER, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify
and hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof, and (ii) if this Agreement is
terminated by you because of any refusal, inability or failure on the part of
the Company or the Selling Securityholders to perform any agreement herein,
to fulfill any of the conditions herein, or to comply with any provision
hereof other than by reason of a default by any of the Underwriters, the
Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the
transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling
Securityholders to deliver the Stock shall be subject to the conditions that
(a) the Registration Statement shall have become effective and (b) no stop
order suspending the effectiveness thereof shall be in effect and no
proceedings therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be
without liability of the Company and the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; PROVIDED, HOWEVER, that in the event of any such
termination the Company agrees to indemnify and hold harmless the
Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholders under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in paragraph (a) of Section 7 of this Agreement, notwithstanding
the absence of a judicial determination as to the propriety and
enforceability of the obligations under this Section 11 and the possibility
that such payments might later be held to be improper; PROVIDED, HOWEVER,
that (i) to the extent any such payment is ultimately held to be improper,
the persons receiving such payments shall promptly refund them and (ii) such
persons shall provide to the Company, upon request, reasonable assurances of
their ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, the Selling Securityholders and the
several Underwriters and, with respect to the provisions of Section 7 hereof,
the several parties (in addition to the Company, the Selling Securityholders
and the several Underwriters) indemnified under the provisions of said
Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give
to any other person, firm or corporation any legal or equitable remedy or
claim under or in respect of this Agreement or any provision herein
contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Stock from any of the
several Underwriters.
18
<PAGE>
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush
Street, San Francisco, California 94104; and if to the Company, shall be
mailed, telegraphed or delivered to it at its office, 500 Airport Blvd.,
Suite 200, Burlingame, CA 94010, Attention: Richard Doerr; and if to the
Selling Securityholders, shall be mailed, telegraphed or delivered to the
Selling Securityholders in care of ___________ at ___________. All notices
given by telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties
and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation
made by or on behalf of any Underwriter or controlling person thereof, or by
or on behalf of the Company or the Selling Securityholders or their
respective directors or officers, and (c) delivery and payment for the Stock
under this Agreement; PROVIDED, HOWEVER, that if this Agreement is terminated
prior to the Closing Date, the provisions of paragraphs (i) and (j) of
Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
19
<PAGE>
Please sign and return to the Company and to the Selling Securityholders
in care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.
Very truly yours,
SERENA SOFTWARE, INC.
By
------------------------------------
Richard Doerr
President and CEO
SELLING SECURITYHOLDERS:
Douglas D. Troxel
Athena Troxel
Murphy Family Trust
Roseann P. Geyer
By
------------------------------------
[Attorney-in-Fact]
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
SG COWEN SECURITIES CORPORATION
SOUNDVIEW TECHNOLOGY GROUP, INC.
By Hambrecht & Quist LLC
By
------------------------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
<PAGE>
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
<S> <C>
Hambrecht & Quist LLC...........................................
SG Cowen Securities Corporation.................................
SoundView Technology Group, Inc.................................
---------
Total........................................................... 6,000,000
</TABLE>
S-1
<PAGE>
SCHEDULE II
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME OF SELLING SECURITYHOLDERS TO BE SOLD
------------------------------- ----------
<S> <C>
Douglas D. Troxel
Athena Troxel
Murphy Family Trust
Roseann P. Geyer
---------
Total........................................................... 2,000,000
</TABLE>
S-2
<PAGE>
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF WILSON SONSINI GOODRICH & ROSATI, P.C.
COUNSEL FOR THE COMPANY
AND THE SELLING SECURITYHOLDERS
(i) Each of the Company and its U.S. subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, is duly qualified as a
foreign corporation and in good standing in each state of the United States
of America in which its ownership or leasing of property requires such
qualification (except where the failure to be so qualified would not have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole),
and has full corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; all the
issued and outstanding capital stock of each of the U.S. subsidiaries of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable, and is owned by the Company free and clear of all liens,
encumbrances and security interests, and to the best of such counsel's
knowledge, no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in such U.S. subsidiaries are
outstanding;
(ii) the authorized capital stock of the Company consists of shares
of Preferred Stock, of which there are outstanding shares, and
shares of Common Stock, $ par value, of which there are outstanding
shares (including the Underwritten Stock plus the number of shares of Option
Stock issued on the date hereof) and such additional number of shares, if
any, as may have been issued after and prior to the Closing Date,
pursuant to ; proper corporate proceedings have been taken validly to
authorize such authorized capital stock; all of the outstanding shares of
such capital stock (including the Underwritten Stock and the shares of Option
Stock issued, if any) have been duly and validly issued and are fully paid
and nonassessable; any Option Stock purchased after the Closing Date, when
issued and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will have been duly and validly issued and be fully
paid and nonassessable; and no preemptive rights of, or rights of refusal in
favor of, stockholders exist with respect to the Stock, or the issue and sale
thereof, pursuant to the Certificate of Incorporation or Bylaws of the
Company and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or
rights of co-sale which exist with respect to the Stock being sold by the
Selling Securityholders or the issue and sale of the Stock;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained
therein, as to which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Securities Act and with
the rules and regulations of the Commission thereunder;
(v) such counsel have no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial and statistical data contained or incorporated by reference
therein, as to which such counsel need not express any opinion or belief) at
the Effective Date contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or that the Prospectus (except
as to the financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein, as to which
such counsel need not express any opinion or belief) as of its date or at the
Closing Date (or any later date on which Option Stock is purchased),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
A-1
<PAGE>
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel)
and 11(c) of Form S-1 is to the best of such counsel's knowledge accurately
and adequately set forth therein in all material respects or no response is
required with respect to such Items, and the description of the Company's
stock option plan and the options granted and which may be granted thereunder
and the options granted otherwise than under such plan set forth in the
Prospectus accurately and fairly presents the information required to be
shown with respect to said plan and options to the extent required by the
Securities Act and the rules and regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion
of such counsel are of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described and filed as required;
(viii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(ix) the Underwriting Agreement has been duly executed and delivered by
or on behalf of the Selling Securityholders and the Custody Agreement between
the Selling Securityholders and ChaseMellon Shareholder Services, LLC, as
Custodian, and the Power of Attorney referred to in such Custody Agreement
have been duly executed and delivered by the several Selling Securityholders;
(x) the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not conflict with,
or result in a breach of, the Certificate of Incorporation or Bylaws of the
Company or any of its subsidiaries or any agreement or instrument known to
such counsel to which the Company or any of its subsidiaries is a party or
any applicable law or regulation, or so far as is known to such counsel, any
order, writ, injunction or decree, of any jurisdiction, court or governmental
instrumentality;
(xi) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights
or such rights have expired by reason of lapse of time following notification
of the Company's intent to file the Registration Statement;
(xii) good and marketable title to the shares of Stock sold by the
Selling Securityholders under the Underwriting Agreement, free and clear of
all liens, encumbrances, equities, security interests and claims, has been
transferred to the Underwriters who have severally purchased such shares of
Stock under the Underwriting Agreement, assuming for the purpose of this
opinion that the Underwriters purchased the same in good faith without notice
of any adverse claims;
(xiii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated in the Underwriting Agreement, except such as have
been obtained under the Securities Act and such as may be required under
state securities or blue sky laws in connection with the purchase and
distribution of the Stock by the Underwriters; and
(xiv) the Stock sold by the Selling Securityholders and the Stock issued
and sold by the Company will been duly authorized for listing by the Nasdaq
National Market upon official notice of issuance.
- - - - -------------------------------------------------------------------------------
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or of the State of California,
upon opinions of local counsel satisfactory in form and scope to counsel for
the Underwriters. Copies of any opinions so relied upon shall be delivered
to the Representatives and to counsel for the Underwriters and the foregoing
opinion shall also state that counsel knows of no reason the Underwriters are
not entitled to rely upon the opinions of such local counsel.
A-2
<PAGE>
STATE OF CALIFORNIA
[SEAL]
[STAMP]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 1 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it
is full, true and correct.
[SEAL] IN WITNESS WHEREOF, I execute this
certificate and affix the Great Seal of
the State of California this day of
NOV 17, 1998
-------------------------------------------
/s/ Bill Jones
Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF
SERENA SOFTWARE, INC.
RICHARD A. DOERR and VITA STRIMAITIS hereby certify that:
1. They are the President and Assistant Secretary, respectively, of
SERENA Software, Inc., a California corporation (the "Corporation").
2. Article Four of the Corporation's Articles of Incorporation is
amended and restated to read as follows:
"This corporation is authorized to issue one class of shares designated
Common Stock. The total number of shares of Common Stock this corporation
shall have the authority to issue is 60,000,000. Upon the filing of this
Certificate of Amendment of Articles of Incorporation, each share of
Common Stock shall be split and converted into one and one-half (1 1/2)
shares of Common Stock. No fractional shares will be issued upon such
stock split; any fractional shares will be rounded up to the nearest
whole share."
3. The foregoing amendment of the Corporation's Articles of
Incorporation has been duly approved by the Corporation's Board of Directors.
4. Pursuant to Section 902(c) of the California Corporations Code,
approval of the Corporation's shareholders is not required to effect this
amendment to the Corporation's Articles of Incorporation.
The undersigned further certify under penalty of perjury under the laws
of the State of California that they have read the foregoing Certificate of
Amendment of Articles of Incorporation and know the contents thereof, and
that the statements made therein are true and correct.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment of Articles of Incorporation at Burlingame, California on November
12, 1998.
/s/ Richard A. Doerr
------------------------------------
RICHARD A. DOERR, President
/s/ Vita Strimaitis
------------------------------------
VITA STRIMAITIS, Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
SERENA SOFTWARE INTERNATIONAL
RICHARD A. DOERR and VITA STRIMAITIS hereby certify that:
1. They are the President and Assistant Secretary, respectively, of SERENA
Software International, a California corporation (the "Corporation").
2. Article Four of the Corporation's Articles of Incorporation is amended and
restated to read as follows:
"This corporation is authorized to issue one class of shares
designated Common Stock. The total number of shares of Common Stock
this corporation shall have the authority to issue is 40,000,000.
Upon the filing of this Certificate of Amendment of Articles of
Incorporation, each share of Common Stock shall be split and converted
into one and one-half (1-1/2) shares of Common Stock. No fractional
shares will be issued upon such stock split; any fractional shares
will be rounded up to the nearest whole share."
3. The foregoing amendment of the Corporation's Articles of Incorporation has
been approved by the Corporation's Board of Directors.
4. Pursuant to Section 902-C- of the California Corporations Code, approval of
the Corporation's shareholders is not required to effect this amendment to
the Corporation's Articles of Incorporation.
The undersigned further certify under penalty of perjury under the laws
of the State of California that they have read the foregoing Certificate of
Amendment of Articles of Incorporation and know the contents thereof, and
that the statements made therein are true and correct.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment of Articles of Incorporation at Burlingame, California on
August 30, 1998.
/s/ Richard A. Doerr
---------------------
RICHARD A. DOERR, President
/s/ Vita Strimaitis
---------------------
VITA STRIMAITIS, Assistant Secretary
<PAGE>
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
JUL 10 1998
-----------
[STAMP OMITTED]
/s/ Bill Jones
Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
SERENA SOFTWARE INTERNATIONAL
RICHARD A. DOERR and VITA STRIMAITIS hereby certify that:
1. They are the President and Assistant Secretary, respectively, of
SERENA Software International, a California corporation (the "Corporation").
2. Article Four of the Corporation's Articles of Incorporation is
amended and restated to read as follows:
"This corporation is authorized to issue one class of shares designated
Common Stock. The total number of shares of Common Stock this corporation
shall have the authority to issue is 40,000,000."
3. The foregoing amendment of the Corporation's Articles of Incorporation
has been duly approved by the Corporation's Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of the Corporation's shareholders in accordance
with Sections 902 and 903 of the Corporations Code. The total number of
outstanding shares of Common Stock of this Corporation is 7,563,200. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was a majority of the outstanding shares
of Common Stock.
The undersigned further certify under penalty of perjury under the laws of
the State of California that they have read the foregoing Certificate of
Amendment of Articles of Incorporation and know the contents thereof, and that
the statements made therein are true and correct.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment of Articles of Incorporation at Burlingame, California on July 8,
1998.
[STAMP OMITTED]
/s/ Richard A. Doerr
---------------------------
Richard A. DOERR, President
/s/ Vita Strimaitis
------------------------------------
VITA STRIMAITIS, Assistant Secretary
<PAGE>
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California,
hereby certify:
That the attached transcript has been compared with the record on
file in this office, of which it purports to be a copy, and that it is full,
true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
OCT - 8 1997
------------
[STAMP OMITTED]
/s/ Bill Jones
------------------
Secretary of State
<PAGE>
SECRETARY OF STATE
[STAMP OMITTED]
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
JUN 27 1997
-----------
[STAMP OMITTED]
/s/ Bill Jones
Secretary of State
<PAGE>
CERTIFICATE OF CORRECTION
OF CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
SERENA SOFTWARE INTERNATIONAL
Loki Efaw and Vita Strimaitis certify that:
1. They are the Vice President and Assistant Secretary, respectively, of
SERENA Software International, a California corporation.
2. The name of the corporation filing this certificate is SERENA Software
International; it is a California corporation.
3. The instrument being corrected is entitled "CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF SERENA SOFTWARE INTERNATIONAL." It
was filed in the office of the Secretary of State of the State of
California on June 25, 1997.
4. Paragraph 2 of the CERTIFICATE OF AMENDMENT is corrected to read as
follows:
Article Four of the Articles of Incorporation of this corporation is
amended to read as follows:
"This corporation is authorized to issue only one class of shares,
which shall be designated "common" shares. The total authorized
number of shares which may be issued is ten million (10,000,000)
shares. Upon amendment of this Article to read as herein set
forth, each outstanding share is split and converted into 70,000
shares."
5. Paragraph 2 as corrected and set forth above, conforms the wording of
amendment to the wording of the amendment in the resolution or written
consent approving the amendment adopted by the board of directors and
the shareholders.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
The undersigned certify that:
1. They are the president and the secretary, respectively, of_________________
SERENA Software International ________________________________, a
California corporation.
2. Article FOUR of the Articles of Incorporation of this corporation is
amended to read as follows:
"THIS CORPORATION IS AUTHORIZED TO ISSUE ONLY ONE CLASS OF SHARES, WHICH
shall be designated "common" shares. The total authorized number of such
SHARES WHICH MAY BE ISSUED IS 10,000,000 (TEN MILLION) SHARES.".
3. The foregoing amendment of Articles of Incorporation has been duly approved
by the board of directors.
4. The foregoing amendment of Articles of Incorporation has been duly approved
by the required vote of shareholders in accordance with Section 902,
California Corporations Code. The total number of outstanding shares of the
corporation is 96. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was
more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
/s/ Richard A. Doerr
DATE: June 23, 1997 --------------------------
------------- (Signature of President)
Richard A. Doerr
--------------------------
(Typed name of President), President
/s/ Jon F. Veloski
--------------------------
(Signature of Secretary)
John F. Veloski
--------------------------
(Typed name of Secretary), Secretary
Page 1 of 1
<PAGE>
SECRETARY OF STATE
CORPORATION DIVISION
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the corporate record on
file in this office, of which it purports to be a copy, and that same is full,
true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
FEB 7 1996
----------
[STAMP OMITTED]
/s/ Bill Jones
Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
The undersigned certify that:
1. They are the president and the secretary, respectively, of SERENA
CONSULTING, a California corporation.
2. Article ONE of the Articles of Incorporation of this corporation is amended
to read as follows:
"THE NAME OF THIS CORPORATION IS SERENA SOFTWARE INTERNATIONAL"
3. The foregoing amendment of Articles of Incorporation has been duly approved
by the board of directors.
4. The foregoing amendment of Articles of Incorporation has been duly approved
by the required vote of shareholders in accordance with Section 902,
California Corporations Code. The total number of outstanding shares of the
corporation is 100. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was
more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
/s/ Douglas D. Troxel
DATE: January 4, 1996 -------------------------
--------------- (Signature of President)
Douglas D. Troxel
-------------------------
(Typed name of President), President
/s/ Athena P. Troxel
----------------------------
(Signature of Secretary)
Athena P. Troxel
-----------------------------
(Typed name of Secretary), Secretary
Page 1 of 1
<PAGE>
STATE OF CALIFORNIA
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the record on file
in this office, of which it purports to be a copy, and that same is full,
true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
Sep 03 1980
-----------
[STAMP OMITTED]
/s/ Bill Jones
--------------
Secretary of State
<PAGE>
STATE OF CALIFORNIA
OFFICE OF THE SECRETARY OF STATE
I, MARCH FONG EU, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that same is full, true
and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
JUN 20 1980
-----------
[STAMP OMITTED]
/s/ March Fong Eu
-----------------
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
SERENA CONSULTING
ONE: The name of this corporation is SERENA CONSULTING.
TWO: The purpose of this corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
THREE: The name and address in this state of the
corporation's initial agent for service of process is Douglas D. Troxel, 908
Wharfside, San Mateo, California.
FOUR: This corporation is authorized to issue only one
class of shares, which shall be designated "common" shares. The total
authorized number of such shares which may be issued is 1000 shares.
Dated: June 17, 1980
/s/ Douglas D. Troxel
----------------------
Douglas D. Troxel
I declare that I am the person who executed the above Articles
of Incorporation, and such instrument is my act and deed.
/s/ Douglas D. Troxel
----------------------
Douglas D. Troxel
<PAGE>
CERTIFICATE OF INCORPORATION
OF
SERENA SOFTWARE, INC.
ARTICLE I
The name of the corporation is SERENA Software, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
(a) This Corporation is authorized to issue two classes of shares to
be designated, respectively, Common Stock and Preferred Stock. The total number
of shares of Common Stock which this Corporation shall have the authority to
issue shall be 60,000,000, $.001 par value, and the total number of shares of
Preferred Stock this Corporation shall have authority to issue shall be
5,000,000, $.001 par value.
(b) The Preferred Stock may be issued from time to time in one or
more series pursuant to a resolution or resolutions providing for such issue
duly adopted by the Board of Directors (authority to do so being hereby
expressly vested in the Board). The Board of Directors is further authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and to fix the
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
<PAGE>
ARTICLE V
The name and mailing address of the incorporator are as follows:
James Reilly
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before
voting begins or unless the Bylaws of the Corporation shall so provide.
ARTICLE VIII
The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of the
Corporation.
ARTICLE IX
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter,
amend or repeal the Bylaws of the Corporation.
ARTICLE X
(a) To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall be indemnified by the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
(b) The Corporation shall indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to
an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate is or
was a director, officer or employee of the Corporation or any predecessor of
the Corporation or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to
the Corporation.
(c) Neither any amendment nor repeal of this Article X,
nor the adoption of any provision of this Corporation's Certificate of
Incorporation inconsistent with this Article X, shall eliminate or reduce the
effect of this Article X, in respect of any matter occurring, or any action or
-2-
<PAGE>
proceeding accruing or arising or that, but for this Article X, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
ARTICLE XI
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside of
the State of Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE XII
Vacancies created by the resignation of one or more members of
the Board of Directors and newly created directorships, created in accordance
with the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE XIII
Advance notice of new business and stockholder nominations for
the election of directors shall be given in the manner and to the extent
provided in the Bylaws of the Corporation.
ARTICLE XIV
Until a Registration Statement regarding the sale of the
Corporation's Common Stock to the public is declared effective by the
Securities and Exchange Commission, stockholders shall be entitled to
cumulative voting rights as set forth in this Article XV and the Bylaws of
the Corporation. At all elections of directors of the Corporation, each
holder of stock or of any class or classes or of a series or series thereof
shall be entitled to as many votes as shall equal the number of votes which
(except for this provision as to cumulative voting) such stockholder would be
entitled to cast for the election of directors with respect to such
stockholder's shares of stock multiplied by the number of directors to be
elected, and such stockholder may cast all of such votes for a single
director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such stockholder may see fit. As of
the date that a Registration Statement regarding the sale of the
Corporation's Common Stock to the public is declared effective by the
Securities and Exchange Commission, this Article XV shall no longer be
effective and may be deleted herefrom upon any restatement of this
Certificate of Incorporation.
-3-
<PAGE>
ARTICLE XV
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-4-
<PAGE>
TABLE OF CONTENTS
OF
BYLAWS
OF
SERENA CONSULTING
ARTICLE 1 - OFFICES
-------------------
Section 1.1 - PRINCIPAL OFFICES
Section 1.2 - OTHER OFFICES
ARTICLE 2 - MEETINGS OF SHAREHOLDERS
------------------------------------
Section 2.1 - PLACE OF MEETINGS
Section 2.2 - ANNUAL MEETING
Section 2.3 - SPECIAL MEETING
Section 2.4 - NOTICE OF SHAREHOLDERS' MEETINGS
Section 2.5 - MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Section 2.6 - QUORUM
Section 2.7 - ADJOURNED MEETING; NOTICE
Section 2.8 - VOTING
Section 2.9 - WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS
Section 2.10 - SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Section 2.11 - RECORD DATE FOR SHAREHOLDER NOTICE, VOTING & GIVING CONSENTS
Section 2.12 - PROXIES
Section 2.13 - INSPECTORS OF ELECTION
ARTICLE 3 - DIRECTORS
---------------------
Section 3.1 - POWERS
Section 3.2 - NUMBER AND QUALIFICATION OF DIRECTORS
Section 3.3 - ELECTION AND TERM OF OFFICE OF DIRECTORS
Section 3.4 - VACANCIES
Section 3.5 - PLACE OF MEETINGS AND MEETINGS BY TELEPHONE
Section 3.6 - ORGANIZATIONAL MEETING
Section 3.7 - OTHER REGULAR MEETINGS
Section 3.8 - SPECIAL MEETINGS
Section 3.9 - QUORUM
Section 3.10 - WAIVER OF NOTICE
Section 3.11 - ADJOURNMENT
Section 3.12 - NOTICE OF ADJOURNMENT
Section 3.13 - ACTION WITHOUT MEETING
Section 3.14 - FEES AND COMPENSATION OF DIRECTORS
ARTICLE 4 - COMMITTEES
----------------------
Section 4.1 - COMMITTEES OF DIRECTORS
Section 4.2 - MEETINGS AND ACTION OF COMMITTEES
<PAGE>
ARTICLE 5 - OFFICERS
--------------------
Section 5.1 - OFFICERS
Section 5.2 - APPOINTMENT OF OFFICERS
Section 5.3 - SUBORDINATE OFFICERS
Section 5.4 - REMOVAL AND RESIGNATION OF OFFICERS
Section 5.5 - VACANCIES OF OFFICES
Section 5.6 - CHAIRMAN OF THE BOARD
Section 5.7 - PRESIDENT
Section 5.8 - VICE PRESIDENTS
Section 5.9 - SECRETARY
Section 5.10 - CHIEF FINANCIAL OFFICER
ARTICLE 6 - RECORDS AND REPORTS
-------------------------------
Section 6.1 - MAINTENANCE AND INSPECTION OF SHARE REGISTER
Section 6.2 - MAINTENANCE AND INSPECTION OF BYLAWS
Section 6.3 - MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
Section 6.4 - INSPECTION BY DIRECTORS
Section 6.5 - ANNUAL REPORT TO SHAREHOLDERS
Section 6.6 - FINANCIAL STATEMENTS
Section 6.7 - AMMUAL STATEMENT OF GENERAL INFORMATION
ARTICLE 7 - GENERAL CORPORATE MATTERS
-------------------------------------
Section 7.1 - RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
Section 7.2 - CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS
Section 7.3 - CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
Section 7.4 - CERTIFICATES FOR SHARES
Section 7.5 - LOST CERTIFICATES
Section 7.6 - REPRESENTATION OF SHARES OF OTHER CORPORATIONS
Section 7.7 - CONSTRUCTION AND DEFINITIONS
ARTICLE 8 - AMENDMENTS
----------------------
Section 8.1 - AMENDMENT BY SHAREHOLDERS
Section 8.2 - AMENDMENT BY DIRECTORS
ARTICLE 9 - INDEMNIFICATION OF DIRECTORS,
-----------------------------------------
OFFICERS, EMPLOYEES AND OTHER AGENTS
------------------------------------
Section 9.1 - INDEMNIFICATION
CERTIFICATION
-------------
<PAGE>
BYLAWS
OF
SERENA CONSULTING
ARTICLE 1
OFFICES
Section 1.1. PRINCIPAL OFFICES. The board of directors shall fix
the location of the principal executive office of the corporation at any
place within or outside the State of California. If the principal executive
office is located outside this state, and the corporation has one or more
business offices in this state, the board of directors shall fix and
designate a principal business office in the State of California.
Section 1.2. OTHER OFFICES. The board of directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
Section 2.1. PLACE OF MEETINGS. Meetings of shareholders shall
be held at any place within or outside the State of California designated by
the board of directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.
Section 2.2. ANNUAL MEETING. Unless for a particular year a
different date and time is designated by the board of directors, the annual
meeting of shareholders shall be held on the first Wednesday in December in
each year at 10:00 a.m. However, if this day falls on a legal holiday, then
the meeting shall be held at the same time and place on the next succeeding
full business day. At this meeting, directors shall be elected, and any other
proper business may be transacted.
Section 2.3. SPECIAL MEETING. A special meeting of
<PAGE>
the shareholders may be called at any time by the board of directors, or by
the chairman of the board, or by the president, or by one or more
shareholders holding shares in the aggregate entitled to cast not less than
10% of the votes at that meeting.
If a special meeting is called by any person or persons other than
the board of directors, the request shall be in writing, specifying the time
of such meeting and the general nature of the business proposed to be
transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the chairman of the board,
the president, any vice president, or the secretary of the corporation. The
officer receiving the request shall cause notice to be promptly given to the
shareholders entitled to vote, in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws, that a meeting will be held at the time
requested by the person or persons calling the meeting, not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after receipt of
the request, the person or persons requesting the meeting may give the
notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board of directors may be held.
Section 2.4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of
meetings of shareholders shall be sent or otherwise given in accordance with
Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60)
days before the date of the meeting. The notice shall specify the place, date
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, or (ii) in the case of the annual
meeting, those matters which the board of directors, at the time of giving
the notice, intends to present for action by the shareholders. The notice of
any meeting at which directors are to be elected shall include the name of
any nominee or nominees whom, at the time of the notice, management intends
to present for election. If action is proposed to be taken at any meeting for
approval of (i) a contract or transaction in which a director has a direct or
indirect financial interest, pursuant to Section 310 of the Corporations Code
of California, (ii) an amendment of the articles of incorporation, pursuant
to Section 902 of that Code, (iii) a reorganization of the corporation,
pursuant to Section 1201 of that Code, (iv) a voluntary dissolution of the
corporation, pursuant to Section 1900 of that Code, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 of that
-2-
<PAGE>
Code, the notice shall also state the general nature of that proposal.
Section 2.5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice
of any meeting of shareholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by first-class mail or telegraphic or other written
communication to the corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at that address, all further notices or reports shall be deemed
to have been duly given without further mailing if these shall be available
to the shareholder on written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of the notice.
An affidavit of the mailing or other means of giving any notice of
any shareholders' meeting shall be executed by the secretary, or any transfer
agent of the corporation giving the notice, and shall be filed and maintained
in the minute book of the corporation.
Section 2.6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
Section 2.7. ADJOURNED MEETING; NOTICE. Any shareholders'
meeting, annual or special, whether or not a
-3-
<PAGE>
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in person or by
proxy; but in the absence of a quorum, no other business may be transacted at
that meeting, except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from
the date set for the original meeting, in which case the board of directors
shall set a new record date. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At
any adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting.
Section 2.8. VOTING. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the provisions
of Section 2.11 of these bylaws, subject to the provisions of Sections 702 to
704, inclusive, of the Corporations Code of California (relating to voting
shares held by a fiduciary, in the name of a corporation, or in joint
ownership). The shareholders' vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. On any matter other
than elections of directors, any shareholder may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote
them against the proposal, but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect
to all shares that the shareholder is entitled to vote. If a quorum is
present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on any matter (other than the election of
directors) shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by California General Corporation Law
or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or
more candidates a number of votes greater than the number of the
shareholder's shares) unless the candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has given
notice
-4-
<PAGE>
prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of directors to
be elected multiplied by the number of votes to which that shareholder's
shares are entitled, or distribute the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of votes, up to the number of
directors to be elected, shall be elected.
Section 2.9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or special
however called and noticed, and wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to a holding of the
meeting, or an approval of the minutes. The waiver of notice or consent need
not specify either the business to be transacted or the purpose of any annual
or special meeting of shareholders, except that if action is taken or
proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or
consent shall state the general nature of the proposal. All such waivers,
consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver
of notice of that meeting, except when the person objects, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the meeting.
Section 2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting
at which all shareholders entitled to vote on that action were present and
voted. In the case of election of directors, such a consent shall be
effective only if signed by
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the holders of all outstanding shares entitled to vote for the election of
directors; provided, however, that a director may be elected at any time to
fill a vacancy on the board of directors that has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors. All such
consents shall be filed with the secretary of the corporation and shall be
maintained in the corporate records. Any shareholder giving a written
consent, or the shareholder's proxy holder or a transferee of the shares or a
personal representative of the shareholder or their respective proxy holders,
may revoke the consent by a writing received by the secretary of the
corporation before written consents of a number of shares required to
authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the secretary shall give prompt
notice of the corporate action approved by the shareholders without a
meeting. This notice shall be given in the manner specified in Section 2.5 of
these bylaws. In the case of approval of (i) contracts or transactions in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Corporations Code of California, (ii) indemnification of
agents of the corporation, pursuant to Section 317 of that Code, (iii) a
reorganization of the corporation, pursuant to Section 1201 of that Code, and
(iv) a distribution in dissolution other than in accordance with the rights
of outstanding preferred shares, pursuant to Section 2007 of that Code, the
notice shall be given at least ten (10) days before the consummation of any
action authorized by that approval.
Section 2.11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND
GIVING CONSENTS. For purposes of determining the shareholders entitled to
notice of any meeting or to vote or entitled to give consent to corporate
action without a meeting, the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of any such meeting nor more than sixty (60) days
before any such action without a meeting, and in this event only shareholders
of record on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date, except as otherwise
provided in the California General Corporation Law.
If the board of directors does not so fix a record date:
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(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action of the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
Section 2.12. PROXIES. Every person entitled to vote for
directors or on any other matter shall have the right to do so either in
person or by one or more agents authorized by a written proxy signed by the
person and filed with the secretary of the corporation. A proxy shall be
deemed signed if the shareholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission, or otherwise) by the
shareholder or the shareholder's attorney in fact. A validly executed proxy
which does not state that it is irrevocable shall continue in full force and
effect unless (i) revoked by the person executing it, before the vote
pursuant to that proxy, by a writing delivered to the corporation stating
that the proxy is revoked, or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy
is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy. The revocability of a proxy that states on its face
that is is irrevocable shall be governed by the provisions of Section 705(e)
and 705(f) of the Corporations Code of California.
Section 2.13. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the board of directors may appoint any person other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a shareholder's
proxy shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting on the request of one or more shareholders or proxies, the
holders of a majority of
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shares or their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the chairman of the
meeting may, and upon the request of any shareholder or a shareholder's proxy
shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any
way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE 3
DIRECTORS
Section 3.1. POWERS. Subject to the provisions of the California
General Corporation Law and any limitations in the articles of incorporation
and these bylaws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by
or under the direction of the board of directors.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of
the corporation; prescribe any powers and duties for them that are consistent
with law, with the articles of incorporation, and with these bylaws; fix
their compensation; and require from them security for faithful service.
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(b) Change the principal executive office or the principal
business office in the State of California from one location to another;
cause the corporation to be qualified to do business in any other state,
territory, dependency, or country and conduct business within or without the
State of California; California for holding of any shareholders' meeting, or
meetings, including annual meetings.
(c) Adopt, make, and use a corporate seal; prescribe the
forms of certificates of stock; and alter the form of the seal and
certificates.
(d) Authorize the issuance of shares of stock of the
corporation on any lawful terms, in consideration of money paid, labor done,
services actually rendered, debts or securities cancelled, or tangible or
intangible property actually received.
(e) Borrow money and incur indebtedness on behalf of the
corporation, and cause to be executed and delivered for the corporation's
purposes, in the corporate name, promissory notes, bonds, debentures, deeds
of trust, mortgages, pledges, hypothecations, and other evidences of debt and
securities.
Section 3.2. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be one (1) until changed by a duly
adopted amendment to the articles of incorporation or by an amendment to this
bylaw adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares
not consenting in the case of action by written consent, are equal to more
than 16-2/3% of the outstanding shares entitled to vote.
Section 3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected at each annual meeting of the shareholders to hold office
until the next annual meeting. Each director, including a director elected to
fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
Section 3.4. VACANCIES. Vacancies in the board of directors may
be filled by a majority of the remaining directors, though less than a
quorum, or by a sole remaining director, except that a vacancy created by the
removal of a director by the vote or written consent of the shareholders or
by court order may be filled only by the vote of a majority of
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the shares entitled to vote represented at a duly held meeting at which a
quorum is present, or by the written consent of holders of a majority of the
outstanding shares entitled to vote. Each director so elected shall hold
office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or
if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony, or if the authorized number of directors is increased,
or if the shareholders fail, at any meeting of shareholders at which any
director or directors are elected, to elect the number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors, but any such
election by written consent shall require the consent of a majority of the
outstanding shares entitled to vote.
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary, or the board of
directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 3.5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the board of directors may be held at any place within or outside
the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board shall be held at any place within or outside
the State of California that has been designated in the notice of the meeting
or, if not stated in the notice or there is no notice, at the principal
executive office of the corporation. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as
all directors participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
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Section 3.6. ORGANIZATIONAL MEETING. Immediately following each
annual meeting of shareholders, the board of directors shall hold a regular
meeting for the purpose of organization, any desired election of officers,
and the transaction of other business. Notice of this meeting shall not be
required.
Section 3.7. OTHER REGULAR MEETINGS. Other regular meetings of
the board of directors shall be held without call at such time as shall from
time to time be fixed by the board of directors. Such regular meetings may be
held without notice.
Section 3.8. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the
chairman of the board or the president or any vice president or the secretary
or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the notice is
delivered personally, or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight
(48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director
or to a person at the office of the director who the person giving the notice
has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place if the
meeting is to be held at the principal executive office of the corporation.
Section 3.9. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except
to adjourn as provided in Section 3.11 of these bylaws. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the board of
directors, subject to the provisions of Section 310 of the Corporations Code
of California (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311
of that Code (as to appointment of committees), and Section 317(e) of that
Code (as to indemnification of directors). A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for that meeting.
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Section 3.10. WAIVER OF NOTICE. The transactions of any meeting
of the board of directors, however called and noticed or wherever held, shall
be as valid as though had at a meeting duly held after regular call and
notice if a quorum is present and if, either before or after the meeting,
each of the directors not present signs a written waiver of notice, a consent
to holding the meeting or an approval of the minutes. The waiver of notice or
consent need not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the corporate records or made a
part of the minutes of the meeting. Notice of a meeting shall also be deemed
given to any director who attends the meeting without protesting before or at
its commencement, the lack of notice to that director.
Section 3.11. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 3.12. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of the
time and place shall be given before the time of the adjourned meeting, in
the manner specified in Section 3.8 of these bylaws, to the directors who
were not present at the time of the adjournment.
Section 3.13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board of directors may be taken without a
meeting, if all members of the board shall individually or collectively
consent in writing to that action. Such action by written consent shall have
the same force and effect as a unanimous vote of the board of directors. Such
written consent or consents shall be filed with the minutes of the
proceedings of the board.
Section 3.14. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined
by resolution of the board of directors. This Section 3.14 shall not be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation for those services.
ARTICLE 4
COMMITTEES
Section 4.1. COMMITTEES OF DIRECTORS. The board of
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directors may, by resolution adopted by a majority of the authorized number
of directors, designate one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board. The board may
designate one or more directors as alternate members of any committee, who
may replace any absent member at any meeting of the committee. Any committee,
to the extent provided in the resolution of the board, shall have all the
authority of the board, except with respect to:
(a) the approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval or
approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in
any committee;
(c) the fixing of compensation of the directors for serving
on the board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range determined
by the board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of these committees.
Section 4.2. MEETINGS AND ACTION OF COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in accordance
with, the provisions of Sections 3.5 (place of meetings), 3.7 (regular
meetings), 3.8 (special meetings and notice), 3.9 (quorum), 3.10 (waiver of
notice), 3.11 (adjournment), 3.12 (notice of adjournment), and 3.13 (action
without meeting) of these bylaws, with such changes in the context of those
Sections as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings
of committees may be determined either by resolution of the board of
directors or by resolution of the committee; special meetings of committees
may also be called by resolution of the board of directors; and notice of
special meetings of committees shall also be given to all alternate members,
who shall have the right to attend all meetings of the committee. The board
of directors may adopt rules for the government of any committee not
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inconsistent with the provisions of these bylaws.
ARTICLE 5
OFFICERS
Section 5.1. OFFICERS. The officers of the corporation shall be a
president, a secretary, and a chief financial officer. The corporation may
also have, at the discretion of the board of directors, a chairman of the
board, one or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
Section 5.2. APPOINTMENT OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with the
provisions of Section 5.3 or Section 5.5 of these bylaws, shall be appointed
by the board of directors, and each shall serve at the pleasure of the board,
subject to the rights, if any, of an officer under any contract of employment.
Section 5.3. SUBORDINATE OFFICERS. The board of directors may
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in
the bylaws or as the board of directors may from time to time determine.
Section 5.4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer
may be removed, either with or without cause, by the board of directors, at
any regular or special meeting of the board, or, except in case of an officer
chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
officer is a party.
Section 5.5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification
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or any other cause shall be filled in the manner prescribed in these bylaws
for regular appointments to that office.
Section 5.6. CHAIRMAN OF THE BOARD. The chairman of the board,
if such an officer be appointed, shall, if present, preside at meetings of
the board of directors and exercise and perform such other powers and duties
as may be from time to time assigned to him by the board of directors or
prescribed by the bylaws. If there is no president, the chairman of the board
shall in addition be the chief executive officer of the corporation and shall
have the powers and duties prescribed in Section 5.7 of these bylaws.
Section 5.7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the board,
if there be such an officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board of
directors, have general supervision, direction, and control of the business
and the officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence of the chairman of the board, or if there be
none, at all meetings of the board of directors. He shall have the general
powers and duties of management usually vested in the office of president of
a corporation, and shall have such other powers and duties as may be
prescribed by the board of directors or the bylaws.
Section 5.8. VICE PRESIDENTS. In the absence or disability of
the president, the vice presidents, if any, in order of their rank as fixed
by the board of directors or, if not ranked, a vice president designated by
the board of directors, shall perform all the duties of the president (except
for such duties as are assigned to the chairman of the board in Section 5.6
of these bylaws, if such chairman has been appointed), and when so acting
shall have all the powers of, and be subject to all the restrictions upon,
the president. The vice presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them
respectively by the board of directors or the bylaws, and the president, or
the chairman of the board.
Section 5.9. SECRETARY. The secretary shall keep or cause to be
kept, at the principal executive office or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, with the time and place holding and
shareholders, whether regular or special, and, if special, how authorized,
the notice given, the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings.
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The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all
shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the corporation
if one be adopted, in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
by the bylaws.
Section 5.10. CHIEF FINANCIAL OFFICER. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings, and shares. The books of account shall at all reasonable times be
open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the board of directors or
the bylaws.
The chief financial officer shall also be known as the treasurer.
ARTICLE 6
RECORDS AND REPORTS
Section 6.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving
the names and
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addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the corporation holding at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five day prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholders' names and addresses,
who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or the date specified in the demand as the date as of which the list
is to be compiled. The record of shareholders shall also be open to
inspection on the written demand of any shareholder or holder of a voting
trust certificate, at any time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. Any inspection and copying under this
Section 6.1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the demand.
Section 6.2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation
shall keep at its principal executive office, or if its principal executive
office is not in the State of California, at its principal business office in
this state, the original or a copy of the bylaws as amended to date, which
shall be open to inspection by the shareholders at all reasonable times
during office hours. If the principal executive office of the corporation is
outside the State of California and the corporation has no principal business
office in this state, the Secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the bylaws as amended to
date.
Section 6.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
shareholders and the board of directors and any committee or committees of
the board of directors shall be kept at such place or places designated by
the board of directors, or, in the absence of such designation, at the
principal executive office of the corporation. The minutes shall be kept in
written form and the accounting books and records shall be kept either in
written form or in any other
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form capable of being converted into written form. The minutes and accounting
books and records shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate, at any reasonable time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
The inspection may be made in person or by an agent or attorney, and shall
include the right to copy and make extracts. These rights of inspection shall
extend to the records of each subsidiary corporation of the corporation.
Section 6.4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the corporation and
each of its subsidiary corporations. This inspection by a director may be
made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.
Section 6.5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the California General
Corporation Law is expressly dispensed with, but nothing herein shall be
interpreted as prohibiting the board of directors from issuing annual or
other periodic reports to the shareholders of the corporation as they
consider appropriate.
Section 6.6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly
period of each fiscal year, and any accompanying balance sheet of the
corporation as of the end of each such period, that has been prepared by the
corporation shall be kept on file in the principal executive office of the
corporation for twelve (12) months and each such statement shall be exhibited
at all reasonable times to any shareholder demanding an examination of any
such statement or a copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%)
of the outstanding shares of any class of stock of the corporation makes a
written request to the corporation for an income statement of the corporation
for the three-month, six-month, or nine-month period of the then current
fiscal year ended more than thirty (30) days before the date of the request,
and a balance sheet of the corporation as of the end of that period, the
chief financial officer shall cause that statement to be prepared, if not
already prepared, and shall deliver personally or mail that statement or
statements to the person making the request within thirty (30) days after the
receipt of the request. If the corporation has not sent to the shareholders
its annual report for the last fiscal year, this
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report shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The corporation shall also, on the written request of any
shareholder, mail to the shareholder a copy of the last annual, semi-annual,
or quarterly income statement which it has prepared, and a balance sheet as
of the end of that period.
The quarterly income statements and balance sheets referred to in
this section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared
without audit from the books and records of the corporation.
Section 6.7. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall annually file with the Secretary of State of the State of
California, on the prescribed form and within the period specified, a
statement as required by Section 1502 of the Corporations Code of California.
ARTICLE 7
GENERAL CORPORATE MATTERS
Section 7.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action
by shareholders by written consent without a meeting), the board of directors
may fix, in advance, a record date, which shall not be more than sixty (60)
days before any such action, and in that case only shareholders of record on
the date so fixed are entitled to receive the dividend, distribution, or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the
California General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close
of business on the day on which the board adopts the applicable resolution or
the sixtieth (60th) day before the date of that action, whichever is later.
Section 7.2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes, or other
evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or
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<PAGE>
endorsed by such person or persons and in such manner as, from time to time,
shall be determined by resolution of the board of directors.
Section 7.3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The
board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation, and this authority may be general or confined to specific
instances; and, unless so authorized or ratified by the board of directors or
within the agency power of an officer, no officer, agent, or employee shall
have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
for any amount.
Section 7.4. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of the capital stock of the corporation shall be
issued to each shareholder when any of these shares are fully paid, and the
board of directors may authorize the issuance of certificates or shares as
partly paid provided that these certificates shall state the amount of the
consideration to be paid for them and the amount paid. All certificates shall
be signed in the name of the corporation by the chairman of the board or vice
chairman of the board or the president or vice president and by the chief
financial officer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificates
may be facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed on a certificate shall
have ceased to be that officer, transfer agent, or registrar before that
certificate is issued, it may be issued by the corporation with the same
effect as if that person were an officer, transfer agent, or registrar at the
date of issue.
Section 7.5. LOST CERTIFICATES. Except as provided in this
Section 7.5, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the corporation and cancelled
at the same time. The board of directors may, in case any share certificate
or certificate for any other security is lost, stolen, or destroyed,
authorize the issuance of a replacement certificate on such terms and
conditions as the board may require, including provisions for indemnification
of the corporation secured by a bond or other adequate security sufficient to
protect the corporation against any claim that may be made against it,
including any expense or liability, on account of the alleged loss, theft, or
destruction of the certificate or the issuance of the replacement certificate.
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<PAGE>
Section 7.6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
chairman of the board, the president, or any vice president, or any other
person authorized by resolution of the board of directors or by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
granted to these officers to vote or represent on behalf of the corporation
any and all shares held by the corporation in any other corporation or
corporations may be exercised by any of these officers in person or by any
person authorized to do so by a proxy duly executed by these officers.
Section 7.7. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the California General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and
a natural person.
ARTICLE 8
AMENDMENTS
Section 8.1. AMENDMENT BY SHAREHOLDERS. New bylaws may be
adopted or these bylaws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the articles of incorporation of the corporation
set forth the number of authorized directors of the corporation, the
authorized number of directors may be changed only by an amendment of the
articles of incorporation.
Section 8.2. AMENDMENT BY DIRECTORS. Subject to the rights of
the shareholders as provided in Section 8.1 of these bylaws, bylaws (other
than a bylaw or an amendment of a bylaw changing the authorized number of
directors) may be adopted, amended, or repealed by the board of directors.
ARTICLE 9
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
Section 9.1. INDEMNIFICATION. The corporation shall to the
maximum extent permitted by the California General Corporation Law, indemnify
each of its agents against expenses, judgments, fines, settlements and other
amounts actually and
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<PAGE>
reasonably incurred in connection with any proceeding arising by reason of
the fact any such person is or was an agent of the corporation. For purposes
of this Section, an "agent" of the corporation includes any person who is or
was a director, officer, employee, or other agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise, or was a director, officer, employee, or agent of a
corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
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<PAGE>
CERTIFICATION
The undersigned certifies that the undersigned is the duly
appointed, qualified, and acting Secretary of SERENA CONSULTING, a California
corporation, and that the foregoing bylaws were duly adopted as the bylaws of
that corporation by the directors of that corporation on May 20, 1980, at a
meeting of the directors duly held and constituted, and that such bylaws are
now in full force and effect, without change.
Dated: August 12, 1980
---------------
/s/ Athena P. Troxel
ATHENA P. TROXEL, Secretary
<PAGE>
AMENDMENT TO THE BYLAWS
RESOLVED, that Section 3.2 of the Bylaws are hereby revised to state that the
authorized number of directors shall be increased to anywhere from three to
seven as determined by the Board of Directors from time to time. The
remainder of Section 3.2 shall remain in full force and effect.
<PAGE>
BYLAWS
OF
SERENA SOFTWARE, INC.
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I CORPORATE OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 REGISTERED OFFICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . .1
2.1 PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . .2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS. . . . . .2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . .3
2.7 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.8 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . . .4
2.9 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. . . . . . . . . .4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. . . . . . . .5
2.13 PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE. . . . . . . . . . . . . . . . . . .6
2.15 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE III DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 NUMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS. . . . . . . . . .7
3.4 RESIGNATION AND VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . .7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . .8
3.6 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.10 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . . .9
3.11 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. . . . . . . . . . . . .9
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . .9
3.14 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE IV COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 COMMITTEE MINUTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 MEETINGS AND ACTION OF COMMITTEES. . . . . . . . . . . . . . . . . . . . 11
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 APPOINTMENT OF OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 REMOVAL AND RESIGNATION OF OFFICERS. . . . . . . . . . . . . . . . . . . 12
5.4 CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 CHIEF EXECUTIVE OFFICER. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.8 SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 CHIEF FINANCIAL OFFICER. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 ASSISTANT SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 AUTHORITY AND DUTIES OF OFFICERS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 THIRD PARTY ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. . . . . . . . . . . . . . 14
6.3 SUCCESSFUL DEFENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 DETERMINATION OF CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 PAYMENT OF EXPENSES IN ADVANCE . . . . . . . . . . . . . . . . . . . . . 15
6.6 INDEMNITY NOT EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 INSURANCE INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 THE CORPORATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. . . . . . . 16
ARTICLE VII RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS. . . . . . . . . . . . . . . . . . 17
7.2 INSPECTION BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . . 17
ARTICLE VIII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 CHECKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS . . . . . . . . . . . . 18
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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8.3 STOCK CERTIFICATES; PARTLY PAID SHARES . . . . . . . . . . . . . . . . . 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES. . . . . . . . . . . . . . . . . . . 19
8.5 LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 CONSTRUCTION; DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 19
8.7 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 TRANSFER OF STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.11 STOCK TRANSFER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 20
8.12 REGISTERED STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES. . . . . . . . . . . . . . . 21
11.2 DUTIES OF CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XII LOANS TO OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
-iii-
<PAGE>
BYLAWS
OF
SERENA SOFTWARE, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the Corporation shall be 1209 Orange Street, in
the City of Wilmington, County of New Castle, State of Delaware, 19801. The
name of the registered agent of the Corporation at such location is The
Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place
or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the Corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the (i)
board of directors, (ii) the chairman of the board, (iii) the president, (iv)
the chief executive officer or (v) one or more stockholders holding shares in
the aggregate entitled to cast not less than ten percent (10%) of the votes at
that meeting.
<PAGE>
If a special meeting is called by any person other than the board of
directors, the request shall be in writing, specifying the time of such meeting
and the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president, or the secretary of the corporation. No business may be transacted
at such special meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons who called the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these Bylaws not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notice shall specify the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the Corporation not less than 90 days prior to the meeting;
provided, however, that in the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. To be in
proper form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations, propose the business, and, as the
case may be, the name and address of the person or
persons to be nominated or the nature of the business to
be proposed;
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<PAGE>
(ii) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at
such meeting and, if applicable, intends to appear in
person or by proxy at the meeting to nominate the person
or persons specified in the notice or introduce the
business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee
and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations
are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as
would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or
intended to be proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairman of the meeting, or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question
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<PAGE>
brought before such meeting, unless the question is one upon which, by
express provisions of the statutes or of the certificate of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these Bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Sections 2.12 and 2.14 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required by this chapter to be taken at any annual or special
meeting of stockholders of a Corporation, or any action that may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice, and without a vote if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
If the board of directors does not so fix a record date, the fixing of such
record date shall be governed by the provisions of Section 213 of the General
Corporation Law of Delaware.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the Corporation, but no such
proxy shall be voted or acted upon after 3 years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
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2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The stock ledger shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the president, or in his absence by a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER
The authorized number of directors of the Corporation shall be three (3).
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
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3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these Bylaws, at each annual meeting
of stockholders, directors of the Corporation shall be elected to hold office
until the expiration of the term for which they are elected, and until their
successors have been duly elected and qualified; except that if any such
election shall not be so held, such election shall take place at a stockholders'
meeting called and held in accordance with the Delaware General Corporation Law.
Directors need not be stockholders unless so required by the certificate of
incorporation or these Bylaws, wherein other qualifications for directors may be
prescribed.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the Corporation.
Stockholders may remove directors with or without cause. Any vacancy occurring
in the board of directors with or without cause may be filled by a majority of
the remaining members of the board of directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors
elected by all of the stockholders having the right to
vote as a single class may be filled by a majority of the
directors then in office, although less than a quorum, or
by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more
directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a
majority of the directors elected by such class or
classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders
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holding at least 10% of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office as aforesaid, which election shall be governed by the provisions of
Section 211 of the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the Corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the Corporation. If the notice is mailed, it
shall be deposited in the United States mail at least 4 days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors
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present at any meeting at which there is a quorum shall be the act of the
board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.11 CONDUCT OF BUSINESS
Meetings of the board of directors shall be presided over by the chairman
of the board, if any, or in his absence by the chief executive officer, or in
their absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, the board of directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and
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receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
3.14 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these Bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. If at any time a class or series
of shares is entitled to elect one or more directors, the provisions of this
Article 3.14 shall apply to the vote of that class or series and not to the vote
of the outstanding shares as a whole.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the Corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the Bylaws of the Corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution, or (v) amend the Bylaws of the Corporation; and, unless the
board resolution establishing the committee, the Bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
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4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these Bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), Section 3.10 (adjournment and notice of adjournment),
Section 3.11 (conduct of business) and 3.12 (action without a meeting), with
such changes in the context of those Bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the Corporation shall be a chief executive officer, one or
more vice presidents, a secretary and a chief financial officer. The
Corporation may also have, at the discretion of the board of directors, a
chairman of the board, a president, a chief operating officer, one or more
executive, senior or assistant vice presidents, assistant secretaries and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
Corporation shall be appointed by the board of directors, subject to the rights,
if any, of an officer under any contract of employment. The board of directors
may appoint, or empower an officer to appoint, such officers and agents of the
business as the Corporation may require (whether or not such officer or agent is
described in this Article V), each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the board of directors may from time to time determine. Any vacancy
occurring in any office of the Corporation shall be filled by the board of
directors or may be filled by the officer, if any, who appointed such officer.
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5.3 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
another officer, by such other officer.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these Bylaws. If there is no
chief executive officer, then the chairman of the board shall also be the chief
executive officer of the Corporation and shall have the powers and duties
prescribed in Section 5.5 of these Bylaws.
5.5 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the Corporation shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers of the Corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a Chairman of the Board at all meetings of the Board of Directors. He or she
shall have the general powers and duties of management usually vested in the
chief executive officer of a Corporation, including general supervision,
direction and control of the business and supervision of other officers of the
Corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
5.6 PRESIDENT
Subject to such supervisory powers as may be given by these Bylaws or the
Board of Directors to the Chairman of the Board or the Chief Executive Officer,
if there be such officers, the president shall have general supervision,
direction and control of the business and supervision of other officers of the
Corporation, and shall have such other powers and duties as may be prescribed
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by the Board of Directors or these Bylaws. In the event a Chief Executive
Officer shall not be appointed, the President shall have the duties of such
office.
5.7 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the chief executive officer and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the chief executive
officer. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these Bylaws, the chief executive officer or the chairman of
the board.
5.8 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these Bylaws. He shall keep the seal of the Corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these Bylaws.
5.9 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the Corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
Corporation as may be ordered by the board of directors, shall render
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to the chief executive officer and directors, whenever they request it, an
account of all of his transactions as treasurer and of the financial
condition of the Corporation, and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or these
Bylaws.
5.10 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
Corporation shall respectively have such authority and perform such duties in
the management of the business of the Corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the
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Corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court
of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made
(1) by the board of Directors or the Executive Committee by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) or if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of
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stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another while holding such office.
6.7 INSURANCE INDEMNIFICATION
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the Corporation" shall
include, in addition to the resulting Corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
and subject to the provisions of this Article VI (including, without limitation
the provisions of Section 6.4) with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advanced of expenses provided by, or granted
pursuant to, this Article 6 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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<PAGE>
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The Corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The Court may summarily order the
Corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, any vice president,
the chief financial officer, the secretary or assistant secretary of this
Corporation, or any other person authorized by the board of directors or the
chief executive officer or a vice president, is authorized to vote, represent,
and exercise on behalf of this Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
Corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
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<PAGE>
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the Corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the Corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
The Corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the Corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the Corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
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<PAGE>
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and"or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and"or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and cancelled at the same time. The Corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a Corporation and a natural
person.
8.7 DIVIDENDS
The directors of the Corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock.
The directors of the Corporation may set apart out of any of the funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
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<PAGE>
8.8 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The Corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
Corporation to restrict the transfer of shares of stock of the Corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other Bylaws of the Corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
Corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
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<PAGE>
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the Corporation that the Corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the Corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the Corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the Corporation is insolvent, to be
receivers, of and for the Corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to
elect successors to directors whose terms have expired or
would have expired upon qualification of their
successors; or
(ii) the business of the Corporation is suffering or is
threatened with irreparable injury because the directors
are so divided respecting the management of the affairs
of the Corporation that the required vote for action by
the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the Corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve,
liquidate or distribute its assets.
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<PAGE>
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the Corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
ARTICLE XII
LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
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<PAGE>
Number SERENA software Shares
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP 817492 10 1
This Certifies That
[BACKGROUND ILLUSTRATION]
is the record holder of
FULLY PAID AND NONASSESABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
SERENA SOFTWARE, INC.
Transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate property
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Robert Pender, Jr. /s/ Richard Doerr
--------------------- ------------------
Secretary President
[Corporate Seal of SERENA Software, Inc.
1998 *Delaware*]
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
By
--------------------------------
Authorized Signature
<PAGE>
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, option, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable law or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- __Custodian__
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _________________
in common (State)
COM PROP -- as community property
UNIF TRF MIN AT-- __Custodian (until age__)
(Cust)
_______under Uniform Transfers
(Minor)
to Minors Act _________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________________ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - - - --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
__________________________________________________________attorney-in-fact
<PAGE>
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________
-------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN
NOTICE: UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature Guaranteed
- - - - ------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM) PURSUANT TO S.E.C. Rule 17Ad-15
5<PAGE>
SERENA SOFTWARE INTERNATIONAL
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made as of
September 25, 1998 by and among SERENA Software International, a California
corporation (the "COMPANY"), and Donald A. Murphy, as Trustee of the Murphy
Family Trust, Pamela J. Murphy, as Trustee of the Murphy Family Trust, and
Roseann P. Geyer (each a "SHAREHOLDER" and, collectively, the "SHAREHOLDERS").
RECITALS
A. In connection with the issuance of shares of Common Stock issued to
the Shareholders (the "SHARES") of the Company pursuant to that certain
Agreement and Plan of Reorganization of an even date hereof between the Company,
SSI Acquisition Corp., a California corporation and wholly-owned subsidiary of
the Company, Optima Software, Inc., a California corporation ("OPTIMA"), and
certain shareholders of Optima, including the Shareholders and Douglas D.
Troxel, an individual, (the "MERGER AGREEMENT"), the Company and the
Shareholders desire to enter into this Agreement in order to grant certain
rights to the Shareholders;
B. It is a condition to the closing of the transactions contemplated by
the Merger Agreement that the Company and the Shareholders enter into this
Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
AGREEMENT
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or
any successor agency.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(c) "REGISTRABLE SECURITIES" shall mean (i) the Shares and (ii)
shares of the Company's Common Stock or other securities issued or issuable with
respect to the Shares upon any stock split, stock dividend, recapitalization, or
similar event; PROVIDED, HOWEVER, that any shares described in clauses (i) or
(ii) above which have been resold to the public pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
registration promulgated under the Securities Act, or in a private transaction
in which the registration rights
<PAGE>
granted under this Agreement are not assigned shall cease to be Registrable
Securities upon such resale.
(d) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
(e) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with this Agreement, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
the fees of a single counsel acting on behalf of all of the Shareholders, and
the expense of any special audits incident to or required by any such
registration, but excluding all Selling Expenses.
(f) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(g) "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Shareholders.
2. COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, other than (i) a registration relating solely to employee benefit plans,
or (ii) a registration relating solely to a transaction pursuant to Rule 145
promulgated under the Securities Act, then for each such registration the
Company will:
(i) promptly give to each Shareholder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 15 days after receipt of such written notice from the
Company, by any Shareholder or Shareholders; PROVIDED, HOWEVER, that the number
of Registrable Securities to be included in such registration shall be subject
to the managing underwriter cutback provisions described in Section 2(c).
(b) NOTICE OF UNDERWRITING. If the registration of which the Company
gives notice is for an underwritten registered public offering, the Company
shall so advise the Shareholders as a part of the written notice given pursuant
to Section 2(a). In such event, the right of any Shareholder to registration
shall be conditioned upon such underwriting and the inclusion of the Registrable
Securities held by such Shareholder in such underwriting to the extent provided
in this Section. All Shareholders proposing to distribute their Registrable
Securities through such underwriting (together with the Company and the other
shareholders distributing their securities through such underwriting) shall
enter into an underwriting agreement with the Underwriter's Representative for
such offering. The Shareholders shall have no right to participate in the
selection of the underwriters for an offering pursuant to this Section 2.
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<PAGE>
(c) CUT-BACK AND ALLOCATION. Notwithstanding any other provision of
this Section 2, if the managing underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting to the extent of
excluding all Registrable Securities from such registration in the Company's
public offering; PROVIDED, HOWEVER, the Company will use reasonable efforts to
include up to fifty percent (50%) of the Registrable Securities then outstanding
to the extent more than fifty percent (50%) of such Registrable Securities are
requested to be included in the Company's initial public offering. In the event
that less than 50% of the Registrable Securities are requested to be so
included, the Company shall use its reasonable efforts to include all such
Registrable Securities. The Company has not granted Registration Rights to any
other person, and any such rights granted hereafter shall be subject to the
rights contained hereon. In the event such limitation is applied to Registrable
Securities, the Company shall so advise all Shareholders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among the Shareholders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Shareholders. If any Shareholder disapproves of the
terms of any such underwriting, such Shareholder may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(d) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2 prior to the effectiveness of such registration whether or not any
Shareholder has elected to include securities in such registration.
3. REGISTRATION ON FORM S-3. The Company shall use its best efforts to
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act. After the Company has
qualified for the use of Form S-3, each Shareholder shall have the right to
request unlimited registrations on Form S-3 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended method of disposition of such shares by each such Shareholder;
PROVIDED, HOWEVER, that a Shareholder may not make such a request more than once
every year), subject to the following limitations:
(i) the Company shall not be obligated to cause a registration
on Form S-3 to become effective prior to 90 days following the effective date of
a Company-initiated registration (other than a registration effected solely to
qualify an employee benefit plan or to effect a business combination pursuant to
Rule 145);
(ii) the Company shall not be required to effect a registration
on Form S-3 unless the Shareholder or Shareholders requesting registration
propose to dispose of shares of Registrable Securities having an aggregate
disposition price (before deduction of underwriting discounts and expenses of
sale) of at least $2,000,000;
-3-
<PAGE>
(iii) the Company shall not be obligated to effect more than one
registration under this Section 3 during any six month period; and
(iv) the Company shall not be required to maintain and keep any
such registration on Form S-3 effective for a period exceeding forty-five (45)
days from the effective date thereof. The Company shall give notice to all
Shareholders and all holders of registration rights under any other agreement of
the Company granting Form S-3 or similar demand registration rights of the
receipt of a request for registration pursuant to this Section and shall provide
a reasonable opportunity for all such other Shareholders, including holders of
registration rights under any other agreement of the Company granting Form S-3
or similar demand registration rights, to participate in the registration.
Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the extent requested by the Shareholder or Shareholders thereof for purposes of
disposition.
4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2 or Section 3 shall be borne by the Company. All Selling Expenses
relating to securities registered by the Shareholders shall be borne by the
Shareholders of such securities pro rata on the basis of the number of shares so
registered.
5. REGISTRATION PROCEDURES.
(a) COMPANY OBLIGATIONS. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Shareholder advised in writing as to the initiation
of each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will furnish such number of prospectuses
and other documents incident thereto as a Shareholder from time to time may
reasonably request.
(b) SHAREHOLDER OBLIGATIONS. The Company may require each
Shareholder to furnish to the Company in writing such information regarding such
Shareholder and the distribution of such Registrable Securities as the Company
may from time to time reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement. Each Shareholder agrees to use its best efforts to cooperate
with the Company in connection with the preparation and filing of a registration
statement covering the Registrable Securities.
6. TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Agreement shall terminate as to any Shareholder upon the
earlier to occur of (i) four (4) years after the Company's initial public
offering, or (ii) at such time after the Company's initial public offering as
all of the Registrable Securities then held by such Shareholder may be sold
within any three (3) month period pursuant to Rule 144.
7. INDEMNIFICATION.
(a) The Company will indemnify each Shareholder and such
Shareholder's legal counsel and independent accountants, and each person
controlling such Shareholder within the
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<PAGE>
meaning of Section 135 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 13 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such
Shareholder and such Shareholder's legal counsel and independent accountants,
and each person controlling such Shareholder, each such underwriter and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in eliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Shareholder or underwriter and stated to be specifically
for use therein; and provided, further, that the Company will not be liable to
any such person or entity with respect to any such untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus that
is corrected in the final prospectus filed with the Commission pursuant to Rule
424(b) promulgated under the Securities Act (or any amendment or supplement to
such prospectus) if the person asserting any such loss, claim, damage or
liability purchased securities but was not sent or given a copy of the
prospectus (as amended or supplemented) at or prior to the written confirmation
of the sale of such securities to such person in any case where such delivery of
the prospectus (as amended or supplemented) is required by the Securities Act,
unless such failure to deliver the prospectus (as amended or supplemented) was a
result of the Company's failure to provide such prospectus (as amended or
supplemented).
(b) Each Shareholder will, if Registrable Securities held by such
Shareholder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 13 of the Securities Act, and each other such
Shareholder and each person controlling such Shareholder within the meaning of
Section 13 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Shareholders, such directors,
officers, legal counsel, independent accountants, underwriters or control
persons for any legal or any other
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<PAGE>
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Shareholder and stated to be specifically for use therein;
PROVIDED, HOWEVER, that the obligations of such Shareholders hereunder shall be
limited to an amount equal to the gross proceeds before expenses and commissions
to each such Shareholder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is impaired as a result of such failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
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<PAGE>
(f) The obligations of the Company and Shareholders under this
Section shall survive the completion of any offering of Registrable Securities
in a registration statement under Section 2 or Section 3, and otherwise.
8. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Shares to the public without registration, after such time as a
public market exists for the Common Stock of the Company, the Company agrees to
use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act, at all
times after the effective date of the first registration under the Securities
Act filed by the Company for an offering of its securities to the general
public;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements);
(c) furnish to Shareholders upon request a written statement as to
its compliance with the reporting requirements of Rule 144 (at any time after 90
days after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Shareholder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Shareholder to sell any such securities without
registration.
9. RESTRICTIONS ON TRANSFER. Provided that the Company is given prior
notice of such assignment, the rights granted hereunder to cause the Company to
register securities may be assigned to a transferee or assignee who acquires at
least 50,000 shares of Registrable Securities (appropriately adjusted for stock
splits, recapitalizations and the like effected after the date hereof). In the
event that rights granted hereunder are assigned in accordance with this
Section 9, such assignee shall be deemed to be a "Shareholder" as that term is
used in this Agreement
10. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, without regard to choice of
law provisions. The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the breach
or interpretation of this Agreement or the enforcement of any and all rights,
duties, liabilities, obligations, powers and other relations between the parties
arising under this Agreement.
11. ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding among the parties regarding the subject matter herein. Except as
otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
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<PAGE>
12. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Shareholder, to such address as such Shareholder shall
have furnished to the Company in writing, or (b) if to the Company, to its
principal executive offices and addressed to the attention of the Chief
Financial Officer, or to such other address as the Company shall have furnished
to such Shareholder.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by facsimile, or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
13. AMENDMENT. Any provision of this Agreement may be amended, waived or
modified only upon the written consent of (i) the Company, (ii) holders of a
majority of the outstanding Registrable Securities and shares of the Company's
Common Stock or other securities issued or issuable with respect to the Shares
upon any stock split, stock dividend, recapitalization or similar event issued
upon conversion thereof (excluding for all purposes in such computation any such
securities resold to the public or otherwise without rights hereunder) and (iii)
Roseann P. Geyer, so long as she shall continue to hold Registrable Securities.
Any Shareholder may waive any of his or her rights or the Company's obligations
hereunder without obtaining the consent of any other person.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Registration Rights
Agreement as of the date set forth above.
"COMPANY" SERENA SOFTWARE INTERNATIONAL
a California corporation
By: /s/ Richard A. Doerr
-----------------------------------------
Name: Richard A. Doerr
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
"SHAREHOLDERS" /s/ Donald A. Murphy
--------------------------------------------
Donald A. Murphy,
as Trustee of the Murphy Family Trust
/s/ Pamela J. Murphy
--------------------------------------------
Pamela J. Murphy,
as Trustee of the Murphy Family Trust
/s/ Roseann P. Geyer
--------------------------------------------
Roseann P. Geyer
[SERENA SOFTWARE INTERNATIONAL REGISTRATION RIGHTS AGREEMENT]
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<PAGE>
SERENA SOFTWARE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
_______________, 1998, by and between SERENA Software, Inc. (the "Company")
and _________________________ (the "Indemnitee"), and shall become effective
as of the time the Securities and Exchange Commission declares effective the
Company's Registration Statement on Form S-1 relative to its initial
underwritten public offering of Common Stock.
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified by the Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. CERTAIN DEFINITIONS.
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more
<PAGE>
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes might lead to
the institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "Company" shall include, in addition to SERENA
Software, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which SERENA Software,
Inc. (or any of its wholly owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim regarding any
Indemnifiable Event and any federal, state, local or foreign taxes imposed on
the Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement.
(e) "Expense Advance" shall mean an advance payment of Expenses to
Indemnitee pursuant to Section 3(a).
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<PAGE>
(f) "Indemnifiable Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(c) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board of Directors who is not a party to
the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(j) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. INDEMNIFICATION.
(a) INDEMNIFICATION OF EXPENSES. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any Claim by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of Expenses shall be made by the Company
as soon as practicable but in any event no later than five (5) business days
after written demand by Indemnitee therefor is presented to the Company.
(b) REVIEWING PARTY. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in Section 2(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified under
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<PAGE>
applicable law, and (ii) the obligation of the Company to make an Expense
Advance shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; PROVIDED, HOWEVER, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expense Advance shall be unsecured and no interest shall be charged
thereon. If there has not been a Change in Control, the Reviewing Party
shall be selected by the Board of Directors, and if there has been such a
Change in Control (other than a Change in Control which has been approved by
a majority of the Company's Board of Directors who were directors immediately
prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part
under applicable law, Indemnitee shall have the right to commence litigation
seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the
legal or factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Absent such litigation, any
determination by the Reviewing Party shall be conclusive and binding on the
Company and Indemnitee.
(c) CHANGE IN CONTROL. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, if desired by Indemnitee, shall be selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion
to the Company and Indemnitee as to whether and to what extent Indemnitee would
be permitted to be indemnified under applicable law and the Company agrees to
abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
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<PAGE>
(d) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
(5) business days after written demand by Indemnitee therefor to the Company.
Expenses incurred in defending any proceeding may be advanced by the Company
prior to the final disposition of the proceeding upon receipt of an undertaking
by or on behalf of Indemnitee to repay the Expenses incurred, if it shall be
determined ultimately that Indemnitee is not entitled to be indemnified.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of NOLO
CONTENDERE, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 3(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
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<PAGE>
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee (not to be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election so to do. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense
and (ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee's separate counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 9(a) hereof.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any other agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
5. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
6. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
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7. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
8. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. EXCEPTIONS. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for acts,
omissions or transactions from which Indemnitee may not be indemnified under
applicable law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
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extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; PROVIDED, HOWEVER, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having jurisdiction over such action
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
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Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be performed
entirely within the State of Delaware.
18. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
"COMPANY" SERENA SOFTWARE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
-----------------------------
Address: 500 Airport Blvd., Suite 200
----------------------------
Burlingame, CA 94010
----------------------------
"INDEMNITEE"
((1))
Address:
-----------------------------
-----------------------------
-----------------------------
[SIGNATURE PAGE TO SERENA SOFTWARE, INC. INDEMNIFICATION AGREEMENT]
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SERENA SOFTWARE, INC.
AMENDED AND RESTATED
1997 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSES OF THE PLAN. The purposes of this Amended and Restated
1997 Stock Option and Incentive Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options or Stock Purchase Rights
are, or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means SERENA Software , Inc., a California
corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
<PAGE>
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed
by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the 181st day of
such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment"
by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as
reported in THE WALL STREET JOURNAL or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE>
(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option
or Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
t (w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this Amended and Restated 1997 Stock Option and
Incentive Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the Exchange Act.
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
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<PAGE>
(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 4,550,000 Shares (the Shares may be authorized, but
unissued, or reacquired Common Stock), plus (i) any unused Shares, (ii) any
forfeited Shares, and (iii) annual increases on the first day of each fiscal
year, beginning with the fiscal year ending January 31, 2001, equal to the
lesser of (a) 2 1/2% percent of the Shares of Common Stock outstanding on the
last day of each preceding fiscal year or (b) such amount as determined by
the Board. For purposes of this Section 3, (i) "unused Shares" means Shares
reserved for issuance but not subject to grants under this Amended and
Restated 1997 Stock Option and Incentive Plan (the "1997 Plan") and (ii)
"forfeited Shares" means any Shares covered by grants under the 1997 Plan
that are not issued to participants or that are returned to the Company upon
forfeiture of such Shares.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered
pursuant to an Option Exchange Program, the unpurchased Shares which were
subject thereto shall become available for future grant or sale under the
Plan (unless the Plan has terminated); PROVIDED, however, that Shares that
have actually been issued under the Plan, whether upon exercise of an Option
or Right, shall not be returned to the Plan and shall not become available
for future distribution under the Plan, except that if Shares of Restricted
Stock are repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different groups of
Service Providers.
(ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
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<PAGE>
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value
of the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
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(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority
to extend the post-termination exercisability period of Options longer than
is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of
Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by an Optionee to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on
all Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted
only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
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(i) No Service Provider shall be granted, in any fiscal year
of the Company, Options to purchase more than 250,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 750,000
Shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 13.
(iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the canceled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of
the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall
be ten (10) years from the date of grant or such shorter term as may be
provided in the Option Agreement. Moreover, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five
(5) years from the date of grant or such shorter term as may be provided in
the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
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(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value
per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied
before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation
program or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
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10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by
the Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's
death or Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his
or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the
Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise
his or her Option within such period of time as is specified in the Option
Agreement to the extent the Option is vested on the date of termination (but
in no event later than the expiration of the term of such Option as set forth
in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall
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revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (but in no event later than the expiration
of the term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance, but only to the extent that the Option is
vested on the date of death. In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the Optionee
is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. The
Option may be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the Option under
the Optionee's will or the laws of descent or distribution. If the Option is
not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically, by means of a
Notice of Grant, of the terms, conditions and restrictions related to the
offer, including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the offeree must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock Purchase Agreement in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's service with the Company for any reason (including death
or Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion.
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(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such
additional terms and conditions as the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable.
In addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option
or Stock Purchase Right will terminate immediately prior to the consummation
of such proposed action.
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<PAGE>
(c) MERGER OR ASSET SALE. In the event of (i) a merger or
consolidation of the Company with or into another corporation resulting in
the outstanding voting securities of the Company immediately prior thereto
representing (either by remaining or by being converted into voting
securities of the surviving entity) less than 50% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (ii) the sale
of all or substantially all of the assets of the Company, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested
or exercisable. If an Option becomes fully vested and exercisable in the
event of a merger or consolidation or sale of assets as provided above, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes
the determination granting such Option or Stock Purchase Right, or such other
later date as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a reasonable time
after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to
Options granted under the Plan prior to the date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required.
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<PAGE>
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the manner and to
the degree required under Applicable Laws.
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<PAGE>
SERENA SOFTWARE, INC.
STOCK OPTION AGREEMENT
AMENDED AND RESTATED 1997 STOCK OPTION AND INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Amended and Restated 1997 Stock
Option and Incentive Plan (the "Plan") and this Option Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest at the end of each month thereafter, subject to the Optionee continuing to
be a Service Provider on such dates.
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for 90 days after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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<PAGE>
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an
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<PAGE>
Employee or a former Employee, the Company will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) INCENTIVE STOCK OPTION. If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized
on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the lesser of
(A) the difference between the Fair Market Value of the Shares acquired on
the date of exercise and the aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the aggregate Exercise Price. Any
additional gain will be taxed as capital gain, short-term or long-term
depending on the period that the ISO Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or
(ii) one year after the exercise date, the Optionee shall immediately notify
the Company in writing of such disposition. The Optionee agrees that he or
she may be subject to income tax withholding by the Company on the
compensation income recognized from such early disposition of ISO Shares by
payment in cash or out of the current earnings paid to the Optionee.
7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not
be modified adversely to the Optionee's
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<PAGE>
interest except by means of a writing signed by the Company and Optionee.
This agreement is governed by the internal substantive laws, but not the
choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan and this Option Agreement.
Optionee has reviewed the Plan and this Option Agreement in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing
this Option Agreement and fully understands all provisions of the Plan and
Option Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Option Agreement. Optionee further agrees
to notify the Company upon any change in the residence address indicated
below.
OPTIONEE: SERENA SOFTWARE, INC.
___________________________________ ___________________________________
Signature By
____________________________________ ___________________________________
Print Name Title
____________________________________
Residence Address
____________________________________
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<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Amended and Restated 1997 Stock Option and
Incentive Plan (the "Plan") and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to
be irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or
exercise of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
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<PAGE>
EXHIBIT A
SERENA SOFTWARE, INC.
EXERCISE NOTICE
SERENA Software, Inc.
500 Airport Blvd., Suite 200
Burlingame, CA 94010
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of SERENA Software, Inc. (the "Company")
under and pursuant to the Amended and Restated 1997 Stock Option and Incentive
Plan (the "Plan") and the Stock Option Agreement dated _____________, 19___ (the
"Option Agreement"). The purchase price for the Shares shall be $_____________,
as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof,
<PAGE>
and may not be modified adversely to the Purchaser's interest except by means
of a writing signed by the Company and Purchaser. This agreement is governed
by the laws of the State of California without giving effect to the conflicts
of laws principles thereof.
Submitted by: Accepted by:
PURCHASER: SERENA Software, Inc.
__________________________________ ____________________________________
Signature By
__________________________________ ____________________________________
Print Name Title
ADDRESS: ADDRESS:
_________________________________ SERENA Software, Inc.
500 Airport Blvd., Suite 200
_________________________________ Burlingame, CA 94010
____________________________________
Date Received
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<PAGE>
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between SERENA
Software, Inc. ("Pledgee"), and _________________________ ("Pledgor").
RECITALS
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's Amended and Restated 1997 Stock Option and Incentive Plan, and
Pledgor's election under the terms of the Option to pay for such shares with his
promissory note (the "Note"), Pledgor has purchased _________ shares of
Pledgee's Common Stock (the "Shares") at a price of $________ per share, for a
total purchase price of $__________. The Note and the obligations thereunder
are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. CREATION AND DESCRIPTION OF SECURITY INTEREST. In consideration of
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. PLEDGOR'S REPRESENTATIONS AND COVENANTS. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. PAYMENT OF INDEBTEDNESS. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. ENCUMBRANCES. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE>
c. MARGIN REGULATIONS. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. VOTING RIGHTS. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. STOCK ADJUSTMENTS. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. OPTIONS AND RIGHTS. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. DEFAULT. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. RELEASE OF COLLATERAL. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall
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be that number of full Shares which bears the same proportion to the initial
number of Shares pledged hereunder as the payment of principal bears to the
initial full principal amount of the Note.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. TERM. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. INSOLVENCY. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. PLEDGEHOLDER LIABILITY. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. INVALIDITY OF PARTICULAR PROVISIONS. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. SUCCESSORS OR ASSIGNS. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. GOVERNING LAW. This Security Agreement shall be interpreted and
governed under the laws of the State of California without giving effect to the
conflicts of laws principles thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" SERENA Software, Inc.
________________________________
Signature
________________________________
Print Name
________________________________
Title
"PLEDGEHOLDER" ________________________________
Secretary of
SERENA Software, Inc.
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<PAGE>
EXHIBIT C
NOTE
$_______________ Burlingame, CA
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to SERENA Software,
Inc., (the "Company"), or order, the principal sum of _______________________
($_____________), together with interest on the unpaid principal hereof from the
date hereof at the rate of _______________ percent (____%) per annum, compounded
semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
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SERENA SOFTWARE, INC.
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a
Service Provider (as described in the Plan and the attached Restricted Stock
Purchase Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE
SHARES. By your signature and the signature of the Company's representative
below, you and the Company agree that this Stock Purchase Right is granted
under and governed by the terms and conditions of the Amended and Restated
1997 Stock Option and Incentive Plan (the "Plan") and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: SERENA Software, Inc.
___________________________ ________________________________
Signature By
___________________________ ________________________________
Print Name Title
<PAGE>
EXHIBIT A-1
SERENA SOFTWARE, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is
an Service Provider, and the Purchaser's continued participation is
considered by the Company to be important for the Company's continued growth;
and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to
participate in the affairs of the Company, the Administrator has granted to
the Purchaser a Stock Purchase Right subject to the terms and conditions of
the Plan and the Notice of Grant, which are incorporated herein by reference,
and pursuant to this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser
and the Purchaser hereby agrees to purchase shares of the Company's Common
Stock (the "Shares"), at the per Share purchase price and as otherwise
described in the Notice of Grant.
2. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may
be paid by delivery to the Company at the time of execution of this Agreement
of cash, a check, or some combination thereof.
3. REPURCHASE OPTION.
(a) In the event the Purchaser ceases to be a Service Provider
for any or no reason (including death or disability) before all of the Shares
are released from the Company's Repurchase Option (see Section 4), the
Company shall, upon the date of such termination (as reasonably fixed and
determined by the Company) have an irrevocable, exclusive option (the
"Repurchase Option") for a period of sixty (60) days from such date to
repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 4) at the original purchase price per share (the
"Repurchase Price"). The Repurchase Option shall be exercised by the Company
by delivering written notice to the Purchaser or the Purchaser's executor
(with a copy to the Escrow Holder) AND, at the Company's option, (i) by
delivering to the Purchaser or the Purchaser's executor a check in the amount
of the aggregate Repurchase Price, or (ii) by canceling an amount of the
Purchaser's indebtedness to the Company equal to the aggregate Repurchase
Price, or (iii) by a combination of (i) and (ii) so that the combined payment
and cancellation of indebtedness equals the aggregate Repurchase Price. Upon
delivery of such notice and the payment of the aggregate Repurchase Price,
the Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interests therein or
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relating thereto, and the Company shall have the right to retain and transfer
to its own name the number of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase
Shares hereunder, the Company may designate and assign one or more employees,
officers, directors or shareholders of the Company or other persons or
organizations to exercise all or a part of the Company's purchase rights
under this Agreement and purchase all or a part of such Shares. If the Fair
Market Value of the Shares to be repurchased on the date of such designation
or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price
of such Shares, then each such designee or assignee shall pay the Company
cash equal to the difference between the Repurchase FMV and the aggregate
Repurchase Price of such Shares.
4. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) 1/4th of the Shares shall be released from the Company's
Repurchase Option one year after the Date of Grant and 1/48th of the Shares
shall be released from the Company's Repurchase Option at the end of each
month thereafter, provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section
6).
5. RESTRICTION ON TRANSFER. Except for the escrow described in
Section 6 or the transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until such Shares are released from the Company's Repurchase Option in
accordance with the provisions of this Agreement, other than by will or the
laws of descent and distribution.
6. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser
attached hereto as Exhibit A-3, until such time as the Company's Repurchase
Option expires. As a further condition to the Company's obligations under
this Agreement, the Company may require the spouse of Purchaser, if any, to
execute and deliver to the Company the Consent of Spouse attached hereto as
Exhibit A-4.
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(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate
to be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during
the term of the Repurchase Option, there is (i) any stock dividend, stock
split or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and
all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the
Repurchase Option.
7. LEGENDS. The share certificate evidencing the Shares, if any,
issued hereunder shall be endorsed with the following legend (in addition to
any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
8. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
9. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's
own tax advisors the federal, state, local and foreign tax consequences of
this investment and the transactions contemplated by this Agreement. The
Purchaser is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. The Purchaser
understands that the Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of the
transactions contemplated by this Agreement. The Purchaser understands that
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
taxes as ordinary income the difference between the purchase price for the
Shares and the Fair Market Value of the Shares as of the date any
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<PAGE>
restrictions on the Shares lapse. In this context, "restriction" includes
the right of the Company to buy back the Shares pursuant to the Repurchase
Option. The Purchaser understands that the Purchaser may elect to be taxed
at the time the Shares are purchased rather than when and as the Repurchase
Option expires by filing an election under Section 83(b) of the Code with the
IRS within 30 days from the date of purchase. The form for making this
election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER
SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of the State of California. This
Agreement, subject to the terms and conditions of the Plan and the Notice of
Grant, represents the entire agreement between the parties with respect to
the purchase of the Shares by the Purchaser. Subject to Section 15(c) of the
Plan, in the event of a conflict between the terms and conditions of the Plan
and the terms and conditions of this Agreement, the terms and conditions of
the Plan shall prevail. Unless otherwise defined herein, the terms defined
in the Plan shall have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid,
and addressed to the parties at the addresses of the parties set forth at the
end of this Agreement or such other address as a party may request by
notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the
Purchaser under this Agreement may only be assigned with the prior written
consent of the Company.
(d) Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such
provision, nor prevent that party from thereafter enforcing any other
provision of this Agreement. The rights granted both parties hereunder are
cumulative and shall not constitute a waiver of either party's right to
assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
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<PAGE>
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR
THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement. Purchaser agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Administrator upon any questions arising under the Plan or this
Agreement. Purchaser further agrees to notify the Company upon any change in
the residence indicated in the Notice of Grant.
DATED: ______________________
PURCHASER: SERENA Software, Inc.
______________________________ __________________________________
Signature By
______________________________ __________________________________
Print Name Title
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<PAGE>
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto __________________________________________ (__________)
shares of the Common Stock of SERENA Software, Inc. standing in my name of
the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint __________________________
________________ to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________
and the undersigned dated ______________, 19__.
Dated: _______________, 19
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
________, 19__
Corporate Secretary
SERENA Software, Inc.
500 Airport Blvd., Suite 200
Burlingame, CA 94010
Dear ____________:
As Escrow Agent for both SERENA Software, Inc. (the "Company"), and the
undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement ("Agreement") between
the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively as the "Company") exercises the Company's
Repurchase Option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at
the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all documents necessary or appropriate to make
such securities negotiable and to complete any transaction herein
contemplated, including but not limited to the filing with any applicable
state blue sky authority of any required applications for consent to, or
notice of transfer of, the securities. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased
by the Company or its assignees pursuant to exercise of the Company's
Repurchase Option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to
do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith, and any act done or omitted by you pursuant to the
advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree, you shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been
entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with
your obligations hereunder, may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor.
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12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain
in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a
party may designate by ten days' advance written notice to each of the other
parties hereto.
COMPANY: SERENA Software, Inc.
500 Airport Blvd., Suite 200
Burlingame, CA 94010
PURCHASER: __________________________________
__________________________________
__________________________________
ESCROW AGENT: Corporate Secretary
SERENA Software, Inc.
500 Airport Blvd., Suite 200
Burlingame, CA 94010
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
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<PAGE>
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with the laws of the State of California without
giving effect to the conflicts of laws principles thereof.
Very truly yours,
SERENA Software, Inc.
_____________________________________
By
_____________________________________
Title
PURCHASER:
_____________________________________
Signature
_____________________________________
Print Name
ESCROW AGENT:
_____________________________________
Corporate Secretary
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EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement").
In consideration of the SERENA Software, Inc.'s grant to my spouse of the
right to purchase shares of SERENA Software, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said
Agreement or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of
our residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 19
__________________________________________
Signature of Spouse
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross
income for the current taxable year the amount of any compensation taxable to
taxpayer in connection with his or her receipt of the property described
below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of SERENA
Software, Inc. (the "Company").
3. The date on which the property was transferred is: ____________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will never
lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated: ___________________, 19____ _____________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ _____________________________________
Spouse of Taxpayer
<PAGE>
SERENA SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of SERENA Software, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the common stock of the Company.
(d) "COMPANY" shall mean SERENA Software, Inc., and any Designated
Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings,
commissions and bonuses, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments and other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each Purchase
Period.
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(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after December 1 and
June 1 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective (the "SEC Effective Date") and ending on the
last Trading Day on or before February 28, 2001. The duration and timing of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 1999 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date and that the first
Purchase Period shall commence on the SEC Effective Date and end on the last
trading day on or before August 30, 1999.
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(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "SHARE" means a share of Common Stock, as adjusted in accordance
with Section 19 of the Plan.
(q) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(r) "TRADING DAY" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after December 1 and June 1 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
December 1, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without
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shareholder approval if such change is announced at least five (5) days prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. PARTICIPATION.
(a) An eligible Employee working primarily in the United States of
America may become a participant in the Plan by completing a subscription
agreement authorizing payroll deductions in the form of EXHIBIT A to this Plan
and filing it with the Company's payroll office prior to the applicable
Enrollment Date.
(b) An eligible Employee working primarily outside of the United
States of America may become a participant in the Plan by completing a
participation agreement authorizing payroll deductions in the form of EXHIBIT B
to this Plan and filing it with the Company's payroll office prior to the
applicable Enrollment Date.
(c) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding 10% of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to
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zero percent (0%) at any time during a Purchase Period. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
25,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof. The option shall expire on the last day of the
Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
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(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. DELIVERY. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of EXHIBIT C to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from
which the participant withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's
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account during the Offering Period but not yet used to exercise the option
shall be returned to such participant or, in the case of his or her death, to
the person or persons entitled thereto under Section 15 hereof, and such
participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of
notice of termination of employment shall be treated as continuing to be an
Employee for the participant's customary number of hours per week of
employment during the period in which the participant is subject to such
payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 225,000 shares, plus an annual increase to be added on the first day of
each fiscal year, beginning with the fiscal year ending January 31, 2001, equal
to the lesser of (i) 1% of the Shares of Common Stock outstanding on the last
day of the previous fiscal year or (ii) such amount as determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
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<PAGE>
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion,
may deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7),
as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall
be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an option.
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<PAGE>
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Offering
Period or the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 19 and this Section 20 hereof,
no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or
any other applicable law, regulation or stock exchange rule), the Company
shall obtain shareholder approval in such a manner and to such a degree as
required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
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procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
[REMAINDER OF THE PAGE LEFT BLANK INTENTIONALLY]
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EXHIBIT A
SERENA SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the SERENA Software, Inc. 1999 Employee Stock Purchase Plan
(the "Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):_________
_______________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER
<PAGE>
THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE
PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY,
WHICH ARISE UPON THE DISPOSITION OF THE COMMON STOCK. The Company may,
but will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions
or benefits attributable to sale or early disposition of Common Stock by
me. If I dispose of such shares at any time after the expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time of
such disposition, and that such income will be taxed as ordinary income
only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over
the purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_______________________________ ________________________________________
Relationship
________________________________________
(Address)
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Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other
than spouse)
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EXHIBIT C
SERENA SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the SERENA Software,
Inc. 1999 Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:____________________________
<PAGE>
SERENA SOFTWARE, INC.
1999 DIRECTOR OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and
to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" means the common stock of the Company.
(d) "COMPANY" means SERENA Software, Inc.
(e) "DIRECTOR" means a member of the Board.
(f) "DISABILITY" means total and permanent disability as defined in
section 22(e)(3) of the Code.
(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination as
reported in THE WALL STREET JOURNAL or such other source as the Administrator
deems reliable;
<PAGE>
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "INSIDE DIRECTOR" means a Director who is an Employee.
(k) "OPTION" means a stock option granted pursuant to the Plan.
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means a Director who holds an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Director Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 150,000 Shares (the "Pool") (the Shares may be authorized, but
unissued, or reacquired Common Stock), plus an annual increase to be added on
the first day of each fiscal year, beginning with the fiscal year ending Januay
31, 2001, equal to the lesser of (i) 1/2% of the Shares of Common Stock
outstanding on the last day of each preceding fiscal year or (ii) such amount as
determined by the Board of Directors.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
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4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) PROCEDURE FOR GRANTS. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 25,000 Shares (the "First Option") on the date on which
such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an
Inside Director but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 5,000 Shares (a "Subsequent Option") on the first day of
each fiscal year (beginning with the fiscal year ending January 31, 2001)
provided he or she is then an Outside Director and if as of such date, he or
she shall have served on the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder
shall be as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option
shall become exercisable cumulatively with respect to 1/4th of the Shares
subject to the First Option on the anniversary of the date of grant, and as to
1/48th of the First Option at the end of each month thereafter, provided that
the Optionee continues to serve as a Director on such dates.
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(vi) The terms of a Subsequent Option granted hereunder
shall be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable cumulatively with respect to 1/4th of the Shares
subject to the Subsequent Option on the anniversary of the date of grant, and as
to 1/48th of the Subsequent Option at the end of each month thereafter, provided
that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented
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by the Company in connection with the Plan, or (v) any combination of the
foregoing methods of payment.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he
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or she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, the Option or option shall become fully exercisable, including
as to Shares for which it would not otherwise be exercisable. Thereafter, the
Option or option shall remain exercisable in accordance with Sections 8(b)
through (d); PROVIDED, HOWEVER, that if the Successor Corporation does not
assume such outstanding Option or substitute for it an equivalent option, and
the Option would otherwise terminate pursuant to Sections 8(b)
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through 8(d) after the consummation of the merger or asset sale transaction,
then the Board shall notify the Optionee that the Option shall be fully
exercisable for a period of thirty (30) days from the date of such notice,
and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares). If such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in
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the opinion of counsel for the Company, such a representation is required by
any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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SERENA SOFTWARE, INC.
DIRECTOR OPTION AGREEMENT
SERENA Software, Inc., (the "Company"), has granted to _________________
(the "Optionee"), an option to purchase a total of 25,000 shares of the
Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1999 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in
the Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
2. EXERCISE PRICE. The exercise price is $_______ for each share of
Common Stock.
3. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option shall become exercisable in installments
cumulatively with respect to 1/4th of the Optioned Stock on the anniversary of
the date of grant, and as to an additional 1/48th of the Optioned Stock at the
end of each month thereafter, so that 100% of the Optioned Stock shall be
exercisable 4 years after the date of grant; provided, however, that in no event
shall any Option be exercisable prior to the date the shareholders of the
Company approve the Plan.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. METHOD OF PAYMENT. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
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(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. TERM OF OPTION. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
8. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
9. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the laws of the State of California
without giving effect to the conflicts of laws principles thereof.
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DATE OF GRANT:______________________ SERENA SOFTWARE, INC.
By:_____________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated:_____________________ _________________________________________
Optionee
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EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
SERENA Software, Inc.
500 Airport Blvd., Suite 200
Burlingame, CA 94010
Attention: Corporate Secretary
1. EXERCISE OF OPTION. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of SERENA Software, Inc. (the "Company") under and pursuant to the
Company's 1999 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Agreement.
3. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is
under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the
times proposed by Optionee.
4. TAX CONSEQUENCES. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
<PAGE>
6. ENTIRE AGREEMENT. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof. This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: SERENA SOFTWARE, INC.
Name:_________________________ By:______________________________________
Its:_____________________________________
Signature
Address:______________________ Address: 500 Airport Blvd., Suite 200
Burlingame, CA 94010
Dated:________________________ Dated:_____________________
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EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is made and entered into between
SERENA Software International, a corporation organized under the laws of the
State of California, with its principal office at Burlingame, California
("Company"), and Richard A. Doerr ("Employee").
For and in consideration of the employment of Employee as President and
Chief Executive Officer of Company, the Company and Employee hereby covenant and
agree:
1. EMPLOYMENT
The Company employs Employee and Employee accepts employment as President
and Chief Executive Officer on the terms and conditions set forth in this
Agreement. As President and Chief Executive Officer, Employee shall perform such
duties as shall be assigned by the Company and as are normally performed by
persons holding like positions, including, but not limited to overall management
of and accountability of Company operations, Finances, Sales and Marketing,
Distribution Channels and International Operations. The Effective Date of this
Agreement shall be April 21, 1997. Employee accepts such employment and agrees
to render his services as provided in this Agreement and as directed from time
to time by the Board of Directors of the Company. All of Employee's services
shall be performed conscientiously and to the full extent of his ability.
Employee shall devote his entire productive time, ability and attention to the
business of the Company during the term of this Agreement. Employee shall not
directly or indirectly render any services of a business, commercial or
professional nature to any other person or organization for compensation or
otherwise without the prior written consent of the Company. This provision is
not intended to preclude personal investments of Employee which do not require
significant day to day attention and management on his part.
2. COMPENSATION AND BENEFITS OF EMPLOYEE
The Company shall pay as full consideration to Employee for his services to
be rendered pursuant to this Agreement compensation consisting of the following:
a. Salary computed at an annual rate of two hundred thousand dollars
($200,000.00). Employee's salary shall be paid according to the Company's
periodic payroll practice. Employee's salary will be reviewed on an annual
basis. Employee's annual salary reviews are not a guarantee of increases, which
may be granted solely in the Company's discretion. The payment of a salary
determined on an annual basis is not a promise of employment for any specified
term.
b. Employee shall receive those fringe benefits regularly provided by the
Company to its employees as set forth in the Company's "Employee Handbook," on
such terms and conditions as are described in the Employee Handbook or other
applicable policies or plans. Nothing in this paragraph shall be construed to
obligate the Company to continue to provide employee benefits to its employees
or to prohibit the modification of the type or extent of benefits provided by
the Company to its employees.
c. Employee shall accrue vacation at the rate of three (3) weeks per
year, calculated on the basis of his anniversary date. Vacation will be
scheduled at times consistent with the needs of Company, as determined by the
Chairman of the Board.
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d. Employee will be eligible to receive an annual bonus beginning with
the Company's 1997-98 fiscal year so long as the Company is able to meet the
targets set forth below during the 1997-98 fiscal year (or other such targets or
measures for future fiscal years as may be determined by the Board of Directors)
while employed with the Company. The amount of the bonus will be determined
after the close of the Company's fiscal year and after the Company has received
its audited financial statement for the just-ended fiscal year. All references
to Sales Volume shall be calculated to exclude upgrades as defined in SERENA's
current Pricing Manual. The references to Profit Before Taxes ("PBT) shall be
calculated before payment of any bonus to the Chairman of the Board and shall be
as determined by the Company's auditors using generally acceptable accounting
principles. The amount of the bonus shall be determined according to the
following formula:
(1) If the new Sales Volume increases at least 25% over the prior
fiscal year AND the Company's PBT increases at least 12.5% over
the prior fiscal year, in the same fiscal year, Employee will
receive a bonus of $50,000; and
(2) Employee shall be eligible to receive 1.25% of each dollar
constituting new Sales Volume in excess of the 25% increase over
the prior fiscal year's Sales Volume until such time as the Sales
Volume is at a 50% increase over the prior fiscal year and 2.5%
of each dollar of PBT until such time as the PBT is at a 25%
increase over the prior fiscal year.
(3) If the new Sales Volume increases by 50% over the prior fiscal
year AND if the Company's PBT increases by 25% over the prior
fiscal year, in the same fiscal year, Employee shall be entitled
to receive the following:
(a) 3% of each dollar of New Sales over the 50% increase as set
forth above, and
(b) 2.5% of each dollar of PBT over the 25% increase as set
forth above.
e. In the event of Employee's termination prior to the end of any fiscal
year in which he is eligible to receive a bonus, Employee's bonus, if any, will
be calculated based on the Sales Volume and PBT accrued as of the last day of
Employee's employment with the Company.
3. STOCK OPTIONS
During his first year of employment, Company agrees to create a stock
option plan under which Employee shall be entitled to receive stock options
constituting 593,000 shares of the Company's stock. The grant price per share
will be determined by the Board of Directors on the date of grant. Except as
otherwise provided herein, Employee's stock options shall be governed by the
SERENA Software International Stock Option Plan (the "Plan"), as may be adopted
by the Board of Directors.
a. So long as he remains employed on the vesting date, Employee's stock
options shall vest according to the following schedule:
(1) One third (1/3) shall vest on the one year anniversary of
Employee's first day of employment.
(2) The remaining two thirds (2/3) shall vest on the last day of each
month over 24 months, commencing the 13 month of Employee's
employment.
b. The term of the options is ten (10) years from the date of vesting,
unless sooner terminated.
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<PAGE>
c. These options will terminate one year after cessation of employment
with the Company.
d. These stock options are not transferable except by will or by the
applicable laws of descent and distribution.
e. Employee acknowledges and agrees that the Company has made no
representations or warranties about the tax treatment of Employee's stock
options or the exercise of such options. Employee acknowledges that he has been
advised to seek professional tax advice from an advisor of his own choosing
prior to exercising any option and prior to the disposition of shares issued
upon the exercise of any option.
4. TERMINATION OF EMPLOYMENT
a. If the Company terminates Employee's employment without Cause within
one (1) year of Employee's first day of employment, or Employee resigns for Good
Reason as defined herein, the Company will pay Employee a severance package
consisting of twelve (12) months of severance pay, less applicable payroll
deductions, at Employee's then current base salary. After the first year of
employment the severance package shall be six months of Employee's then current
base salary. Said severance pay will be paid to Employee, at the Company's
option, (1) in accordance with the Company's periodic payroll practices or (2)
in a lump sum within thirty (30) days of Employee's termination. For purposes of
this Agreement, Cause means:
(1) Willful breach or continual neglect or failure to perform any
material duty or material responsibility which Employee is
charged with performing under this Agreement;
(2) Commission of any act of dishonesty, fraud, misrepresentation or
other act of moral turpitude;
(3) Commission of any act of disloyalty, refusal to cooperate with
co-workers which, in the exclusive judgment of the Company,
prevents effective performance of duties, or insubordination;
(4) Misappropriation or misuse of the Company's confidential trade
secret information; or
(5) Misrepresentation or concealment of any material fact for the
purpose of securing or maintaining this Agreement.
b. Termination of employment by you for Good Reason shall be deemed to
have occurred if you terminate your employment for any of the following reasons:
(1) The assignment to you of any duties grossly inconsistent with
your positions, duties, responsibilities and status with the
Company;
(2) A material change in your reporting responsibilities and titles;
(3) A material reduction by the Company in your Base Salary or a
failure by the Company to pay you any portion of your current
compensation under any plan, agreement or arrangement of or with
the Company that is due to you; or
(4) A sale of a controlling interest of the Company's stock which for
purposes of this Agreement shall be in excess of 51% of the
outstanding shares.
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<PAGE>
c. The Employee and the Company shall have the same right to terminate
Employee's employment for any reason whatsoever with or without Cause upon
thirty (30) days' written notice to the other party. Thereafter, the parties
will meet for the purpose of reviewing all facts and circumstances upon which
the termination is based. In lieu of the thirty days' advance written notice, at
its discretion, the Company may terminate Employee's employment without notice
to Employee by providing Employee thirty (30) days' pay, in addition to any
other sums due to Employee as of the date of termination.
d. The rights and duties created by this section may not be modified in
any way except by a written agreement dated and signed by the Company's Chairman
of the Board.
5. COOPERATION WITH THE COMPANY AFTER TERMINATION
Following any notice of termination of employment, Employee shall cooperate
fully with the Company in all matters relating to the winding up of his pending
work on behalf of the Company and the orderly transfer of any such pending work
to other employees of the Company as may be designated by the Company. The
Company shall be entitled to such full-time or part-time services of Employee as
the Company may reasonably require during all or part of any period following
any notice of termination.
6. CONDUCT
Prior and subsequent to Employee's termination date, if any, Employee shall
not do or attempt to do any of the following acts: (I) interfere with any of the
Company's business; (ii) interfere in any manner with any of the Company's
employees or independent contractors; (iii) use any of the Company's trade
secrets, including, but not limited to, its customer lists, or other property,
except in the best interests of the Company (as determined by the Company in its
sole discretion); or (iv) withhold any premiums, deposits or other forms of
payments, applications, financial or confidential information of the Company's
clients or customers.
7. COMPANY PROPERTY
In the event of Employee's termination, whether voluntary or involuntary,
Employee shall take all reasonable steps promptly to deliver to the Company all
property belonging to the Company which is in Employee's possession or under
Employee's control. Employee shall also inform the Company of the whereabouts of
any such items the location of which is known to the Employee but not the
Company.
8. TRADE SECRETS, RIGHTS AND DUTIES
a. Employee specifically agrees that he shall not at any time, either
during or subsequent to the term of Employee's employment with the Company, in
any fashion, form or manner, either directly or indirectly, unless expressly
consented to in writing by the Company, use, divulge, disclose or communicate to
any person or entity any confidential information of any kind, nature or
description concerning any matters affecting or relating to the business of the
Company, including, but not limited to, the Company's sales and marketing
methods, distribution channels, programs and related data, financial
information, pricing information or other written records used in the Company's
business; the Company's computer processes, programs and codes; the names,
addresses, buying habits or practices of any of its clients or customers;
compensation paid to other employees and independent contractors and other terms
of this employment or contractual relationships; any other confidential
information of, about or concerning the business of the Company, its manner of
operations, or other data of any kind, nature or description. The parties to
this Agreement hereby stipulate that, as between them, the above information and
items are important, material and confidential trade secrets that affect the
successful conduct of the Company's business and its good will, and that any
breach of any term of this section is a material breach of this Agreement. All
equipment, notebooks, documents, memoranda, reports, files, samples, books,
correspondence, lists or other written and graphic records, and the like,
including tangible or intangible computer programs, records and data, affecting
or relating to the business of the Company, which the
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<PAGE>
Employee might prepare, use, construct, observe, possess or control, shall be
and shall remain the Company's sole property.
b. Employee agrees that all business procured by the Employee while
employed by the Company is and shall remain the permanent and exclusive property
of the Company. Employee further agrees that each of the employees and
independent contractors of the Company is a significant and valuable asset of
the Company and shall at all times, both during and subsequent to the
termination of Employee's employment, be treated as the sole and exclusive
property of the Company.
c. Any interference with the Company's business, property, confidential
information, trade secrets, clients, customers, employees or independent
contractors by the Employee or any of Employee's agents during or after the term
of Employee's employment, which causes actual or threatened damage to the
company's business interests or business relationships, shall be treated and
acknowledged by the parties as a material breach of this Agreement.
9. NON-SOLICITATION
Employee hereby acknowledges and agrees that he will likely be exposed to a
significant amount of confidential information concerning the Company's business
methods, operations and customers while employed under this Agreement, that such
information might be retained by Employee in tangible form or simply retained in
the Employee's memory, and that the protection of the Company's exclusive rights
to such confidential information and trade secrets can best be ensured by means
of a restriction on the Employee's activities after termination of employment.
Therefore, the Employee agrees that for a one-year period following employment
termination (whether voluntary or involuntary and with or without Cause), he
shall not solicit, divert or initiate any contact with (or attempt to solicit,
divert or initiate any contact with) any customer, client, independent
contractor or employee of the Company for any commercial or business reason
whatsoever which would be detrimental to the Company.
10. Injunctive Relief
Employee hereby acknowledges and agrees that any violation of Sections 6, 8
and 9 of this Agreement pertaining to Conduct, trade Secrets and
Non-Solicitation, will cause damage to the Company in an amount difficult to
ascertain. Accordingly, in addition to any other relief to which the Company may
be entitled, the parties agree that the Company shall be entitled to temporary
or permanent injunctive relief for any breach or threatened breach by Employee
of the terms of Sections 6, 8 and 9 of this Agreement.
11. ASSIGNMENT
The rights and obligations of the Employee under this Agreement are not
assignable except to the extent set forth in paragraph 11 herein. Any attempt to
assume the rights and obligations, in whole or in part, will be void and of no
effect unless prior written consent of Employee is obtained. The rights and
obligations of Employer may be assigned or transferred without the consent of
Employee.
12. ARBITRATION OF CONTROVERSIES
a. WHEN ARBITRATION IS REQUIRED
Except as provided below, Employee and the Company agree to submit the
following disputes, claims or controversies to final and binding arbitration,
in accordance with the provisions of California Code of Civil Procedure 1280
ET SEQ: Any and all claims arising out of Employee's employment or cessation
of employment which could have been brought before an appropriate government
agency or in an appropriate court of law, including but not limited to: (1)
breach of this Agreement or any other employment agreement or contract,
express or implied; (2) breach of any other term or condition of employment,
whether express of implied; (3) breach of any covenant of good faith and fair
dealing; (4)
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<PAGE>
employment discrimination or harassment in violation of the California Fair
Employment and Housing Act or Title VII of the Civil Rights Act of 1964; (5) age
discrimination or harassment in violation of the Age Discrimination in
Employment Act or the California Fair Employment and Housing Act; (6) any other
claim arising under the common law of the State of California or of the United
States related to Employee's employment or termination from employment; and (7)
violation of any other federal, state or local statute, ordinance or regulation
related to Employee's employment with the Company or the termination of that
employment.
Employee and Company further agree that this duty to arbitrate extends not
only to disputes between Employee and the Company, but also to disputes between
Employee and the Company's officers, directors, employees and agents which arise
out of Employee's employment with the Company or the termination of that
employment.
Notwithstanding the foregoing, the parties agree that Employee and the
Company will not arbitrate any dispute, claim or controversy arising from (1)
any misuse, misappropriation or unlawful disclosure of the Company's
confidential trade secret information by Employee, or (2) any solicitation of
Company's employees, independent contractors, customers or clients by Employee.
b. TIME FOR DEMANDING ARBITRATION
Any demand for arbitration shall be made in writing and served upon the
other party to this Agreement, in accordance with paragraph 15a hereof. Such
demand shall be served no later than ninety (90) calendar days following the
date upon which the dispute arises. For purposes of this paragraph, the date
upon which the dispute arises shall be the date of the event, occurrence, or
happening giving rise thereto. This time period shall not be extended by virtue
of informal attempts to resolve the dispute.
c. SELECTION OF ARBITRATORS
In the event of a demand for arbitration, the parties shall first attempt
to agree upon an arbitrator to hear the dispute. If agreement is not reached
within fourteen (14) calendar days of the demand for arbitration, the party
seeking arbitration shall, within the fourteen (14) day period, request from the
American Arbitration Association ("AAA"), a list of five (5) arbitrators
experienced in labor and employment disputes. Immediately upon receipt of the
list of arbitrators from AAA, the party seeking arbitration shall forward a copy
of the list to the other party. Within fourteen (14) calendar days of receipt of
the list by the party seeking arbitration, the parties shall confer and attempt
to agree upon one of the arbitrators appearing on the list. If such agreement
cannot be reached, then within said fourteen (14) day period the parties shall
select the arbitrator by alternately striking names from the list until a single
name remains. The party seeking arbitration shall be the first to strike.
d. TIME IS OF THE ESSENCE
The parties expressly recognize the importance of resolving disputes under
this Agreement in an expeditious and timely manner. Therefore, time is of the
essence. Failure of a party seeking arbitration to abide by the time limits set
forth herein shall constitute a waiver by that party of the dispute.
e. REMEDIES
The arbitrator shall have the power to award any types of legal or
equitable relief that would be available in a court of competent jurisdiction or
administrative tribunal, including punitive damages for causes of action when
such damages are available under law.
f. FINAL AND BINDING ARBITRATION
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<PAGE>
The decision of the arbitrator shall be final and binding on the parties.
g. NO DELETION, ADDITION OR MODIFICATION
The arbitrator shall have no authority to add to, delete from, or modify in
any way the provisions of this Agreement.
h. COSTS OF ARBITRATION
Employee understands and agrees that he shall be responsible for paying the
first $120, of the costs of commencing the arbitration, if Employee initiates
the arbitration, and the remainder of the fees will be paid by the Company,
subject to a subsequent award by the arbitrator. Each party shall pay their
respective attorney's fees, if any.
13. EMPLOYEE'S DUE DILIGENCE
Employee has had the opportunity to investigate fully the employment
offered by the Company and Employee has exercised due diligence in investigating
the Company's offer. Employee therefore acknowledges that except for the terms
and conditions set forth in this Agreement, no representations of any kind have
been made to his with respect to the nature of his work, the duration of his
employment, his expected compensation, or any other conditions surrounding his
employment by the Company.
14. GENERAL PROVISIONS
a. NOTICES
Any notices to be given under this Agreement by either party to the
other may be effected by personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested. Mailed notices shall
be addressed to the parties at the addresses appearing below their signatures
and each party may change his address by written notice, in accordance with this
paragraph. Mailed notices shall be deemed communicated as of three (3) days
after mailing.
b. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or
in writing, express or implied, between the parties hereto with respect to the
employment of Employee by Company, and contains all of the covenants and
agreements between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no representation,
inducements, promises, or agreements, oral or written, express or implied, with
regard to Employee's employment, have been made or intended by any party, or
anyone acting on behalf on any party, or anyone acting on behalf of any party,
which are not embodied herein and that no other agreement, statement, or promise
regarding employment, either oral or written, express or implied, not contained
in this Agreement will be effective only if it is in writing and signed by both
parties.
c. PARTIAL INVALIDITY
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<PAGE>
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
d. WAIVER OF BREACH
A waiver by either party of a breach of this Agreement by the other
party shall neither constitute nor be construed as a waiver by that party of
later similar breaches.
e. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
SERENA Software International, Inc. Richard A. Doerr
(COMPANY) (EMPLOYEE)
By: /s/ Douglas D. Troxel /s/ Richard A. Doerr
--------------------- ---------------------
Title: President
Date:1997/04/17 Date: April 18, 1997
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<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made effective June 24, 1980, by and between SERENA
CONSULTING, a California corporation (hereinafter called "Employer") and DOUGLAS
D. TROXEL (hereinafter called "Employee").
WITNESSETH:
The parties hereby agree as follows:
1. EMPLOYMENT.
Employer hereby employs Employee, and Employee hereby accepts such
employment, on the terms and conditions hereinafter set forth.
2. TERM.
Employment under this agreement shall commence on June 24, 1980 and shall
terminate from year to year unless sooner terminated as hereinafter provided.
3. SALARY AND DISCRETIONARY BONUS.
For services rendered hereunder, Employer shall pay Employee, prior to
payroll withholdings, a salary of $7,500.00 per month. This salary may be
increased or decreased, from time to time, as agreed upon by the parties. In
addition Employer may, in its discretion and from time to time, depending in
part upon the extent to which Employee's services have benefited Employer, pay
additional sums to Employee as bonuses.
<PAGE>
4. DUTIES.
Employee is employed as a data processing consultant and, unless otherwise
directed by Employer, shall perform all duties normally or customarily performed
by a data processing consultant, and such additional duties as may be assigned
by Employer. Employee will at all times perform the duties as may be assigned by
Employer. Employee will at all times perform the duties required of him under
this agreement, faithfully, industriously, ethically, and to the best of his
ability. Employee shall devote substantially his full time to the employment
hereunder and shall not, without Employer's prior written consent, either render
personal services to any other person or firm or on his own account, or engage
in any activity directly or indirectly in competition with or adverse to
Employer's business (whether such engagement be alone, as partner, officer,
director, employee or otherwise).
5. VACATIONS.
Employee shall be entitled to four (4) weeks vacation with pay during each
fiscal year of Employer. The vacation schedule of Employee shall be subject to
the approval of Employer and in doing so Employer shall bear in mind the family,
personal and other commitments of Employee as well as the best interests of
Employer and similar commitments of any other employees. If this Employment
Agreement commences or ends on any day other than the first or last day,
respectively, of Employer's fiscal year, then the vacation period to which
Employee shall be entitled in such fiscal year shall be prorated accordingly.
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<PAGE>
If Employee fails to avail himself of all vacation time to which he is
entitled under this agreement and is re-employed by Employer at the end of the
term hereof, then Employee shall be entitled to "carry forward" such unused
vacation time, up to a maximum of twenty-six (26) weeks.
6. HOLIDAYS.
Employee shall be entitled to such holidays as shall be determined from
time to time by Employer.
7. ILLNESS OR DISABILITY.
Employee, upon becoming ill or otherwise mentally or physically disabled,
shall be entitled to sick leave with pay, up to a maximum of fifty-two (52)
weeks for all periods of illness or disability during any one fiscal year of
Employer. If this agreement commences or ends on any day other than the first or
last day, respectively, of Employer's fiscal year, then the sick leave period to
which Employee shall be entitled in such fiscal year shall be prorated
accordingly. However, Employer may reduce Employee's pay during periods of sick
leave by the amount of any disability income receivable by Employee for that
same period under either any governmental disability payment program or any
insured disability payment program maintained by Employer as a fringe benefit
for Employee.
8. FRINGE BENEFITS.
Employee shall be entitled to enjoy and participate equally in all fringe
benefits from time to time provided by Employer for any other executive
employees of similar tenure.
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<PAGE>
without limitation or obligation, such fringe benefits MAY include group term
life insurance, death benefits, disability insurance, accident and health
insurance, retirement benefit plans, and payment of association dues.
9. EXPENSE REIMBURSEMENT.
Employee shall be entitled to reimbursement for expenses incurred in the
performance of his duties hereunder to the extent and only to the extent, from
time to time authorized by Employer. Employer shall not, however, unreasonably
discriminate against Employee in allowing expense reimbursements, and Employee
shall be entitled to such reimbursements on the same basis as provided for any
other professional employees of Employer.
10. TERMINATION FOR CAUSE.
Employer may, at its option, terminate this agreement for cause upon the
happening of any of the following events:
(a) Employee's act or omission which injures the business reputation
of Employer (if such act or omission continues or is not corrected
after desistance or correction has been requested by Employer);
(b) Employee's insolvency, filing of a petition of bankruptcy, or the
assignment of assets for the benefit of his creditors;
(c) Employee's breach of a material provision of this agreement, or
any other agreement to which Employee and Employer are parties, if
such breach (if
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<PAGE>
curable) is not cured within ten (10) days after Employer requests the
same; and
(d) Employee's becoming partially or totally disabled for a period
beyond that specified in paragraph 7 above;
(e) Employee's fraud or dishonesty with regard to any dealing with
Employer or Employer's business.
11. NOTICES.
Any notices required or permitted to be given hereunder shall be deemed
duly given and if and when delivered in writing personally to Employee (if
intended for Employee) or if and when delivered personally to any officer (other
than Employee) of Employer (if intended for Employer). Such notices shall be
deemed duly given seventy-two (72) hours after mailing the same via United
States mail, posted in the State of California, postage prepaid, and addressed
as follows:
(a) If intended for Employer:
SERENA CONSULTING, a California corporation
908 Wharfside Drive
San Mateo, CA 94403
(b) If intended for Employee:
Douglas D. Troxel
908 Wharfside Drive
San Mateo, CA 94403
Either party may change the address to which notices to such party may be mailed
by giving written notice of such change to
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the other party.
12. DISALLOWED PAYMENTS.
All payments made by Employer to or for the account of Employee as
compensation, fringe benefit or expense reimbursement under this agreement are
made with the understanding and intention that such payments are properly
deductible by Employer for Federal income tax purposes, and the making of such
payments is expressly conditioned on such deductibility. If any such payment
should be, in fact, disallowed as a proper deduction by Employer for Federal
income tax purposes, such payment shall be deemed to be, from the date of
payment, a loan from Employer to Employee, bearing interest at the rate of six
percent (6%) per annum; and repayable upon demand.
13. ENTIRE AGREEMENT; AMENDMENTS.
This writing sets forth the entire agreement of the parties hereto and
shall not be amended or modified except by a writing signed by the party to be
bound thereby.
14. SUCCESSORS AND ASSIGNS.
This agreement is for the employment of Employee personally, and the
services to be rendered hereunder by Employee must be rendered by Employee and
no other person. Except as herein provided to the contrary, this agreement shall
be binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors, assigns, personal representatives, heirs and legatees.
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<PAGE>
EMPLOYMENT
AND
SOFTWARE DISTRIBUTION
AGREEMENT
BY AND BETWEEN
A. BRUCE LELAND
AND
SERENA INTERNATIONAL
<PAGE>
TABLE OF CONTENTS
PAGE
----
I DEFINITIONS
II EMPLOYMENT
1.0 AT-WILL EMPLOYMENT 1
2.0 DUTIES 2
3.0 COMPENSATION AND BENEFITS 2
4.0 RECEIPT OF DOCUMENTATION 2
5.0 TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION 2
6.0 COMPENSATION AND BENEFITS UPON TERMINATION 3
7.0 ARBITRATION/GOVERNING LAW 3
8.0 DAMAGE LIMITATION 3
9.0 SUCCESSORS 3
10.0 RIGHT TO ADVICE OF COUNSEL 3
11.0 MODIFICATION 4
12.0 MISCELLANEOUS 4
III RIGHTS TO LICENSE, COPY, DISTRIBUTE, DEVELOP AND SUPPORT PDSTOOLS
1.0 DISTRIBUTION LICENSE 4
2.0 SOURCE CODE LICENSE 4
3.0 DUTIES AND OBLIGATIONS OF LELAND 5
4.0 DUTIES AND OBLIGATIONS OF SERENA 5
5.0 TERM 7
6.0 WARRANTY 7
7.0 MAINTENANCE 8
8.0 PROPRIETARY RIGHTS INDEMNIFICATION 8
9.0 LELAND'S PROPRIETARY RIGHTS 8
10.0 TERMINATION 9
11.0 LIMITATIONS OF LIABILITY 11
12.0 SOURCE CODE ESCROW 11
13.0 GENERAL CONDITIONS 11
<PAGE>
EXHIBITS
A Master License Agreement
B Non-Disclosure and Program Evaluation Agreement
C Maintenance and Enhancement Plan
D Software Service Level Objectives
E Escrow Agreement
<PAGE>
EMPLOYMENT AND SOFTWARE DISTRIBUTION AGREEMENT
This is an agreement ("Agreement") entered into on OCTOBER 28, 1993 by and
between A.
Bruce Leland, an individual ("LELAND"), and SERENA International, a California
corporation ("SERENA"), in which LELAND agrees to employment terms and
conditions with SERENA as specified below, and in which LELAND licenses to
SERENA the right to copy, license, distribute and support LELAND's computer
program known as PDSTOOLS in accordance with the terms and conditions specified
below.
This Agreement is divided into three sections for ease of reading. The
first section is DEFINITIONS. The second section is EMPLOYMENT. The third
section is RIGHTS TO LICENSE, COPY, DISTRIBUTE, DEVELOP AND SUPPORT PDSTOOLS.
I. DEFINITIONS
PDSTOOLS includes, and this Agreement governs, the executable or object
code for all computer programs and any related modifications, enhancements,
documentation and information provided by LELAND for PDSTOOLS.
PDSTOOLS is a software program designed to run on the IBM MVS/SP, MVS/XA,
and MVS/ESA operating systems. The purpose of PDSTOOLS is to enhance the ability
of systems and applications programmers to find and manipulate partitioned data
sets (PDS), extended partitioned data sets (PDSE), sequential data sets, and
virtual storage access method (VSAM) data sets, thereby improving the
productivity of these systems and applications programmers.
II. EMPLOYMENT
LELAND has accepted the position of Software Architect ("Position")
reporting directly to Douglas D. Troxel for the development, support and
maintenance of PDSTOOLS, subject to the terms and conditions set forth in this
Section. In consideration of the mutual agreements set forth below, LELAND and
SERENA agree to the following terms and conditions.
1.0 AT-WILL EMPLOYMENT
Accepting the terms of this Section is a condition of employment for
the Position. In accepting the terms of this Section, LELAND hereby acknowledges
that LELAND's permanent, full-time employment is "at-will." LELAND further
understands that either LELAND or SERENA can terminate this employment
relationship at any time, without prior notice, for any reason. Neither LELAND
nor SERENA has to give "cause" for termination. LELAND also recognizes that
SERENA reserves the right, in its sole discretion, to make personnel changes for
its own purposes, without limitation, and without incurring any liability.
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<PAGE>
2.0 DUTIES
LELAND agrees to devote all of LELAND's business time, skill,
attention, and best efforts to SERENA's business to discharge and fulfill the
responsibilities assigned to LELAND by SERENA during LELAND's employment under
this Section. LELAND further agrees that LELAND will not render services to any
other person or entity of any kind for compensation without the prior written
consent of SERENA. In addition, LELAND shall not engage in any activity which
conflicts or interferes with the performance of the duties and responsibilities
of the position of Software Architect.
3.0 COMPENSATION AND BENEFITS
3.1 See Section III 4.4.2 for compensation. SERENA may make such
deductions, withholdings, or payments from lump sums payable to LELAND pursuant
to this Agreement which are required by law for taxes and similar charges. In
the event of LELAND's death, SERENA will make all salary payments which are
accrued and not yet paid as of the date of LELAND's death to LELAND's legal
representative.
3.2 LELAND is entitled to participate in or receive benefits under
SERENA's employee benefit plans and policies in effect from time to time,
subject to the generally applicable terms and conditions of the particular
benefit plan. These benefit plans may include health care, life insurance,
accidental death and disability, long-term disability, and/or savings plan
provided by or through SERENA or made available by SERENA.
4.0 RECEIPT OF DOCUMENTATION
LELAND acknowledges that LELAND has received from SERENA a copy of the
Summary of Benefits, as well as SERENA's Employee Benefit Summary, relating to
health care, life insurance, accidental death and disability, and savings plan.
LELAND understands that SERENA reserves the right and option, in its sole
discretion, to change, interpret or modify these policies at any time.
5.0 TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION
5.1 As an expressed condition of LELAND's employment with SERENA,
LELAND agrees to execute confidentiality agreements as requested by SERENA,
including but not limited to SERENA's Employee Proprietary Agreement as it is
from time to time amended.
5.2 LELAND further agrees that any trade secrets, proprietary and
confidential information related to the products other than PDSTOOLS acquired by
LELAND during the course of LELAND's employment is both confidential and
essential to SERENA's business. LELAND agrees that LELAND will not utilize or
reveal such information to others, either during the life of this Agreement or
at any time thereafter, except where such use and disclosure is necessary for
the performance of LELAND's duties and responsibilities in the position of
Software Architect or authorized in writing by SERENA.
5.3 LELAND further recognizes that SERENA's work force constitutes an
important and vital aspect to its business. LELAND, therefore, agrees that for a
period of 1 year following the termination of this Agreement for any reason
whatsoever, LELAND shall not solicit any of SERENA's then current employees to
terminate their employment with SERENA and to become employed by any firm,
company, or other business enterprise with which LELAND may be connected.
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<PAGE>
6.0 COMPENSATION AND BENEFITS UPON TERMINATION
Upon termination of LELAND's employment, the following events will
occur:
(a) SERENA will pay to LELAND all royalties, vacation pay, and
appropriate bonus, if any accrued through the date of LELAND's termination from
SERENA and not yet paid.
(b) LELAND will not be entitled to receive any other compensation or
benefits provided by or on behalf of SERENA, other than vested benefits that are
payable in accordance with the terms of any applicable benefit plan, and amounts
provided in Section III 4.4 and Section III 10.0.
(c) LELAND's rights to continue group health plan coverage will be
determined in accordance with applicable federal law.
7.0 ARBITRATION/GOVERNING LAW
Any dispute, claim or controversy of any kind, arising under, in
connection with, or relating to this Agreement or LELAND's employment, except as
provided in Section II 5.0, shall be resolved exclusively by binding arbitration
in San Francisco, California in accordance with the commercial rules of the
American Arbitration Association then in effect. LELAND and SERENA agree to
waive any objection to personal jurisdiction or venue in any forum located in
San Francisco, California. Except as provided in Section II 5.0, no claim,
lawsuit or action of any kind may be filed by either party of this Agreement.
Arbitration is the exclusive dispute resolution mechanism between the parties
hereto. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The validity, interpretation, effect and enforcement of this
Agreement shall be governed by the laws of the State of California.
8.0 DAMAGE LIMITATION
Upon termination of LELAND's employment, LELAND shall not be entitled
to recover any compensation, benefits or damages except as specifically
described herein. This damage waiver provides that no damages (including without
limitation, special, consequential, general, liquidated, or punitive damages)
shall be required by or on behalf of SERENA.
9.0 SUCCESSORS
Subject to the provisions in Section III 13.10, SERENA will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of SERENA
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that SERENA would be required to perform it if no such
succession has taken place. Failure of SERENA to obtain such an assumption and
agreement prior to the effectiveness of any such succession shall entitle LELAND
to the benefits listed in Section III 4.4 and Section 10.0 of this Agreement,
subject to the terms and conditions therein.
10.0 RIGHT TO ADVICE OF COUNSEL
LELAND has the right to consult with LELAND's lawyer so that LELAND is
fully aware of LELAND's rights and obligations under this Section.
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11.0 MODIFICATION
This Section may not be amended, modified, or changed or discharged in
any respect except as agreed in writing and signed by LELAND and a designated
officer of SERENA.
12.0 MISCELLANEOUS
The rights and obligations of SERENA under this Agreement shall inure
to the benefit of and shall be binding under the present and future subsidiaries
of SERENA, any and all successors and assigns of SERENA. No assignment of this
Agreement by SERENA will relieve SERENA of its obligations hereunder. LELAND
shall not assign any of LELAND's rights and/or obligations under this Agreement
and any such attempted assignment will be void. This Agreement shall be binding
upon LELAND's heirs, executors, administrators or other legal representatives
and their legal assigns.
III. RIGHT TO LICENSE, COPY, DISTRIBUTE, DEVELOP AND SUPPORT PDSTOOLS
1.0 DISTRIBUTION LICENSE
1.1 LELAND grants to SERENA an exclusive, worldwide, nontransferable
license to copy, market, and distribute PDSTOOLS in executable or object code
form only, pursuant to the terms of a written license agreement, such as the
sample attached in Exhibit "A."
1.2 LELAND further grants to SERENA the right to distribute
evaluation copies of PDSTOOLS pursuant to the terms of a Non-Disclosure and
Program Evaluation Agreement, Exhibit "B."
1.3 LELAND further grants to SERENA the right to permit others to
market and distribute copies of PDSTOOLS pursuant to a written distribution
agreement, but may not permit any third party to copy all or any part of
PDSTOOLS without the expressed written permission of LELAND.
1.4 Copies of PDSTOOLS may be distributed to users only if they have
executed written license agreements with SERENA or SERENA's agents. A sample
license agreement used by SERENA is attached as Exhibit "A." All of SERENA's
agents must use a license agreement similar to this license agreement,
clarifying to the user that user has no ownership rights to PDSTOOLS and has
only the right to use PDSTOOLS in accordance with the license agreement.
2.0 SOURCE CODE LICENSE
LELAND grants to SERENA the rights to use the source code only for the
express purpose of supporting SERENA's customers. No right or passage of
ownership is granted or implied by LELAND to SERENA for this use by SERENA.
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3.0 DUTIES AND OBLIGATIONS OF LELAND
3.1 LELAND agrees to include version, release and modification in the
object code for each evaluation copy and permanent copy of PDSTOOLS.
3.2 LELAND will use his best efforts to maintain and support PDSTOOLS
in accordance with SERENA's Maintenance and Enhancement Plan and in accordance
with SERENA's Software Service Level Objectives, attached as Exhibits "C" and
"D."
3.3 LELAND agrees to inform SERENA of any defect or error in PDSTOOLS
within a reasonable time after its discovery by LELAND, and to perform the
obligations set forth in subparagraph 3.2 above with respect to these defects or
errors.
3.4 LELAND agrees to work with SERENA to satisfy SERENA's requests,
users' requests, and SERENA's agents' requests for custom modification,
consulting, presentations, and training.
3.5 LELAND will use his best efforts to both supply an avoidance
procedure or correction in accordance with the Software Service Level
Objectives, attached hereto as Exhibit "D."
3.6 LELAND shall have the right to hire a subcontractor for purposes
of performing services relating to the timely completion of project development
pursuant to this Agreement. The selection, payment of costs, and terms and
conditions of work for said subcontractor shall be made according to the mutual
agreement of the parties.
4.0 DUTIES AND OBLIGATIONS OF SERENA
4.1 SERENA shall be responsible for payment of all costs related to
the production, marketing and distribution of PDSTOOLS as may be deemed
reasonably necessary. Such costs shall include, but not be limited to, expenses
related to documentation, packaging, production, support and advertising.
4.2 SERENA agrees to provide LELAND with the facilities, computers
and other resources as may be deemed reasonably necessary by SERENA for LELAND
to fulfill his obligations described in Section III 3.0.
4.3 For the sole purpose of continuing SERENA's marketing rights of
PDSTOOLS, SERENA must generate fees from new licenses, leases, rentals, upgrades
and transfer fees in the amount of $300,000 per year and fees from maintenance
and enhancements (M&E) must equal at least 80% of the M&E fees of the previous
year.
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4.4 PAYMENTS AND REPORTS
4.4.1 In consideration of the rights and licenses granted
hereunder, and subject to the provisions of Sections III 4.4.2 and 4.4.3, SERENA
agrees to pay LELAND a royalty equal to 23.1% of SERENA's cash receipts received
from new licenses, leases, rentals, upgrades, transfer fees and M&E of PDSTOOLS
in the United States (U.S.) and 28.1% of SERENA's cash receipts received from
new licenses, leases, rentals, upgrades, transfer fees and M&E outside the
United States (Non-U.S.).
These royalty rates are subject to Steven Smith or a person
mutually agreeable to LELAND and SERENA working under LELAND's direction at
SERENA with Steven Smith or a person mutually agreeable to LELAND and SERENA
dedicating at least 80% of his time to the development, support and maintenance
of PDSTOOLS. If these conditions are not met, these royalty rates change to
25.2% of U.S. PDSTOOLS cash receipts and 30.6% of Non-U.S. cash receipts.
4.4.2 In each month, LELAND shall receive an advance against
royalties payable pursuant to Section III 4.4.1. The monthly advance shall be in
the amount of $6,000.00.
4.4.3 In the event that LELAND ceases employment with SERENA
for reasons other than LELAND's failure or inability to maintain PDSTOOLS for a
consecutive 90-day period as described further in Section III 10.1.4 and Section
III 10.4, the royalty credit set forth in Section III 4.4.2 shall be
discontinued. Upon this occurrence, LELAND shall receive a straight 33% royalty
with no minimum royalty as set forth in Section III 4.4.2.
4.4.4 SERENA agrees to submit to LELAND within 30 days after
the end of each calendar quarter a written report of the licenses and invoices,
cash receipts, and net amount due LELAND for the preceding calendar quarter.
SERENA agrees to pay the net amount due by the time the report is due.
4.4.5 Unless otherwise specified, all payments due hereunder
will be in United States dollars and will be made by check or wire transfer to a
bank account specified by LELAND.
4.4.6 SERENA will pay and reimburse LELAND for all duties,
sales and use taxes, other taxes and other charges relating to PDSTOOLS, with
the sole exception of taxes on LELAND's income.
4.4.7 Late payment will incur a late charge of 1.5% interest
per month or the highest rate permitted by law.
4.4.8 SERENA agrees to provide LELAND with the facilities,
computers and other resources necessary to accomplish the services described in
Section III 6.0 and 7.0, below.
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4.5 RECORD KEEPING AND AUDITS
4.5.1 SERENA agrees to make the following records and to keep
them for a period of at least 3 years:
4.5.1.1 Copies of all reports to LELAND and copies of
original agreements, bills and invoices containing the information needed to
prepare them.
4.5.1.2 Written records of (a) the name, address and
telephone number of each customer to whom or to which PDSTOOLS (in permanent,
lease, rental or evaluation form) is distributed by or for SERENA; (b) the name
of an individual contact if the customer is an organization; and (c) other
reports as mutually agreed by SERENA and LELAND.
4.5.2 LELAND will have the right, at least once per calendar
year during the term of this Agreement and for three (3) years thereafter, to
have independent certified public accountants reasonably acceptable to SERENA
audit all records that this Agreement requires SERENA to make and keep. All
audits will be begun upon at least 5 business days prior written notice. LELAND
will pay the auditor's fee. All audits will be held in confidence. Any shortfall
in royalties will be paid in 5 days.
4.6 SERENA agrees to use diligent efforts to provide all distributors
and licensees with new releases, updates and corrections provided by LELAND
according to the mutual agreement of SERENA and LELAND.
5.0 TERM
Unless terminated earlier as provided below, this Agreement will
continue under the terms and conditions provided in this Agreement.
6.0 WARRANTY
6.1 Under the warranty set forth above, LELAND accepts no
responsibility for all or any part of PDSTOOLS that has been modified by anyone
other than LELAND unless LELAND has reviewed the modifications, has determined
that they constitute valid corrections of PDSTOOLS and has approved them in
writing. LELAND will in any event be free to use any modifications of PDSTOOLS
so approved for LELAND's normal business purposes in all versions of PDSTOOLS,
without payment or obligation to SERENA.
6.2 THE FOREGOING WARRANTIES ARE FOR SERENA'S EXCLUSIVE BENEFIT AND
ARE NONTRANSFERABLE. THE FOREGOING WILL BE SERENA'S EXCLUSIVE REMEDIES FOR
BREACH OF WARRANTY BY LELAND. LELAND DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND
IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY
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<PAGE>
PARTICULAR PURPOSE LELAND DOES NOT PROMISE THAT PDSTOOLS WILL BE ERROR FREE OR
WILL OPERATE WITHOUT INTERRUPTION.
7.0 MAINTENANCE
LELAND shall have the right to hire a subcontractor for purposes of
performing services relating to the timely completion of project development
pursuant to this Agreement. The selection, payment of costs, and terms and
conditions of work for said subcontractor shall be made according to the mutual
agreement of the parties.
8.0 PROPRIETARY RIGHTS INDEMNIFICATION
8.1 LELAND will indemnify SERENA against any claim that PDSTOOLS as
delivered by LELAND infringes any third party's patent, copyright or trade
secret under the laws of the United States of America. This obligation of LELAND
shall be subject, however, to the following terms and conditions.
8.1.1 The obligation will arise only if SERENA gives LELAND
prompt notice of the infringement claim and grants LELAND, in writing, exclusive
control over its defense and settlement.
8.1.2 The obligation will cover only the latest release of
PDSTOOLS delivered by LELAND, and will not cover any correction, modification or
addition made by anyone other than LELAND.
8.1.3 The obligation will not cover claims that PDSTOOLS
infringes any third party's rights as used in combination with any software not
supplied by LELAND.
8.1.4 If an infringement claim is asserted, or if LELAND
believes one likely, LELAND will have the right, but no obligation, to procure a
license from the person claiming or likely to claim infringement or to modify
PDSTOOLS to avoid the claim of infringement.
8.2 THE FOREGOING IS LELAND'S EXCLUSIVE OBLIGATION WITH RESPECT TO
CLAIMS OF INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY KIND.
9.0 LELAND'S PROPRIETARY RIGHTS
9.1 SERENA acknowledges and agrees that LELAND has and will retain
all ownership rights in PDSTOOLS, including all patent rights, copyrights,
copyright registration, trade secrets, documentation, trademarks, service marks,
related goodwill and confidential and proprietary information. SERENA agrees not
to attempt to modify, reverse compile, disassemble, or otherwise reverse
engineer the object code for PDSTOOLS. SERENA will have no rights in PDSTOOLS
except as explicitly, stated in this Agreement.
-8-
<PAGE>
9.2 Each party agrees to use reasonable effort, and at least the same
care that it uses to protect its own confidential information of like
importance, to prevent unauthorized dissemination or disclosure of the other
party's confidential information during and after the term of this Agreement.
9.2.1 Confidential information will include: (a) any source
code and programmer's documentation for any of the Software disclosed to SERENA;
(b) non-public financial information concerning either party; (c) either party's
research and development, new product, pricing and marketing plans, unless and
until publicly announced; and (d) any information designated as confidential in
writing at or prior to disclosure.
9.2.2 This confidentiality obligation will not apply to
information that: (a) becomes known to the general public without fault or
breach on the part of the receiving party; (b) the disclosing party customarily
provides to others without restriction or disclosure; or (c) the receiving party
obtains from a third party without breach of any nondisclosure obligation and
without restriction on disclosure.
9.3 LELAND grants to SERENA the right to use the name PDSTOOLS to
denote the Software in connection with SERENA's marketing and sublicensing of
PDSTOOLS.
9.4 During the term of this Agreement, SERENA agrees not to develop,
publish, or promote for sale other programs which compete with PDSTOOLS. For
purposes of this Section, a product shall be deemed to compete if it contains
more than 35% of substantially similar functions from a reasonable user's
perspective.
9.5 A copyright notice of the following form will be placed on the
initial display in PDSTOOLS:
-C- 1989-1993 SERENA. All rights reserved. PDSTOOLS-TM-
LELAND grants SERENA the right to publish copyright notices under
SERENA's name in PDSTOOLS displays and PDSTOOLS documentation for the term of
this Agreement for marketing purposes only.
9.6 SERENA agrees to allow LELAND the right to review advertising,
promotional materials, and direct mail before SERENA publicizes these items.
9.7 SERENA agrees that LELAND shall have full and complete control
over the development and support of PDSTOOLS.
10.0 TERMINATION
10.1 This Agreement will terminate upon the sooner of any of the
following:
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10.1.1 On the 30th day after either party gives the other
notice of a material breach by the other of any term or condition of this
Agreement, unless the breach is cured before that day.
10.1.2 When LELAND at his discretion gives SERENA notice of
termination after SERENA has been for more than 60 days the subject of any
voluntary or involuntary proceeding relating to bankruptcy, insolvency,
liquidation, receivership, or assignment for the benefit of creditors.
10.1.3 Upon 30 day notice by LELAND of SERENA's failure reach
the annual quota described in Section 4.0.
10.1.4 Upon 30 day notice by SERENA of LELAND's failure or
inability to maintain PDSTOOLS for a consecutive 30-day period.
10.1.5 Upon 30 day notice by LELAND of SERENA's failure to
market or distribute PDSTOOLS for a consecutive 30-day period.
10.2 After termination by LELAND for breach by SERENA or for any
voluntary or involuntary proceeding relating to bankruptcy, insolvency,
liquidation, receivership, or assignment for the benefit of creditors by SERENA,
as set forth above, SERENA will have no right to copy, market or distribute
PDSTOOLS and will promptly destroy or return to LELAND all copies of PDSTOOLS in
its possession or under its control.
10.3 After termination by LELAND for breach by SERENA or for any
voluntary or involuntary proceeding relating to bankruptcy, insolvency,
liquidation, receivership, or assignment for the benefit of creditors by SERENA,
as set forth above, users which have been properly licensed before the
termination may continue to use PDSTOOLS under the terms of their written
sublicense agreement, but all such licenses will inure to LELAND's benefits, and
SERENA will execute documents and provide assistance as reasonably requested by
LELAND to enable LELAND to enforce them.
10.4 After termination by SERENA under Section III 10.1.4 relating to
the permanent disability or death of LELAND, SERENA shall pay royalties to
LELAND or LELAND's heirs in the following amounts:
<TABLE>
<CAPTION>
Cash Receipts Cash Receipts
(U.S and Canada) (Non-U.S. and Canada)
<S> <C> <C>
First Year 25% 30%
Second Year 20% 25%
Third Year 20% 20%
Fourth Year 20% 15%
Fifth Year 15% 10%
</TABLE>
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SERENA shall gain all proprietary rights to PDSTOOLS upon termination
under Section III 10.1.4 and for payments to LELAND as defined above in Section
III 10.4.
10.5 After termination, neither party will be liable for damages of
any kind as a result of exercising its right to terminate this Agreement
according to these terms and conditions, and termination will not affect any
other right or remedy of either party.
10.6 Payment and indemnification obligations arising prior to
termination and the obligations of each party to keep the other's confidential
information confidential will remain in force.
11.0 LIMITATIONS OF LIABILITY
LELAND WILL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE. IN NO EVENT
WILL LELAND'S LIABILITY IN CONNECTION WITH THIS AGREEMENT EXCEED AMOUNTS PAID TO
LELAND BY SERENA HEREUNDER THESE LIMITATIONS APPLY TO ALL CAUSES OF ACTION IN
THE AGGREGATE, INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF
WARRANTY, LELAND'S NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER
TORTS.
12.0 SOURCE CODE ESCROW
The parties agree to execute the Source Code Escrow Agreement which is
attached as Exhibit "E." Pursuant to the terms of this Source Code Escrow
Agreement, LELAND will deposit a fully documented copy of the source code for
PDSTOOLS and of any upgrades with a third-party escrow agent selected by SERENA.
SERENA shall pay all fees and charges made by the escrow agent pursuant to this
escrow.
13.0 GENERAL PROVISIONS
13.1 This Agreement and attached exhibits will be governed by and
construed according to the laws of the State of California without regard to
principles of conflicts of law.
13.2 This Agreement may be amended or supplemented only by writing
signed on behalf of both parties. No purchase order, invoice or similar document
will amend this Agreement even if accepted by the receiving party in writing.
13.3 WAIVER: A waiver by either party of any of the above terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach thereof. All remedies, rights, undertakings, obligations and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation, or agreement of
either party.
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13.4 Neither party will have the right to claim damages or to
terminate this Agreement as a result of the other's failure or delay in
performance due to circumstances beyond its reasonable control, such as labor
disputes, strikes, lockouts, shortages of or inability to obtain labor, fuel,
raw materials or supplies, war, riot insurrection, epidemic, act of God, or
governmental action not the fault of the nonperforming party.
13.5 If any part of this Agreement is found invalid or unenforceable,
it will be enforced to the maximum extent permitted by law, and other parts of
this Agreement will remain in force.
13.6 Either party may have injunctive, preliminary or other equitable
relief to remedy any actual or threatened unauthorized disclosure of
confidential information or unauthorized use, copying, marketing, distribution
or sublicensing of PDSTOOLS.
13.7 This Agreement and attached exhibits represent the entire
agreement between the parties relating to the obligations and duties regarding
PDSTOOLS and LELAND's employment agreement at SERENA, and supersedes all prior
representations, discussions, negotiations and agreements, whether written or
oral.
13.8 All notices, reports, requests, or other communications required
or permitted hereunder must be in writing. They will be deemed given when: (a)
delivered personally; (b) sent by commercial overnight courier with written
verification of receipt of; or (c) sent by registered or certified mail, postage
paid, in each case to the receiving party's address set forth below or to any
other address that the receiving party may have provided for purposes of notice
hereunder.
13.9 In any suit to enforce this Agreement, including arbitration, the
prevailing party will have the right to cover its costs and reasonable
attorney's fees, including costs, fees and expenses on appeal.
13.10 SERENA may assign this Agreement to the surviving entity in
a merger or consolidation in which SERENA retains a majority interest.
Otherwise, neither party may assign any rights or delegate other duties under
this Agreement without the other's prior written consent, and any attempt to do
so without that consent will be void. This Agreement will bind and inure to the
benefit of the parties and their respective successors and permitted assigns.
A. BRUCE LELAND SERENA INTERNATIONAL
By: /s/ A. Bruce Leland By: /s/ Douglas D. Troxel
-------------------------------- -------------------------------
A. Bruce Leland Douglas D. Troxel, President
1103 Kendal Court 500 Airport Boulevard, Suite 200
San Jose, CA 95120 Burlingame, CA 94010
Date: 10/28/93 Date: 93/10/28
-------- --------
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May 18, 1993
Steven D. Smith
2501 Foothill Boulevard, Apt. #7
La Crescenta, California 91214
RE: EMPLOYMENT AGREEMENT
--------------------
Dear Mr. Smith:
SERENA International ("SERENA") is pleased that you are accepting the position
of Senior Software Engineer ("Position") for development and maintenance of
PDSTOOLS and other software products, subject to the terms and conditions set
forth in this Letter Agreement ("Agreement"). In consideration of the mutual
agreements set forth below, you and SERENA agree to the following terms and
conditions:
1. NATURE OF BUSINESS
SERENA licenses PDSTOOLS (also referred to as SysProg Utilities and/or
PDS/E) and SyncTrac-Registered Trademark- directly through its sales
force to end users, and SERENA licenses Change Man-Registered Trademark-
and COMPAREX-Registered Trademark- through distributors to end users. As
of January 1, 1993, SERENA has begun direct licensing of Change
Man-Registered Trademark- in Canada. Due to the nature of SERENA's
business and the volatility of the marketplace, the size and business
practices of SERENA may rapidly change. You agree that SERENA may, at
its discretion, make such changes in the duties and responsibilities of
your Position as it deems appropriate.
2. EMPLOYMENT
Accepting the terms of this Agreement is a condition of employment for the
Position. In accepting the terms of this Agreement, you hereby acknowledge
that your permanent, full-time employment is "at-will." You further
understand that either you or SERENA can terminate this employment
relationship at any time, without prior notice, for any reason. Neither you
nor SERENA has to give "cause" for termination. You also recognize that
SERENA reserves the right, in its sole discretion, to make personnel
changes for its own purposes, without limitation, and without incurring any
liability.
Your start date shall be Thursday, July 1, 1993. If there is any change in
your start date, please inform SERENA.
3. DUTIES OF AGREEMENT
Your specific duties and assignments are defined for you in Exhibit A.
<PAGE>
You shall be reporting to A. Bruce Leland.
You shall serve in this Position with such duties and responsibilities that
exist as of the date this Agreement is signed and/or as may later be
assigned by SERENA. You agree to devote all of your business time, skill,
attention, and best efforts to SERENA's business to discharge and fulfill
the responsibilities assigned to you by SERENA during your employment under
this Agreement. You agree that you will not render services to any other
person or entity of any kind for compensation without the prior written
consent of SERENA. In addition, you shall not engage in any activity which
conflicts or interferes with the performance of the duties and
responsibilities of this Position.
4. COMPENSATION AND BENEFITS
a. Commissions on PDSTOOLS Revenues. - During your employment under this
Agreement, you are entitled to receive Commissions on PDSTOOLS
Revenues as follows:
(1) 7.7% of the Gross Domestic Revenues of PDSTOOLS;
(2) 9.4% of the Net International Revenues of PDSTOOLS.
Gross Domestic Revenues are defined as cash receipts to SERENA from
new licenses, leases, rentals, and maintenance and enhancement (M&E)
revenues received from licensees of PDSTOOLS in the United States.
Net International Revenues are defined as monies received by SERENA
International Headquarters from SERENA offices and distributors
outside the United States for new licenses, leases, rentals, and M&E
revenues for PDSTOOLS.
The Commissions (net of Advances described below) are paid on a
quarterly basis on the 15th day of the month following the calendar
quarters. The Commissions are based on Gross Domestic Revenues and Net
International Revenues received during the preceding quarter.
You are entitled to receive a monthly nonrefundable Advance on these
Commissions in the amount of $6,000 per month. These Advances will be
reconciled against the actual Commissions at the end of each calendar
quarter. Any Advance balance will be carried forward to the following
periods as an offset to future Commissions.
b. Commissions on New Products. - During your employment under this
Agreement, you are entitled to receive Commissions of 7% on Net
Revenues from New Products that are developed substantially by you.
Net Revenues is defined as cash receipts to SERENA from new licenses,
leases, rentals and M&E revenues received from licenses of New
Products.
<PAGE>
To qualify for the Commissions, you must prepare and produce 80% or
more of the program code, tests and documentation for the New
Products, as well as continue to provide 80% or more of the
maintenance and enhancements for the New Products.
c. SERENA may make such deductions, withholdings, or payments from lump
sums payable to you pursuant to this Agreement which are required by
law for taxes and similar charges. In the event of your death, SERENA
will make all Commission payments which are accrued and not yet paid
as of the date of your death to your legal representative.
d. SERENA will pay you a $2,000 moving allowance in July to move your
possessions from Southern California to Northern California.
e. Benefit Plans.- You are entitled to participate in or receive benefits
under SERENA's employee benefit plans and policies as in effect from
time to time ("Benefit Plans"), subject to the generally applicable
terms and conditions of the particular Benefit Plan. These Benefit
Plans may include health care, life insurance, accidental death and
disability, long-term disability, and/or savings plans provided by or
through SERENA or made available by SERENA. The provisions of the
Benefit Plans are incorporated into this Agreement by reference. Your
insurance coverages will begin on the first day of the month in which
your current insurance coverage with Bank of America terminates.
f. Receipt of Documentation. - You acknowledge that you have received
from SERENA a copy of the Summary of Benefits, as well as SERENA's
Employee Benefit Summary, both documents attached as Exhibit B,
relating to health care, life insurance, accidental death and
disability, and savings plans. You understand that SERENA reserves the
right and option, in its sole discretion, to change, interpret or
modify these policies at any time.
g. Nothing in the preceding paragraphs relating to benefits under this
Agreement shall affect the "at-will" character of this Agreement.
5. TRADE SECRETS, PROPRIETARY AND CONFIDENTIAL INFORMATION
As an expressed condition of your employment with SERENA, you agree to
execute confidentiality agreements as requested by SERENA, including, but
not limited to, SERENA's Employee Proprietary Agreement as it is from time
to time amended.
You further agree that any trade secrets, proprietary and confidential
information acquired by you during the course of your employment is both
confidential and essential to SERENA's business. You agree that you will
not utilize or reveal such information to others, either during the life of
this Agreement or at any time thereafter, except where such use and
disclosure is necessary for the performance of your duties and
responsibilities in the Position or authorized in writing by SERENA.
<PAGE>
You further recognize that SERENA's work force constitutes an important and
vital aspect to its business. You agree, therefore, that for a period of
one year following the termination of this Agreement for any reason
whatsoever, you shall not solicit any of SERENA's then current employees to
terminate their employment with SERENA and to become employed by any firm,
company, or other business enterprise with which you may then be connected.
6. COMPENSATION AND BENEFITS UPON TERMINATION OR DEATH
Upon termination of your employment, SERENA will pay you certain
compensation and benefits. The benefits referred to herein do not change
the "at will" nature of this Agreement. The benefits and compensation that
SERENA will pay you include the following:
a. All Commissions, vacation pay, and appropriate bonus, if any, accrued
through the date of your termination from SERENA and not yet paid.
b. You will not be entitled to receive any other compensation or benefits
provided by or on behalf of SERENA, other than vested benefits that
are payable in accordance with the terms of any applicable benefit
plan, and amounts provided in 6(d) herein.
c. Continuation of any life insurance, accidental death and disability or
any other benefits if you make an appropriate conversion and comply
with the requirements of each plan. Your rights to continue group
health plan coverage will be determined in accordance with applicable
federal law.
d. The Commissions to your estate in case of death or disability will be
as follows:
i In the first year following your death, Commissions will be the
standard rate in paragraph 4(a)(b) above.
ii In the second year following your death, Commissions will be
reduced to 66-2/3% of the standard rate in paragraph 4(a)(b)
above.
iii In the third year following your death, Commissions will be
reduced to 33-1/3% of the standard rate in paragraph 4(a)(b)
above.
iv There will be no Commissions after the third year following your
death.
7. SUCCESSORS
SERENA will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of SERENA to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that SERENA would
be required to perform it if no such succession has taken place. Failure of
SERENA to obtain such an assumption and agreement prior to the
effectiveness of any such succession shall entitle you to the benefits
listed in Paragraph 6a of this Agreement, subject to the terms and
conditions therein.
<PAGE>
8. ARBITRATION/GOVERNING LAW
Any dispute, claim or controversy of any kind, arising under, in connection
with, or relating to this Agreement or your employment, except as provided
in Paragraph 5 above, shall be resolved exclusively by binding arbitration
in San Francisco, California in accordance with the commercial rules of the
American Arbitration Association then in effect. You and SERENA agree to
waive any objection to personal jurisdiction or venue in any forum located
in San Francisco, California. Except as provided in Paragraph 5 above, no
claim, lawsuit or action of any kind may be filed by either party of this
Agreement; arbitration is the exclusive dispute resolution mechanism
between the parties hereto. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. The validity, interpretation,
effect and enforcement of this Agreement shall be governed by the laws of
the State of California.
9. ENTIRE AGREEMENT
This Agreement sets forth the entire Agreement and understanding between
you and SERENA, and supersedes any other negotiations, agreements,
understandings, oral agreements, representations or past or future
practices whether written or oral, by SERENA.
Each SERENA plan or policy referred to herein directly or by implication is
incorporated herein only insofar as it does not contradict this Agreement.
If any inconsistencies between this Agreement and any such plan or policy
exist, this Agreement shall control. Nothing in any such plan or policy
shall change the "at-will" nature of this Agreement, by which either party
can terminate this Agreement without regard to cause.
10. RIGHT TO ADVICE OF COUNSEL
You have the right to consult with your lawyer so that you are fully aware
of your rights and obligations under this Agreement.
11. MODIFICATION
This Agreement may not be amended, modified, or changed or discharged in
any respect except as agreed in writing and signed by you and a designated
officer of SERENA.
12. SEVERABILITY AND INTERPRETATION
In the event that any provision or any previous portion of this Agreement
is held invalid or unenforceable by a court of competent jurisdiction, such
provision or portion thereof shall be considered separate and apart from
the remainder of this Agreement, and the other provisions shall remain
fully valid and enforceable. In the event that any provision shall be held
to be overly broad as written, such provision shall be deemed
<PAGE>
amended to narrow its application to the extent necessary to make the
provision enforceable according to applicable law and enforced as amended.
13. NOTICES
All notices required by this Agreement shall be given in writing either by
personal delivery or first class mail, return receipt requested. Notices
given by SERENA shall be addressed to SERENA's address set forth on the
first page of this Agreement. Notice given by mail shall be deemed given
five (5) days following the date of mailing.
14. MISCELLANEOUS
The rights and obligations of SERENA under this Agreement shall inure to
the benefit of and shall be binding under the present and future
subsidiaries of SERENA, any and all successors and assigns of SERENA. No
assignment of this Agreement by SERENA will relieve SERENA of its
obligations hereunder. You shall not assign any or your rights and/or
obligations under this Agreement and any such attempted assignment will be
void. This Agreement shall be binding upon your heirs, executors,
administrators or other legal representatives and their legal assigns.
15. DAMAGE LIMITATION
Upon termination of your employment, you shall not be entitled to recover
any compensation, benefits or damages except as specifically described
herein. This damage waiver provides that no damages (including without
limitation, special, consequential, general, liquidated, or punitive
damages) shall be required by or on behalf of SERENA.
16. WAIVER
A waiver by either party of any of the above terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations and agreements
contained in this Agreement shall be cumulative, and none of them shall be
in limitation of any other remedy, right, undertaking, obligation, or
agreement of either party.
If this letter sets forth our entire agreement, please sign below and return the
original to me. You may keep the enclosed copy.
SERENA International
/s/ William C. Zollner
William C. Zollner
Chief Operating Officer
<PAGE>
I, Steven D. Smith, hereby state that I understand and agree with the terms and
conditions on pages 1 through 6 of this letter Agreement. Accepted and agreed to
this 18 day of MAY, 1993.
/s/ Steven D. Smith
Steven D. Smith
<PAGE>
EXHIBIT A
JOB DESCRIPTION
SENIOR SOFTWARE ENGINEER
80% or more of your time will be spent in development, enhancement, maintenance,
support and coordination on PDSTOOLS, a software product owned by A. Bruce
Leland and marketed exclusively by SERENA.
The remaining 20% or less of your time will be spent in development of new
products, in the enhancement, maintenance and support of other SERENA products,
or in the development of PC skills for porting SERENA products to the PC or
other platforms.
You have an idea for a product to build LOGON procedures dynamically. SERENA has
not done a marketing plan for this product and, accordingly cannot adjudge the
potential of this product. It is your responsibility to prepare a clear
description of the product idea to enable SERENA to prepare a marketing plan.
Your specific duties and assignments for PDSTOOLS are as follows:
1. Development, enhancement and maintenance of PDSTOOLS, the primary set of
duties, to keep PDSTOOLS competitive and state-of-the-art with IBM's
operating system and direction and to meet the requirements of the Software
Service Level Objectives and Maintenance & Enhancement (M&E) Plan for all
PDSTOOLS customers.
2. Support for customers and prospects as needed (recognizing that the support
role is secondary to the development, enhancement and maintenance
activities).
3. Participate in monthly meetings to discuss and present the development and
enhancement plan as well as reported and outstanding problems on PDSTOOLS
along with other PDSTOOLS developers and support people.
4. Participate in quarterly meetings to discuss and present the development
and enhancement plan as well as reported and outstanding problems on
PDSTOOLS along with other PDSTOOLS developers and support people.
5. Participate in meetings with users and prospects to determine product usage
and direction.
6. Participate in meetings with marketing, sales and support personnel to
determine product usage and direction.
7. Occasionally assist other developers with technical approaches or ideas to
assist with the development of other products.
<PAGE>
EXHIBIT B
SUMMARY OF BENEFITS
MEDICAL, DENTAL AND OTHER INSURANCE
The monthly premium is fully paid by SERENA for the employee and his/her
dependent(s). Medical coverage commences on the first of the month in which the
current insurance coverage with Bank of America terminates. The Company will
reimburse up to $250.00 each calendar year per employee to cover the initial
deductibles.
Life insurance is also included in this plan, and each employee is insured for
$25,000.00.
Long-Term Disability benefits are also part of the plan, as well as a
comprehensive dental program.
VACATION
An employee is entitled to two (2) weeks of vacation per year after the first
year and up to five years of employment; on the sixth year and thereafter, an
employee is entitled to three (3) weeks of vacation per year. (Should an
employee resign or is terminated, vacation will be calculated on a prorated
basis.)
HOLIDAYS
SERENA observes eight (8) holidays: New Year's Day, President's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and the Friday after, and
Christmas Day.
401K PLAN
An employee is allowed to participate in this payroll deduction benefit provided
that all conditions are met. This is a planned retirement, incentive-type
program where the employee has the discretion of investing funds in various
options (stocks, bonds, etc.)
HEALTH CLUB
Membership fees are paid for by the Company for the employee only.
COSTCO
Membership fees are paid for by the employee.
<PAGE>
AMENDMENT TO SOFTWARE LICENSE AGREEMENT
This Amendment to SOFTWARE LICENSE AGREEMENT dated for reference NOVEMBER 19,
1990 is made by and between Bruce Leland ("Licensor") and SERENA, a California
corporation, ("Licensee") with reference to the following facts:
A. By documents dated January 31, 1989, the parties made and executed a
certain Software License Agreement and Addendum thereto (collectively "License
Agreement").
B. Language in the original License Agreement referred to "gross revenues"
with no provision for marketing expenses in calculating "net revenues."
C. A third party (Steven Smith) has been receiving six (6%) percent of "net
revenues" of which Licensor has contributed four (4%) percent and Licensee has
contributed two (2%) percent. Copy of a letter dated November 27, 1989 signed by
Steven Smith and Douglas D. Troxel stipulating these terms is attached.
D. The parties now desire to amend the License Agreement in certain
particulars.
NOW THEREFORE it is agreed as follows:
1. Section 8.1 under Paragraph 8.0 of the License Agreement is replaced by the
following language:
8.1 In consideration of the rights and licenses granted hereunder, and
subject to the provisions of sections 8.2 and 8.3, Licensee agrees to pay
to Licensor a royalty equal to thirty-six percent (36%) of Licensee's NET
revenues from sales, sublicenses, leases, rentals, maintenance and
enhancement fees, or other transfers of the Software. Said royalties shall
be reconciled on a cash basis and paid quarterly. Net revenues shall be
defined here as monies paid to Licensee after marketing expenses.
Domestically, (United States and Canada) that is pegged at seventy percent
(70%) of gross revenues when sold directly by Licensee. In foreign markets
and other cases of indirect marketing efforts where agents are involved,
net revenues are pegged at eighty-five percent (85%) of Licensee royalty.
2. Given that royalty payments have been paid based on net revenues, it is
agreed that these terms are retroactive to the original execution date.
3. Except as provided in this Amendment, the License Agreement remains
unchanged.
Executed in Burlingame, California on November 19, 1990.
Bruce Leland SERENA
/s/ A. Bruce Leland /s/ Douglas D. Troxel
Douglas D. Troxel, President
Nov 19, 1990 Dated November 19, 1990
<PAGE>
SOFTWARE AGREEMENT
THIS SOFTWARE AGREEMENT ("Agreement") is made this 1st day of July 1991, by and
between High Power Software Inc. ("HPS), having its principal place of business
at 1500 West El Camino Avenue, Suite 305, Sacramento, California 95833, and
SERENA Consulting, Inc. ("SERENA"), having its principal place of business at
500 Airport Boulevard, Suite 200, Burlingame, California 94010.
1.0 DEFINITIONS
SyncTrac shall mean the executable or object code for all computer
programs and any related modifications, enhancements, documentation,
and information relating to the SyncTrac computer product.
2.0 LICENSE GRANT
2.1 HPS grants to SERENA exclusive, worldwide, non-transferable
marketing rights to copy, market, and distribute SyncTrac in
executable or object code form only, and under the terms and
conditions set forth herein, pursuant to the terms of a written
license agreement.
2.2 HPS further grants to SERENA the right to distribute evaluation
copies of SyncTrac pursuant to the terms of a written temporary
license agreement.
2.3 HPS further grants to SERENA the right to appoint intermediaries
to market and distribute copies of SyncTrac pursuant to written
distributor agreements.
2.4 SERENA will use its best reasonable efforts in the promotion and
marketing of SyncTrac, both domestically and internationally.
2.5 As long as SERENA retains exclusive marketing rights to SyncTrac
under this Agreement, SERENA will not market any product which is
competitive in the marketplace with SyncTrac.
3.0 SERIALIZATION
HPS shall include the version, release, and serial number embedded in
the object code in each production copy of SyncTrac. HPS will be
solely responsible for creation of trial and customer copies of
SyncTrac.
4.0 SUB-LICENSING AND END-USERS
Trial and customer copies of SyncTrac may be distributed to end-users
with the following provisions:
(a) End-user may install SyncTrac only at a single location and only
on a single CPU, unless approved in writing by SERENA. End-user
shall not attempt to modify or transfer SyncTrac; and,
<PAGE>
(b) All ownership rights, title, and interest to SyncTrac and all
modifications and enhancements thereof are reserved by SERENA
and HPS, FIFTY PERCENT (50%) FOR SERENA AND
FIFTY PERCENT (50%) FOR HPS, AS CO-OWNERS.
5.0 PROPRIETARY RIGHTS NOTICES
SERENA shall include a notice in each production copy of SyncTrac that
proprietary rights to SyncTrac are reserved by HPS and SERENA. This
notice shall be:
(a) embedded in the object code;
(b) printed on the title pages of all documentation; and,
(c) printed on labels attached to tapes and other recording
media.
6.0 TERM
The term of this Agreement shall be three (3) years commencing July 1,
1991. Thereafter, it may be renewed at SERENA's option for subsequent
terms of five (5) years each, upon written notice to HPS not less
than thirty (30) days prior to the termination date of each preceding
term.
7.0. PAYMENTS AND REPORTS
7.1 HPS shall be entitled to Royalties Payable equal to:
(a) twenty-eight percent (28%) of SERENA's cash receipts from
sales, leases, and rentals of SyncTrac; and,
(b) forty-five percent (45%) of SERENA's cash receipts from
maintenance and enhancement fees for SyncTrac ("Royalties
Payable").
Royalties Payable shall be determined monthly based on SERENA's
cash receipts from both domestic and international SyncTrac
sales.
7.2 In each of the initial thirty-six (36) months of this Agreement,
HPS shall receive a royalty advance of $9,755.00 ("Advance
Royalty") against Royalties Payable hereunder. In the event
Royalties Payable are less than the Advance Royalty paid, the
difference shall be deemed an advance to HPS recoverable against
future Royalties Payable, but shall not constitute a debt or
obligation of HPS or its principals except to the extent it is
recovered from or offset against future Royalties Payable.
7.3 Each month's Royalties Payable shall be reduced by the cumulative
unrecovered Advance Royalty paid to establish the Net Royalty
Payable. Seventy-five percent (75%) of the Net Royalty Payable
shall be retained by SERENA as reimbursement for fifty percent
(50%) of the Development Expense Advances (as defined in
paragraph 10.1) until such advances have been repaid in full.
The balance of the Net Royalty Payable shall be paid to HPS
monthly. Such advances shall not constitute a debt or obligation
of HPS or its principals except to the extent they are recovered
from or offset against Net Royalty Payable under the terms of
this paragraph.
<PAGE>
7.4 SERENA further agrees to report for each copy of SyncTrac
distributed by or for SERENA as follows:
7.4.1 Within thirty (30) days after the end of each calendar
quarter, SERENA will send HPS a written report on the
distribution of all copies of SyncTrac during the quarter,
as well as a written report of any maintenance contracts
relating to SyncTrac.
7.4.2 Each report will specify the following
(a) the number of copies distributed by or for SERENA;
(b) the number of maintenance contracts;
(c) the total applicable royalties; and,
(d) the net amount due HPS.
7.5 Unless otherwise specified, all payments due hereunder will be
in United States dollars and will be made by check or wire
transfer to a bank account specified by HPS.
8.0 COSTS
SERENA shall be responsible for payment for all costs related to the
production, marketing, and distribution of SyncTrac. Such costs shall
include, but not limited to, expenses related to marketing, packaging,
reproduction, support, and advertising.
9.0 RECORDKEEPING AND AUDITS
SERENA agrees to prepare and maintain the following records which can
also be audited by HPS or its authorized agent(s):
9.1 Copies of all reports to HPS and copies of the substantiating
original agreements, bills, and invoices.
9.2 Records of the following:
(a) the name, address, and telephone number of each customer
to whom SyncTrac is distributed;
(b) the name of the individual contact if the customer is an
organization;
(c) the serial number of each copy distributed to each
customer; and,
(d) copies of all sub-license agreements, showing all parties'
signatures.
9.3 Any report or record may be audited at any time by HPS or its
authorized agent(s).
<PAGE>
10.0 DEVELOPMENT
10.1 HPS will use its best efforts to develop, maintain, and document
SyncTrac and related products. Prior to July 1, 1991, SERENA
advanced to HPS certain funds for the development of SyncTrac.
Attached hereto as Exhibit "A" is a schedule of such advances
showing the fifty percent (50%) recoverable portion thereof,
herein referred to as Development Expense Advances. After
July 1, 1991, HPS shall assume responsibility for all
development expenses, including the cost of telephone lease
lines and access to SERENA's mainframe computer service but
excluding computer time at SERENA's mainframe computer service
(providing said computer time is reasonable), other than the
cost for computer use, which shall be paid by SERENA, provided
the same is with reasonable limits.
10.2 HPS will provide the first line technical support for SyncTrac
until notified by SERENA that SERENA is able to provide first-
line technical support. SERENA agrees to credit HPS $2500.00 per
month against Development Expense Advances while HPS is
providing first-line technical support.
10.3 HPS grants SERENA the right of first refusal to market software
products developed, owned, or acquired by HPS during the term
of the Agreement. For each product, the right of first refusal
will extend for ninety (90) days after notification in writing
to SERENA by HPS. Failure of SERENA to respond in writing, or to
indicate its intention to meet the terms of a submitted
proposal, within the ninety (90) day period, will be deemed as a
waiver by SERENA and will release HPS from any further
commitment with respect to the product offered.
11.0 WARRANTY
11.1 Upon receipt of documentation demonstrating a defect or error in
SyncTrac, HPS will use its best efforts to:
(a) supply an avoidance procedure within fifteen (15) days; and,
(b) supply a correction with twenty (20) days thereafter.
11.2 HPS agrees to inform SERENA of any defect or error in SyncTrac
within a reasonable time after discovery by HPS, and at SERENA's
request, to perform the obligations set forth in paragraph 11.1
(above) with respect to those defects or errors.
11.3 HPS shall not be responsible for all or any part of SyncTrac
that has been modified by any party other than HPS unless HPS
has reviewed the modification and determined that it constitutes
a valid correction of SyncTrac.
11.4 HPS warrants that SyncTrac will operate in accordance with its
documentation. HPS disclaims any other warranty, express or
implied, including the implied warranties of merchantability and
fitness for a particular purpose. HPS does not represent that
SyncTrac will be error-free or will operate without
interruption.
<PAGE>
12.0 INFRINGEMENT CLAIM
12.1 HPS will indemnify SERENA against any claim that SyncTrac, as
delivered by Licensor, infringes any third party's patent,
copyright or trade secret under the laws of the United States.
This obligation of HPS shall be subject, however, to the
following terms and conditions:
12.1.1 The obligation will arise only if SERENA gives HPS prompt
notice of the infringement claim and grants HPS, in
writing, exclusive control over its defense and
settlement.
12.1.2 The obligation will cover only the latest release of
SyncTrac delivered by HPS, and will not cover any
correction, modification, or addition made by anyone
other than HPS.
12.1.3 The obligation will not cover claims that SyncTrac
infringes any third party's rights as used in combination
with any software not supplied by HPS.
12.1.4 If an infringement claim is asserted, or if HPS believes
one to be likely, HPS will have the right, but not the
obligation, to procure a license from the person claiming
or likely to claim infringement, or to modify SyncTrac to
avoid the claim of infringement.
12.2 The foregoing is HPS' exclusive obligation with respect to
claims of infringement or proprietary rights of any kind.
13.0 PROPRIETARY RIGHTS
13.1 Under the terms of this Agreement, HPS grants SERENA an
exclusive world-wide license in all proprietary rights in
SyncTrac, including all patent rights, copyrights, copyright
registrations, trade secrets, trademarks, service marks, and
related goodwill and proprietary information. All applications
for patent, registration of copyright or registration of
trademarks or service marks in any jurisdiction, shall be in the
name of HPS and SERENA as co-owners, but SERENA's exclusive
license shall be recorded in connection with any such
application or resulting patent, copyright registration, or
trademark, or service mark registration. All notices of
proprietary rights shall include the names of both HPS and
SERENA.
13.1.1 During the term of this Agreement, both HPS and SERENA
will consult and agree on any matters involving these
proprietary rights, including without limitation,
selection of alternative or additional trademarks or
service marks and decisions regarding filing of
applications for registration relating to any such
proprietary rights.
13.1.2 HPS and SERENA will share equally the cost of any
applications for registration or protection of
proprietary rights in or related to SyncTrac, including
without limitation, patent applications, applications
for copyright registration and applications for
trademark or service mark registration. HPS and SERENA
will cooperate fully with respect to all such
applications and shall execute all documents necessary
or appropriate in connection with any such application
or recording of licenses granted pursuant to this
Agreement.
<PAGE>
13.2 Each party agrees to use reasonable effort, and at least the
same care that it uses to protect its own confidential
information of like importance, to prevent unauthorized
dissemination or disclosure of the other party's confidential
information during and after the term of this Agreement.
13.2.1 Confidential information will include:
(a) any source code and programmer's documentation for
SyncTrac;
(b) non-public financial information concerning either
party;
(c) either party's research and development, new product,
pricing and marketing plans, unless and until publicly
announced; and,
(d) any information designated as confidential in writing
at or prior to disclosure.
13.2.2 These confidentiality obligations will not apply to
information that:
(a) becomes known to the general public without fault or
breach on the part of the receiving party;
(b) the disclosing party customarily provides to others
without restriction on disclosure; or
(c) the receiving party obtains from a third party
without breach of any nondisclosure obligation and
without restriction on disclosure.
13.3 Nothing herein shall be construed to restrict the right of HPS
to use any techniques, algorithms, know-how, codes or
documentation related to SyncTrac in connection with other
products developed by HPS or its principals.
14.0 FIRST RIGHT OF REFUSAL
During the pendency of this Agreement, SERENA shall have the first
right of refusal to acquire HPS' interest in SyncTrac. In
consideration therefor, SERENA shall pay to HPS a sum certain in such
amount and by cash or promissory note as the parties shall then
agree. The determination of the amount shall acknowledge the
Royalties Payable during the remaining term, HPS' share of the
proprietary rights retained hereunder and such other factors as the
parties deem relevant.
15.0 TERMINATION
15.1 This Agreement will terminate upon the sooner of any of the
following:
15.1.1 The expiration of this Agreement in accordance with
paragraph 6.0;
15.1.2 On the thirtieth (30th) day after either party gives the
other notice in writing of a material breach by the other
of any term or condition hereof, unless the breach is
satisfactorily resolved before that day; and,
<PAGE>
15.1.3 When either party, at its discretion, gives the other
notice of termination in writing after the other has
been, for more than sixty (60) days, the subject of any
voluntary or involuntary proceeding relating to
bankruptcy, insolvency, liquidation, receivership, or
assignment for the benefit of creditors.
15.2 After termination, as set forth above, SERENA will have no right
to copy, market or distribute SyncTrac and will promptly return
to HPS all copies of SyncTrac in its possession or under its
control.
15.3 After termination, end-users properly sublicensed prior to
termination may continue to use SyncTrac under the terms of
their written sublicense agreements, but all benefits and
obligations of the sublicenses will be shared equally by HPS and
SERENA.
15.4 Payment and indemnification obligations arising prior to
termination and the obligations of each party to keep the
other's confidential information will remain in force.
15.5 If termination is due to bankruptcy by either party, the non-
bankrupt party has the first right of refusal to acquire the
rights and ownership of the other party at a mutually agreeable
price, said price not to exceed four times the revenues for the
twelve (12) months immediately preceding the date of bankruptcy.
15.6 In the event SERENA does not choose to continue marketing
SyncTrac after three (3) years, HPS and SERENA will mutually
agree to other marketing channels and the distribution in
revenues from said channels.
16.0 SOURCE CODE ESCROW
The parties agree to execute a source code escrow agreement pursuant
to which the parties will deposit a fully documented copy of the
source code for SyncTrac, including any subsequent upgrades,
versions, and releases.
17.0 GENERAL PROVISIONS
17.1 This Agreement will be governed by and construed according to
the laws of the State of California.
17.2 This Agreement may be amended or supplemented only in writing,
signed and agreed upon by both parties. No purchase order,
invoice, or similar document will amend this Agreement even if
accepted by the receiving party in writing.
17.3 No waiver will be implied from conduct or failure to enforce
rights. No waiver will be effective unless done so in writing on
behalf of the party claimed to have waived.
17.4 If any part of this Agreement is found to be invalid or
unenforceable, it will be enforced to the maximum extent
permitted by law, and other parts of this Agreement will remain
in force.
<PAGE>
17.5 Either party may seek injunctive or other equitable relief to
remedy any actual or threatened unauthorized disclosure of
confidential information or unauthorized use, copying, marketing,
distribution, or sublicensing of SyncTrac.
17.6 This Agreement represents the entire agreement between the
parties relating to SyncTrac and supersedes all prior
representations, discussions, negotiations and agreements,
whether written or oral.
17.7 All notices, reports, requests, and other communications
required or permitted hereunder must be in writing. They will be
deemed given when:
(a) delivered personally;
(b) sent by commercial overnight courier with written
verification of receipt thereof; or
(c) sent by registered or certified mail, postage prepaid.
Such communications will be delivered to the receiving party's
address, set forth below, or to any other address that the
receiving party may have provided for purposes of notice
hereunder.
17.8 In any suit to enforce this Agreement, including arbitration, the
prevailing party will have the right to recover its costs and
reasonable attorney's fees, including costs, fees, and expenses
on appeal.
17.9 For purposes of this Agreement, the parties to this Agreement are
independent contractors. There is no relationship of partnership,
agency, franchise, or joint venture between the parties. Neither
party has the authority to bind the other or to incur any
obligation on its behalf.
17.10 Either party may assign this Agreement to the surviving entity
in a merger or consolidation in which it retains a majority
interest. Otherwise, neither party may assign any rights or
delegate any duties under this Agreement without the other's
prior written consent. Any attempt to do so without that consent
will be void. This Agreement will bind and inure to the benefit
of the parties and their respective successors and permitted
assigns.
17.11 SERENA and HPS agree to meet on an annual basis to set quotas and
to align and evaluate SyncTrac's direction.
HIGH POWER SOFTWARE SERENA INTERNATIONAL
/s/ William C. Zollner
Chief Operating Officer
/s/ Larry G. Wasson FOR
- - - - ------------------------------- ----------------------------------
LARRY G. WASSON, President DOUGLAS D. TROXEL, President
/s/ Mohammad Madani 2,27,96
- - - - -------------------------------
MOHAMMAD MADANI, Vice President
1500 West El Camino, Suite 305 500 Airport Boulevard, Suite 200
Sacramento, California 95833 Burlingame, California 94010
<PAGE>
EXHIBIT "A"
Summary of SyncTrac's Development Expenses
HIGH POWER SOFTWARE
<TABLE>
<CAPTION>
ITEM Feb'9 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mohammed 5000
Larry 2083 4165 4165 4165 4165 4165 4165 4165 4165 4165 4165 4165
Rent 540 540 540 540 540 -150 590 590 590
Phone 140 257 282 427 419 199 411 265
Printer 1000
??? - 936 1248 1248 1248 1404 1937 1980 880 2640 2420 4255
Tymnet 144 1351 1937 2308 1943 2073 4091 1632 1362 3163 2832 6176
Document
TOTAL 2367 7249 8172 9688 8315 8381 10604 7872 6407 10558 10007 20186
<CAPTION>
ITEM TOTAL '90 Feb Mar Apr May Jun TOTAL '91TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mohammed 5000 5000 5000 5000 5000 5000 25,000 30,000
Larry 47897.5 4165 4165 4165 4165 4165 4165 24,990 72,888
Rent 4320 590 590 590 590 590 2,950 7,270
Phone 2380 0 2,380
Printer 1000 0 1,000
??? 20196 3302 3607 4160 2240 13,309 33,505
Tymnet 29012 3584 1833 5372 10,789 39,801
Document 2520 2220 7200 6795 7815 26,550 26,550
TOTAL 109806 19161 17415 26487 1879 0 17570 4165 103,588 213,396
</TABLE>
THIS EXHIBIT REPRESENTS ONE-HALF (1/2) OWED BY HPS IN DEVELOPMENT AND
RECOVERAGE EXPENSES.
<PAGE>
ADDENDUM TWO TO SOFTWARE AGREEMENT
THIS ADDENDUM TWO to the Software Agreement ("Agreement"), said Agreement being
effective July 1, 1991, is made June 6, 1995, by and between High Power Software
Inc. ("HPS") and SERENA Consulting ("SERENA"), doing business as SERENA
International. The first and only ADDENDUM to the Agreement was made April 1,
1994.
1. SAMS:Select
1.1 Ownership of SAMS:Select
HPS and SERENA agree that, for the period until June 6, 1995, HPS and SERENA had
joint ownership of the product known as SAMS:Select (also known as DMS/Sync or
DS/Sync), a product derived from the program code of SyncTrac. For definition
purposes for the Agreement and this Addendum Two, "ownership" is defined as
proprietary information, copyright, trademarks and trade secrets whether or not
any portion thereof is, or may be, validly copyrighted or registered. On June 6,
1995, SERENA agrees to grant its ownership of 50% of SAMS:Select to HPS for no
consideration. This grant of ownership is done to enable HPS to strike a
contract with Sterling Software for the marketing of SAMS:Select by Sterling
Software.
1.2 Share of Cash Receipts Associated with SAMS:Select
HPS and SERENA agree that, for the period until June 6, 1995, HPS and SERENA
agree to share any net revenues to SERENA for SAMS:Select at 50% for HPS and 50%
for SERENA. Net revenues are defined as the cash received by SERENA or HPS on
SAMS:Select, including, but not limited to, license fees and maintenance fees,
advances on license fees and maintenance fees, and sale of the ownership of
SAMS:Select by HPS. Effective June 6, 1995, HPS and SERENA agree to share any
net revenues received by HPS and SERENA at 75% for HPS and 25% for SERENA. The
receiving party shall pay the appropriate share to the other party within 15
days of receipt of the monies.
1.3 Payment for Costs of SERENA's Computer Services Facility Associated with
SAMS:Select
HPS agrees to reimburse SERENA in the amount of $250.00 per month for the costs
of SERENA's mainframe computer services facility for work done by HPS associated
with the development, maintenance, support and marketing of SAMS:Select. This
charge shall be reimbursed by HPS to SERENA by the 15th day of the month
following the month in which the charges are incurred.
Should HPS' computer time, file sizes, tape mounts, and other activities
associated with SAMS:Select increase dramatically, HPS agrees to discuss the
increase in costs
<PAGE>
associated with the SAMS:Select activity with SERENA, and agree at a mutually
agreeable charge for the SAMS:Select activity.
1.4 Marketing Rights for SAMS:Select in Italy
SERENA signed a marketing agreement with Selesta Gestione Centri ("Selesta") in
which SERENA agreed to give Selesta marketing rights to SAMS:Select in Italy at
a commission rate higher than the commission rate for SyncTrac and higher than
the software industry standard in exchange for the source code and documentation
to SAMS:Select from Selesta.
The source code for SAMS:Select was passed from SERENA to HPS for no
consideration.
To assure no misunderstanding in ownership and marketing rights for SAMS:Select,
SERENA agrees to assign its rights under the marketing agreement with Selesta to
HPS. In so doing, HPS will receive the royalties stipulated in the marketing
agreement with Selesta for the revenues generated by Selesta in Italy. SERENA
grants this assignment with the understanding that HPS will not reassign the
marketing rights for: SAMS:Select in Italy to Sterling Software or any entity
controlled by Sterling Software. Should HPS reassign the marketing rights for
SAMS:Select in Italy to Sterling Software, the marketing rights for SAMS:Select
shall revert to SERENA.
HPS agrees to report for each copy of SAMS:Select distributed by or for HPS as
follows:
Within 15 days after the end of each month, HPS will send SERENA a written
report on the distribution of all copies of SAMS:Select during the month,
as well as a written report of any maintenance contracts relating to
SAMS:Select.
Each monthly report will specify the number of copies of SAMS:Select
distributed by or for HPS; the number of maintenance contracts; the total
applicable royalties; and the net amount due SERENA.
HPS agrees to pay the royalties due to SERENA from revenues generated by Selesta
in accordance with Section 1.2 above.
2. Advances against SyncTrac Royalties
In the initial 36 months (July 1991 through June 1994) of the Agreement, SERENA
agreed to pay $9,755.00 per month for a total of $351,180 as an Advance Royalty
against Royalties Payable as defined in the Agreement. In fact, SERENA paid a
total of $444,610 in Advance Royalties to HPS during the first 36 months of the
Agreement. From July 1994 through May 1995, SERENA paid an additional
$183,000.00 in
Page 2
<PAGE>
Advance Royalties to HPS, bringing the total advances to $627,610.00 at May 31,
1995.
SERENA agrees to continue to pay the greater of Net Royalty Payable or $15,000
per month in Advance Royalty through June 1997. A Net Royalty Payable will occur
when the total Royalties Payable accrued against SyncTrac revenues throughout
the term of this Agreement and against SAMS:Select revenues through the period
ended June 6, 1995, and other amounts owed by HPS to SERENA generates a total
amount in excess of the Advance Royalties, offset by any technical support
credits (See Section 3 below). A Net Advance Royalties will occur when the
Advance Royalties, offset by any technical support credits (See Section 3
below), exceeds the total Royalties Payable accrued against SyncTrac revenues
throughout the term of this Agreement and against SAMS:Select revenues through
the period ended June 6, 1995, and other amounts owed by HPS to SERENA. At May
31, 1995, the total of Advance Royalties, offset by technical support credits,
was still in excess of Royalties Payable and other monies paid by SERENA on
behalf of HPS in the amount of $25,412.72. This amount represents the Net
Advance Royalties at May 31, 1995.
3. Credit against Advance Royalties for Technical Support Services by HPS
The Agreement called for HPS to "provide the first-line technical support for
SyncTrac until notified by SERENA that SERENA is able to provide first-line
technical support," and SERENA agreed to "credit HPS $2,500.00 per month against
Development Expense Advances while HPS is providing first-line technical
support."
In fact, the credit of $2,500.00 was applied as an offset against the Advance
Royalties of $9,755.00 from SERENA to HPS for the period from July 1991 through
May 1992. In May 1992, SERENA notified HPS that SERENA was able to provide
first-line support, and the credit of $2,500.00 was stopped.
The technical support credit was renewed in February 1994 in the amount of
$3,000.00 per month, and this technical support credit of $3,000.00 per month
has continued through May 1995 as an offset against Advance Royalties (although
the amount of the Advance Royalties changed, as explained in Section 2 above).
HPS will continue to receive a credit of $3,000.00 per month against the Advance
Royalty as long as there is a Net Advance Royalties and HPS is providing
technical support for SERENA. When the Net Advance Royalties reaches zero (or,
stated another way, when there is a Net Royalties Payable balance), or HPS does
not provide technical support for SERENA, the credit stops. The credit will be
renewed if a Net Advance Royalties returns.
Page 3
<PAGE>
4. Copies of Master License Agreements ("MLAs") and Software License
Agreements for SyncTrac
SERENA agrees to provide a copy of each MLA and SLS for every SyncTrac customer
by the 15th day of the month following the month in which the MLA and SLS is
signed.
HIGH POWER SOFTWARE SERENA CONSULTING
/s/ Larry G. Watson /s/ Douglas D. Troxel
- - - - -------------------------- -----------------------------
Larry G. Wasson, President Douglas D. Troxel, President
Date: Date: 95/09/01
-------------------- --------
/s/ Mohammad Madani
- - - - -------------------------------
Mohammad Madani, Vice President
Date: 95/08/04
--------
1500 West El Camino, Suite 305 500 Airport Boulevard, Suite 200
Sacramento, CA 95833 Burlingame, CA 94010
Page 4
<PAGE>
DT: August 17, 1995
TO: Bill Zollner
FR: John Veloski
RE: Addendum Two to HPS Agreement
Bill:
The following is my understanding of the important parts of the 8/04/95 HPS
Agreement.
- Any SAMS:Select monies (revenues) received by HPS prior to June 6,
1995 are to be shared 50/50 between HPS and SERENA. Revenues include
license fees, M&E, advances on license fees and the sale of the
ownership of SAMS:Select.
- SAMS:Select revenue received by HPS after June 6 are to be shared 75%
for HPS and 25% for SERENA.
- HPS is to pay SERENA within 15 days of receipt of the monies.
- HPS will reimburse SERENA in the amount of $250 per month for
mainframe usage. Again, this is to be paid by the 15th. The Agreement
doesn't stipulate a start time for this. Aug. 1?
- HPS will send SERENA a report on the distribution of all copies of
SAMS:Select distributed during the month as well as a listing of all
maintenance contracts. These reports will show the applicable
royalties and the net amount due SERENA.
- SERENA will continue to pay HPS $15,000 per month as an advance on
Royalties.
- The Net Royalty Payable will be netted against any amounts owed to
SERENA by HPS for SAMS:Select revenues.
- HPS will continue to receive a credit of $3,000 per month against the
Advance Royalty as long HPS is providing technical support and there
is a negative Net Advance Royalties balance.
- When the Net Advance Royalties reaches zero (or when there is a
positive balance payable) or when HPS does not provide technical
support, the credit stops.
This seems to be all the relevant parts. My only question is "does the $250 per
month start on Aug. 1"?
<PAGE>
Date: Feb. 27, 1996
From: Mohammad Madani
To: Bill Zollner
Subj: Addendum #3 to our software agreement
Dear Bill:
To comply with our addendum #3 effective January 31st 1996, I am supplying all
the software and the documentation for the SyncTrac/OP product. I have attached
two disk copies which include the following 6 directories:
DOC Includes SyncTrac for DOS User Guide (DOS330U.DOC)
and SyncTrac for UNIX User Guide (UNX110U.DOC)
INCLUDE All "include" files related to the Micro Soft Assembler part of the
SYNC.ASM and SYNCGEN.ASM programs.
MASM The Assembler source codes of the SYNC and SYNCGEN programs
SYNCNET SyncTrac for Network (Alpha version)
SYNCPC SyncTrac for DOS online portion version 3.3.0
SYNCUDOS SyncTrac for UNIX, and its DOS equivalent. This software Detects
Changes in a LAN environment and UNIX servers. It is currently in
use at House Hold Credit Services.
If there is anything else that you need please let me know. Thank you very much
Bill.
Sincerely Yours,
Mohammad Madani
/s/ Mohammad Madani
<PAGE>
MEMORANDUM
DT: 2/28/96
TO: JohnV, Alex
FR: Bill Z
RE: PAYMENT TO HPS FOR SYNCTRAC FOR OPEN PLATFORMS
cc: Doug, Lisa
FL: sync\hpspay.doc
Attached is signed Addendum Three, EFFECTIVE 1/31/96, to Software Agreement with
HPS. This Addendum Three stipulates, among other things, that:
1. Forgiveness by SERENA of Right to Receive 25% of all Cash Receipts on
SAMS:Select
No more monies from HPS for SAMS:Select after 1/31/96. Read carefully.
2. Reimbursement by HPS to SERENA for the Use of its Mainframe Computer
Facilities or its Mainframe Computer Facilities Access
HPS will owe us 50% reimbursement on SyncTrac time and 50% on SAMS:Select time.
Maribet has set up separate IDs for SAMS:Select, but she just did this. There
will be very little on SAMS:Select in Feb96.
3.1 Purchase of HPS' 50% ownership in SyncTrac/Open Platforms (SyncTrac/OP)
For $86,422, we are purchasing the remaining 50% ownership in SyncTrac/OP. We
already own 50%.
PLEASE PREPARE CHECK TODAY FOR SIGNATURE BY DOUG OR ME. SEND BY FEDEX TODAY TO
HPS.
Thank you.
BillZ
<PAGE>
ADDENDUM THREE TO SOFTWARE AGREEMENT
THIS ADDENDUM THREE is subject to and incorporates all of the provisions stated
in the Software Agreement, as amended, ("Agreement"), said Agreement being
effective July 1, 1991, by and between High Power Software Inc. ("HPS") and
SERENA Consulting ("SERENA"), doing business as SERENA International. This
Addendum Three is effective January 31, 1996, and takes precedence over any
conflicting points contained in the Agreement.
1. Forgiveness by SERENA of Right to Receive 25% of all Cash Receipts on
SAMS:Select
HPS and SERENA agree that HPS shall retain all cash receipts for or related to
SAMS:Select for all license agreements signed by Sterling Software or
Selesta-Italy with licensees after January 31, 1996, or for the sale of the
ownership of SAMS:Select. For all license agreements signed by Sterling Software
or Selesta-Italy with licensees before or on January 31, 1996, and for all other
cash receipts by HPS for SAMS:Select before or on January 31, 1996, HPS shall
owe SERENA 25% of the cash receipts.
2. Reimbursement by HPS to SERENA for the Use of its Mainframe Computer
Facilities or its Mainframe Computer Facilities Access
HPS agrees to reimburse SERENA for the prorated computer costs charged on or by
SERENA's mainframe computer facilities. HPS will reimburse 100% of the prorated
computer costs for the computer time associated with any SAMS:Select
machine-time usage and HPS will reimburse 50% of the prorated computer costs for
the computer time associated with any SyncTrac machine-time usage. These
prorated computer costs are calculated by (a) taking the computer time charged
to the HPS TSO User Identification (ID) numbers (2 IDs for SyncTrac and 2 IDs
for SAMS:Select for now and future IDs as mutually agreed) at or by SERENA's
mainframe computer facilities, (b) divided by the total computer time charged at
or by SERENA's mainframe computer facilities, and (c) multiplied by the total
computer time charges at or by SERENA's mainframe computer facilities. These
prorated computer costs will be invoiced to HPS by SERENA and will be offset
against any royalties due to HPS from SERENA, as described in the Agreement.
3. SyncTrac/Open Platforms - SyncTrac for use on operating systems other than
IBM Mainframe (Multiple Virtual System (MVS), Disk Operating System/Virtual
Storage Extended (DOS/VSE), and Virtual Machine (VM))
3.1 Purchase of HPS' 50% ownership in SyncTrac/Open Platforms (SyncTrac/OP)
HPS hereby transfers, grants, conveys, assigns, and relinquishes exclusively to
SERENA all of HPS's right, title, and interest in and to both the tangible and
the intangible property constituting SyncTrac/OP, in perpetuity (or for the
longest period of time otherwise permitted by law), including the following
corporeal and incorporeal incidents to SyncTrac/OP:
a) Title to and possession of the media, devices, and documentation that
constitute all copies of the SyncTrac/OP, its component parts, and all
documentation relating thereto, possessed or controlled by HPS, which
are to be delivered to SERENA pursuant to this Agreement;
b) All right, title, and benefit of HPS in and to the inventions,
discoveries, improvements, ideas, trade secrets, know-how,
confidential information, and all other intellectual property owned or
claimed by HPS pertaining to SyncTrac/OP (but excluding any right or
interest in the trademarks and trade names of HPS); and
<PAGE>
c) All of the right, title, interest, and benefit of HPS in, to, and
under all agreements, contracts, licenses, and leases entered into by
HPS, or having HPS as a beneficiary, pertaining to SyncTrac/OP,
including (without limitation) HPS's rights as licensor under any
End-User License Agreements.
In exchange for this transfer of right and title in SyncTrac/OP from HPS to
SERENA, SERENA agrees to pay HPS the sum of $86,422 on or before February 29,
1996.
3.2 Covenant Not to Compete
HPS shall not engage in the business of acquiring, developing, marketing,
distributing, licensing, or maintaining systems and application computer
programs having any function similar to, competitive with, or substitutable for
SyncTrac/OP, except as related to SyncTrac/MVS or as otherwise agreed by SERENA.
HPS shall not engage in any such activity, directly or indirectly, on its own
behalf or in the service of or on behalf of others. HPS further acknowledges and
agrees that the foregoing prohibition will have no impact on their other
business and prospects, including their research and development activities or
any other functions or operations. Notwithstanding the foregoing, this provision
shall not restrict in any manner the acquisition or use of any programming or
materials by HPS solely for internal purposes.
3.3. Consent to Injunctive Relief
The parties agree that in the event of a breach of this Agreement by HPS, money
damages may not be adequate remedy to SERENA, and therefore, SERENA shall be
entitled to an injunction for enforcement of the covenant not to compete.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date shown above.
HIGH POWER SOFTWARE SERENA CONSULTING
/s/ Larry G. Wasson /s/ Douglas D. Troxel
- - - - -------------------------- ----------------------------
Larry G. Wasson, President Douglas D. Troxel, President
/s/ Mohammad Madani 2,27,96
- - - - -------------------
Mohammad Madani, Vice President
1500 West El Camino, Suite 305 500 Airport Boulevard, Suite 200
Sacramento, CA 95833 Burlingame, CA 94010
Page 2
<PAGE>
AGREEMENT
The undersigned parties acknowledge that High Power Software ("HPS") wishes to
copy the VSAM Synchronization technology into the SyncTrac Code Base from Delta
Backup. Both parties further acknowledge that this will not change HPS'
ownership of Delta Backup (a/k/a SAMS SELECT), nor will it in any way change the
present joint ownership of SyncTrac. SyncTrac shall continue to be owned 50% by
SERENA and 50% by HPS.
Furthermore, the issue of whether or not the VSAM Synchronization shall be
considered a core component of SyncTrac or a separately purchased option is a
decision that will be made jointly between HPS and SERENA's marketing
department.
ACCEPTED BY:
SERENA SOFTWARE INTERNATIONAL HIGH POWER SOFTWARE
(SERENA) (HPS)
/s/ Douglas D. Troxel /s/ Mohammad Madani
- - - - ------------------------------ -----------------------------
Signature Signature
DOUGLAS D. TROXEL MOHAMMAD MADANI
- - - - ----------------- ---------------
Printed Name Printed Name
Chief Technology Officer V.P.
- - - - ------------------------ ----
Title Title
1998/05/06 5/6/1998
- - - - ---------- --------
Date Date
<PAGE>
WATERFRONT PLAZA
OFFICE LEASE
by and between
WATERFRONT TOWER PARTNERS, L.P.
("Landlord")
and
SERENA CONSULTING, INCORPORATED
-------------------------------
("Tenant")
For the approximately 15,594 SF premises at
500 Airport Boulevard, Suite 200, Burlingame, CA 94010
<PAGE>
OFFICE LEASE
Table of Contents
<TABLE>
<CAPTION>
PARAGRAPH PAGE
- - - - --------- ----
<S> <C>
1. Parties 1
2. Terms and Definitions 1
3. Premises and Common Areas 1
4. Lease Term 2
5. Rent 2
6. Direct Expenses 3
7. Late Payment Charges 4
8. Security Deposit 4
9. Condition of Premises 4
10. Holding Over 4
11. Use of the Premises 5
12. Quiet Enjoyment 5
13. Alterations 5
14. Surrender of the Premises 6
15. Personal Property Taxes 6
16. Utilities and Services 6
17. Repair and Maintenance 6
18. Liens 7
19. Landlord's Right to Enter the Premises 7
20. Signs 7
21. Insurance 7
22. Damage or Destruction 9
23. Condemnation 9
24. Assignment and Subletting 10
25. Default 11
26. Subordination 12
27. Notices 12
28. Attorneys' Fees 13
<PAGE>
29. Tenant Statements 13
30. Transfer of the Building by Landlord 13
31. Landlord's Right to Perform Tenant's Covenants 13
32. Tenant's Remedy 13
33. Mortgagee Protection 14
34. Brokers 14
</TABLE>
(i)
<PAGE>
PARAGRAPH PAGE
- - - - --------- ----
35. Acceptance 14
36. Modifications for Lender 14
37. Rules and Regulations 14
38. Parking 14
39. General 14
TABLE OF EXHIBITS
-----------------
Exhibit A The Premises
Exhibit B Work Letter Agreement
Exhibit C Commencement Date Memorandum
Exhibit D Rules and Regulations
Exhibit E Parking Rules and Regulations
(ii)
<PAGE>
WATERFRONT PLAZA
OFFICE LEASE
1. PARTIES.
This Lease ("Lease"), dated AUGUST 15, 1994, is entered into by and
between Waterfront Tower Partners, L.P., a California limited partnership
("Landlord"), whose address is 500 Airport Boulevard, Suite 121, Burlingame,
California 94010 and SERENA CONSULTING, INCORPORATED,
____________________________________________________________________________
___________, a California Corporation ("Tenant"), whose address is 500 Airport
Boulevard, Suite 200, Burlingame, California
____________________________________________________________________________.
2. Terms and Definitions. For the purposes of this Lease the following
terms shall have the following definitions:
2.1 PREMISES. Those certain premises commonly known as 500 Airport
Boulevard, Suite 200, Burlingame, California consisting of approximately 15,594
___________________________________rentable square feet on the 2nd floor of the
Building, as more particularly shown on EXHIBIT A attached hereto.
2.2 BUILDING. That four (4) story office building located at 500
Airport Boulevard, Burlingame, California, consisting of approximately one
hundred thousand (100,000) rentable square feet.
2.3 TERM. 60 months.
2.4 ANTICIPATED COMMENCEMENT DATE. NOVEMBER 1, 1994
2.5 MONTHLY RENT.
<TABLE>
<CAPTION>
MONTHS OF TERM MONTHLY RENT
-------------- ------------
<S> <C>
1-12 $19,492.50
13-24 $20,272.20
25-36 $21,051.90
37-48 $21,831.60
49-60 $23,391.00
</TABLE>
2.6 TENANT'S PERCENTAGE. 15.6 percent.
2.7 DIRECT EXPENSES BASE. 1995
2.8 SECURITY DEPOSIT. $19,492.50 REQUIRED; $11,000.00 EXISTING;
2.9 BROKERS. CORNISH & CAREY COMMERCIAL
--------------------------------------------------
<PAGE>
--------------------------------------------------
2.10 TENANT IMPROVEMENTS. The Improvements to be constructed by
Landlord pursuant to EXHIBIT B.
3. PREMISES AND COMMON AREAS.
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises together with a right in common with other tenants of the
Building to use the common areas of the Building. For the purposes of this Lease
the "Common Areas" shall be all areas and facilities appurtenant to the Building
provided and designated by Landlord for the general use and convenience of
Tenant and other tenants and occupants of the Building, including, without
limitation, lobbies, interior hallways, entrances, stairways, elevators,
designated parking areas, sidewalks, driveways, landscaped areas, service areas,
trash disposal facilities, and similar areas and facilities, subject to the
reasonable rules and regulations and changes therein from time to time
promulgated by Landlord governing the use of the Common Areas.
Landlord shall at all times have exclusive control of the Common Areas
and may at any time temporarily close any part thereof, exclude and restrain
anyone from any part thereof, except the bona fide customers, employees and
invitees of Tenant who use the Common Areas in accordance with the rules and
regulations as Landlord may from time to time promulgate, and may change the
configuration or location of the Common Areas. In exercising any such rights,
Landlord shall make a reasonable effort to minimize any disruption of Tenant's
business.
-1-
<PAGE>
4. LEASE TERM.
4.1 The term of this Lease shall be for the period set forth in
Paragraph 2.3 commencing on the Commencement Date and ending on the expiration
of such period, unless sooner terminated as provided herein. The "Commencement
Date" of this Lease shall be the date which is the earlier of the following:
4.1.1 The date the City of Burlingame has approved the
Tenant Improvements constructed pursuant to EXHIBIT B as evidenced by the
City's completion of a final inspection and written approval of the Tenant
Improvements as completed in accordance with the building permit issued for
the Tenant Improvements; or
4.1.2 The date Tenant commences occupancy of the Premises.
4.2 COMMENCEMENT DATE MEMORANDUM. When the actual Commencement
Date is determined, the parties shall execute a memorandum in the form of
EXHIBIT C setting forth the Commencement Date.
4.3 DELIVERY OF POSSESSION. If Landlord is unable to deliver
possession of the Premises to Tenant on the Anticipated Commencement Date set
forth in Paragraph 2.4, Landlord shall not be subject to liability therefor,
nor shall such failure effect the validity of this Lease, or the obligations
of Tenant. In such case, subject to the provisions of Paragraph 4.4, Tenant
shall not be obligated to pay Rent or perform any other obligations of Tenant
under this Lease, except as may be otherwise provided herein, until
possession of the Premises is tendered to Tenant; provided, however, if
Landlord has not delivered possession of the Premises within sixty (60) days
from the Anticipated Commencement Date, subject to force majeure, Tenant may,
at Tenant's option with notice in writing to Landlord within ten (10) days
thereafter, cancel this Lease. If such notice is not received by Landlord
within such ten (10) day period, Tenant's right to cancel this Lease shall
terminate and be of no further force and effect.
4.4 TENANT DELAYS. If the Commencement Date has not occurred on or
before the Anticipated Commencement Date due to the fault of Tenant, then
notwithstanding any other provision hereof, the Commencement Date of this
Lease shall be the date specified as the Anticipated Commencement Date and
Tenant shall commence payment to Landlord of the Monthly Rent due hereunder.
4.5 EARLY ENTRY. If Tenant is permitted to occupy the Premises
prior to the Commencement Date for the purpose of fixturing or any other
purpose permitted by Landlord, such early entry shall be at Tenant's sole
risk and subject to all the terms and provisions hereof, except for the
payment of Monthly Rent which shall commence on the Commencement Date.
Landlord shall have the right to impose such additional conditions on
Tenant's early entry as Landlord shall deem appropriate, and shall further
have the right to require that Tenant execute an early entry agreement
containing such conditions prior to Tenant's early entry.
5. RENT.
5.1 MONTHLY RENT. Tenant shall pay to Landlord, in lawful money of
the United States, for each calendar month of the Term, the Monthly Rent set
forth in Paragraph 2.5, except that the first installment of Monthly Rent
shall be paid upon execution. Monthly Rent shall be payable in advance, on
the first day of each calendar month, without abatement,
<PAGE>
deduction, claim, offset, prior notice or demand. Monthly Rent for any
partial month shall be prorated.
-2-
<PAGE>
5.3 ADDITIONAL RENT. All monies (except Monthly Rent) required to
be paid by Tenant under this Lease, including, without limitation, Direct
Expenses, shall be deemed Additional Rent.
5.4 RENT. Rent shall mean Monthly Rent plus Additional Rent.
6. DIRECT EXPENSES.
6.1 DEFINITIONS. For the purposes of this Paragraph 6, the following
terms shall have the following definitions:
6.1.1 TENANT'S PERCENTAGE. The percentage of the rentable
area of the Premise to the rentable area of the Building. Tenant's Percentage
is set forth in Paragraph 2.6 above.
6.1.2 DIRECT EXPENSES BASE. The amount of the monthly
Direct Expenses which Landlord has included in the Monthly Rent, which amount
is set forth in Paragraph 2.7 above.
6.1.3 DIRECT EXPENSES. The term "Direct Expenses" shall
include:
6.1.3.1 All real and personal property taxes and
assessments imposed by any governmental authority or agency on the Building
and the land on which the Building is located (including a prorata portion of
any taxes on levied on the common areas); any assessments levied in lieu of
taxes; any non-progressive tax on or measured by gross rentals received from
the rental of space in the Building; and any other costs levied or assessed
by, or at the direction of, any federal, state, or local government authority
in connection with the use or occupancy of the Premises or the parking
facilities serving the Premises; any tax on this transaction or any document
to which Tenant is a party creating or transferring an interest in the
Premises, and any expenses, including cost of attorneys or experts,
reasonably incurred by Landlord in seeking reduction by the taxing authority
of the above-referenced taxes, less tax refunds obtained as a result of an
application for review thereof; but shall not include any net income,
franchise, capital stock; estate or inheritance taxes.
6.1.3.2 Operating costs consisting of all
operating expenses of the Building, which shall be computed on an accrual
basis and shall consist of all expenditures to maintain all facilities in the
operation of the Building and Common Areas. The term "Operating Costs" as
used herein shall mean all expenses, costs and disbursements (but no capital
investment items, except as provided in subparagraph (h) below, or specific
costs especially billed to and paid by specific tenants) of every kind and
nature which Landlord shall pay or become obligated to pay because of or in
connection with the ownership and operation of the Building and Common Areas;
(a) wages and salaries of all employees engaged in operating and maintenance
or security of the Building and the Common Areas including taxes, insurance
and benefits relating thereto; (b) all supplies and materials used in
operation, repair, replacement and maintenance of the Building and Common
Areas; (c) cost of all utilities including surcharges for the Building and
Common Areas, which are not separately metered to the Premises, including the
cost of water, sewer, power, heating, lighting, air conditioning and
ventilating for the Building; (d) cost of all maintenance and service
agreements for the Building and the Common Areas and the equipment thereon,
including but not limited to, security and energy management, services,
window cleaning, elevator maintenance and janitorial service; (e) cost of all
insurance which Landlord or Landlord's lender deems necessary for the
Building and Common Areas including the cost of fire and extended coverage
insurance, including a rent loss endorsement, and casualty and liability
insurance applicable to the Building and Landlord's personal property used in
<PAGE>
connection therewith; (f) cost of repairs and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance or by Tenant or
other third parties, and alterations attributable solely to tenants of the
Building); (g) a reasonable management fee for the manager of the Building
and Common Areas; (h) the cost of any capital improvements made to the
Building after the Commencement Date that reduce other operating expenses or
are required under any governmental law or regulation that was not applicable
to the Building at the time it was constructed, such cost thereof to be
amortized over such reasonable period as Landlord shall determine consistent
with applicable governmental requirements; (l) accounting and attorneys'
fees; and (j) licenses, permits, inspection and related governmental fees.
The cost of additional or extraordinary services provided to Tenant
and not paid or payable by Tenant pursuant to other provisions of this Lease,
shall be payable by Tenant to Landlord as an Operating Cost and may be billed
by Landlord with the Operating Costs or in a lump sum.
Operating costs shall not include: (i) the cost of any additional
or extraordinary services provided to other tenants of the Building; (ii)
principal and interest payments on loans secured by deeds of trust recorded
against the Building; or (iii) real estate sales or leasing brokerage
commissions.
6.2 PAYMENT BY TENANT. If Tenant's Percentage of the Direct
Expenses paid or incurred by Landlord for any calendar year exceeds the
Direct Expenses Base, then Tenant shall pay such excess as additional rent.
As soon as possible after the beginning of each calendar year, Landlord
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shall give to Tenant a statement of any additional rent payable by Tenant
hereunder for the previous year, which shall be due and payable upon receipt. In
addition, for each year after the first calendar year or portion thereof, Tenant
shall pay Tenant's Percentage of Landlord's estimate of the amount by which the
Direct Expenses for that year exceed the Direct Expenses Base. This amount shall
be divided into twelve (12) equal monthly installments. Tenant shall pay to
Landlord, concurrently with the Monthly Rent payment next due following receipt
of such statement, an amount equal to one monthly installment multiplied by the
number of months from January in the calendar year in which the statement is
submitted to the month of such payment, both months inclusive. Subsequent
installments shall be payable concurrently with the regular Monthly Rent
payments for the balance of that calendar year and shall continue until the next
calendar year's statement is rendered. If, in any calendar year, Tenant's
Percentage of the actual Direct Expenses is less than the estimated Direct
Expenses for that year, then upon receipt of Landlord's statement, any
overpayment made by Tenant on the monthly installment basis shall be credited
toward the next Monthly Rent falling due and the estimated monthly installments
of Tenant's Percentage of Direct Expenses shall be adjusted to reflect such
lower Direct Expenses for the most recent year.
7. LATE PAYMENT CHARGES.
Tenant acknowledges that late payment by Tenant to Landlord of Rent
and other charges provided for under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult or impracticable to fix. Therefore, if any installment of
Rent or any other charge due from Tenant is not received by Landlord within ten
(10) days after the date due, Tenant shall pay to Landlord an additional sum
equal to ten percent (10%) of the amount overdue as a late charge for every
month or portion thereof that the Rent or other charges remain unpaid. The
parties agree that this late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of the late payment by Tenant. Any
returned checks will be subject to a $25.00 handling charge.
Initials:
/s/ Signature Illegible /s/ Signature Illegible
Landlord Tenant
8. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon Lease
execution the amount set forth in Paragraph 2.8 above as a security deposit
for the full and faithful performance of every provision of this Lease to be
performed by Tenant. If Tenant defaults with respect to any provision of this
Lease, Landlord may apply all or any part of the security deposit for the
payment of any Rent or other sum in default, the repair of damage to the
Premises, or the payment of any other amount which Landlord may spend or
become obligated to spend by reason of Tenant's default, or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default, to the full extent permitted by law. If any portion of the
security deposit is so applied, Tenant shall, within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient
to restore the security deposit to its original amount, and Tenant's failure
to do so shall be a default under this Lease. Landlord shall not be required
to keep the security deposit separate from its general funds, and Tenant
shall not be entitled to interest on the security deposit. If Tenant is not
otherwise in default, the security deposit or any balance thereof shall be
returned to Tenant within thirty (30) days of termination of the Lease.
9. CONDITION OF PREMISES. If no Tenant Improvements are to be
constructed by Landlord, Tenant acknowledges that Tenant has inspected the
Premises and accepts the Premises as of the Commencement Date in their
"as-is" condition. If Landlord constructs any Tenant Improvements to the
Premises, within ten (10) days after the Commencement Date Tenant shall
conduct a walk-through inspection of the Premises with Landlord and complete
a punch-list of items needing additional work by Landlord. Other than the
items specified in
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the punch-list, by taking possession of the Premises, Tenant shall be deemed
to have accepted the Premises as improved with the Tenant Improvements in
good, clean and completed condition and repair, subject to all applicable
laws, codes and ordinances. The punch-list to be prepared by Tenant shall not
include any damage to the Premises caused by Tenant's move-in, which damage
shall be repaired or corrected by Tenant at its expense. Tenant acknowledges
that neither Landlord nor its agents have made any representations or
warranties as to the suitability or fitness of the Premises for the conduct
of Tenant's business or for any other purpose, nor has Landlord or its agents
agreed to undertake any alterations or construct any tenant improvements to
the Premises except as expressly provided in this Lease.
10. HOLDING OVER.
If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term, with the express or implied consent of
Landlord, such tenancy shall be month-to-month only and shall not constitute
a renewal or extension for any further term. If Tenant remains in possession
either with or without Landlord's consent, Monthly Rent shall be increased to
an amount equal to one hundred twenty-five percent (125%) of the Monthly Rent
payable during the last month
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of the Term, and any other sums due under this Lease shall be payable in the
amount and at the times specified in this Lease. Such month-to-month tenancy
shall be subject to every other term, condition, and covenant contained
herein. If Tenant remains in possession without Landlord's consent, Tenant
shall indemnify, defend and hold Landlord harmless from all claims, costs and
liabilities including attorneys' fees and costs, arising from or in
connection with Tenant remaining in possession.
11. USE OF THE PREMISES.
11.1 TENANT'S USE. Tenant shall use the Premises solely for general
office purposes, and shall not use the Premises for any other purpose without
obtaining the prior written consent of Landlord.
11.2 COMPLIANCE WITH LAWS.
11.2.1 Tenant shall not use the Premises or suffer or
permit anything to be done in or about the Premises or the Common Areas which
will in any way conflict with any law, statute, zoning restriction, ordinance
or governmental law, rule, regulation or requirement of public authorities
now in force or which may hereafter be in force, relating to or affecting the
condition, use or occupancy of the Premises or the Common Areas. Tenant shall
not commit any public or private nuisance or any other act or thing which
might or would disturb the quiet enjoyment of any other tenant of Landlord or
any occupant of nearby property. Tenant shall place no loads upon the floors,
walls or ceilings in excess of the maximum designed load determined by
Landlord or which endanger the structure; nor place any harmful liquids in
the drainage systems; nor dump or store waste materials or refuse or allow
such to remain outside the Building proper, except in the enclosed trash
areas provided.
11.2.2 "Hazardous Material" shall mean any substance or
material which is capable of posing a risk of injury to health, safety or
property, including all of those materials and substances designated as
hazardous or toxic by any federal, state or local law, ordinance, rule,
regulation or policy. Without limiting the generality of the foregoing, the
term "Hazardous Material" shall include all of those materials and substances
defined as "Toxic Materials" in Sections 66680 through 66685 of Title 22 of
the California Code of Regulations, Division 4, Chapter 30, as the same shall
be amended from time to time, or any other materials requiring remediation
under federal, state or local laws, ordinances, rules, regulations or
policies.
11.2.3 Tenant shall not introduce any Hazardous Material
in, on or adjacent to the Premises or the Common Areas without complying with
all applicable federal, state and local laws, ordinances, rules, regulations,
and policies relating to the release, storage, use, disposal, transportation
or clean-up of Hazardous Materials, including, but not limited to, the
obtaining of proper permits. Tenant shall immediately notify Landlord of any
release or contamination or any inquiry, test, investigation, or enforcement
proceeding by or against Tenant or the Premises concerning a Hazardous
Material. If Tenant's release, storage, use, disposal or transportation of
any Hazardous Material in, on or adjacent to the Premises or the Common Areas
results in any contamination of the Premises, the Common Areas, or the soil
or surface or groundwater in or about the same, Tenant shall clean-up all
such contamination at its expense. Tenant shall indemnify, defend and hold
Landlord harmless from and against any claims, suits, causes of action,
costs, fees, including attorneys' fees and costs, arising out of or in
connection with (i) any such contamination, (ii) any clean-up work, inquiry
or enforcement proceeding, (iii) any Hazardous Materials released, stored,
used, disposed of, or transported by Tenant or its agents, employees,
contractors or invitees or any loss or damage to persons or property
resulting from items (i) through (iii) above. Tenant's obligations under this
Paragraph 11.2.3 shall survive the termination of this Lease.
12. OUTLET ENJOYMENT.
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Landlord covenants that Tenant, upon performing the terms,
conditions and covenants of this Lease, shall have quiet and peaceful
possession of the Premises as against any person claiming the same by,
through or under Landlord.
13. ALTERATIONS.
Tenant shall not make or permit any alterations, additions or
improvements ("Alterations") in, on or about the Premises, except for
nonstructural Alterations not exceeding Two Thousand Dollars ($2,000.00) in cost
per calendar year, without the prior written consent of Landlord, and according
to plans and specifications approved in writing by Landlord, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, Landlord shall have
the right to withhold consent to structural Alterations at its sole and absolute
discretion. With regard to Alterations not requiring Landlord's consent, Tenant
shall provide Landlord copies of all plans and specifications therefor prior to
the construction thereof. Notwithstanding the foregoing Tenant shall not,
without the prior written consent of Landlord, make any:
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(a) Alterations to the structure or exterior of the Building;
(b) Alterations to and penetrations of the roof of the Building; and
(c) Alterations visible from outside the Premises, including the
Common Areas, to which Landlord may withhold Landlord's consent on wholly
aesthetic grounds.
All Alterations shall be installed at Tenant's sole expense, in compliance
with all applicable laws, by a licensed contractor, shall be done in a good
and workmanlike manner conforming in quality and design with the Premises
existing as of the Commencement Date, and shall not diminish the value of
either the Building or the Premises. All Alterations made by Tenant other than
trade fixtures and personal property shall be and become the property of
Landlord upon installation and shall not be deemed Tenant's personal property;
provided, however, that Landlord may, at its option at the time consent for
the Alterations is requested, require that Tenant, at Tenant's expense at the
expiration or earlier termination of the Term, remove any or all Alterations
installed by Tenant and return the Premises to their condition prior to the
installation of such Alterations, normal wear and tear excepted.
Notwithstanding any other provision of this Lease, Tenant shall be solely
responsible for the maintenance and repair of any and all Alterations made by
it to the Premises. Tenant shall give Landlord written notice of Tenant's
intention to perform work on the Premises, whether or not Landlord's consent
is required, at least twenty (20) days prior to the commencement of such work
to enable Landlord to post and record a Notice of Nonresponsibility or other
notice deemed proper before the commencement of any such work. Landlord, at
Landlord's option at the expiration or earlier termination of the Term, may
require Tenant to remove some or all of any Alterations installed without
Landlord's consent.
14. SURRENDER OF THE PREMISES.
Upon the expiration or earlier termination of the Term, Tenant
shall surrender the Premises to Landlord in its condition existing as of the
Commencement Date, normal wear and tear and fire or other casualty and
approved Alterations excepted, with all interior walls repaired and repainted
if marked or damaged, all carpets shampooed and cleaned, all broken, marred
or nonconforming acoustical ceiling tiles replaced, and all floors cleaned
and waxed, all to the reasonable satisfaction of Landlord. Tenant shall
remove from the Premises all of Tenant's Alterations required to be removed
pursuant to Paragraph 13 and all Tenant's personal property, and repair any
damage and perform any restoration work caused by such removal. If Tenant
fails to remove such Alterations and Tenant's personal property, and such
failure continues after the termination of this Lease, Landlord may retain
such property and all rights of Tenant with respect to it shall cease, or
Landlord may place all or any portion of such property in public storage for
Tenant's account. Tenant shall be liable to Landlord for costs of removal of
any such Alterations and Tenant's personal property and storage and
transportation costs of same, and the cost of repairing and restoring the
Premises, together with interest at the maximum rate permitted by law from
the date of expenditure by Landlord. If the Premises are not so surrendered
at the expiration or earlier termination of this Lease, Tenant shall
indemnify, defend and hold Landlord and its agents harmless against all
claims, costs and liabilities, including attorneys' fees and costs, resulting
from Tenant's delay in so surrendering the Premises.
15. PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all
taxes assessed or levied against Tenant's personal property in, on or about
the Premises or elsewhere. When possible, Tenant shall cause its personal
property to be assessed and billed separately from the real or personal
property of Landlord.
16. UTILITIES AND SERVICES.
Landlord agrees to furnish or cause to be furnished to the Premises
during normal business hours water, gas, electricity suitable for the
intended use of the Premises, heating and air conditioning required for the
comfortable use and occupancy of the Premises, refuse pickup, and janitorial
service. Landlord shall not be liable for and Tenant shall not
<PAGE>
be entitled to any abatement of rent by reason of Landlord's failure to
furnish any of the foregoing utilities and services when such failure is
caused by accident, breakage or repairs, strikes, lockouts or other labor
disturbances or labor disputes, governmental regulation, moratorium or other
governmental action, inability despite the exercise of due diligence to
obtain water, electricity or fuel, or any other cause beyond Landlord's
reasonable control. In the event of any failure, stoppage or interruption,
Landlord shall diligently attempt to promptly resume services.
17. REPAIR AND MAINTENANCE.
17.1 LANDLORD'S OBLIGATIONS. Landlord shall keep in good order,
condition and repair the structural parts of the Building, including the
foundation and subflooring of the Building, the roof and exterior walls
(excluding the interior surfaces of exterior walls), and the Common Areas,
including parking areas, driveways, sidewalks, exterior lighting and
landscaped areas, except for any damage thereto caused by the negligence or
willful acts or omissions of Tenant or of Tenant's agents, employees or
invitees, or by reason of the failure of Tenant to perform or comply with any
terms of
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this Lease, or caused by Alterations made by Tenant or by Tenant's agents,
employees or contractors. It is an express condition precedent to all
obligations of Landlord to repair and maintain that Tenant shall have
notified Landlord of the need for such repairs or maintenance. Tenant waives
the provisions of Sections 1941 and 1942 of the California Civil Code and any
similar or successor law regarding Tenant's right to make repairs and deduct
the expenses of such repairs from the Rent due under this Lease.
17.2 TENANT'S OBLIGATIONS. Tenant shall at all times and at its own
expense clean, keep and maintain in good order, condition and repair every
part of the Premises which is not within Landlord's obligation pursuant to
Paragraph 17.1. Tenant's repair and maintenance obligations shall include
interior walls and wall surfaces, ceilings, floors and floor coverings,
windows, doors, entrances and vestibules located within the Premises. Tenant
shall also be responsible for all pest control within the Premises. Tenant
shall, at its cost, comply with, including the making by Tenant of any
Alteration to the Premises, all present and future regulations, rules, laws,
ordinances, and requirements of all governmental authorities (including,
without limitation state, municipal, county and federal governments and their
departments, bureaus, boards and officials) arising from the use or occupancy
of, or applicable to, the Premises or privileges appurtenant to or in
connection with the enjoyment of the Premises.
18. LIENS.
Tenant shall keep the Building free from any liens arising out of
any work performed, materials furnished or obligations incurred by or on
behalf of Tenant and shall indemnify, defend and hold Landlord and its Agents
harmless from all claims, costs and liabilities, including attorneys' fees
and costs, in connection with or arising out of any such lien or claim of
lien. Tenant shall cause any such lien imposed to be released of record by
payment or posting of a proper bond acceptable to Landlord within ten (10)
days after written request by Landlord. Tenant shall give Landlord written
notice of Tenant's intention to perform work on the Premises which might
result in any claim of lien at least ten (10) days prior to the commencement
of such work to enable Landlord to post and record a Notice of
Nonresponsibility. If Tenant fails to so remove any such lien within the
prescribed ten (10) day period, then Landlord may do so at Tenant's expense
and Tenant shall reimburse Landlord for such amounts upon demand. Such
reimbursement shall include all costs incurred by Landlord including
Landlord's reasonable attorneys fees with interest thereon at the maximum
rate permitted by law.
19. LANDLORD'S RIGHT TO ENTER THE PREMISES.
Tenant shall permit Landlord and its agents to enter the Premises
at all reasonable times with reasonable notice, except for emergencies in
which case no notice shall be required, to inspect the same, to post notices
of nonresponsibility and similar notices, and marketing signs, to show the
Premises to interested parties such as prospective lenders, to make necessary
repairs, to discharge Tenant's obligations hereunder when Tenant has failed
to do so within a reasonable time after written notice from Landlord, and at
any reasonable time within one hundred and eighty (180) days prior to the
expiration or earlier termination of the Term, to place upon the Building and
the Common Areas ordinary "For Lease" signs and to show the Premises to
prospective tenants. The above rights are subject to reasonable security
regulations of Tenant, and to the requirement that Landlord shall at all
times act in a manner to cause the least possible physical interference with
Tenant's business.
20. SIGNS.
The location, size, design, color and other physical aspects of the
Tenant identification sign shall be subject to the Landlord's written approval
prior to installation, which shall not be unreasonably withheld, and any
appropriate municipal or other governmental approvals. The cost of the sign, its
installation, maintenance and
<PAGE>
removal expense shall be Tenant's sole expense. If Tenant fails to maintain
its sign, or, if Tenant fails to remove its sign upon termination of this
Lease, Landlord may do so at Tenant's expense and Tenant's reimbursement to
Landlord for such amounts shall be deemed Additional Rent.
21. INSURANCE.
21.1 INDEMNIFICATION. Tenant hereby agrees to defend, indemnify and
hold harmless Landlord and its agents from and against any and all claims,
damage, loss, liability or expense including attorneys' fees and legal costs
suffered directly or by reason of any claim, suit or judgment brought by or
in favor of any person or persons for damage, loss or expense due to, but not
limited to, bodily injury and property damage sustained by such person or
persons which arises out of, is occasioned by or in any way attributable to
the use or occupancy of the Premises or the Common Areas or any part thereof
and adjacent areas by Tenant, the acts or omissions of the Tenant, its
agents, employees or any contractors brought onto the Premises or the Common
Areas by Tenant, except to the extent caused by the negligence or willful
misconduct of Landlord or its agents. Tenant agrees that the obligations
assumed herein shall survive this Lease.
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21.2 TENANT'S INSURANCE. Tenant agrees to maintain in full force
and effect at all times during the Term, at its own expense, for the
protection of Tenant and Landlord, as their interests may appear, policies of
insurance issued by a responsible carrier or carriers acceptable to Landlord
which afford the following coverages:
21.2.1 Comprehensive general liability insurance in an
amount not less than Two Million and no/100ths Dollars ($2,000,000.00)
combined single limit for both bodily injury and property damage which
includes blanket contractual liability broad form property damage, personal
injury, completed operations and products liability, naming Landlord and its
Agents as additional insureds.
21.2.2 "All Risk" property insurance (including, without
limitation, vandalism, malicious mischief, inflation endorsement, and
sprinkler leakage endorsement) on Tenant's personal property located on or in
the Premises. Such insurance shall be in the full amount of the replacement
cost, as the same may from time to time increase as a result of inflation or
otherwise, and shall be in a form providing coverage comparable to the
coverage provided in the standard ISO All-Risk form. As long as this Lease is
in effect, the proceeds of such policy shall be used for the repair and
replacement of such items so insured. Landlord shall have no interest in the
insurance proceeds on Tenant's personal property.
21.3 BUILDING INSURANCE. During the Term Landlord shall maintain
"All Risk" property insurance (including inflation endorsement, sprinkler
leakage endorsement and, at Landlord's option, boiler and machinery
insurance, earthquake and flood coverage) on the Building excluding coverage
of all Tenant's personal property located on or in the Premises, but
including the Tenant improvements. Such insurance shall also include
insurance against loss of rents on an "All Risk" basis, including, at
Landlord's option, earthquake and flood, in an amount equal to the Monthly
Rent and Additional Rent, and any other sums payable under the Lease, for a
period of at least twelve (12) months commencing on the date of loss. Such
insurance shall name Landlord and its Agents as named insureds and include a
lender's loss payable endorsement in favor of Landlord's lender (Form 438 BFU
Endorsement). If the Building insurance premiums are increased due to
Tenant's use of the Premises, improvements installed by Tenant, or any other
cause solely attributable to Tenant, Tenant shall pay the full amount of the
increase within ten (10) days after written notice from Landlord.
21.4 INCREASED COVERAGE. Upon demand, Tenant shall provide
Landlord, at Tenant's expense, with such increased amount of existing
insurance, and such other insurance as Landlord or Landlord's lender may
reasonably require to afford Landlord and Landlord's lender adequate
protection.
21.5 CO-INSURER. If, on account of the failure of Tenant to comply
with the foregoing provisions, Landlord is adjudged a co-insurer by its
insurance carrier, then, any loss or damage Landlord shall sustain by reason
thereof, including attorneys' fees and costs, shall be borne by Tenant and
shall be immediately paid by Tenant upon receipt of a bill therefor and
evidence of such loss.
21.6 INSURANCE REQUIREMENTS. All insurance shall be in a form
satisfactory to Landlord and shall be carried with companies that have a
general policy holder's rating of not less than "A" and a financial rating of
not less than Class "X" in the most current edition of Best's insurance
Reports shall provide that such policies shall not be subject to material
alteration or cancellation except after at least thirty (30) days' prior
written notice to Landlord; and shall be primary as to Landlord. The policy
or policies, or duly executed certificates for them, together with
satisfactory evidence of payment of the premium thereon shall be deposited
with Landlord prior to the Commencement Date, and upon renewal of such
policies, not less than thirty (30) days prior to the expiration of the term
of such coverage. If Tenant fails to procure and maintain the insurance
required hereunder, Landlord may, but shall not be required to, order such
insurance at Tenant's expense and
<PAGE>
Tenant shall reimburse Landlord. Such reimbursement shall include all costs
incurred by Landlord including Landlord's reasonable attorneys fees, with
interest thereon at the maximum rate permitted by law.
21.7 LANDLORD'S DISCLAIMER. Landlord and its agents shall not be
liable for any loss or damage to persons or property resulting from fire,
explosion, falling plaster, glass, tile or sheetrock, steam, gas,
electricity, water or rain which may leak from any part of the Building, or
from the pipes, appliances or plumbing works therein or from the roof, street
or subsurface or whatsoever, unless caused by or due to the sole negligence
or willful acts of Landlord. Landlord and its agents shall not be liable for
any latent defect in the Premises. Tenant shall give prompt written notice to
Landlord in case of a casualty, accident or repair needed in the Premises.
21.8 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
all rights of recovery against the other on account of loss and damage
occasioned to such waiving party for its property or the property of others
under its control to the extent that such loss or damage is insured against
under any insurance policies which may be in force at the time of such loss
or damage. Tenant and Landlord shall, upon obtaining policies of insurance
required hereunder, give notice to the insurance carrier that the foregoing
mutual waiver of subrogation is contained in this Lease and Tenant and
Landlord shall cause each insurance policy obtained by such party to provide
that the insurance
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<PAGE>
company waives all right of recovery by way of subrogation against either
Landlord or Tenant in connection with any damage covered by such policy.
22. DAMAGE OR DESTRUCTION.
22.1 LANDLORD'S OBLIGATION TO REBUILD. If the Premises or the Building
is damaged or destroyed, Landlord shall promptly and diligently repair the same
unless it has the right to terminate this Lease as provided herein and it elects
to so terminate.
22.2 RIGHT TO TERMINATE. Landlord shall have the right to terminate
this Lease in the event any of the following events occurs:
22.2.1 Insurance proceeds are not available to pay one hundred
percent (100%) of the cost of such repair;
22.2.2 The Premises cannot, with reasonable diligence, be
fully repaired by Landlord within one hundred twenty (120) days after the date
of the damage or destruction; or
22.2.3 The Premises cannot be safely repaired because of the
presence of hazardous factors, including, but not limited to, earthquake faults,
radiation, chemical waste and other similar dangers.
If Landlord elects to terminate this Lease, Landlord shall give
Tenant written notice of its election to terminate within thirty (30) days
after such damage or destruction, and this Lease shall terminate fifteen (15)
days after the date Tenant receives such notice. If Landlord elects not to
terminate the Lease, subject to Tenant's termination right set forth below,
Landlord shall promptly commence the process of obtaining necessary permits
and approvals and repair of the Premises or the Building as soon as
practicable, and this Lease will continue in full force and effect. All
insurance proceeds from insurance under Paragraph 21.3 shall be disbursed and
paid to Landlord. Tenant shall be required to pay to Landlord the amount of
any deductibles payable in connection with any insured casualties, unless the
casualty was caused by the sole negligence or willful misconduct of Landlord.
Tenant shall have the right to terminate this Lease, if the
Premises cannot, with reasonable diligence and subject to Tenant delays, be
fully repaired within one hundred eighty (180) days from the date of damage
or destruction. The determination of the estimated repair period shall be
made by Landlord in its good faith business judgment within thirty (30) days
after such damage or destruction. Landlord shall deliver written notice of
the repair period to Tenant after such determination has been made and Tenant
shall exercise its right to terminate this Lease, if at all, within ten (10)
days of receipt of such notice from Landlord.
22.3 LIMITED OBLIGATION TO REPAIR. Landlord's obligation, should it
elect or be obligated to repair or rebuild, shall be limited to the basic
Premises, the Tenant Improvements, or the basic Building, as the case may be.
22.4 ABATEMENT OF RENT. Rent shall be temporarily abated
proportionately, but only to the extent of any proceeds received by Landlord
from rental abatement Insurance described in Paragraph 21.3, during any
period when, by reason of such damage or destruction, Landlord and Tenant
reasonably determine that there is substantial interference with Tenant's use
of the Premises, having regard to the extent to which Tenant may be required
to discontinue Tenant's use of the Premises. Such abatement shall commence
upon such damage or destruction and end upon substantial completion by
Landlord of the repair or reconstruction which Landlord is obligated or
undertakes to do. Tenant shall not be entitled to any compensation or damages
from Landlord for loss of the use of the Premises, damage to
<PAGE>
Tenant's personal property or any Inconvenience occasioned by such damage,
repair or restoration. Tenant hereby waives the provisions of Section 1932,
Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code,
and the provisions of any similar law hereinafter enacted.
22.5 DAMAGE NEAR END OF TERM. Anything herein to the contrary
notwithstanding, if the Premises or the Building is destroyed or damaged
during the last twelve (12) months of the Term, then Landlord or Tenant may,
at its option, cancel and terminate this Lease as of the date of the
occurrence of such damage. If neither Landlord nor Tenant elects to so
terminate this Lease, the repair of such damage shall be governed by
Paragraphs 22.1 and 22.2.
23. CONDEMNATION.
23.1 TOTAL CONDEMNATION. If title to all of the Premises or
Building or so much thereof is taken for any public or quasi-public use under
any statute or by right of eminent domain so that reconstruction of the
Premises or Building will not, In Landlord's and Tenant's mutual opinion,
result in the Premises being reasonably suitable for Tenant's continued
occupancy for the uses and purposes permitted by this Lease, this Lease shall
terminate as of the date that possession of the
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Premises or Building or part thereof be taken. A sale by Landlord to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this paragraph.
23.2 PARTIAL CONDEMNATION. If any part of the Premises or Building
is taken and the remaining part is reasonably suitable for Tenant's continued
occupancy for the purposes and uses permitted by this Lease, this Lease
shall, as to the part so taken, terminate as of the date that possession of
such part of the Premises or Building is taken. The Rent and other sums
payable hereunder shall be reduced in the same proportion that Tenant's use
and occupancy of the Premises is reduced. If any portion of the Common Areas
is taken, Tenant's Rent shall be reduced only if such taking materially
interferes with Tenant's use of the Common Areas and then only to the extent
that the fair market rental value is diminished by such partial taking. If
the parties disagree as to the amount of Rent reduction, the matter shall be
resolved by arbitration and such arbitration shall comply with and be
governed by the California Arbitration Act, Sections 1280 through 1294.2 of
the California Code of Civil Procedure. Each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure
allowing either party to petition the Superior Court to terminate this Lease
in the event of a partial taking of the Property or Premises.
23.3 NO ALLOCATION OF AWARD. No award for any partial or entire
taking shall be apportioned. Tenant assigns to Landlord its interest in any
award which may be made in such taking or condemnation, together with any and
all rights of Tenant arising in or to the same or any part thereof. Nothing
contained herein shall be deemed to give Landlord any interest in or require
Tenant to assign to Landlord any separate award made to Tenant for the taking
of Tenant's personal property, for the interruption of Tenant's business, or
its moving costs, or for the loss of its good will.
24. ASSIGNMENT AND SUBLETTING.
24.1 DEFINITIONS.
24.1.1 SUBLET. Any transfer, sublet, assignment, license or
concession agreement, change of ownership, mortgage, or hypothecation of this
Lease or the Tenant's interest in the Lease or in and to all or a portion of
the Premises.
24.1.2 SUBRENT. Any consideration of any kind received, or
to be received, by Tenant from a subtenant if such sums are related to
Tenant's interest in this Lease or in the Premises.
24.1.3 SUBTENANT. The person or entity with whom a Sublet is
proposed to be or is made.
24.2 LANDLORD'S CONSENT. Tenant shall not enter into a Sublet without
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any attempted or purported Sublet without Landlord's prior written
consent shall be void and confer no rights upon any third person and, at
Landlord's election, shall terminate this Lease. Each Subtenant shall agree in
writing, for the benefit of Landlord, to assume, to be bound by, and to perform
the terms, conditions and covenants of this Lease to be performed by Tenant.
Notwithstanding anything contained herein, Tenant shall not be released from
personal liability for the performance of each term, condition and covenant of
this Lease by reason of Landlord's consent to a Sublet unless Landlord
specifically grants such release in writing.
<PAGE>
24.3 INFORMATION TO BE FURNISHED. If Tenant desires at any time to
Sublet the Premises or any portion thereof, it shall first notify Landlord of
its desire to do so and shall submit in writing to Landlord; (i) the name and
identity of the proposed Subtenant; (ii) the nature of the proposed
Subtenant's business to be carried on in the Premises; (iii) the terms and
provisions of the proposed Sublet and a copy of the proposed Sublet form
containing a description of the subject premises; and (iv) such financial
information, including financial statements, as Landlord may reasonably
request concerning the proposed Subtenant.
24.4 LANDLORD'S ALTERNATIVES. At any time within thirty (30) days
after Landlord receipt of the information specified in Paragraph 24.3,
Landlord may, by written notice to Tenant, elect; (i) to lease for its own
account the Premises or the portion thereof so proposed to be Sublet by
Tenant, upon the same terms as those offered to the proposed Subtenant but on
a form acceptable to Landlord; (ii) to lease for its own account the Premises
or the portion thereof so proposed to be Sublet by Tenant to any person upon
any terms desired by Landlord; (iii) to consent to the Sublet by Tenant; or
(iv) to refuse its consent to the Sublet. If Landlord consents to the Sublet,
Tenant may thereafter enter into a valid Sublet of the Premises or portion
thereof, upon the terms and conditions and with the proposed Subtenant set
forth in the information furnished by Tenant to Landlord pursuant to
Paragraph 24.3, subject, however, at Landlord's election, to the condition
that any excess of the
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Subrent over the Rent required to be paid by Tenant under this Lease, less
reasonable attorneys' fees and leasing commissions paid by Tenant on the
Sublet, shall be paid to Landlord.
24.5 PRORATION. If a portion of the Premises is Sublet, the pro
rata share of the Rent attributable to such partial area of the Premises
shall be determined by Landlord by dividing the Rent payable by Tenant
hereunder by the total square footage of the Premises and multiplying the
resulting quotient (the per square foot rent) by the number of square feet of
the Premises which are Sublet.
24.6 EXEMPT SUBLETS. Notwithstanding the above, Landlord's prior
written consent shall not be required for an assignment of this Lease to a
subsidiary, affiliate or parent corporation of Tenant, or a corporation into
which Tenant merges or consolidates, if Tenant gives Landlord prior written
notice of the name of any such assignee, and if the assignee assumes, in
writing, for the benefit of Landlord all of Tenant's obligations under the
Lease. An assignment or other transfer of this Lease to a purchaser of all or
substantially all of the assets of Tenant shall be deemed a Sublet requiring
Landlord's prior written consent. Such assignment shall not relieve Tenant of
any obligations under this Lease.
25. DEFAULT.
25.1 TENANT'S DEFAULT. A default under this Lease by Tenant shall
exist if any of the following occurs:
25.1.1 If Tenant fails to pay Rent or any other sum required
to be paid hereunder within five (5) days after the date due; or
25.1.2 If Tenant falls to perform any term, covenant or
condition of this Lease except those requiring the payment of money, and Tenant
fails to cure such breach within ten (10) days after written notice from
Landlord where such breach could reasonably be cured within such ten (10) day
period; provided, however, that where such failure could not reasonably be cured
within the ten (10) day period, that Tenant shall not be in default if it
commences such performance within the ten (10) day period and diligently
thereafter prosecutes the same to completion; or
25.1.3 If Tenant assigns its assets for the benefit of its
creditors; or
25.1.4 If the sequestration or attachment of or execution on
any material part of Tenant's personal property essential to the conduct of
Tenant's business occurs, and Tenant fails to obtain a return or release of such
personal property within thirty (30) days thereafter, or prior to sale pursuant
to such sequestration, attachment or levy, whichever is earlier; or
25.1.5 If a court makes or enters any decree or order other
than under the bankruptcy laws of the United States adjudging Tenant to be
insolvent; or approving as properly filed a petition seeking reorganization
of Tenant; or directing the winding up or liquidation of Tenant and such
decree or order shall have continued for a period of thirty (30) days.
25.2 REMEDIES. Upon a default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively
or in the alternative:
25.2.1 Landlord may continue this Lease in full force and
effect, and this Lease shall continue in full force and effect as long as
Landlord does not terminate this Lease, and Landlord shall have the right to
collect Rent when due.
<PAGE>
25.2.2 Landlord may terminate Tenant's right to possession
of the Premises at any time by giving written notice to that effect, and
relet the Premises or any part thereof. Tenant shall be liable immediately to
Landlord for all costs Landlord incurs in reletting the Premises or any part
thereof, including, without limitation, broker's commissions, expenses of
cleaning and redecorating the Premises required by the reletting and like
costs. Reletting may be for a period shorter or longer than the remaining
term of this Lease. No act by Landlord other than giving written notice to
Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. On termination, Landlord has the right to
remove all Tenant's personal property and store same at Tenant's cost and to
recover from Tenant as damages:
25.2.2.1 The worth at the time of award of unpaid Rent
and other sums due and payable which had been earned at the time of
termination; plus
25.2.2.2 The worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of such
Rent loss that Tenant proves could have been reasonably avoided; plus
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25.2.2.3 The worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable for the balance of the
Term after the time of award exceeds the amount of such Rent loss that Tenant
proves could be reasonably avoided; plus
25.2.2.4 Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform Tenant's obligations under this Lease, or which, in the ordinary
course of things, would be likely to result therefrom, including, without
limitation, any costs or expenses incurred by Landlord: (i) in retaking
possession of the Premises; (ii) in maintaining, repairing, preserving,
restoring, replacing, cleaning, altering or rehabilitating the Premises or
any portion thereof, including such acts for reletting to a new tenant or
tenants; (iii) for leasing commissions; or (iv) for any other costs necessary
or appropriate to relet the Premises; plus
25.2.2.5 At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time
by the laws of the State of California.
The "worth at the time of award" of the amounts referred
to in Paragraphs 25.2.2.1 and 25.2.2.2 is computed by allowing interest at
the Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award. The "worth at the time of award"
of the amount referred to in Paragraph 25.2.2.3 is computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). Tenant waives redemption or
relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any default
of Tenant hereunder.
25.2.3 Landlord may, with or without terminating this
Lease, re-enter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. No re-entry or taking
possession of the Premises by Landlord pursuant to this paragraph shall be
construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant.
25.3 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in
default in the performance of any obligation required to be performed by it
hereunder unless and until it has failed to perform such obligation within
thirty (30) days after receipt of written notice by Tenant to Landlord
specifying the nature of such default; provided, however, that if the nature
of Landlord's obligation is such that more than thirty (30) days are required
for its performance, then Landlord shall not be deemed to be in default if it
shall commence such performance within such thirty (30) day period and
thereafter diligently prosecute the same to completion.
26. SUBORDINATION.
This Lease is subject and subordinate to mortgages and deeds of
trust (collectively "Encumbrances") which may now affect the Building, to any
covenants, conditions and restrictions and to all renewals, modifications,
consolidations, replacements and extensions thereof; provided, however, if
the holder or holders of any such Encumbrance ("Holder") shall require that
this Lease to be prior and superior thereto, within seven (7) days of written
request of Landlord to Tenant, Tenant shall execute, have acknowledged and
deliver any and all documents or instruments, in the form presented to
Tenant, which Landlord or Holder deems necessary or desirable for such
purposes. Landlord shall have the right to cause this Lease to be and become
and remain subject and subordinate to any and all Encumbrances which are now
or may hereafter be executed covering the Premises or any renewals,
modifications, consolidations, replacements or extensions thereof, for the
full amount of all advances made or to be made thereunder and without regard
to the time or character of such advances, together with interest thereon and
subject to all the terms and provisions thereof; provided only, that in the
event of termination of any such lease or
<PAGE>
upon the foreclosure of any such mortgage or deed of trust, so long as Tenant
is not in default, Holder agrees to recognize Tenant's rights under this
Lease as long as Tenant shall pay the Rent and observe and perform all the
provisions of this Lease to be observed and performed by Tenant. Within seven
(7) days after Landlord's written request, Tenant shall execute any and all
documents required by Landlord or the Holder required to make this Lease
subordinate to any lien of the Encumbrance. If Tenant fails to do so, it
shall be deemed that this Lease is subordinated.
Notwithstanding anything to the contrary set forth in this paragraph,
Tenant hereby attorns and agrees to attorn to any entity purchasing or otherwise
acquiring the Building or the Project at any sale or other proceeding or
pursuant to the exercise of any other rights, powers or remedies under such
Encumbrance.
27. NOTICES. Any notice or demand required or desired to be given under
this Lease shall be in writing and shall be personally served or in lieu of
personal service may be given by mail. If given by mail, such notice shall be
deemed to have been given when seventy-two (72) hours have elapsed from the
time when such notice was deposited in the United States mail, registered or
certified, and
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postage prepaid, addressed to the party to be served. At the date of
execution of this Lease, the addresses of Landlord and Tenant are as set
forth in Paragraph 1. After the Commencement Date, the address of Tenant
shall be the address of the Premises. Either party may change its address by
giving notice of same in accordance with this paragraph.
28. ATTORNEYS' FEES.
If either party brings any action or legal proceeding for damages
for an alleged breach of any provision of this Lease, to recover rent, or
other sums due, to terminate the tenancy of the Premises or to enforce,
protect or establish any term, condition or covenant of this Lease or right
of either party, the prevailing party shall be entitled to recover as a part
of such action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and costs.
29. TENANT STATEMENTS.
29.1 ESTOPPEL CERTIFICATES. Tenant shall within seven (7) days
following written request by Landlord execute and deliver to Landlord any
documents, including estoppel certificates, in the form prepared by Landlord
(a) certifying that this Lease is unmodified and in full force and effect or,
if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect and the date to which the
Rent and other charges are paid in advance, if any, and (b) acknowledging
that there are not, to Tenant's knowledge, any uncured defaults on the part
of Landlord, or, if there are uncured defaults on the part of the Landlord,
stating the nature of such uncured defaults, and (c) evidencing the status of
the Lease as may be required either by a lender making a loan to Landlord to
be secured by deed of trust or mortgage covering the Building or a purchaser
of the Building from Landlord. Tenant's failure to deliver an estoppel
certificate within seven (7) days after delivery of Landlord's written
request therefor shall be conclusive upon Tenant (a) that this Lease is in
full force and effect, without modification except as may be represented by
Landlord, (b) that there are now no uncured defaults in Landlord's
performance and (c) that no Rent has been paid in advance. If Tenant fails to
so deliver a requested estoppel certificate within the prescribed time it
shall be conclusively presumed that the Lease is unmodified and in full force
and effect except as represented by Landlord.
29.2 FINANCIAL STATEMENTS. Tenant shall within seven (7) days after
written request by Landlord deliver to Landlord the current financial
statements of Tenant, and financial statements of the two (2) years prior to
the current financial statements year, with an opinion of a certified public
accountant, including a balance sheet and profit and loss statement for the
most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied.
30. TRANSFER OF THE BUILDING BY LANDLORD.
In the event of any conveyance of the Building and assignment by
Landlord of this Lease, Landlord shall be and is hereby entirely released
from all liability under any and all of its covenants and obligations
contained in or derived from this Lease occurring after the date of such
conveyance and assignment and Tenant agrees to attorn to such transferee
provided such transferee assumes Landlord's obligations under this Lease.
31. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.
If Tenant shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease within the
time periods specified in Paragraphs [22.A(i)] and (ii) as applicable,
Landlord may, but shall not be obligated to and without waiving or releasing
Tenant from any obligation of Tenant under this Lease, make
<PAGE>
such payment or perform such other act to the extent Landlord may deem
desirable, and in connection therewith, pay expenses and employ counsel. All
sums so paid by Landlord and all penalties, interest and costs in connection
therewith shall be due and payable by Tenant on the next day after any such
payment by Landlord, together with interest thereon at the interest Rate from
such date to the date of payment by Tenant to Landlord, plus collection costs
and attorneys' fees. Landlord shall have the same rights and remedies for the
nonpayment thereof as in the case of default in the payment of Rent.
32. TENANT'S REMEDY.
If, as a consequence of a default by Landlord under this Lease,
Tenant recovers a money judgment against Landlord, such judgment shall be
satisfied only out of the proceeds of sale received upon execution of such
judgment and levied thereon against the right, title and interest of Landlord
in the Building and out of Rent or other income from such property receivable
by Landlord or out of consideration received by Landlord from the sale or
other disposition of all or any part of Landlord's right, title or interest
in the Building, and neither Landlord nor its agents shall be liable for any
deficiency.
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33. MORTGAGEE PROTECTION.
If Landlord defaults under this Lease, Tenant will notify any
beneficiary of a deed of trust or mortgagee of a mortgage covering the
Building, and offer such beneficiary or mortgagee a reasonable opportunity to
cure the default, including time to obtain possession of the Building by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
34. BROKERS.
Landlord and Tenant each warrant and represent to the other that it
has had no dealings with any real estate broker or agent in connection with
the negotiation of this Lease other than the broker(s) named in Paragraph 2.9
above, and that it knows of no other real estate broker or agent who is or
might be entitled to a commission in connection with this Lease. Landlord and
Tenant agree to indemnify, defend and hold each other and their respective
agents harmless from and against any and all liabilities or expenses,
including attorneys fees and costs, arising out of or in connection with
claims made by any other broker or individual for commissions or fees
resulting from the execution of this Lease.
35. ACCEPTANCE.
This Lease shall only become effective and binding upon full
execution hereof by Landlord and delivery of a signed copy to Tenant. Neither
party shall record this Lease nor a short form memorandum thereof.
36. MODIFICATIONS FOR LENDER.
If, in connection with obtaining financing for the Building or any
portion thereof, Landlord's lender shall request reasonable modification to
this Lease as a condition to such financing, Tenant shall not unreasonably
withhold, delay or defer its consent thereto, provided such modifications do
not materially adversely affect Tenant's rights hereunder.
37. RULES AND REGULATIONS. Tenant shall faithfully observe and comply
with the Rules and Regulations of the Building, a copy of which is attached
as EXHIBIT D to this Lease, and all reasonable nondiscriminatory
modifications and/or additions to the Rules and Regulations which Landlord
may adopt from time to time.
38. PARKING. Tenant shall have the right to use the parking facilities of
the Building in common with other tenants of the Building. Tenant's use of the
parking facilities shall be on the terms and conditions set forth in EXHIBIT E.
39. GENERAL.
39.1 CAPTIONS. The captions and headings used in this Lease are for
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
39.2 EXECUTED COPY. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
<PAGE>
39.3 TIME. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
39.4 SEVERABILITY. If one or more of the provisions contained herein,
except for the payment of Rent, is for any reason held invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
39.5 CHOICE OF LAW. This Lease shall be construed and enforced in
accordance with the substantive laws of the State of California. The language
in all parts of this Lease shall in all cases be construed as a whole
according to its fair meaning and not strictly for or against either Landlord
or Tenant.
39.6 GENDER: SINGULAR, PLURAL. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural.
39.7 BINDING EFFECT. The covenants and agreement contained in this
Lease shall be binding on the parties hereto and on their respective
successors and assigns to the extent this Lease is assignable.
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39.8 WAIVER. The waiver by Landlord of any breach of any term,
condition or covenant, of this Lease shall not be deemed to be a waiver of
such provision or any subsequent breach of the same or any other term,
condition or covenant of this Lease. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach at the time of acceptance of such payment. No covenant, term or
condition of this Lease shall be deemed to have been waived by Landlord
unless such waiver is in writing signed by Landlord.
39.9 ENTIRE AGREEMENT. This Lease is the entire agreement between
the parties, and there are no agreements or representations between the
parties except as expressed herein. Except as otherwise provided herein, no
subsequent change or addition to this Lease shall be binding unless in
writing and signed by the parties hereto.
39.10 AUTHORITY. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of said corporation or partnership,
as the case may be, represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of said entity in accordance with
its corporate bylaws, statement of partnership or certificate of limited
partnership, as the case may be, and that this Lease is binding upon said
entity in accordance with its terms. Landlord, at its option, may require a
copy of such written authorization to enter into this Lease.
39.11 EXHIBITS. All exhibits, amendments, riders and addendums
attached hereto are hereby incorporated herein and made a part hereof.
This Lease is effective as of the date the last signatory necessary to
execute the Lease shall have executed this Lease.
TENANT
Dated 94/11/21 SERENA CONSULTING, INCORPORATED
--------------------------------
a California Corporation
By /s/ Douglas D. Troxel
-----------------------------
Its President
By____________________________
Its__________________________
LANDLORD
Dated 12/1/94 Waterfront Tower Partners, L.P., a
California limited partnership
By Peninsula Office Management, Inc.,
a California corporation
General Partner
By /s/ Angelo A. Orphan
-----------------------------
Its PRES
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ADDENDUM TO THE LEASE DATED AUGUST 15, 1994, BY AND BETWEEN WATERFRONT TOWER
PARTNERS, L.P., A CALIFORNIA LIMITED PARTNERSHIP, LANDLORD, AND SERENA
CONSULTING, INCORPORATED, A CALIFORNIA CORPORATION, TENANT, FOR THOSE
PREMISES LOCATED AT 500 AIRPORT BOULEVARD, SUITE 200, BURLINGAME, CALIFORNIA.
40. TOXIC CONTAMINATION DISCLOSURE:
Lessor and Lessee acknowledge that they have been advised that numerous
federal, state, and/or local laws, ordinances and regulations (hereinafter
referred to as the "Laws") affect the existence and removal, storage,
disposal, leakage of and contamination by materials designated as hazardous
or toxic (hereinafter referred to as the "Toxics"). Many materials, some
utilized in everyday business activities and property maintenance, are
designated as hazardous or toxic.
Some of the Laws require that Toxics be removed or cleaned up by landowners,
future landowners or former landowners without regard to whether the party
required to pay for "clean up" caused the contamination, owned the property
at the time the contamination occurred or even knew about the contamination.
Some items, such as asbestos or PCBs, which were legal when installed, now
are classified as Toxics, and are subject to removal requirements. Civil
lawsuits for damages resulting from Toxics may be filed by third parties in
certain circumstances.
Cornish & Carey Commercial has recommended, and hereby recommends, that each
of the parties have competent professional environmental specialists review
the Property and make recommended tests so that a reasonably informed
assessment of these matters can be made by each of the parties. Lessor and
Lessee acknowledge that neither Cornish & Carey Commercial nor its agents or
salespersons, have been retained to investigate or arrange investigation by
others, and have not made any recommendations or representations with regard
to the presence or absence of Toxics on, in or beneath the Property. Lessor
and Lessee agree that they will rely only on persons who are experts in this
field and will obtain such expert advice so each of them will be as fully
informed as possible with regards to Toxics in entering into this Agreement.
41. TENANT IMPROVEMENTS:
Lessor shall, at Lessor's cost and expense, cause the following improvements
to be made to the Premises prior to the commencement date:
Existing space Suite 200:
a. Re-configure walls per attached space plan;
b. Replace carpeting in main hallway with new of same grade and
color;
c. Touch up, patch and paint on walls where necessary;
d. Remove carpeting in break room and replace with VCT tile or sheet
vinyl;
e. Install VCT tile in the newly enlarged equipment room;
f. Install upper and lower cabinets in break room to end of wall
(see attached space plan);
g. Install additional outlets in break room to accommodate new
appliances;
h. Install package HVAC unit in equipment room to accommodate above
standard load generated by computers; and
i. Construct and install a countertop per attached plan in rear LAN
room.
Expansion Space:
a. Construct walls per attached space plan;
b. Texture and paint walls with a mutually acceptable color;
c. Install new carpeting per building standard, color to be mutually
acceptable;
d. Install new ceiling tiles and light lenses; and
e. Install electrical distribution per attached space plan.
42. OPTION TO RENEW:
<PAGE>
Lessee is given the option to extend the term on all the provisions contained
in this Lease, except for minimum monthly rent, for a period of five years
(hereinafter referred to as the "Extended Term") following expiration of the
initial term, by giving notice of exercise of the option (hereinafter
referred to as the "Option Notice") to Lessor at least 90 days, but not more
than 120 days before the expiration of the term. Provided that, if Lessee is
in default on the date of giving the option notice, the option notice shall
be totally ineffective, or if Lessee is in default on the date the extended
term is to commence, the extended term shall not commence and this Lease
shall expire at the end of the initial term.
The parties shall have 30 days after Lessor receives the option notice in
which to agree on minimum monthly rent during the extended term. If the
parties agree on the minimum monthly rent for the
<PAGE>
extended term, which shall be 95% of the then prevailing fair market rental
rate for comparable property, they shall immediately execute an amendment to
this Lease stating the minimum monthly rent for the extended term.
If the parties are unable to agree on the minimum monthly rent for the
extended period within that period, the option notice shall be of no effect
and this Lease shall expire at the end of the term. Neither party to this
Lease shall have the right to have a court or other third party set the
minimum monthly rent.
Lessee shall have no other right to extend the term beyond the extended term.
43. RIGHT OF FIRST OFFERING TO LEASE:
Lessee shall have the First Right of Offering on any space which becomes
available on the second floor and which is unencumbered by any other First
Rights (the "Expansion Space"). When such Expansion Space becomes available,
Lessee shall be notified in writing of its availability and shall have five
business days to notify Lessor of its intent to lease said Expansion Space
and shall at that time begin negotiations and have five business days to come
to an agreement on this Expansion Space.
If Lessee does not indicate within five business days its agreement to lease
the Expansion Space or part thereof, Lessor thereafter shall have the right
to lease or extend the Lease covering the Expansion Space or part of it to a
third party.
44. DUAL REPRESENTATION:
Lessor and Lessee acknowledge that Cornish & Carey Commercial represents both
Lessor and Lessee, and Lessor and Lessee consent thereto.
45. ABOVE STANDARD IMPROVEMENTS:
If Lessee chooses, Lessee can request full height glass walls in offices #266
and #267. The cost of this above standard improvement will be amortized into the
monthly rental (plus a 10% money factor) and paid in addition to the rental
amounts set forth in paragraph 2.5.
LANDLORD: WATERFRONT TOWER PARTNERS, L.P., a California limited partnership
By: __________________________ Date: ____________________
TENANT: SERENA CONSULTING, INCORPORATED, a California corporation
By: /s/ Douglas D. Troxel Date: 94/11/21
---------------------
<PAGE>
EXHIBIT A
---------
THE PREMISES
------------
[To Be Attached]
<PAGE>
EXHIBIT B
---------
WORK LETTER AGREEMENT
---------------------
In connection with the Tenant Improvements to be installed on the Premises
the parties hereby agree as follows:
1. PLANS AND SPECIFICATIONS. Landlord shall retain TSH Architects as
the architect ("Architect") for the completion of final working architectural
and engineering plans and specifications for the Tenant Improvements to be
constructed on the Premises ("Final Plans and Specifications"). Landlord
reserves the right to substitute the Architect with another architect of its
selection. Tenant shall cooperate diligently with the Architect, and shall
furnish on or before AUGUST 29, 1994, all information required by the
Architect for completion of the Final Plans and Specifications. Landlord and
Tenant shall indicate their approval of the Final Plans and Specifications by
Initialing them and attaching them hereto as EXHIBIT B-1. Either party shall
have the right to terminate this Lease upon notice to the other party, if the
Final Plans and Specifications are not approved by Tenant and Landlord in
writing on or before AUGUST 29, 1994 through no fault of the terminating
party. Upon completion of the Final Plans and Specifications and approval
thereof by Landlord and Tenant, Landlord will obtain subcontractor trade bids
and furnish a cost breakdown to Tenant.
2. LANDLORD TO CONSTRUCT. Landlord shall complete construction of the
Tenant Improvements in a good and workmanlike manner.
3. TENANT IMPROVEMENTS ALLOWANCE. Landlord shall provide an allowance
for the planning and construction of the Tenant Improvements in the amount of
turn-key per mutually acceptable space plan ("Tenant Improvements
Allowance"). The Tenant Improvements Allowance shall be the maximum
contribution by Landlord for the Tenant Improvements Cost, as defined in
Paragraph 4, subject to the provisions of Paragraph 5.
4. TENANT IMPROVEMENTS COST. The Tenant Improvements cost ("Tenant
Improvements Cost") to be paid by Landlord from the Tenant Improvements
Allowance shall include, but not be limited to:
(a) All costs of preliminary and final architectural and engineering
plans and specifications for the Tenant Improvements, and engineering costs
associated with completion of the State of California energy utilization
calculations under Title 24 legislation;
(b) All costs of obtaining building permits and other necessary
authorizations from the City of Burlingame;
(c) All costs of Interior design and finish schedule plans and
specifications including as-built drawings;
(d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by Landlord's contractor in connection with construction of the Tenant
Improvements; and
<PAGE>
(e) All fees payable to the Architect and Landlord's engineering firm
if they are required by Tenant to redesign any portion of the Tenant
Improvements following Tenant's approval of the Final Plans and Specifications.
In no event shall the Tenant Improvements Cost include any costs of
procuring, constructing or installing in the Premises any of Tenant's personal
property.
<PAGE>
Tenant shall make all cash payments in a lump sum within ten (10) days after
receipt of a statement from Landlord therefor. If Tenant fails to make a timely
election of the foregoing alternatives, it will be deemed to have elected
alternative (II).
6. CHANGE REQUESTS. No revisions to the approved Final Plans and
Specifications shall be made by either Landlord or Tenant unless approved in
writing by both parties. Landlord agrees to make all changes: (i) required by
any public agency to conform with governmental regulations, or (ii) requested
in writing by Tenant and approval in writing by Landlord, which approval
shall not be unreasonably withheld. Any costs related to such changes shall
be added to the Tenant Improvements Cost and shall be paid for by Tenant as
and with any Excess Tenant Improvements Cost as set forth in Paragraph 5. The
billing for such additional costs to Tenant shall be accompanied by evidence
of the amounts billed as is customarily used in the business. Costs related
to changes shall include, without limitation, any architectural or design
fees, and Landlord's general contractor's price for effecting the change.
7. TERMINATION. If the Lease is terminated prior to the Commencement
Date and prior to completion of the Tenant Improvements, either by Landlord
pursuant to the provisions of Paragraph 1 of this Work Letter Agreement, or
for any reason due to the default of Tenant hereunder, Tenant shall pay to
Landlord, within five (5) days of receipt of a statement therefor, any costs
incurred by Landlord through the date of termination in connection with the
Tenant Improvements.
8. CONDITION. If Landlord is unable to obtain a building permit for
the Tenant Improvements within one hundred twenty (120) days from the date of
execution hereof, then Landlord shall have the right to terminate this Lease
upon written notice to Tenant.
-2-
<PAGE>
EXHIBIT C
---------
COMMENCEMENT DATE MEMORANDUM
----------------------------
LANDLORD: Waterfront Tower Partners, L.P.
TENANT: Serena Consulting, Incorporated, a California Corporation
---------------------------------------------------------
LEASE DATE: August 15, 1994
--------------------
PREMISES: 500 Airport Boulevard, Suite 200
---
Burlingame, CA 94010
Pursuant to Paragraph 4.1 of the above-referenced Lease, the Commencement
Date is hereby established as Feb 1, 1995
-----------
LANDLORD
Waterfront Tower Partners, L.P., a
California limited partnership
By Peninsula Office Management,
Inc., a California corporation,
General Partner
By /s/ Angelo A. Orphan
------------------------
Its Pres.
TENANT
Serena Consulting, Incorporated,
a California Corporation
By /s/ Douglas D. Troxel
------------------------
Its President
<PAGE>
RULES AND REGULATIONS
---------------------
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside or inside
of the Building without the prior written consent of Landlord. Landlord
shall have the right to remove, at Tenant's expense and without notice, any
sign Installed or displayed in violation of this rule. All approved signs
or lettering on doors and walls shall be printed, painted, affixed or
inscribed at the expense of Tenant by a person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection
with any window or door of the Premises, or placed on any windowsill, which
is visible from the exterior of the Premises, Tenant shall immediately
discontinue such use. Tenant shall not place anything against or near glass
partitions or doors or windows which may appear unsightly from outside the
Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exists,
entrances, elevators, or stairways of the Building. The halls, passages,
exists, entrances, elevators, and stairways are not open to the general
public, but are open, subject to reasonable regulation, to Tenant's
business invitees. Landlord shall in all cases retain the right to control
and prevent access thereto of all persons whose presence in the judgment of
Landlord would be prejudicial to the safety, character, reputation and
interest of the Building and its tenants; provided that nothing herein
contained shall be construed to prevent such access to persons with whom
any tenant normally deals in the ordinary course of its business, unless
such persons are engaged in illegal or unlawful activities. No tenant and
no employee or invitee of any tenant shall go upon the roof of the
Building.
4. The directory of the Building will be provided exclusively for the display
of the name and location of tenants only, and Landlord reserves the right
to exclude any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the Building for
the purpose of cleaning the same.
6. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and
Tenant shall not alter any lock or install a new additional lock or bolt on
any door of its Premises. Tenant, upon the termination of its tenancy,
shall deliver to Landlord the keys of all doors which have been furnished
to Tenant, and in the event of loss of any keys so furnished, shall pay
Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions
in their installation.
8. The Building freight elevator(s) shall be available for use by all tenants
in the Building, subject to such reasonable scheduling as Landlord, in its
discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in the
Building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes and similar
items shall, unless otherwise agreed in writing by Landlord, be made during
the hours of 6:00 p.m. and 6:00 a.m. or on Saturday or Sunday. Deliveries
during normal office hours shall be limited to normal office supplies and
other small items. No deliveries shall be made which impede or interfere
with other tenants or the operation of the Building.
<PAGE>
9. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which
is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms shall be provided at
Tenant's expense. Business machines and mechanical equipment belonging to
Tenant, which cause noise or vibration that may be transmitted to the
structure of the Building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the Building, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or vibration.
The persons employed to move such equipment in or out of the Building must
be acceptable to Landlord. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all
damage done to the Building by maintaining or moving such equipment or
other property shall be repaired at the expense of Tenant.
-1-
<PAGE>
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants
of the Building by reason of noise, odors or vibrations, nor shall Tenant
bring into or keep in or about the Premises any birds or animals.
11. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord.
12. Tenant shall not waste electricity, water or air-conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air-conditioning and to comply with any governmental
energy-saving rules, laws or regulations of which Tenant has actual notice.
13. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
14. Landlord reserves the right to exclude from the Building between the hours
of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee
in charge of the Building and has a pass or is property identified. Tenant
shall be responsible for all persons for whom it requests passes and shall
be liable to Landlord for all acts of such persons. Landlord shall not be
liable for damages for any error with regard to the admission to or
exclusion from the Building of any person.
15. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein.
The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees
or invitees, shall have caused it.
16. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise
to the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the Building.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
17. Tenant shall not install any radio or television antenna, loudspeaker or
other devices on the roof or exterior walls of the Building. Tenant shall
not interfere with radio or television broadcasting or reception from or in
the Building or elsewhere.
18. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof,
except in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where
and how telephone and telegraph wires are to be introduced to the Premises.
Tenant shall not cut or bore holes for wires. Tenant shall not affix any
floor covering to the floor of the Premises in any manner except as
approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
19. Tenant shall not install, maintain or operate upon the Premises any vending
machines without the written consent of Landlord.
20. Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building are prohibited, and Tenant shall
cooperate to prevent such activities.
<PAGE>
21. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the Rules or
Regulations of the Building.
22. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary
and customary manner of trash and garbage disposal. All garbage and refuse
disposal shall be made in accordance with directions issued from time to
time by Landlord.
23. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted on the Premises without
Landlord's consent, except that the use by Tenant of Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate and
similar beverages or use of microwave
-2-
<PAGE>
over for employed use shall be permitted, provided such equipment and use
is in accordance with all applicable federal, state, county and city laws,
codes, ordinances, rules and regulations.
24. Tenant shall not use in any space or in the public halls of the Building
any hand truck except those equipped with rubber tires and side guards or
such other material-handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the Building.
25. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
26. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
27. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
28. Tenant's requirements will be attended to only upon appropriate application
to the Building management office by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
29. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the tenants of the
Building.
30. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of Tenant's lease of its Premises in the
Building.
31. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the
preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
32. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and
guests.
-3-
<PAGE>
EXHIBIT E
---------
PARKING RULES AND REGULATIONS
-----------------------------
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the Building.
1. Tenant shall not park or permit the parking of any vehicle under its
control in any parking designated by Landlord as areas for parking by
visitors to the Building. Tenant shall not leave vehicles in the parking
areas overnight nor park any vehicles in the parking areas other than
automobiles, motorcycles, motor driven or non-motor driven bicycles or
four-wheeled trucks.
2. Parking stickers or any other device or form of identification supplied by
Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed
as requested and may not be mutilated in any manner. The serial number of
the parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder
will be void.
3. No overnight or extended term storage of vehicles shall be permitted.
4. Vehicles must be parked entirely within the painted stall lines of a single
parking stall.
5. All directional signs and arrows must be observed.
6. The speed limit within all parking areas shall be 5 miles per hour.
7. Parking is prohibited:
(a) In areas not striped for parking;
(b) In aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord.
8. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
9. Loss or theft of parking identification devices from automobiles must be
reported immediately, and a lost or stolen report must be filed by the
customer at that time. Landlord has the right to exclude any car from the
parking facilities that does not have an identification device.
10. Any parking identification devices found by the purchaser must be reported
immediately to avoid confusion.
11. Lost or stolen devices found by the purchaser must be reported immediately
to avoid confusion.
12. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
<PAGE>
13. Landlord reserves the right to modify and/or adopt such other reasonable
and non-discriminatory rules and regulations for the parking facilities as
it deems necessary for the operation of the parking facilities. Landlord
may refuse to permit any person who violates these rules to park in the
parking facilities, and any violation of the rules shall subject the car to
removal.
14. Landlord reserves the right to charge for parking on a non-discriminatory
basis.
15. Tenant shall have a total of 11 covered parking spaces at no additional
charge. Tenant shall be responsible for the cost of the signs which
designate each space.
/s/ D.D.T.
Initial
/s/ A.A.O.
Initial
<PAGE>
THIS SECOND ADDENDUM TO LEASE ("SECOND ADDENDUM") IS DATED FOR REFERENCE
PURPOSES AS OF NOVEMBER 15, 1994, AND IS MADE BETWEEN WATERFRONT TOWER PARTNERS,
L.P., A CALIFORNIA LIMITED PARTNERSHIP ("LANDLORD") AND SERENA CONSULTING,
INCORPORATED, A CALIFORNIA CORPORATION ("TENANT") TO BE A PART OF THAT CERTAIN
LEASE AND ADDENDUM THERETO, OF EVEN DATE HEREWITH BETWEEN LANDLORD AND TENANT
(HEREIN THE "LEASE FORM") CONCERNING 15,594 SQUARE FEET OF SPACE, KNOWN AS SUITE
200 (THE "PREMISES") LOCATED AT 500 AIRPORT BOULEVARD, CITY OF BURLINGAME, STATE
OF CALIFORNIA (THE "PROJECT"). LANDLORD AND TENANT AGREE THAT THE LEASE FORM IS
HEREBY MODIFIED AND SUPPLEMENTED AS FOLLOWS:
1. TENANT IMPROVEMENTS:
Notwithstanding anything to the contrary in the Lease Form:
Landlord at its sole cost and expense shall construct the improvements
(the "Tenant Improvements") described in the plans and specifications,
which are attached hereto as Exhibit "B-1." The Tenant Improvements
shall be constructed in accordance with said plans and specifications,
and in a good and workmanlike manner, and using new materials and
equipment of good quality.
2. PREMISES AND COMMON AREAS:
Notwithstanding anything to the contrary in the Lease Form:
Landlord shall at all times maintain the Common Areas in good order
and repair and in a first class condition.
3. RENT:
Notwithstanding anything to the contrary in the Lease Form, Tenant's obligation
to pay Monthly Rent shall commence on the Commencement Date. Landlord and Tenant
acknowledge that upon execution of this Lease, Tenant shall pay to Landlord the
sum of Nineteen Thousand Four Hundred Ninety Two and 50/100 Dollars ($19,492.50)
as prepaid rent ("Prepaid Rent") for the first installment of Monthly Rent due
following the Commencement Date. In the event the Commencement Date does not
fall on the first (1st) day of the Month and the amount of Prepaid Rent is
therefore greater than the amount of Monthly Rent owed for the first
installment, then Landlord shall reduce the amount of the second installment of
Monthly Rent due by the excess amount of Prepaid Rent paid. All Monthly Rent and
Additional Rent shall be equitably prorated to reflect the Commencement and
Expiration Dates of the Lease.
4. ACCEPTANCE OF PREMISES: Notwithstanding anything to the contrary in the
Lease Form:
Tenant's acceptance of the Premises shall not be deemed a waiver of
Tenant's right to have defects in the Tenant Improvements or the
Premises repaired at Landlord's sole expense. Tenant shall give notice
to Landlord whenever any such defect becomes reasonably apparent, and
Landlord shall repair such defect as soon as practicable.
5. SECURITY DEPOSIT:
Notwithstanding anything to the contrary in the Lease Form:
Landlord and Tenant acknowledge that prior to the execution of this
Lease Tenant paid Landlord the sum of $11,000.00 as a Security
Deposit. This Security Deposit has accrued interest at the rate of 5%
annually and will continue to accrue interest until the Commencement
Date of the new Lease. Upon Commencement of the new Lease a Security
Deposit of $19,492.50 less the original Security Deposit (which
includes all accrued interest) shall be paid to Lessor.
6. COMPLIANCE WITH LAWS:
Notwithstanding anything to the contrary in the Lease Form:
<PAGE>
At the Commencement Date, the Premises shall conform with all
requirements of covenants, conditions, restrictions and encumbrances,
all underwriter's requirements, and all rules, regulations, statutes,
ordinances, laws and building codes, (collectively, "Laws") applicable
thereto. Tenant shall not be required to construct or pay the cost of
complying with any underwriter's requirements or Laws requiring
construction of improvements in the Premises which are properly
capitalized under generally accepted accounting principles, unless
such compliance is necessitated solely because of Tenant's particular
use of the Premises.
<PAGE>
7. USE OF PREMISES:
Notwithstanding anything to the contrary in the Lease Form:
If the Premises should become substantially unusable for Tenant's use
as a consequence of cessation of utilities or other services required
to be provided to the Premises by Landlord for a period longer than 3
business days, or the presence of any material which is now or
hereafter regulated by any governmental authority or which poses a
hazard to the environment or human life ("Hazardous Material") which
does not result from Tenant's introduction, use, storage or disposal
of such material in violation of applicable law in or about the
Premises, then Tenant shall be entitled to an abatement of rent to the
extent of the interference with Tenant's use of the Premises
occasioned thereby. If such interference cannot be corrected or the
damage resulting therefrom repaired so that the Premises will be
reasonably suitable for Tenant's intended use within sixty (60) days
following the occurrence of such event, then Tenant also shall be
entitled to terminate this Lease by delivery of written notice to
Landlord at any time after occurrence of the event of interfering with
Tenant's use.
8. ALTERATIONS, ADDITIONS AND IMPROVEMENTS:
Notwithstanding anything to the contrary in the Lease Form:
A. NONSTRUCTURAL:
If Landlord's consent is required for an Alteration and Landlord does
not notify Tenant in writing of its approval or disapproval within
fifteen (15) days following Tenant's written request for approval,
then Landlord shall be deemed to have approved the proposed
Alteration.
B. REMOVAL:
Upon request, Landlord shall advise Tenant in writing whether it
reserves the right to require Tenant to remove any Alterations from
the Premises upon termination of the Lease.
C. TENANT'S PROPERTY:
Excepting those improvements specified in Exhibit B-1, all
Alterations, trade fixtures and personal property installed in the
Premises at Tenant's expense ("Tenant's Property") shall at all times
remain Tenant's property and Tenant shall be entitled to all
depreciation, amortization and other tax benefits with respect
thereto. Except for Alterations which cannot be removed without
structural injury to the Premises, at any time Tenant may remove
Tenant's Property from the Premises, provided Tenant repairs all
damage caused by such removal.
D. LIEN WAIVER:
Landlord shall have no lien or other interest whatsoever in any item
of Tenant's Property, or any portion thereof or interest therein
located in the Premises or elsewhere, and Landlord hereby waives all
such liens and interests, except in the event that Tenant is in
default of the Lease Agreement and terms thereof. Within ten (10) days
following Tenant's request, Landlord shall execute documents in a form
reasonably acceptable to Tenant to evidence Landlord's waiver of any
right, title, lien or interest in Tenant's Property located in the
Premises.
E. SALE OF TENANT'S PROPERTY:
<PAGE>
Landlord shall provide Tenant with at least five (5) days prior
written notice of any sale of Tenant's Property.
9. DIRECT EXPENSES:
Notwithstanding anything to the contrary in the Lease Form:
The term Direct Expenses as defined in Paragraph 6.1.3 of the Lease
Form shall not include and in no event shall Tenant have any
obligation to perform or to pay directly, or to reimburse Landlord
for, all or any portion of the following repairs, maintenance,
improvements, replacements, premiums, claims, losses, fees, charges,
costs and expenses (collectively, "Costs"), nor shall any portion of
the Tenant Improvement allowance be applied to such costs:
<PAGE>
A. LOSSES CAUSED BY OTHERS:
Costs occasioned by the act, omission or violation of Law by Landlord,
any other occupant of the Project, or their respective agents,
employees or contractors.
B. CASUALITIES AND CONDEMNATIONS:
Costs occasioned by fire, acts of God, or other casualties or by the
exercise of the power of eminent domain.
C. REIMBURSABLE EXPENSES:
Costs for which Landlord has a right of reimbursement from others.
D. REAL ESTATE TAXES:
Taxes, assessments, all other governmental levies, and any increases
in the foregoing occasioned by or relating to (i) a conveyance or
other transfer of the real property of which the Premises is a part
(a) to any person or entity affiliated with or related to Landlord or
the partners, shareholders, officers or directors of Landlord or (b)
in connection with estate planning or (c) which is not otherwise a
bona fide, arm's length sale to an unrelated third party.
E. UTILITIES OR SERVICES:
Costs (i) arising from the disproportionate use of any utility or
service supplied by Landlord to any other occupant of the Project, or
(ii) associated with utilities and services of a type not provided to
Tenant.
F. MORTGAGES:
Interest, charges and fees incurred on debt, payments on mortgages and
rent under ground leases.
G. HAZARDOUS MATERIALS:
Costs incurred to investigate the presence of any Hazardous Material
(defined in the Lease), Costs to respond to any claim of Hazardous
Material contamination or damage, Costs to remove any Hazardous
Material from the Project and any judgments or other Costs incurred in
connection with any Hazardous Material exposure or releases, except to
the extent caused by the storage, use or disposal of the Hazardous
Material in question by Tenant.
H. MANAGEMENT:
Any fee, profit or compensation retained by Landlord or its affiliates
for management and administration of the Project in excess of the
management fee which would be charged by a professional management
services for operation of comparable projects in the vicinity.
I. DUPLICATION:
Costs and expenses for which Tenant reimburses Landlord directly or
which Tenant pays directly to a third person.
10. COMPUTATION OF BASE AMOUNT:
Notwithstanding anything to the contrary in the Lease Form:
<PAGE>
The Base Year accounting method shall be used in calculating the
Direct Expenses. The Base Year for this Lease shall be the 1995
Calendar Year Actual Expenses.
11. INDEMNITY:
Notwithstanding anything to the contrary in the Lease Form:
A. LANDLORD'S INDEMNIFICATION. Landlord shall indemnify and hold
harmless Tenant from all damages, liabilities, claims, judgments,
actions, attorneys' fees, consultants' fees, costs and expenses
arising from the negligence or willful misconduct of Landlord or its
employees, agents, contractors or invitees, or the breach of
Landlord's obligations or representations under this Lease.
<PAGE>
12. ASSIGNMENT AND SUBLETTING:
Notwithstanding anything to the contrary in the Lease Form:
Tenant may, with Landlord's prior written consent, sublet the Premises
to: (i) a subsidiary, affiliate, division or corporation controlled or
under common control with Tenant; (ii) a successor corporation related
to Tenant by merger, consolidation, nonbankruptcy reorganization, or
government action; (iii) purchaser of substantially all of Tenant's
assets located in the Premises (collectively, "Permitted
Sublessee's"). For the purpose of this Lease, sale or transfer of
Tenant's capital stock, including without limitation, a transfer in
connection with the merger, consolidation or nonbankruptcy
reorganization of Tenant and any sale through any public exchange,
shall not be deemed an assignment, subletting, or any other transfer
of the Lease or the Premises. Landlord's consent to any proposed
subletting shall not be unreasonably withheld. If Tenant assigns or
sublets the Premises to any Permitted Sublessee as provided herein,
Landlord shall not have the right to terminate the Lease due to such
assignment or sublease. Any rents received from sublessee in excess of
the base amount shall be split 50%/50% between Landlord and Tenant.
13. APPROVALS:
Notwithstanding anything to the contrary in the Lease Form, whenever the Lease
requires an approval, consent, designation, determination or judgment by either
Landlord or Tenant, such approval, consent, designation, determination or
judgment (including, without limiting the generality of the foregoing, those
required in connection with assignment and subletting) shall not be unreasonably
withheld or delayed and in exercising any right or remedy hereunder, each party
shall at all times act reasonably and in good faith.
14. REASONABLE EXPENDITURES:
Notwithstanding anything to the contrary in the Lease Form, any expenditure by a
party permitted or required under the Lease, for which such party is entitled to
demand and does demand reimbursement from the other party, shall be limited to
the fair market value of the goods and services involved, shall be reasonably
incurred, and shall be substantiated by documentary evidence available for
inspection and review by the other party or its representative during normal
business hours.
15. DAMAGE OR DESTRUCTION:
Notwithstanding anything to the contrary in the Lease Form:
A. UNINSURED CASUALTY: In the case of damage which is not required
to be covered by insurance, Landlord shall not have the right to
terminate the Lease (i) if the repair or restoration would cost less
than five percent (5%) of the replacement cost of the Premises and/or
Building, or (ii) if Tenant agrees to pay the cost of repair or
restoration in excess of five percent (5%) of the replacement cost of
the Premises and/or Building.
16. SALE OF PROPERTY: Notwithstanding anything to the contrary in the Lease
Form, Landlord shall not be relieved of its obligations under the Lease upon a
sale of the Building, unless the purchasing owner assumes the obligations of
Landlord in writing.
17. MODIFICATIONS TO LEASE FORM: The Lease Form is modified as follows:
A. Paragraph 4.1 is modified by deleting the last sentence thereof
and replacing it with the following: "Notwithstanding anything to the
contrary in the Lease Form:
(i) The Lease shall commence (the "Commencement Date") on the later
of the Anticipated Commencement Date of November 1, 1994 or (ii) the
date by which all of the following have occurred: (a) Landlord has
substantially completed the
<PAGE>
Tenant Improvements as that term is defined in the Work Letter
Agreement attached hereto as Exhibit "B" and as described in
Paragraph 41 of the Lease Addendum, (b) there remains no incomplete
or defective item of Tenant Improvements that would adversely affect
Tenant's intended use of the Premises; (c) Landlord has delivered
possession of the Premises to Tenant; and (d) Landlord has obtained
all approvals and permits from the appropriate governmental
authorities required for the legal occupancy of Premises for Tenant's
intended use.
<PAGE>
B. Paragraph 4.2 is modified by inserting the words "in accordance
with Paragraph 4.1 of this Lease", after the words "is determined" in
the second line thereof.
C. Paragraph 4.4 is deleted in its entirety and replaced with the
following: "4.4 Tenant Delays. "To the extent that occurrence of the
"Commencement Date" is delayed because of Tenant's failure to perform
its obligations under this Lease, then notwithstanding any other
provision of this Lease, the obligation to pay Monthly Rent shall be
advanced and begin one (1) day sooner than it would otherwise occur
for each day of such delay caused by Tenant's default."
D. Paragraph 4.5 is modified as follows: (a) the word "reasonable"
is inserted after the words "such additional" in the fifth line
thereof.
E. Paragraph 5.2 is deleted.
F. Paragraph 6.1.2. is modified as follows: (a) the word "amount" in
the second line thereof is replaced with the words "Direct Expenses
Base Year".
G. Paragraph 6.1.3.1 is modified as follows: (a) the word "on"
located between the words "taxes" and "levied" on the third line
thereof is deleted; and (b) the word ",transfer" is added after the
word "estate" on the eleventh line thereof.
H. Paragraph 6.1.3.2 is modified as follows: (a) the following
phrase is added after the word "therewith" in subparagraph "(e)"
thereof: "to the extent such insurance is commercially reasonable."
I. Paragraph 6.2 is modified as follows: (a) the words "upon
receipt" on the fifth line thereof shall be replaced with the words
"on or before ten (10) days after receipt of Landlord's statement by
Tenant".
J. Paragraph 9 is modified as follows: (a) the first sentence
thereof is deleted; (b) the words "ten (10) days" shall be deleted and
replaced with the words "fifteen (15) working days" in the fourth line
thereof; and (c) the following sentence is added after the second
sentence thereof: "Landlord shall use its best efforts to complete,
repair and/or remedy any items on the punch list or any existing
conditions inconsistent with Landlord's obligations hereunder."
K. Paragraph 11.2.3 is modified as follows: (a) the phrase "as
required by law" is added after the word "contamination" in the tenth
line thereof; (b) the phrase "caused by Tenant's use, storage,
release, disposal, or transportation of Hazardous Materials" shall be
added to the end of subsection (i) after the word "contamination" and
at the end of subsection (ii) after the word "proceeding" in lines
twelve and thirteen thereof; and (c) the following shall be added to
the end of paragraph 11.2.3:
A. LANDLORD INDEMNITY:
Landlord shall indemnify, defend with counsel reasonably
acceptable to Tenant, protect, and hold harmless Tenant, its
employees, agents, contractors, stockholders, officers,
directors, successors, subtenants, personal representatives, and
assigns (collectively the "Tenant Indemnities") from and against
all claims, actions, suits, proceedings, judgments, losses,
costs, personal injuries, damages, liabilities, deficiencies,
fines, penalties, damages, attorneys' fees, consultants' fees,
investigations, detoxifications, remediations, removals, and
expenses of every type and nature ("Claims"), directly or
indirectly arising out of or in connection with any Hazardous
Material present at any time on or about the Premises, or the
soil, air, improvements, groundwater or surface water thereof, or
the violation of any
<PAGE>
Environmental Law relating to any such Hazardous Material, the
Premises or the use of the Premises by any person other than
Tenant, its agents or employees; except to the extent that any
of the foregoing actually results from the release, disposal,
discharge, or emission of Hazardous Material on or about the
Premises during the term of this Lease by Tenant or its agents
or employees in violation of applicable Environmental Laws. In
such event tenant will be soley responsible and Landlord will be
indemnified by Tenant for any costs thereto and Tenant will
relieve Landlord of any liability thereto.
<PAGE>
B. LANDLORD'S REPRESENTATIONS:
Except as disclosed in the following reports, true and correct
copies of which have been delivered by Landlord to Tenant, to the
best knowledge of Landlord, (i) no Hazardous Material is present
on the Project or the Premises or the soil, surface water or
groundwater thereof, (ii) no underground storage tanks or
asbestos containing building materials are present on the Project
or the Premises, and (iii) no action, proceeding, or claim is
pending or threatened concerning the Project or the Premises
concerning any Hazardous Material or pursuant to any
Environmental Law.
C. DEFINITION OF ENVIRONMENTAL LAWS:
As used herein "Environmental Laws" shall mean all local, state,
or federal laws, statutes, ordinances, rules, regulations,
judgments, injunctions, stipulations, decrees, orders, permits,
approvals, treaties, or protocols now or hereafter enacted,
issued or promulgated by any governmental authority which relate
to any Hazardous Material or the use, handling, transportation,
production, disposal, discharge, release, emission, sale, or
storage of, or the exposure of any person to, a Hazardous
Material."
L. Paragraph 13 is modified as follows: (a) the phrase "Subject to
Section 2.10 and Exhibit "B-1" of this Lease and Paragraph 41 of the
Addendum," is added to the beginning of the second full paragraph
thereof which begins with the words "All Alterations"; (b) the words
"relating to the specific Alterations made" is added to the first
sentence of the second full paragraph after the words "applicable
laws".
M. Paragraph 14 is modified be deleting the word "approved" in the
third line and inserting the words "if such approval is required"
after the word "Alterations" in the third sentence thereof.
N. Paragraph 17.1 is modified as follows: (a) the phrase "at its
sole cost and expense" is added after the word "Landlord" in the first
sentence thereof.
O. Paragraph 17.2 is modified as follows: (a) the words
"non-structural, internal portion" is added after the words "every
part of the" in the second line thereof; and (b) the following is
added to the end of Paragraph 17.2: "Notwithstanding anything to the
contrary herein, Landlord shall perform and construct, and Tenant
shall have no responsibility to perform or construct, any repair,
maintenance or improvement (i) necessitated by the acts or omissions
of Landlord or any other occupant of the Project, or their respective
agents, employees or contractors, (ii) occasioned by fire, acts of God
or other casualty or by the exercise of the power of eminent domain,
(iii) required as a consequence of any violation of Law or
construction defect in the Premises or Project as of the Commencement
Date, (iv) for which Landlord has a right of reimbursement from
others, (v) to the heating, ventilating, air conditioning, electrical,
water, sewer, and plumbing systems serving the Premises or the
Project, and (vi) to any portion of the Project outside of the
demising walls of the Premises. Tenant's obligation, if any, to
reimburse Landlord for the costs of such repairs, maintenance and
improvements shall be governed by the other provisions of this Lease."
P. Paragraph 19 is modified as follows: (a) the words "or use of the
Premises" is added after the word "business" in the tenth line
thereof; and (b) the following shall be added to the end of the
paragraph: "During any such entry Landlord and Landlord's agents shall
at all times be accompanied by Tenant, if Tenant provides an escort."
Q. Paragraph 20 is modified as follows: (a) the word "maintenance"
is deleted from the fourth line thereof.
<PAGE>
R. Paragraph 21.2 is modified by adding the word "reasonably"
between the words "carriers" and "acceptable" on the third line
thereof.
S. Paragraph 21.4 is modified by deleting the words "and such other
insurance as Landlord or" in line two thereof and replacing those
words with "as".
T. Paragraph 21.6 is modified by adding the word "reasonably"
between the words "form" and "satisfactory" in the first line thereof.
<PAGE>
U. The third paragraph of Paragraph 22.2.3 is modified as follows:
(a) the word "reasonable" is inserted before the words "estimated
repair" in the third line thereof; (b) the word "ten (10)" is replaced
with the word "fifteen (15)" in the seventh line thereof.
V. Paragraph 22.3 is modified by inserting after the word "be" in
the third line thereof the following: "and as each existed immediately
prior to the destructive event."
W. Paragraph 22.5 is modified as follows: (a) the word "and" is
deleted from the fifth line thereof and the words "and 22.3" are added
after the number "22.2".
X. Paragraph 24.4 is modified as follows: (a) Subsection "(ii)" is
deleted; (b) the words "fifty percent (50%) of" is inserted between
the word "that" and "any" in the tenth line thereof; and (c) the words
"any other Tenant expenses incurred in subletting the Premises and any
special improvements to the Premises for the subtenant for which
Tenant paid" is added after the word "sublet" in the twelfth line
thereof.
Y. Paragraph 25.1.1 is modified by deleting the phrase "within five
(5) days after the date due" and replacing it with the following: "on
or before ten (10) days after actual receipt by Tenant of written
notice from Landlord of the sum due and owing."
Z. Paragraph 25.2.2.4 is modified by adding the following after the
word "thereof" in subsection (ii): "to the extent necessary to obtain
new tenants and only to the extent applicable for the period of the
Lease Term remaining after Tenant's default".
AA. Paragraph 28 is modified by deleting the words "and costs" at the
end of the last sentence thereof and by adding the following: "court
costs, and expert fees as may be fixed by the court. 'Prevailing
Party' as used herein includes a party who dismisses an action for
recovery hereunder in exchange for sums allegedly due, performance of
covenants allegedly breached or considerations substantially equal to
the relief sought in the action."
BB. Paragraph 29.2 is modified as follows (a) the phrase "if
available at no additional cost or if a fee is incurred, Landlord can
reimburse said, reasonable fee," shall be inserted after the words
"statements year" in the third line thereof and after the word "year"
in the fourth line thereof; and (b) the following is added to the end
of the paragraph: "Notwithstanding anything to the contrary herein,
Tenant shall be required to provide financial statements only in
connection with Landlord's sale or refinancing of the Project and all
such statements shall be held in strictest confidence."
CC. Paragraph 30 is modified by adding the words "all of" before
"Landlord's" and adding the words "covenants and" after the word
"Landlord's" in the last line thereof.
DD. Paragraph 31 is modified as follows: (a) the phrase "within the
time periods specified in Paragraphs (22.A(i) and (ii) as applicable,"
in the second and third lines thereof is deleted and replaced with the
following: "after written notice from Landlord as required herein and
expiration of any applicable cure period,"; (b) the term "reasonable"
shall be inserted before the word "sums" and "penalties" in the sixth
sentence thereof; and (c) the phrase "on the next day" is deleted and
replaced with "on or before five (5) days".
EE. Paragraph 38 is modified by adding the following:
"Notwithstanding anything to the contrary herein, without charge,
Tenant shall have the
<PAGE>
exclusive use of not less than eleven (11) covered parking spaces.
Landlord shall in no event oversubscribe parking."
FF. Paragraph 42 of the Addendum is modified as follows: (a) the
second paragraph is deleted and replaced with the following: "If the
parties cannot agree on the Monthly Rent within thirty (30) days prior
to the commencement of such Extended Term, then rent for the extended
space shall be determined by an appraisal. All other terms and
conditions contained in the Lease and this Addendum, as the same may
be amended from time to time by the parties in accordance with the
provisions of the Lease, shall remain in full force and effect and
shall apply during the Extended Term.
If it becomes necessary to determine the fair market rental value for
the Premises by appraisal, real estate appraiser(s), all of whom shall
be members of the American Institute of
<PAGE>
Real Estate Appraisers and who have at least five (5) years experience
appraising office space located in the vicinity of the Premises shall
be appointed and shall act in accordance with the following
procedures:
(i) If the parties are unable to agree on the Fair Market Rent within
the allowed time, either party may demand an appraisal by giving
written notice to the other party, which demand to be effective must
state the name, address and qualifications of an appraiser selected by
the party demanding an appraisal (the "Notifying Party"). Within ten
(10) days following the Notifying Party's appraisal demand, the other
party (the "Non-Notifying Party") shall either approve the appraiser
selected by the notifying party or select a second properly qualified
appraiser by giving written notice of the name, address and
qualification of said appraiser to the Notifying Party. If the
Non-Notifying Party fails to select an appraiser within the ten (10)
day period, the appraiser selected by the Notifying Party shall be
deemed selected by both parties and no other appraiser shall be
selected. If two appraisers are selected, they shall select a third
appropriately qualified appraiser. If the two appraisers fail to
select a third qualified appraiser, the third appraiser shall be
appointed by the then presiding judge of the county where the Premises
are located upon application by either party.
(ii) If only one appraiser is selected, that appraiser shall
notify the parties in simple letter form of its determination of the
Fair Market Rent for the Premises within fifteen (15) days following
his selection, which appraisal shall be conclusively determinative and
binding on the parties as the appraised Fair Market Rent.
(iii) If multiple appraisers are selected, the appraisers shall
meet not later than ten (10) days following the selection of the last
appraiser. At such meeting the appraisers shall attempt to determine
the Fair Market Rent for the Premises as of the commencement date of
the extended term by the agreement of at least two (2) of the
appraisers.
(iv) If two (2) or more of the appraisers agree on the Fair
Market Rent for the Premises at the initial meeting, such agreement
shall be determinative and binding upon the parties hereto and the
agreeing appraisers shall, in simple letter form executed by the
agreeing appraisers, forthwith notifying both Landlord and Tenant of
the amount set by such agreement. If multiple appraisers are selected
and two (2) appraisers are unable to agree on the Fair Market Rent for
the Premises, all appraisers shall submit to Landlord and Tenant an
independent appraisal of the Fair Market Rent for the Premises in
simple letter form within twenty (20) days following appointment of
the final appraiser. The parties shall then determine the Fair Market
Rent for the Premises by averaging the appraisals; provided that any
high or low appraisal, differing from the middle appraisal by more
than ten percent (10%) of the middle appraisal, shall be disregarded
in calculating the average.
(v) The appraisers' determination of Fair Market Rent shall be based
on rental of space of the same age, construction, size and location as
the Premises with the improvements installed therein at Landlord's
expense and shall take into account Tenant's obligations to pay
additional rent under this Lease. In determining Fair Market Rent, the
appraisers shall not consider any alterations installed in the
Premises at Tenant's expense.
(vi) If only one appraiser is selected, then each party shall pay
one-half of the fees and expenses of that appraiser. If three
appraisers are selected, each party shall bear the fees and expenses
of the appraiser it selects and one-half of the fees and expenses of
the third appraiser. Notwithstanding anything to the contrary
contained in this Paragraph, if the rent during the Extended Term is
determined by appraisal and if Tenant does not, in its sole
discretion, approve the rental amount established by such appraisal,
Tenant may rescind its exercise of the Option by giving Landlord
written notice of such election to
<PAGE>
rescind within ten (10) days after receipt of all appraisals. If
Tenant rescinds its exercise of the Option, then (i) the Lease shall
terminate on the thirtieth (30th) day after Tenant's notice of
rescission or on the date the Lease would have otherwise terminated
absent Tenant's exercise of the Option, whichever date is later; and
(ii) Tenant shall pay all costs and expenses of the appraisal.
<PAGE>
GG. Paragraph 43 of the Addendum is modified as follows: (a) the word
"the" is deleted and the words "a continuing" is inserted before the
words "First Right of Offering" in the first line thereof; (b) the
word "and the basic business terms for the expansion space" is
inserted after the word "and" in the third line thereof; and (c) the
words "all the basic business terms, including the monthly rent for,"
are inserted after the word "on" in the fifth line thereof.
19. EFFECT OF ADDENDUM:
All terms with initial capital letters used herein as defined terms shall have
the meanings ascribed to them in the Lease Form unless specifically defined
herein. As used herein, the term "Lease" shall mean the Lease Form, this Second
Addendum and all riders, exhibits, rules, regulations, referred to in the Lease
Form or this Second Addendum.
Landlord: WATERFRONT TOWER PARTNERS, L.P., a California limited partnership
By: /s/ Angelo A. Orphan, Pres. Date:12/1/94
-----------------------------
Tenant: SERENA CONSULTING, INCORPORATED, a California corporation
By: /s/ Douglas D. Troxel Date: 94/11/21
---------------------------
<PAGE>
Amendment to that certain
Lease dated August 15, 1994, together with its Addendum and Second Addendum,
copies of which are attached hereto and made a part hereof, between Waterfront
Tower Partners, L.P., Landlord and SERENA Software International formerly known
as SERENA Consulting, Incorporated, Tenant.
Now therefore:
The above referenced Lease and the Addendums thereto remain in full force and
effect, except as herein set forth:
1. An additional 1,738 square feet of rentable space is hereby added to
the presently contracted 15,594 square feet, for a total of 17,322 square feet
of rentable office space and is further shown on Exhibit A attached hereto.
2. A new rental period (term) of 60 months will commence for the entire
space upon the occupancy date of the new space (1,738 sq. ft). Said occupancy
date is estimated to be on or about August 1, 1996. Actual occupancy date is
AUG 1, 1996
3. The new rent schedule will commence upon the occupancy date of the new
space as follows:
<TABLE>
<CAPTION>
Month of Term Monthly Rent
<S> <C>
1-6 $23,053.00
7-18 23,919.60
19-30 24,786.20
30-41 26,432.50
42-53 27,299.10
54-60 28,165.70
</TABLE>
4. The new space will be improved with Landlords Standard Tenant
Improvements as shown on final plans approved by both parties and made a part
hereof. Unless otherwise provided for in said plans, Landlord will complete work
at Landlord's expense.
5. An additional Security Deposit of $2,780.00 shall be paid by Tenant to
Landlord upon execution of this Amendment by both Parties.
6. Direct Expense Base year to be 1996. Tenant's percentage of building
space is 17.3%.
7. Landlord is not represented by a Broker and is not liable for any
brokerage fees unless otherwise provided herein.
We the undersigned, hereby agree to the terms and conditions herein set forth.
Date: 05/10/96 Date: 5/21/96
-------- --------
Tenant:
SERENA Software International, Waterfront Tower Partners L.P.
formerly known as SERENA Consulting, by Peninsula Office Mgmt. Inc.
Incorporated General Partner
by /s/ Douglas D. Troxel by /s/ Angelo A. Orphan
-------------------- --------------------
by____________________ by_____________________
<PAGE>
EXHIBIT A
---------
THE PREMISES
------------
[TO BE ATTACHED]
[IMAGES OMITTED]
<PAGE>
SECOND AMENDMENT to that certain Lease dated August 15, 1994, together
with its Addendum, Second Addendum and First Amendment dated May 10, 1996,
copies of which are attached hereto and made a part hereof, between Waterfront
Tower Partners, L.P. Landlord and SERENA Software International, formerly known
as SERENA Consulting, Incorporated. Tenant.
Now therefore:
The above referenced Lease, its addendums and First Amendment thereto remain in
full force and effect except as herein set forth:
1. An additional 4,546 square feet of rentable space is hereby added to
the presently contracted 17,322 square feet for a total of 21,868 square feet.
Said 4,546 square feet is located on the third floor at 500 Airport Boulevard,
Burlingame, California, 94010, known as Suite 318 and is shown on Exhibit A
attached hereto. Estimated occupancy date is October 1, 1996. Actual occupancy
date is NOVEMBER 1, 1996.
2. This lease for the additional 4,546 square feet will be coterminous
with the lease terms set forth in the above referenced First Amendment. The rent
schedule for additional 4,546 square feet will be as follows:
<TABLE>
<CAPTION>
MONTHLY OF TERM MONTHLY RENT
<S> <C>
1 - 12 $7,273.60 ($1.60/sq.ft.)
13 - 24 $7,500.90 ($1.65/sq.ft.)
25 - 36 $7,728.20 ($1.70/sq.ft.)
37 - 40 $7,955.50 ($1.75/sq.ft.)
Bal. of Term $8,182.80 ($1.80/sq.ft.)
</TABLE>
A summary of the rent schedule for the total square footage of 21,868 is
attached as Exhibit 'B'. This summary will blend the above rent schedule with
existing rent payments and will be modified to conform with the date of
occupancy of Suite 318 and go into effect as of said occupancy date.
3. The new space will be improved with Landlords Standard Tenant
Improvements as shown on final plans approved by both parties and made a part
hereof. Unless otherwise provided for in said plans, Landlord will complete work
at Landlords expense.
4. An additional Security Deposit of $7,273.60 shall be paid by Tenant to
Landlord upon execution of this Amendment by both parties.
5. Direct expense Base Year to be 1996. Tenant's percentage of building
space upon occupancy of 4,546 square feet will be 21.8%.
6. Landlord is not represented by a Broker and is not liable for any
brokerage fees unless otherwise provided herein.
7. Upon occupancy of the additional 4,546 square feet an additional four
covered parking spaces will be reserved for Tenant at a monthly rental of
$100.00. This brings the total of tenant's covered parking spaces provided as
referenced in Exhibit E of our Lease to 15. Tenant shall be responsible for the
cost of the signs which designate each additional space.
We the undersigned, hereby agree to the terms and conditions herein set forth.
Date: August 20, 1996 Date: 8/24/96
--------------- -------
Tenant Landlord
SERENA Software International Waterfront Tower Partners L.P.
formerly known as SERENA by Peninsula Office Mgmt. Inc.
Consulting Incorporated General Partner
by /s/ Douglas D. Troxel by /s/ Angelo A. Orphan
---------------------- -----------------------
Douglas D. Troxel Angelo A. Orphan
President and CEO General Partner & President
<PAGE>
EXHIBIT A
[IMAGES OMITTED]
<PAGE>
EXHIBIT B
SERENA SOFTWARE LEASE
TERM AND MONTHLY RENT SUMMARY
<TABLE>
<CAPTION>
Original Square Footage Add Space 2nd Floor Add Space 3rd Floor Monthly Rent
Term Dates No. of Months 15,594 1,738 4,546 21,878
<S><C>
02/01/95-01/31/96 12 $1.25 $19,492.50 $19,492.50
02/01/96-07/31/96 5 $1.30 $20,272.20 $20,272.20
Beginning New 60 Month Lease Term
08/01/96-10/31/96 3 $1.30 $20,272.20 $1.60 $2,780.80 $23,053.00
11/01/96-01/31/97 3 $1.30 $20,272.20 $1.60 $2,780.80 $1.60 $7,273.60 $30,326.60
02/01/97-09/30/97 8 $1.35 $21,051.90 $1.65 $2,867.70 $1.60 $7,273.60 $31,193.20
10/01/97-01/31/98 4 $1.35 $21,051.90 $1.65 $2,867.70 $1.65 $7,500.90 $31,420.50
02/01/98-09/30/98 8 $1.40 $21,831.60 $1.70 $2,954.60 $1.65 $7,500.90 $32,287.10
10/01/98-01/31/99 4 $1.40 $21,831.60 $1.70 $2,954.60 $1.70 $7,728.20 $32,514.40
02/01/99-09/30/99 8 $1.50 $23,391.00 $1.75 $3,041.50 $1.70 $7,728.20 $34,160.70
10/01/99-01/31/00 4 $1.50 $23,391.00 $1.75 $3,041.50 $1.75 $7,955.50 $34,388.00
02/01/00-09/30/00 8 $1.55 $24,170.70 $1.80 $3,128.40 $1.75 $7,955.50 $35,254.60
10/01/00-01/31/01 4 $1.55 $24,170.70 $1.80 $3,128.40 $1.80 $8,182.80 $35,481.90
02/01/01-07/31/01 6 $1.60 $24,950.40 $1.85 $3,215.30 $1.80 $8,182.80 $36,348.50
</TABLE>
<PAGE>
THIRD AMENDMENT to that certain
Lease dated August 15, 1994 together with its Addendum, Second Addendum, First
Amendment and Second Amendment thereto, copies of which are attached hereto and
made a part hereof, between Waterfront Tower Partners, L.P. Landlord and SERENA
Software International, formerly known as SERENA Consulting, Incorporated,
Tenant.
Now therefore:
The above referenced Lease, its Addendums and Amendments thereto remain in full
force and effect except as herein set forth:
1. An additional 442 square feet is hereby added to the presently
contracted 21,878 square feet for a total of 22,320 square feet. Said 442 square
feet is located on the third floor (Suite 301) of 500 Airport Blvd. Burlingame,
California, 94010 and is shown on Exhibit "A" attached hereto. Occupancy date is
May 15, 1997.
2. This amendment for the additional 442 square feet will be co-terminus
with the lease terms set forth in the above referenced First Amendment. The rent
schedule of the additional 442 square feet will be as follows:
<TABLE>
<CAPTION>
Months Rent/mo. Sq. ft rate
<S> <C> <C>
1-12 $884.00 $2.00
13-24 911.00 2.06
25-36 937.00 2.12
37-48 964.00 2.18
48 to 7/31/2001 995.00 2.25
</TABLE>
A summary of the rent schedule for the total square footage of 22,320 is
attached as Exhibit "B". This summary will blend the above rent schedule with
existing rent payments and will be modified to conform with the date of
occupancy of Suite 301 and go into effect as of said occupancy date.
3. The new space will be improved with Landlords Standard Tenant
Improvements. Unless otherwise provided for in said plans, Landlord will
complete work at Landlords expense.
4. An additional Security Deposit of $995.00 shall be paid by Tenant to
Landlord upon execution of this Amendment by both parties.
5. Direct expenses Base Year to be 1997. Tenant's percentage of building
space upon occupancy of 442 square feet with be 22.3%.
6. Landlord is not represented by a Broker and is not liable for any
brokerage fees unless otherwise provided herein.
We the undersigned, hereby agree to the terms and conditions herein set forth.
Date: 1997/5/27 Date: 6/3/97
Tenant Landlord
SERENA Software International Waterfront Tower Partners L.P.
formerly known as SERENA by Peninsula Office Mgmt. Inc.
Consulting Incorporated General Partner
by /s/ Douglas D. Troxel by /s/ Angelo A. Orphan
------------------------- -------------------------
Douglas D. Troxel Angelo A. Orphan
Chief Technical Officer & General Partner and President
Chairman of the Board
<PAGE>
Correction of typographical error to:
Amendment dated May 10, 1996
- - - - - Item number 1, line 2 should read "17,332 square feet", not "17,322 square
feet"
Second Amendment dated August 20, 1996
- - - - - Item number 1, line 2 should read "17,332 square feet", not "17,322 square
feet"
- - - - - Item number 1, line 3 should read "21,878 square feet", not "21,868 square
feet"
THIRD AMENDMENT
<PAGE>
Exhibit A
[IMAGES OMITTED]
<PAGE>
EXHIBIT B
SERENA SOFTWARE LEASE
TERM AND MONTHLY RENT SUMMARY
<TABLE>
<CAPTION>
Original Sq. Ft. Add Space 2nd Flr Add Space 3rd Flr Add DT's Suite Monthly Rent
Term Dates No. Months 15,594 1,738 4,546 442 22,320
<S><C>
02/01/95 - 01/31/96 12 $1.25 $19,492.50 $19,492.50
02/01/96 - 07/31/96 5 $1.30 $20,272.20 $20,272.20
Beginning New 60 Month Lease Term
08/01/96 - 10/31/96 3 $1.30 $20,272.20 $1.60 $2,780.80 $23,053.00
11/01/96 - 01/31/97 3 $1.30 $20,272.20 $1.60 $2,780.80 $1.60 $7,273.60 $30,326.60
02/01/97 - 04/31/97 3 $1.35 $21,051.90 $1.65 $2,867.70 $1.60 $7,273.60 $31,193.20
05/01/97 - 09/30/97 5 $1.35 $21,051.90 $1.65 $2,867.70 $1.60 $7,273.60 $2.00 $884.00 $32,077.20
10/01/97 - 01/31/98 4 $1.35 $21,051.90 $1.65 $2,867.70 $1.65 $7,500.90 $2.00 $884.00 $32,304.50
02/01/98 - 09/30/98 8 $1.40 $21,831.60 $1.70 $2,954.60 $1.65 $7,500.90 $2.06 $910.52 $33,197.62
10/01/98 - 01/31/99 4 $1.40 $21,831.60 $1.70 $2,954.60 $1.70 $7,728.20 $2.06 $910.52 $33,424.92
02/01/99 - 09/30/99 8 $1.50 $23,391.00 $1.75 $3,041.50 $1.70 $7,728.20 $2.12 $937.04 $35,097.74
10/01/99 - 01/31/00 4 $1.50 $23,391.00 $1.75 $3,041.50 $1.75 $7,955.50 $2.12 $937.04 $35,325.04
02/01/00 - 09/30/00 8 $1.55 $24,170.70 $1.80 $3,128.40 $1.75 $7,955.50 $2.18 $963.56 $36,218.16
10/01/00 - 01/31/01 4 $1.55 $24,170.70 $1.80 $3,128.40 $1.80 $8,182.80 $2.18 $963.56 $36,445.46
02/01/01 - 07/31/01 6 $1.60 $24,950.40 $1.85 $3,215.30 $1.80 $8,182.80 $2.25 $994.50 $37,343.00
</TABLE>
<PAGE>
FOURTH AMENDMENT to that certain
Lease dated August 15, 1994 along with its Addendum, Second Addendum, First
Amendment, Second Amendment, and Third Amendment (herein collectively the
"LEASE") between Waterfront Tower Partners, L.P., a California limited
partnership, Landlord, and SERENA Software Consulting, Inc., a California
corporation, Tenant.
NOW thereof:
The above referenced Lease, its Addendums and Amendments are reaffirmed by the
Landlord and Tenant and thereto shall remain in full force and effect without
any modifications except as herein set forth in this Fourth Amendment:
1. The Expiration Date shall be extended from the original date of July
31, 2001 to December 31, 2001 for 13,878 rentable square feet of office, a
portion of the Premises comprising of: a) 8,890 rentable square feet on the
second floor on the westerly side of the Building as part of the Premises
specified in the Lease, b) 4,546 rentable square feet on the third floor of the
Building as part of the Premises specified in the Second Amendment to the Lease,
and c) 442 rentable square feet on the third floor of the Building specified as
part of the Premises in the Third Amendment to the Lease, all delineated in
EXHIBIT H attached herein.
2. Within sixty (60) days of an Expiration Date for the 13,878 rentable
square feet in which Tenant is required on such Expiration Date to surrender the
Premises to the Landlord in accordance with Section 19. of the new lease form,
in the event there is a disagreement between the Landlord and Tenant on the
floor layout of the rentable square feet of the Premises required to be
surrendered by the Tenant to the Landlord, Landlord shall engage the services of
an architect whose measurement of such floor layout required to be surrendered
shall conclusively resolve such disagreement.
3. The Expiration Date shall be extended from the original date of July
31, 2001 to December 31, 2002 for 8,442 rentable square feet, a portion of the
Premises comprising of: a) 6,704 rentable square feet on the second floor on the
easterly side of the Building as part of the Premises specified in the Lease
and, b) 1,738 rentable square feet on the second floor of the Building specified
as part of the Premises in the First Amendment to the Lease, all delineated in
EXHIBIT H herein. In the event there is a disagreement between the Landlord and
the Tenant on the floor layout of the rentable square feet to be included in the
8,442 rentable square feet, then such disagreement shall be resolved in the same
manner as stipulated in condition "2." above.
4. Tenant at Landlord's request with written notice to Tenant shall
properly and promptly execute and deliver to Landlord, within five (5) business
days after Landlord has provided such notice:
(a) a new and separate lease form and/or Basic Lease Information form
for the 13,878 rentable square feet of the Premises expiring on July 31, 2001,
and;
(b) a new and separate lease form and/or Basic Lease Information form
for the 8,442 rentable square feet of the Premises expiring on July 31, 2001.
1
<PAGE>
5. Such lease form shall be the same as and contain all the terms and
conditions of the lease which Tenant has executed for the 3,360 rentable square
feet on third floor, except for only the following modifications to such new
lease form:
(a) The Monthly Rent shall be increased to $2.75 per rentable square
foot per month or Thirty-Eight Thousand One Hundred Sixty-Four
and 50/100 Dollars ($38,164.50) per month for five months from
August 1, 2001 to the extended Expiration Date of the Lease of
December 31, 2001 for the 13,878 rentable square feet of the
Premises;
(b) The Monthly Rent shall be increased to: (i)$2.75 per rentable
square foot per month or Twenty-Three Thousand Two Hundred
Fifteen and 50/100 Dollars ($23,215.50) per month for the first
twelve months of from August 1, 2001 to July 31, 2002, and (ii)
$2.85 per rentable square foot per month or Twenty-Four Thousand
and Fifty-Nine and 70/100 Dollars ($24,059.70) per month for five
months from August 1, 2002 to the extended Expiration Date of the
Lease of December 31, 2002 for the 8,442 rentable square feet of
the Premises;
(c) On August 1, 2001, Tenant shall deposit with Landlord a Security
Deposit which shall increase the Security Deposit to Thirty-Eight
Thousand One Hundred Sixty-Four and 00/100 Dollars ($38,164.00)
deducted by the Security Deposit prorated which Tenant has
already deposit with Landlord related to the 13,878 rentable
square feet of the Premises;
(d) On August 1, 2001, Tenant shall deposit with Landlord a Security
Deposit which shall increase the Security Deposit to Twenty-Four
Thousand Fifty-Nine and 00/100 Dollars ($24,059.00) deducted by
the Security Deposit prorated which Tenant has already deposit
with Landlord related to the 8,442 rentable square feet of the
Premises;
(e) In the new lease form for the 13,878 rentable square feet of the
Premises; the Tenant's Share shall be 13.87%
(f) In the new lease form for 8,442 rentable square feet of the
Premises, the Tenant's Share shall be 8.43%
(g) In the new lease form for both the 13,878 rentable square feet
and 8,442 rentable square feet of the Premises, the Base Year
shall 2000;
(h) In the new lease form for the 13,878 rentable square feet, in
Section 36., Option for Extension (Renewal) of Lease Term, on
line three, "Three Hundred and Sixty (360) days" is replaced with
"Two Hundred and Ten (210) days", and on line five of the same
section, "Two Hundred and Seventy (270) days" is replaced with
"One Hundred and Eighty (180) days".
6. Section 36. of the new lease form shall supersede in its entirety the
language in the old LEASE related to the option for the extension of the lease
term, and in the event of any conflict between the two leases, Section 36. of
the new lease form shall prevail.
7. Such new lease form for the 13,878 rentable square feet and 8,442
rentable square feet of the Premises containing the herein terms and conditions
which has been executed by Landlord and Tenant shall supersede in its entirety
the LEASE as referenced above.
2
<PAGE>
8. This Fourth Amendment is conditional and shall become effective only
upon the execution by the Landlord and Tenant of the May 18, 1998 lease for the
3,360 square feet of office rentable square feet in the Building.
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., A SERENA SOFTWARE INTERNATIONAL, INC.,
California limited partnership, a California corporation,
By: Peninsula Office Management, Inc., By: /s/ Richard A. Doerr
a California corporation, General ---------------------
Partner Its. CEO, President
By: /s/ Angelo Orphan
-----------------------
Angelo Orphan, President
3
<PAGE>
LEASE AGREEMENT
BETWEEN
WATERFRONT TOWER PARTNERS, L.P.
AS "LANDLORD"
AND
SERENA SOFTWARE INTERNATIONAL, INC.
AS "TENANT"
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. PREMISES; PROJECT; COMMON AREAS. 4
1.1 Premises. 4
1.2 Project. 4
1.3 Common Areas. 4
2. TERM; POSSESSION 4
2.1 Term. 4
2.2 Delivery of Possession. 5
2.3 Early Entry. 5
3. RENT. 5
3.1 Base Rent 5
3.2 Additional Rent: Increases in Operating Costs and Taxes 5
(a) Definitions 5
(b) Additional Rent 7
3.3 Parking Rent. 8
3.4 Payment of Rent 9
4. SECURITY DEPOSIT 9
5. USE AND COMPLIANCE WITH LAWS 9
5.1 Use 9
5.2 Hazardous Materials 10
(a) Definitions 10
(b) Tenant's Covenants 10
(c) Compliance 11
(d) Landlord's Rights 11
(e) Tenant's Indemnification 11
6. ALTERATIONS 12
6.1 Restrictions on Tenant's Alterations. 12
6.2 Plans and Permits. 12
6.3 Liens. 12
6.4 Trade Fixtures. 13
6.5 Signs. 13
7. MAINTENANCE AND REPAIRS 13
7.1 Tenant's Obligations 13
7.2 Landlord's Obligations. 13
7.3 Alteration Rights Reserved to Landlord. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8. TENANTS TAXES 14
9. UTILITIES AND SERVICES 15
9.1 Description of Services 15
9.2 Payment for Additional Utilities and Services 15
9.3 Interruption of Services 15
10. EXCULPATION AND INDEMNIFICATION 16
10.1 Exculpation of Landlord 16
10.2 Indemnification of Landlord 17
10.3 Survival of Obligations. 17
11. INSURANCE 17
11.1 Tenant's Insurance 17
(a) Liability Insurance 17
(b) Personal Property Insurance 18
(c) Workmen's Compensation Insurance 18
(d) Business Interruption/Extra Expense Insurance 18
(e) Other Coverage 18
(f) Insurance Criteria 18
(g) Increase in Amount of Insurance 18
(h) Insurance Provisions 18
(i) Evidence of Coverage 19
11.2 Landlord's Insurance 19
11.3 Waiver of Subrogation 19
12. DAMAGE OR DESTRUCTION 19
12.1 Landlord's Duty to Repair 19
12.2 Landlord's 20
12.3 Tenant's Right to Terminate 20
12.4 Waiver 20
13. CONDEMNATION 21
13.1 Definitions 21
13.2 Effect on Lease 21
13.3 Restoration 21
13.4 Abatement and Reduction of Rent 22
13.5 Awards 22
13.6 Waiver 22
14. ASSIGNMENT AND SUBLETTING 22
14.1 Landlord's Consent Required 23
14.2 Procedure for Obtaining Consent 23
14.3 Excess Consideration 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
14.4 No Release Of Tenant 24
14.5 Expenses and Attorney's Fees 24
14.6 Effectiveness of Transfer 24
14.7 Landlord's Right to Space 24
14.8 Assignment of Sublease Rents 24
14.9 Assignment and Subletting of Parking Spaces 24
15. DEFAULT AND REMEDIES 25
15.1 Events of Default 25
15.2 Remedies 26
16. LATE CHARGE AND INTEREST 27
16.1 Late Charge 27
16.2 Interest 27
17. WAIVER 27
18. ENTRY, INSPECTION AND CLOSURE 27
19. SURRENDER AND HOLDING OVER 28
19.1 Surrender 28
19.2 Holding Over 28
20. ENCUMBRANCES 29
20.1 Subordination 29
20.2 Mortgagee Protection 29
20.3 Lease Modifications 29
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS 29
21.1 Estoppel Certificates. 29
21.2 Financial Statements 30
22. NOTICES 31
23. ATTORNEYS' FEES 31
23.1 Disputes between Landlord and Tenant 31
23.2 Other Litigation 31
24. QUIET POSSESSION 31
25. SECURITY MEASURES. 31
26. FORCE MAJEURE 32
27. RULES AND REGULATIONS. 32
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
28. LANDLORD'S LIABILITY 32
29. CONSENTS AND APPROVALS. 32
29.1 Determination in Good Faith 32
29.2 No Liability Imposed on Landlord 33
30. BROKERS 33
31. RELOCATION OF PREMISES. 33
32. ENTIRE AGREEMENT 34
33. PARKING RULES 34
34. GENERAL 34
34.1 Captions 34
34.2 Executed Copy 34
34.3 Time. 34
34.4 Severability. 35
34.5 Choice of Law. 35
34.6 Gender; Singular; Plural. 35
34.7 Binding Effect. 35
34.8 Waiver. 35
34.9 Exhibits. 35
35. AUTHORITY 35
36. OPTION FOR EXTENSION (RENEWAL) OF LEASE TERM 50
37. EXPANSION SPACE 52
38. VALIDITY OF LEASE 54
39. MODIFICATIONS 54
40. TENANT REPRESENTATIONS REGARDING ALTERNATIONS 54a
</TABLE>
iv
<PAGE>
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
LEASE DATE: For identification purposes only, the date of this
Lease is MAY 18, 1998.
LANDLORD: Waterfront Tower Partners, L.P., a California limited
partnership
TENANT: SERENA Software International, Inc., a California
corporation
PROJECT: Waterfront Plaza
BUILDING: 500 Airport Blvd., Burlingame, California 94010
RENTABLE AREA OF BUILDING: 99,452 square feet
PREMISES: Floor: THIRD
Suite Number: 300
Rentable area: 3,360 square feet ("RSF")
TERM: 54 Months and 23 Days
SCHEDULED COMMENCEMENT
DATE: JUNE 8, 1998
EXPIRATION DATE: December 31, 2002
OPTION FOR EXTENSION
(RENEWAL) OF LEASE TERM: One Period of 60 months
BASE RENT: June 8, 1998 to June 30, 1998: Seven Thousand Four
Hundred Seventy Dollars ($7,470.00)
Year 1*:$2.90 per rsf, or One Hundred Sixteen Thousand Nine
Hundred Twenty-Eight and 00/100 Dollars ($116,928.00)
Year 2:$3.00 per rsf, or One Hundred Twenty Thousand Nine
Hundred Sixty and 00/100 Dollars ($120,960.00)
Year 3:$3.10 per rsf, or One Hundred Twenty-Four Thousand
Nine Hundred Ninety-Two and 00/100 Dollars ($124,992.00)
Year 4:$3.20 per rsf, or One Hundred Twenty-Nine Thousand
Twenty-Four and 00/100 Dollars ($129,024.00)
Year 5:$3.30 per rsf, or Sixty-Six Thousand Five Hundred
Twenty-Eight and 00/100 Dollars ($66,528.00)**
* Commencing July 1, 1998
**Six (6) months @ Eleven Thousand Eighty-Eight and 00/100
Dollars ($11,088.00) per month.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
BASE YEAR: The calendar year 1998, reset to the calendar year of
Extension Commencement Date
TENANT'S SHARE: 3.34% (rsf/Rentable Area of Building; adjusted and increased
proportionately to include any Expansion Space leased to
Tenant)
SECURITY DEPOSIT: Eleven Thousand Eighty-Eight and 00/100 Dollars ($11,088.00)
PARKING SPACES:
SUBTERRANEAN: None at $ 30.00 per month
LANDLORD'S ADDRESS FOR
PAYMENT OF RENT: Waterfront Tower Partners, L.P.
c/o Rear Gear
891-108 Laurelwood Rd.
Santa Clara, CA 95054
BUSINESS HOURS: 8:00 a.m. to 6:00 p.m. Monday through Friday excluding
national Holidays
STANDARD ELECTRICAL USAGE: 1.20 kilowatt-hours per rentable square foot per month
LANDLORD'S ADDRESS FOR
NOTICES: Waterfront Tower Partners, L.P.
c/o Rear Gear
891-108 Laurelwood Rd.
Santa Clara, CA 95054
TENANT'S ADDRESS FOR
NOTICES: SERENA SOFTWARE INTERNATIONAL, INC.
ATTN: LEGAL DEPARTMENT
500 AIRPORT BLVD.. SUITE 200
BURLINGAME, CA 94010
BROKER: INVESTORS MORTGAGE & REALTY CORP.
GUARANTOR(S): NONE
PROPERTY MANAGER: ANGELO ORPHAN, PENINSULA OFFICE MANAGEMENT, INC.
</TABLE>
2
<PAGE>
ADDITIONAL PROVISIONS:
<TABLE>
<CAPTION>
EXHIBITS:
---------
<S> <C>
Exhibit A:* The Premises
Exhibit B: Construction Rider (Intentionally Omitted, Pages 38-41, Not
Applicable)
Exhibit C: Commencement Date Memorandum
Exhibit C.1: Commencement Date Memorandum for Expansion Space
Exhibit D: Building Rules
Exhibit E: Parking Rules and Regulations
Exhibit F: Additional Provisions
Exhibit G: Fourth Amendment to Lease Dated August 15, 1994 between
Landlord and Tenant
Exhibit H:** Space Layout for Extension of Lease Term on and Dividing 22,320
Square Feet Leased by Tenant into two Expiration Dates of
December 31, 2001 and December 31, 2002
</TABLE>
* Pages 37 - 37a.
** Pages 58-60.
The Basis Lease Information set forth above is incorporated into and made a part
of the Lease and capitalized terms shall be defined terms in the Lease. In the
event of any conflict between any Basic Lease Information and the Lease, the
Lease shall control.
IN WITNESS WHEREOF, the Landlord and Tenant described above have
executed this set of Basic Lease Information as of the Lease Date set forth
above.
<TABLE>
<S> <C>
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., A SERENA SOFTWARE INTERNATIONAL, INC.,
California limited partnership, a California corporation,
/s/ Richard A. Doen
By: Peninsula Office Management, Inc., By:
a California Corporation, General ------------------------
Partner Its: CEO; President
/s/ Angelo Orphan
By:
------------------------------
Angelo Orphan, President
</TABLE>
3
<PAGE>
LEASE AGREEMENT
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("LANDLORD"), and the Tenant identified in the Basic Lease
Information ("TENANT"). Landlord and Tenant hereby agree as follows:
1. PREMISES; PROJECT; COMMON AREAS.
1.1 PREMISES. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, upon the terms and subject to the conditions of this
Lease, the office space identified in the Basic Lease Information (the
"PREMISES") in the Building identified in the Basic Lease Information (the
"BUILDING"). The approximate configuration and location of the Premises is
shown on EXHIBIT A. Landlord and Tenant agree that the rentable area of the
Premises (the "RENTABLE AREA") for all purposes under this Lease shall be the
Rentable Area specified in the Basic Lease Information.
1.2 PROJECT. The Project identified in the Basic Lease Information
(the "PROJECT") includes the Building, the parking facilities serving the
Building (the "PARKING FACILITY"), and the parcel(s) of Land on which the
Building and the Parking Facility are situated (the "LAND"). The Building,
the Parking Facility and the Land are sometimes collectively referred to in
this Lease as the "PROPERTY."
1.3 COMMON AREAS. For the purposes of this Lease the "COMMON
AREAS" shall be all areas and facilities appurtenant to the Building provided
and designated by Landlord for the general use and convenience of Tenant and
other tenants and occupants of the Building, including, without limitation,
lobbies, interior hallways, entrances, stairways, elevators, designated
parking areas, sidewalks, driveways, landscaped areas, service areas, trash
disposal facilities, and similar areas and facilities, subject to the
reasonable rules and regulations and changes therein from time to time
promulgated by landlord governing the use of the Common Areas. Landlord shall
at all times have exclusive control of the Common Areas and may at any time
temporarily close any part thereof, exclude and restrain anyone from any part
thereof, except the bona fide customers, employees and invitees of tenants
who use the Common Areas in accordance with the rules and regulations as
Landlord may from time to time promulgate, and may change the configuration
or location of the Common Areas. In exercising any such rights, Landlord
shall make a reasonable effort to minimize any disruption of Tenant's
business.
2. TERM; POSSESSION.
2.1 TERM. The term of this Lease (the "TERM") shall commence on
the Commencement Date described below and, unless sooner terminated, shall
expire on the Expiration Date set forth in the Basic Lease Information (the
"EXPIRATION DATE"). The "COMMENCEMENT DATE" shall be
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the Scheduled Commencement Date set forth in the Basic Lease Information (the
"SCHEDULED COMMENCEMENT DATE"). When the Commencement Date has been
established, Landlord and Tenant shall confirm the Commencement Date and
Expiration Date in writing in the "COMMENCEMENT DATE MEMORANDUM" attached as
EXHIBIT C. As used in this Lease, the first "LEASE YEAR" shall be the period
from (and including) the Commencement Date through (and including) the last
day of the calendar month in which the first anniversary of the Commencement
Date falls, and each period of twelve full consecutive calendar months
thereafter shall be a subsequent Lease Year.
2.2 DELIVERY OF POSSESSION. If Landlord is unable to deliver
possession of the Premises to Tenant on the Scheduled Commencement Date,
Landlord shall not be subject to liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Tenant. In such case,
Tenant shall not be obligated to pay rent or perform any other obligations of
Tenant under this Lease, except as may otherwise be provided for herein,
until possession of the Premises is tendered to Tenant; provided, however, if
Landlord has not delivered possession of the Premises within ninety (90) days
from the Scheduled Commencement Date, subject to force majeure and any Tenant
Delays, Tenant may, at Tenant's option with notice in writing to Landlord
within ten (10) day thereafter, cancel this Lease. If such notice is not
received by Landlord within such ten (10) day period, Tenant's right to
cancel this Lease shall terminate and be of no further force and effect.
2.3 EARLY ENTRY. If Tenant is permitted to occupy the Premises
prior to the Commencement Date for the purpose of fixturing or any other
purpose permitted by Landlord, such early entry shall be at Tenant's sole
risk and subject to all the terms and provisions hereof, except for the
payment of any Base Rent or Additional Rent which shall commence on the
Commencement Date. Landlord shall have the right to impose such additional
conditions on Tenant's early entry as Landlord shall deem appropriate, and
shall further have the right to require that Tenant execute an early entry
license agreement containing such conditions prior to Tenant's early entry.
3. RENT.
3.1 BASE RENT. Tenant agrees to pay to Landlord the Base Rent set
forth in the Basic Lease Information, without prior notice or demand, on the
first day of each and every calendar month during the Term, except that Base
Rent for the first full calendar month in which Base Rent is payable shall be
paid upon execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for
any partial month at the beginning or end of the Term shall be prorated based
on the actual number of days in the month.
3.2 ADDITIONAL RENT: INCREASES IN OPERATING COSTS AND TAXES.
(a) DEFINITIONS.
(1) "BASE OPERATING COSTS" means Operating Costs for the
calendar year
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specified as the "BASE YEAR" in the Basic Lease Information (excluding
therefrom, however, any Operating Costs of a nature that would not ordinarily
be incurred on an annual, recurring basis).
(2) "BASE TAXES" means Taxes for the calendar year
specified as the Base Year in the Basic Lease Information.
(3) "OPERATING COSTS" means all costs of managing,
operating, maintaining and repairing the Property, computed on an accrual
basis, including all costs, expenditures, fees and charges for: (A)
operation, maintenance and repair of the Property (including but not limited
to maintenance, repair and replacement of glass, the roof covering or
membrane, and landscaping); (B) utilities and services which are not
separately metered to Premises (including telecommunications facilities and
equipment, recycling programs and trash removal), and associated supplies and
materials; (C) compensation (including employment taxes and fringe benefits)
for all persons who perform duties in connection with the operation,
maintenance and repair of the Property; (D) all supplies and materials used
in the operation, repair, replacement and maintenance of the Building and
Common Areas; (E) property (including coverage for earthquake and flood if
required to be carried by Landlord), liability, rental income and other
insurance relating to the Property, and expenditures for deductible amounts
paid under such insurance; (F) licenses, permits and inspections; (G)
complying with the requirements of any law, statute, ordinance or
governmental rule or regulation or any orders pursuant thereto (collectively
"LAWS"); (H) amortization of capital improvements required to comply with
Laws, or which are intended to reduce Operating Costs or improve the utility,
efficiency or capacity of any Building System, with interest on the
unamortized balance at the rate paid by Landlord on funds borrowed to finance
such capital improvements (or, if Landlord finances such improvements out of
Landlord's funds without borrowing, the rate that Landlord would have paid to
borrow such funds, as reasonably determined by Landlord), over such useful
life as Landlord shall reasonably determine; (I) an office in the Building
for the management of the Project, including expenses of furnishing and
equipping such office only once every five years and the rental value of any
space, not to exceed Six Hundred Eighty-Four (684) rentable square feet,
occupied for such purposes; (J) property management fees for the Property (if
such fees are charged by the Landlord or any of its affiliated or associated
entity, then such fees shall not exceed property management fees which would
be charged by a professional property management entity for managing projects
in the Project's vicinity that are comparable to the Project; (K) accounting,
legal and other professional services incurred in connection with the
operation of the Project and the calculation of Operating Costs and Taxes;
(L) a reasonable allowance for depreciation on machinery and equipment used
to maintain the Property and on other personal property owned by Landlord in
the Property (including window coverings and carpeting in common areas); (M)
contesting the validity or applicability of any Laws that may affect the
Property; (N) the Building's share of any shared or common area maintenance
fees and expenses; and (O) any other expense or charge, whether or not
hereinbefore described, which in accordance with generally accepted property
management practices would be considered an expense of managing, operating,
maintaining and repairing the Property.
Operating Costs shall not include (i) capital improvements (except
as otherwise provided above); (ii) costs of special services rendered to
individual tenants (including Tenant) for which a special charge is made;
(iii) interest and principal payments on loans or indebtedness secured by the
Project; (iv) costs of improvements for Tenant or other tenants of the
Building; (v) costs of services or other benefits of a type which are not
available to Tenant but which are available to other tenants or
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occupants, and costs for which Landlord is reimbursed by other tenants of the
Building other than through payment of tenants' shares of increases in
Operating Costs and Taxes; (vi) leasing commissions, attorneys' fees and
other expenses incurred in connection with leasing space in the Building or
enforcing such leases; (vii) depreciation or amortization, other than as
specifically enumerated in the definition of Operating Costs above; and
(viii) fines or penalties incurred due to Landlord's violation of any Law.
(4) "TAXES" means: all real property taxes and general,
special or district assessments or other governmental impositions, of
whatever kind, nature or origin, imposed on or by reason of the ownership or
use of the Property; governmental charges, fees or assessments for transit or
traffic mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other
governmental service or purported benefits to the Property; personal property
taxes assessed on the personal property of Landlord used in the operation of
the Project; service payments in lieu of taxes and taxes and assessments of
every kind and nature whatsoever levied or assessed in addition to, in lieu
of or in substitution for existing or additional real or personal property
taxes on the Property or the personal property described above; any increases
in the foregoing caused by changes in assessed valuation, tax rate or other
factors or circumstances; and the reasonable cost of contesting by
appropriate proceedings the amount or validity of any taxes, assessments or
charges described above. To the extent paid by Tenant or other tenants as
"TENANT'S TAXES" (as defined in Section 8), shall be excluded from Taxes.
(5) "TENANT'S SHARE" means the Rentable Area of the
Premises divided by the total Rentable Area of the Building, as set forth in
the Basic Lease Information. If the Rentable Area of the Building is changed
or the Rentable Area of the Premises is changed by Tenant's leasing of
additional space hereunder or for any other reason, Tenant's Share shall be
adjusted accordingly.
(b) ADDITIONAL RENT.
(1) Tenant shall pay Landlord as "ADDITIONAL RENT" for
each calendar year or portion thereof during the Term, Tenant's Share of the
sum of (x) the amount (if any) by which Operating Costs for the period exceed
Base Operating Costs, and (y) the amount (if any) by which Taxes for such
period exceed Base Taxes.
(2) Prior to the end of the Base Year and each calendar
year thereafter, Landlord shall notify Tenant of Landlord's estimate of
Operating Costs, Taxes and Tenant's Additional Rent for the following
calendar year. Commencing on the first day of January of each calendar year
and continuing on the first day of every month thereafter in such year,
Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated Additional
Rent. If Landlord thereafter estimates that Operating Costs or Taxes for such
year, will vary From Landlord's prior estimate, Landlord may revise the
estimate for such year and notify Tenant only once during the July month of
such year of the revised estimate (and Additional Rent shall thereafter be
payable based on the revised estimate).
(3) As soon as reasonably practicable after the end of
the Base Year and each calendar year thereafter, Landlord shall furnish
Tenant a statement with respect to such year, showing Operating Costs, Taxes
and Additional Rent for the year, and the total payments made by Tenant with
respect thereto. Unless Tenant raises any objections to Landlord's statement
within thirty (30) days after receipt of the same, such statement shall
conclusively be deemed correct and Tenant shall have no right thereafter to
dispute such statement or any item therein or the computation of Additional
Rent based thereon. If Tenant does object to such statement, Landlord shall
provide Tenant with
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reasonable verification of the figures shown on the statement and the parties
shall negotiate in good faith to resolve any disputes. If the parties are
unable to resolve such dispute in good faith within thirty (30) days, then
either party may submit the matter to binding arbitration pursuant to
Sections 1280 et seq. of the California Code of Civil Procedure. Any
objection of Tenant to Landlord's statement and resolution of any dispute
shall not postpone the time for payment of any amounts due Tenant or Landlord
based on Landlord's statement, nor shall any failure of Landlord to deliver
Landlord's statement in a timely manner relieve Tenant of Tenant's obligation
to pay any amounts due Landlord based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined
for the year exceeds the total payments made by Tenant on account thereof,
Tenant shall pay Landlord the deficiency within thirty (30) days of Tenant's
receipt of Landlord's statement. If the total payments made by Tenant on
account thereof exceed Tenant's Additional Rent as finally determined for the
year, Tenant's excess payment shall be credited toward the rent next due from
Tenant under this Lease. For any partial calendar year at the beginning or
end of the Term, Additional Rent shall be prorated on the basis of a 365-day
year by computing Tenant's Share of the increases in Operating Costs and
Taxes for the entire year and then prorating such amount for the number of
days during such year included in the Term. Notwithstanding the termination
of this Lease, Landlord shall pay to Tenant or Tenant shall pay to Landlord,
as the case may be, within ten (10) days after Tenant's receipt of Landlord's
final statement for the calendar year in which this Lease terminates, the
difference between Tenant's Additional Rent for that year, as finally
determined by Landlord, and the total amount previously paid by Tenant on
account thereof. If for any reason Base Taxes or Taxes for any year during
the Term are reduced, refunded or otherwise changed, Tenant's Additional Rent
shall be adjusted accordingly. The obligations of Landlord to refund any
overpayment of Additional Rent and of Tenant to pay any Additional Rent not
previously paid shall survive the expiration of the Term. Notwithstanding
anything to the contrary in this Lease, if there is at any time a decrease in
Taxes below the amount of the Taxes for the Base Year, then for purposes of
calculating Additional Rent for the year in which such decrease occurs and
all subsequent periods, Base Taxes shall be reduced to equal the Taxes for
the year in which the decrease occurs.
3.3 PARKING RENT. In addition to Base Rent and Additional Rent,
Tenant shall pay to Landlord the monthly parking rent (the "PARKING RENT"),
if any, identified in the Basic Lease Information. Such Parking Rent shall be
payable, without prior notice or demand, on the first day of each and every
calendar month during the Term. Parking Rent for any partial month at the
beginning or end of the Term shall be prorated based on the actual number of
days in the month.
3.4 PAYMENT OF RENT. All amounts payable or reimbursable by Tenant
under this Lease, including late charges and interest shall constitute rent
(collectively, "RENT") and shall be payable and recoverable as Rent in the
manner provided in this Lease. All sums payable to Landlord on demand under
the terms of the Lease shall be payable within five (5) days after notice
from Landlord of the amount due. All Rent shall be paid without offset,
recoupment or deduction in lawful money of the United States of America to
Landlord at Landlord's Address for Payment of Rent, as set forth in the Basic
Lease Information or to such other person or at such other place as Landlord
may from time to time designate.
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4. SECURITY DEPOSIT.
On execution of this Lease, Tenant shall deposit with Landlord the
sum (the "SECURITY DEPOSIT") set forth in the Basic Lease Information, in
cash, as security for the performance of Tenants obligations under this
Lease. Upon the Tenant leasing additional office space in the Building, the
Security Deposit shall be increased by an amount equal to one month of the
Tenant's Base Rent for the last month of the last year of Tenant's lease term
for the additional space. Landlord may (but shall have no obligation to) use
the Security Deposit or any portion thereof to cure any Event of Default
under this Lease or to compensate Landlord for any damage Landlord incurs as
a result of Tenant's failure to perform any of Tenant's obligations
hereunder. In such event, Tenant shall immediately pay to Landlord an amount
sufficient to replenish the Security Deposit to the sum initially deposited
with Landlord. If Tenant is not in default at the expiration or termination
of this Lease, Landlord within thirty (30) days shall return to Tenant the
Security Deposit or the balance thereof then held by Landlord and not applied
as provided above. Landlord may commingle the Security Deposit with
Landlord's general and other funds, and Landlord shall not be required to pay
interest on the Security Deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
5.1 USE. The Premises shall be used for general business office
purposes and for no other use or purpose. Tenant shall comply with all
present and future Laws relating to Tenant's use or occupancy of the Premises
(and make any repairs, alterations or improvements as required to comply with
all such Laws), and shall observe the Building Rules (as defined in Section
27). Tenant shall not do, bring, keep or sell anything in or about the
Premises that is prohibited by or that will cause a cancellation of or an
increase in the existing premium for, any insurance policy covering the
Property or any part thereof. Tenant shall not permit the Premises to be
occupied or used in any manner that will constitute waste or a nuisance, or
disturb the quiet enjoyment of or otherwise annoy other tenants in the
Building. Without limiting the foregoing, the Premises shall not be used for
educational activities (except for only the Tenant conducting training
sessions in Tenant's conference room up to five (5) days per week with no
more than fifteen (15) persons per training session provided such training
session(s) shall: (i) not overload the Parking accommodations of the Project,
and (ii) shall be in compliance with the terms and conditions of this Lease),
practice of medicine or any of the healing arts, providing social services,
or for any governmental use (including embassy or consulate use). Tenant
shall not, without the prior consent of Landlord, (i) bring into the Building
or the Premises anything that may cause substantial noise, odor or vibration,
overload the floors in the Premises or the Building or any of the heating,
ventilating and air conditioning ("HVAC"), mechanical, elevator, plumbing,
electrical, fire protection, life safety, security or other systems in the
Building ("BUILDING SYSTEMS"), or jeopardize the structural integrity of the
Building, the Property or any part thereof; (ii) connect to the utility
systems of the Building any apparatus, machinery or other equipment other
than typical office equipment; or (iii) connect (directly, or indirectly
through use of intermediate devices, electrified strip molding, or otherwise)
to any electrical circuit in the Premises any equipment or other load with
aggregate electrical power requirements in excess of 80% of the rated
capacity of the circuit.
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5.2 HAZARDOUS MATERIALS.
(a) DEFINITIONS.
(1) "HAZARDOUS MATERIALS" shall mean any substance: (A)
that now or in the future is regulated or governed by, requires investigation
or remediation under, or is defined as a hazardous waste, hazardous
substance, pollutant or contaminant under any governmental statute, code,
ordinance, regulation, rule or order, and any amendment thereto, including,
for example only, the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Section9601 et seq., and the Resource Conservation
and Recovery Act, 42 U.S.C. Section6901 et seq.; (B) that is toxic,
explosive, corrosive, flammable, radioactive, carcinogenic, dangerous or
otherwise hazardous, including gasoline, diesel fuel, petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), asbestos, radon and urea formaldehyde foam
insulation; or (C) that is governed or regulated by, or requires
investigation, remediation or special handling under, the California Medical
Waste Management Act at California Health and Safety Code Section 117600 et
seq.
(2) "ENVIRONMENTAL REQUIREMENTS" shall mean all present
and future Laws, orders, permits, licenses, approvals, authorizations and
other requirements of any kind applicable to Hazardous Materials.
(3) "HANDLED BY TENANT" and "HANDLING BY TENANT" shall
mean and refer to any installation, handling, generation, storage, use,
disposal, discharge, release, abatement, removal, transportation, or any
other activity of any type by Tenant or its agents, employees, contractors,
licensees, assignees, sublessees, transferees or representatives
(collectively, "REPRESENTATIVES") or its guests, customers, invitees, or
visitors (collectively, "VISITORS"), at or about the Premises in connection
with or involving Hazardous Materials.
(4) "ENVIRONMENTAL LOSSES" shall mean all costs and
expenses of any kind, damages, including foreseeable and unforeseeable
consequential damages, fines and penalties incurred in connection with any
violation of and compliance with Environmental Requirements and all losses of
any kind attributable to the diminution of value, loss of use or adverse
effects on marketability or use of any portion of the Premises or Property.
(b) TENANT'S COVENANTS. No Hazardous Materials shall be
Handled by Tenant at or about the Premises or Property without Landlord's
prior written consent, which consent may be granted, denied, or conditioned
upon compliance with Landlord's requirements, all in Landlord's absolute
discretion. Notwithstanding the foregoing, normal quantities and use of those
Hazardous Materials customarily used in the conduct of general office
activities, such as copier fluids and cleaning supplies, or required by Laws
for pharmacy activities, such as handling and disposal of used needles,
syringes, catheters, tape, gauze, IV bags, bottles, tubing and similar
customer-used medical administration devices ("MEDICAL WASTE") but not
disposal of surgical, pathological or radiological Medical Waste ("PERMITTED
HAZARDOUS MATERIALS"), may be used and stored at the Premises without
Landlord's prior written consent, provided that Tenant's activities at or
about the Premises and Property and the Handling by Tenant of all Hazardous
Materials shall comply at all times with all Environmental Requirements. At
the expiration or termination of the Lease, Tenant shall promptly remove from
the
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Premises and Property all Hazardous Materials Handled by Tenant at the Premises
or the Property. Tenant shall keep Landlord fully and promptly informed of all
Handling by Tenant of Hazardous Materials other than Permitted Hazardous
Materials. Tenant shall be responsible and liable for the compliance with all of
the provisions of this Section by all of Tenant's Representatives and Visitors,
and all of Tenant's obligations under this Section (including its
indemnification obligations under subsection (e) below) shall survive the
expiration or termination of this Lease.
(c) COMPLIANCE. Tenant shall at Tenant's expense promptly
take all actions required by any governmental agency or entity in connection
with or as a result of the Handling by Tenant of Hazardous Materials at or
about the Premises or Property, including inspection and testing, performing
all cleanup, removal and remediation work required, with respect to those
Hazardous Materials, complying with all closure requirements and postclosure
monitoring, and filing all required reports or plans. All Medical Waste
regulated by any Laws that is brought to the Premises shall be stored in
leak-proof, closeable containers, which containers shall be stored in a
specified "dirty storage area" of the Premises that shall be protected from
leaks or any other type of contamination of the Premises. Tenant shall never
use any of the Building's or Landlord's trash receptacles for disposing of
any Medical Waste. All of the foregoing work and all Handling by Tenant of
all Hazardous Materials shall be performed in a good, safe and workmanlike
manner by consultants qualified and licensed to undertake such work and in a
manner that will not interfere with any other tenant's quiet enjoyment of the
Property or Landlord's use, operation, leasing and sale of the Property.
Tenant shall deliver to Landlord prior to delivery to any governmental
agency, or promptly after receipt from any such agency, copies of all
permits, manifests, closure or remedial action plans, notices, and all other
documents relating to the Handling by Tenant of Hazardous Materials at or
about the Premises or Property. If any lien attaches to the Premises or the
Property in connection with or as a result of the Handling by Tenant of
Hazardous Materials, and Tenant does not cause the same to be released, by
payment, bonding or otherwise, within ten (10) days after the attachment
thereof, Landlord shall have the right but not the obligation to cause the
same to be released and any sums expended by Landlord in connection therewith
shall be payable by Tenant on demand.
(d) LANDLORD'S RIGHTS. Landlord shall have the right, but not
the obligation, to enter the Premises at any reasonable time (i) to confirm
Tenant's compliance with the provisions of this Section, and (ii) to perform
Tenant's obligations under this section if Tenant has failed to do so after
reasonable notice to Tenant. Landlord shall also have the right to engage
qualified Hazardous Materials consultants to inspect the Premises and review
the Handling by Tenant of Hazardous Materials, including review of all
permits, reports, plans, and other documents regarding same. Tenant shall pay
to Landlord on demand the costs of Landlord's consultants' fees and all costs
incurred by Landlord in performing Tenant's obligations under this section.
Landlord shall use reasonable efforts to minimize any interference with
Tenant's business caused by Landlord's entry into the Premises, but Landlord
shall not be responsible for any interference caused thereby.
(e) TENANT'S INDEMNIFICATION. Tenant agrees to indemnify,
defend and hold harmless Landlord and its partners, shareholders, directors,
officers, agents, employees or members and its or their partners, members,
directors, officers, shareholders, employees and agents from all
Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable
attorneys', experts' and consultants' fees and costs, incurred at any
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time and arising from or connection with the Handling by Tenant of Hazardous
Materials at or about the Property or Tenant's failure to comply in full with
all Environmental Requirements with respect to the Premises.
6. ALTERATIONS.
6.1 RESTRICTIONS ON TENANT'S ALTERATIONS. Tenant shall not make
any alterations, improvements or changes to the Premises (including
installation of any security system or telephone or data communication
wiring), other than the Tenant Improvements ("ALTERATIONS"), without
Landlord's prior written consent which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Landlord shall have the right to
withhold consent to any structural Alterations in its sole and absolute
discretion. Any such Alterations shall be completed by Tenant at Tenant's
sole cost and expense: (a) with due diligence, in a good and workmanlike
manner, using new materials; (b) in compliance with plans and specifications
approved by Landlord; (c) in compliance with the construction rules and
regulations promulgated by Landlord from time to time; (d) in accordance with
all applicable Laws (including all work, whether structural or nonstructural,
inside or outside the Premises, required to comply fully with all applicable
Laws and necessitated by Tenant's work); and (e) subject to all conditions
which Landlord may in Landlord's discretion impose. Such conditions may
include requirements for Tenant to: (i) provide payment or performance bonds
or additional insurance (from Tenant or Tenant's contractors, subcontractors
or design professionals); (ii) use contractors or subcontractors designated
by Landlord; and (iii) remove all or part of the Alterations prior to or upon
expiration or termination of the Term, as designated by Landlord. If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, or the Project, is required in connection with or as a result of
Tenant's work, such work shall be performed at Tenant's expense by
contractors designated by Landlord. Landlord's right to review and approve
(or withhold approval of) Tenant's plans, drawings, specifications,
contractor(s) and other aspects of construction work proposed by Tenant is
intended solely to protect Landlord, the Property and Landlord's interests.
No approval or consent by Landlord shall be deemed or construed to be a
representation or warranty by Landlord as to the adequacy, sufficiency,
fitness or suitability thereof or compliance thereof with applicable Laws or
other requirements. Except as otherwise provided in Landlord's consent, all
Alterations shall upon installation become part of the realty and be the
property of Landlord.
6.2 PLANS AND PERMITS. Before making any Alterations, Tenant shall
submit to Landlord, for Landlord's prior written approval, reasonably
detailed final plans and specifications prepared by a licensed architect or
engineer, a copy of the construction contract, including the name of the
contractor and all subcontractors proposed by Tenant to make the Alterations
and a copy of the contractor's license. Tenant shall reimburse Landlord upon
demand for any expenses incurred by Landlord in connection with any
Alterations made by Tenant, including reasonable fees charged by Landlord's
contractors or consultants to review plans and specifications prepared by
Tenant and to update the existing as-built plans and specifications of the
Building to reflect the Alterations. Tenant shall obtain all applicable
permits, authorizations and governmental approvals and deliver copies of the
same to Landlord before commencement of any Alterations.
6.3 LIENS. Tenant shall keep the Premises and the Property free
and clear of all liens arising out
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of any work performed, materials furnished or obligations incurred by Tenant.
If any such lien attaches to the Premises or the Property, and Tenant does
not cause the same to be released by payment, bonding or otherwise within ten
(10) business days after the attachment thereof, Landlord shall have the
right but not the obligation to cause the same to be released, and any sums
expended by Landlord in connection therewith shall be payable by Tenant on
demand with interest thereon from the date of expenditure by Landlord at the
Interest Rate (as defined in Section 16.2). Tenant shall give Landlord at
least ten (10) days' notice prior to the commencement of any Alterations and
cooperate with Landlord in posting and maintaining notices of
non-responsibility in connection therewith.
6.4 TRADE FIXTURES. Subject to the provisions of Section 5 and the
foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other
trade fixtures (collectively "TRADE FIXTURES") in the Premises provided that
the Trade Fixtures do not become an integral part of the Premises or the
Building. Tenant shall promptly repair any damage to the Premises or the
Building caused by any installation or removal of such Trade Fixtures.
6.5 SIGNS. The location, size, design, color and other physical
aspects of any Tenant identification sign on the Premises shall be subject to
the Landlord's written approval prior to installation, which shall not be
unreasonably withheld, and any appropriate municipal or other governmental
approvals. No Tenant identification sign is allowed on the exterior walls of
the Building or in the Common Areas without the prior approvals or
authorizations from municipal authorities, and without the prior written
approval from the Landlord before installation; such Landlord approval may be
withheld by the Landlord at its sole discretion. The cost of the sign, any
approvals or authorizations from municipal authorities, its installation,
maintenance and removal costs shall be at Tenant's sole expense. If Tenant
fails to maintain its sign, or, if Tenant fails to remove its sign upon
termination of this Lease, Landlord may do so at Tenant's expense and
Tenant's reimbursement to Landlord shall be payable in accordance with
Section 3.4 hereof.
7. MAINTENANCE AND REPAIRS
7.1 TENANT'S OBLIGATIONS. By taking possession of the Premises,
Tenant agrees that the Premises are then in a good and tenantable condition.
During the Term, Tenant, at Tenant's expense but under the direction of
Landlord, shall repair and maintain the Premises, including the interior
walls, floor coverings, ceiling (ceiling tiles and grid), Tenant
Improvements, Alterations, fire extinguishers, outlets and fixtures, and any
appliances (including dishwashers, hot water heaters and garbage disposers)
in the Premises in reasonably good condition, and keep the Premises in a
clean, safe and orderly condition.
7.2 LANDLORD'S OBLIGATIONS. Landlord shall maintain or cause to be
maintained in reasonably good order, condition and repair, the structural
portions of the roof, foundations, floors and exterior walls of the Building,
the Building Systems, and the Common Areas of the Property, such as
elevators, stairs, corridors and restrooms; provided, however, that Tenant
shall pay the cost of repairs for damage occasioned by Tenant's use of the
Premises or the Property or any act or omission of Tenant or Tenant's
Representatives or Visitors. Landlord shall be under no obligation to inspect
the Premises. Tenant shall promptly report in writing to Landlord any
defective condition known to Tenant which Landlord is required to repair. As
a material part of the consideration for this Lease,
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Tenant hereby waives any benefits of any applicable existing or future Law,
including the provisions of California Civil Code Sections 1932(1), 1941 and
1942, that allow a tenant to make repairs at its landlord's expense.
7.3 ALTERATION RIGHTS RESERVED TO LANDLORD. Landlord hereby
reserves the right, at any time and from time to time, without liability to
Tenant, and without constituting an eviction, constructive or otherwise, or
entitling Tenant to any abatement of rent or to terminate this Lease or
otherwise releasing Tenant from any of Tenant's obligations under this Lease:
(a) To make alterations, additions, repairs, improvements to
or in, or to decrease the size of area of, all or any part of the Building,
the fixtures and equipment therein, and the Building Systems, the Parking
Facility or any part of the Project;
(b) To change the Building's name or street address;
(c) To install and maintain any and all signs on the exterior
and interior of the Building;
(d) To reduce, increase, enclose or otherwise change at any
time and from time to time the size, number, location, lay-out and nature of
the Common Areas and other tenancies and premises in the Property and to
create additional rentable areas through use or enclosure of the Common
Areas; and
(e) If any governmental authority promulgates or revises any
Law or imposes mandatory or voluntary controls or guidelines on Landlord or
the Property relating to the use or conservation of energy or utilities or
the reduction of automobile or other emissions or reduction or management of
traffic or parking on the Property (collectively "CONTROLS"), to comply with
such Controls, whether mandatory or voluntary, or make any alterations to the
Property related thereto.
8. TENANTS TAXES.
"TENANT'S TAXES" shall mean (a) all taxes, assessments, license
fees and other governmental charges or impositions levied or assessed against
or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise sales or
transaction privilege taxes arising out of this Lease (excluding, however,
state and federal personal or corporate income taxes measured by the income
of Landlord from all sources) imposed by any taxing authority upon Landlord
or upon Landlord's receipt of any rent payable by Tenant pursuant to the
terms of this Lease ("RENTAL TAX"), and (c) any increase in Taxes
attributable to inclusion of a value placed on Tenant's personal property,
Trade Fixtures or Alterations. Tenant shall pay any Rental Tax to Landlord in
addition to and at the same time as Base Rent is payable under this Lease,
and shall pay all other Tenant's Taxes before delinquency (and, at Landlord's
request, shall furnish Landlord satisfactory evidence thereof). If Landlord
pays Tenant's Taxes or any portion thereof, Tenant shall reimburse Landlord
upon demand for the amount of such payment, together with interest at the
Interest Rate from the date of Landlord's payment to the date of Tenant's
reimbursement.
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9. UTILITIES AND SERVICES.
9.1 DESCRIPTION OF SERVICES. Landlord shall furnish to the
Premises reasonable amounts of electricity, water, heat and air conditioning,
and janitorial service. Landlord shall also furnish normal fluorescent tube
replacement, window washing, elevator service, and common area toilet room
supplies. Landlord shall furnish electricity, heat, ventilation and air
conditioning during the Business Hours specified in the Basic Lease
Information ("BUSINESS HOURS") on weekdays except public holidays ("BUSINESS
DAYS"). Any additional utilities or services that Landlord may agree to
provide (including lamp or tube replacement for other than Building Standard
lighting Fixtures) provide in shall be at Tenant's sole expense.
9.2 PAYMENT FOR ADDITIONAL UTILITIES AND SERVICES.
(a) Upon request by Tenant in accordance with the procedures
established by Landlord from time to time for furnishing HVAC service at
times other than Business Hours on Business Days, Landlord shall furnish such
service to Tenant and Tenant shall pay for such services on an hourly basis
at the then prevailing rate established for the Building by Landlord.
(b) If the temperature otherwise maintained in any portion of
the Premises by the HVAC systems of the Building is affected as a result of
(i) any lights, machines or equipment used by Tenant in the Premises, or (ii)
the occupancy of the Premises by more than one person per two hundred (200)
square feet of rentable area, then Landlord shall have the right to install
any machinery or equipment reasonably necessary to restore the temperature,
including modifications, to the standard air conditioning equipment. The cost
of any such equipment and modifications, including the cost of installation
and any additional cost of operation and maintenance of the same, shall be
paid by Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity exceeds the Building's
Standard Electrical Usage as set forth in the Basic Lease Information,
Landlord may determine the amount of such excess use by any reasonable means
(including the installation at Landlord's request but at Tenant's expense of
a separate meter or other measuring device) and charge Tenant for the cost of
such excess usage. In addition, Landlord may impose a reasonable charge for
the use of any additional or unusual janitorial services required by Tenant
because of any unusual Tenant Improvements or Alterations, the carelessness
of Tenant or the nature of Tenant's business (including hours of operation).
9.3 INTERRUPTION OF SERVICES. In the event of an interruption in
or failure or inability to provide any services or utilities to the Premises
or Building for any reason (a "SERVICE FAILURE"), such Service Failure shall
not, regardless of its duration, impose upon Landlord any liability
whatsoever, constitute an eviction of Tenant, constructive or otherwise,
entitle Tenant to an abatement of rent or to terminate this Lease or
otherwise release Tenant from any of Tenant's obligations under this Lease.
(a) Notwithstanding the foregoing, if any Service Failure not
caused by Tenant or its Representatives or Visitors directly prevents Tenant
from reasonably using a material portion of the Premises, and Tenant in fact
ceases to use such portion of the Premises, Tenant shall be entitled to an
abatement of Base Rent and Additional Rent with respect to the portion of the
Premises that
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Tenant is prevented from using by reason of such Service Failure in the
following circumstances: (i) if Landlord fails to commence reasonable efforts
to remedy the Service Failure within ten (10) Business Days following the
occurrence of the Service Failure or fails thereafter to pursue diligently
reasonable action to remedy the Service Failure, the abatement of Rent shall
commence on the eleventh (11th) Business Day following the Service Failure
and continue for the balance of the period during which Tenant is so
prevented from using such portion of the Premises; and (ii) if the Service
Failure in all events is not remedied within thirty (30) days following the
occurrence of the Service Failure and Tenant in fact does not use such
portion of the Premises for an uninterrupted period of thirty (30) days or
more by reason of such Service Failure, the abatement of Rent shall commence
no later than the thirty-first (31st) day following the occurrence of the
Service Failure and continue for the balance of the period during which
Tenant is so prevented from using such portion of the Premises.
(b) If a Service Failure is caused by Tenant or its
Representatives or Visitors, Landlord shall nonetheless remedy the Service
Failure at the expense of Tenant pursuant to Landlord's maintenance and
repair obligations under Section 7 or Section 12.1, as the case may be, but
Tenant shall not be entitled to an abatement of Rent or to terminate this
Lease as a result of any such Service Failure.
(c) Notwithstanding Tenant's entitlement to Rent abatement
under the preceding provisions, Tenant shall continue to pay Tenant's then
current Rent until such time as Landlord and Tenant agree on the amount of
the Rent abatement. If Landlord and Tenant are unable to agree on the amount
of such abatement within ten (10) Business Days of the date they commence
negotiations regarding the abatement, then either party may submit the matter
to binding arbitration pursuant to Sections 1280 et seq. of the California
Code of Civil Procedure.
(d) Where the cause of a Service Failure is within the
control of a public utility or other public or quasi-public entity outside
Landlord's control, notification to such utility or entity of the Service
Failure and request to remedy the failure shall constitute "reasonable
efforts" by Landlord to remedy the Service Failure.
(e) Tenant hereby waives the provisions of California Civil
Code Section 1932(l) or any other applicable existing or future law,
ordinance or governmental regulation permitting the termination of this Lease
due to such interruption, failure or inability.
10. EXCULPATION AND INDEMNIFICATION.
10.1 EXCULPATION OF LANDLORD. Landlord shall not be liable to
Tenant for any loss, injury or other damage to any person or property
(including Tenant or Tenant's property) in or about the Premises or the
Property from any cause, including defects in the Property or in any
equipment in the Property; fire, explosion or other casualty; bursting,
rupture, leakage or overflow of any plumbing or other pipes or lines,
sprinklers, tanks, drains, drinking fountains or wash stands in, above, or
about the Premises or the Property; or acts of other tenants in the Property.
Tenant hereby waives all claims against Landlord for such damage and the cost
and expense of defending against claims relating to such damage, except that
Landlord shall indemnify, defend and hold Tenant harmless from and
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against any claims, actions, liabilities, damages, costs or expenses,
including reasonable attorneys' fees and costs incurred in defending against
the same ("CLAIMS") for such damages, to the extent the same are caused by
the willful or grossly negligent acts or omissions of Landlord or its
authorized representatives. In no event, however, shall Landlord be liable to
Tenant for any punitive or consequential damages or damages for loss of
business by Tenant.
10.2 INDEMNIFICATION OF LANDLORD. Tenant shall indemnify, defend
and hold Landlord harmless from and against Claims arising from (a) the acts
or omissions of Tenant or Tenant's Representatives or Visitors in or about
the Property, or (b) any construction or other work undertaken by Tenant on
the Premises or the Property (including any design defects), or (c) any breach
or default under this Lease by Tenant, or (d) any accident, injury or damage,
howsoever and by whomsoever caused, to any person or property, occurring in or
about the Premises or the Property during the Term; excepting only such Claims
for any accident, injury or damage to the extent they are caused by the grossly
negligent or willful acts or omissions of Landlord or its authorized
representatives.
10.3 SURVIVAL OF OBLIGATIONS. The obligations of the parties under
this Section 10 shall survive the expiration or termination of this Lease.
11. INSURANCE.
11.1 TENANT'S INSURANCE.
(a) LIABILITY INSURANCE. Tenant shall maintain in full force
throughout the Term commercial general liability and property damage
insurance providing coverage on an occurrence form basis with limits of not
less than Two Million Dollars ($2,000,000.00) each occurrence for bodily
injury and property damage combined, Two Million Dollars ($2,000,000.00)
annual general aggregate, and Two Million Dollars ($2,000,000.00) products
and completed operations annual aggregate. Tenant's liability insurance
policy or policies shall: (i) include premises and operations liability
coverage, automobile, products and completed operations liability coverage,
broad form property damage coverage including completed operations, blanket
contractual liability coverage with, to the maximum extent possible, coverage
for the indemnification obligations of Tenant under this Lease, and personal
and advertising injury coverage; (ii) provide that the insurance company has
the duty to defend all insureds under the policy; (iii) provide that defense
costs are paid in addition to and do not deplete any of the policy limits;
(iv) cover liabilities arising out of or incurred in connection with Tenant's
use or occupancy of the Premises or the Property; and (v) extend coverage to
cover liability for the actions of Tenant's Representatives and Visitors.
(b) PERSONAL PROPERTY INSURANCE. Tenant shall at all times
maintain in effect with respect to any Alternations and Tenant's Trade
Fixtures and personal property, commercial property insurance providing
coverage, at a minimum, for "broad form" perils, to the extent of 100% of the
full replacement cost of covered property. Tenant may carry such insurance
under a blanket policy, provided that such policy provides equivalent
coverage to a separate policy. During the Term, the proceeds from any such
policies of insurance shall be used for the repair or replacement of the
Alterations, Trade Fixtures and personal property so insured. Landlord shall
be provided coverage
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under such insurance to the extent of its insurable interest and, if
requested by Landlord, both Landlord and Tenant shall sign all documents
reasonably necessary or proper in connection with the settlement of any claim
or loss under such insurance. Landlord shall have no obligation to carry
insurance on any Alternations or on Tenant's Trade Fixtures or personal
property.
(c) WORKMEN'S COMPENSATION INSURANCE. Tenant shall maintain
worker's compensation insurance as required by law and employer's liability
insurance in an amount not less than Five Hundred Thousand Dollars ($500,000).
(d) BUSINESS INTERRUPTION/EXTRA EXPENSE INSURANCE. Tenant
shall maintain loss of income, business interruption and extra expense
insurance in such amounts as will reimburse Tenant for direct or indirect
loss of earnings and incurred costs attributable to the perils commonly
covered by Tenant's property insurance described above but in no event less
than One Million Dollars ($1,000,000). Such insurance shall be carried with
the same insurer that issues the insurance for the personal property.
(e) OTHER COVERAGE. Tenant, at its cost, shall maintain such
other insurance as Landlord may reasonably require from time to time, but in
no event may Landlord require any other insurance which is (i) not then being
required of comparable tenants leasing comparable amounts of space in
comparable buildings in the vicinity of the Building or (ii) not then
available at commercially reasonable rates.
(f) INSURANCE CRITERIA. Each policy of insurance required
under this Section shall: (i) be in a form, and written by an insurer,
reasonably acceptable to Landlord, (ii) be maintained at Tenant's sole cost
and expense, and (iii) require at least thirty (30) days' written notice to
Landlord prior to any cancellation, nonrenewal or modification of insurance
coverage. Insurance companies issuing such policies shall have rating
classifications of "A" or better and financial size category ratings of
"XIII" or better according to the latest edition of the A.M. Best Key Rating
Guide. All insurance companies issuing such policies shall be licensed to do
business in the State of California. Any deductible amount under such
insurance shall not exceed $5,000. Tenant shall provide to Landlord, upon
request, evidence that the insurance required to be carried by Tenant
pursuant to this Section, including any endorsement affecting the additional
insured status, is in full force and effect and that premiums therefore have
been paid.
(g) INCREASE IN AMOUNT OF INSURANCE. Tenant shall increase
the amounts of insurance as required by any Mortgagee, and, not more
frequently than once every three (3) years, as recommended by Landlord's
insurance broker, if, in the opinion of either of them, the amount of
insurance then required under this Lease is not adequate. Any limits set
forth in this Lease on the amount or type of coverage required by Tenant's
insurance shall not limit the liability of Tenant under this Lease.
(h) INSURANCE PROVISIONS. Each policy of liability insurance
required by this Section shall: (i) contain a cross liability endorsement or
separation of insureds clause; (ii) provide that any waiver of subrogation
rights or release prior to a loss does not void coverage; (iii) provided that
it is primary to and not contributing with, any policy of insurance carried
by Landlord covering the same loss; (iv) provide that any failure to comply
with the reporting provisions shall not affect coverage provided
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to Landlord, its partners, property managers and Mortgagees; and (v) name
Landlord, its partners, members, the Property Manager identified in the Basic
Lease Information (the "PROPERTY MANAGER"), and such other parties in
interest as Landlord may from time to time reasonably designate to Tenant in
writing, as additional insureds. Such additional insureds shall be provided
the same extent of coverage as provided to Tenant under such policies. All
endorsements affecting such additional insured status shall be acceptable to
Landlord and shall be at least as broad as additional insured endorsement
form number CG 20 11 11 85 promulgated by the Insurance Services Office.
(i) EVIDENCE OF COVERAGE. Prior to occupancy of the Premises
by Tenant, and not less than thirty (30) days prior to the expiration of any
policy thereafter, Tenant shall furnish to Landlord a certificate of insurance
reflecting that the insurance required by this Section is in force accompanied
by an endorsement showing the required additional insureds satisfactory to
Landlord in substance and form. Notwithstanding the requirements of this
paragraph, Tenant shall, at Landlord's request, provide to Landlord a certified
copy of each insurance policy required to be in force at any time pursuant to
the requirements of this Lease or its Exhibits. Tenant's failure to furnish
Landlord with such certificates of insurance shall be deemed a material default
under this Lease.
11.2 LANDLORD'S INSURANCE. During the Term, Landlord shall maintain
in effect insurance on the Building against "broad form" perils (to the
extent such coverages are available), with responsible insurers, insuring the
Building and the Tenant Improvements in an amount equal to at least eighty
percent (80%) of the replacement cost thereof, excluding land, foundations,
footings and underground installations. Landlord may, but shall not be
obligated to, carry insurance against additional perils and/or in greater
amounts.
11.3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
any right of recovery against the other and the partners, members,
shareholders, officers, directors and authorized representatives of the other
for any loss or damage that is covered by any policy of property insurance
maintained by either party (or required by this Lease to be maintained) with
respect to the Premises or the Property or any operation therein. If any such
policy of insurance relating to this Lease or to the Premises or the Property
does not permit the foregoing waiver or if the coverage under any such policy
would be invalidated as a result of such waiver, the party maintaining such
policy shall obtain from the insurer under such policy a waiver of all right
of recovery by way of subrogation against either party in connection with any
claim, loss or damage covered by such policy.
12. DAMAGE OR DESTRUCTION.
12.1 LANDLORD'S DUTY TO REPAIR.
(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or an part of the Property from
fire or other casualty then, unless either party is entitled to and elects to
terminate this Lease pursuant to Sections 12.2, and 12.3, Landlord shall, at
its expense, use reasonable efforts to repair and restore the Premises and/or
the Property, as the case may be, to substantially their former condition to
the extent permitted by then applicable Laws; provided, however, that in no
event shall Landlord have any obligation for repair or restoration beyond the
extent of insurance proceeds received by Landlord for such repair or
restoration, or for
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any of Tenant's personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but
Tenant's Base Rent and Additional Rent from the date of the casualty through
the date of substantial completion of the repair shall be abated with regard
to any portion of the Premises that Tenant is directly prevented from using
by reason of such damage or its repair. In no event shall Landlord be liable
to Tenant by reason of any injury to or interference with Tenant's business
or property arising from fire or other casualty or by reason of any repairs
to any part of the property necessitated by such casualty.
12.2 LANDLORD'S RIGHT TO TERMINATE. Landlord may elect to terminate
this Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises
and the Property cannot be substantially repaired and restored under
applicable Laws within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate
proceeds are not, for any reason, made available to Landlord from Landlord's
insurance policies (and/or from Landlords funds made available for such
purpose, at Landlord's sole option) to make the required repairs;
(c) If the Building is damaged or destroyed to the extent
that, in the reasonable judgment of Landlord, the cost to repair and restore
the Building would exceed twenty-five percent (25%) of the full replacement
cost of the Building, whether or not the Premises are at all damaged or
destroyed; or
(d) If the fire or other casualty occurs during the last year
of the Term. If any of the circumstances described in subparagraphs (a), (b),
(c) or (d) of this Section 12.2 occur or arise, Landlord shall notify Tenant
in writing of that fact within one hundred and twenty (120) days after the
date of the casualty and in such notice Landlord shall also advice Tenant
whether Landlord has elected to terminate this Lease as provided above.
12.3 TENANT'S RIGHT TO TERMINATE. If all or substantially all of
the Premises are rendered untenantable or inaccessible by damage to all or
any part of the Property from fire or other casualty, then Tenant may elect
to terminate this Lease under the following circumstances: (i) where Landlord
fails to commence the required repairs within one hundred eighty (180) days
after the date of the casualty or (ii) where Landlord fails to complete the
required repairs within one (1) year after the end of such one hundred and
eighty (180) day period, subject to delay pursuant to Section 26, in which
event Tenant may elect to terminate this Lease upon notice to Landlord given
within ten (10) days after such one hundred and eighty (180)-day period or
such one (1) year period, as the case may be.
12.4 WAIVER. Landlord and Tenant each hereby waive the provisions
of California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided
in Sections 12.2 and 12.3.
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13. CONDEMNATION.
13.1 DEFINITIONS.
(a) "AWARD" shall mean all compensation, sums, or anything of
value awarded, paid or received on a total or partial Condemnation.
(b) "CONDEMNATION" shall mean (i) a permanent taking (or a
temporary taking for a period extending beyond the end of the Term) pursuant
to the exercise of the power of condemnation or eminent domain by any public
or quasi-public authority, private corporation or individual having such
power ("CONDEMNOR"), whether by legal proceedings or otherwise, or (ii) a
voluntary sale or transfer by Landlord to any such authority, either under
threat of condemnation or while legal proceedings for condemnation are
pending.
(c) "DATE OF CONDEMNATION" shall mean the earlier of the date
that title to the property taken is vested in the Condemnor or the date the
Condemnor has the right to possession of the property being condemned.
13.2 EFFECT ON LEASE.
(a) If the Premises are totally taken by Condemnation, this
Lease shall terminate as of the Date of Condemnation. If a portion but not
all of the Premises is taken by Condemnation, this Lease shall remain in
effect; provided, however, that if the portion of the Premises remaining
after the condemnation will be reasonably unsuitable for Tenant's continued
use, then upon notice to Landlord within thirty (30) days after Landlord
notifies Tenant of the Condemnation, Tenant may terminate this Lease
effective as of the Date of Condemnation.
(b) If twenty-five percent (25%) or more of the Land or of
the Parking Facility or of the floor area in the Building is taken by
condemnation, or if as a result of any Condemnation the Building is no longer
reasonably suitable for use as an office building, whether or not any portion
of the Premises is taken, Landlord may elect to terminate this Lease,
effective as of the Date of Condemnation, by notice to Tenant within thirty
(30) days after the Date of Condemnation.
(c) If all or a portion of the Premises is temporarily taken
by Condemnor for a period not extending beyond the end of the Term, this
Lease shall remain in full force and effect, but Tenant's Base Rent and
Additional Rent shall be abated with respect to any portion of the Premises
that Tenant is prevented from using as a result of such Condemnation as of
the Date of Condemnation.
13.3 RESTORATION. If this lease is not terminated as provided in
Section 13.2, Landlord, at its expense, shall diligently proceed to repair
and restore the Premises to substantially its former condition (to the extent
permitted by then applicable Laws) and/or repair and restore the Building to
an architecturally complete office building; provided, however, that
Landlord's obligations to so repair and restore shall be limited to the
amount of any Award received by Landlord and not required to be paid to any
Mortgagee (as defined in Section 20.2). In no event shall Landlord have any
obligation
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to repair or replace any improvements in the Premises beyond the amount of
any Award received by Landlord for such repair or to repair or replace any of
Tenant's personal property, Trade Fixtures or Alterations.
13.4 ABATEMENT AND REDUCTION OF RENT. If any portion of the
Premises is taken in a Condemnation or is rendered permanently untenantable
by repair necessitated by the Condemnation and this Lease is not terminated,
the Base Rent and Additional Rent payable under this Lease shall be
proportionally reduced as of the Date of Condemnation based upon the
percentage of rentable square feet in the Premises so taken or rendered
permanently untenantable. In addition, if this Lease remains in effect
following a Condemnation and Landlord proceeds to repair and restore the
Premises, the Base Rent and Additional Rent payable under this Lease shall be
abated during the period of such repair or restoration to the extent such
repairs prevent Tenant's use of the Premises.
13.5 AWARDS. Any Award made shall be paid to Landlord, and Tenant
hereby assigns to Landlord, and waives all interest in or claim to, any
Award, including any claim for the value of the unexpired Term; provided,
however, that Tenant shall be entitled to receive, or to prosecute a separate
claim for, an Award for a temporary taking of the Premises or a portion
thereof by a Condemnor where this Lease is not terminated (to the extent such
Award relates to the unexpired Term), or an Award or portion thereof
separately designated for relocation expenses or the interruption of or
damage to Tenant's business or as compensation for Tenant's personal
property, Trade Fixtures or Alterations.
13.6 WAIVER. Landlord and Tenant each hereby waive the provisions
of California Code of Civil Procedure Section 1265.130 and any other
applicable existing or future Law allowing either party to petition for a
termination of this Lease upon a partial taking of the Premises and/or the
Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not do any of the
following (in each case, a "TRANSFER") without complying with the provisions
of this Section 14: (a) assign, mortgage, pledge, encumber or otherwise
transfer in whole or in part this Lease, the term or estate hereby granted,
or any interest hereunder; (b) permit the Premises or any part thereof to be
occupied or utilized by anyone other than Tenant, Tenant's Visitors, or
Tenant's Representatives, (whether as concessionaire, franchisee, licensee,
permittee or otherwise); or (c) sublet or offer or advertise for subletting
the Premises or any part thereof. Any purported or attempted Transfer without
full compliance with the provisions of this Section 14 shall be voidable by
Landlord and, at Landlord's election, shall constitute an Event of Default
under this Lease. If Tenant is a corporation, each of the following shall be
deemed a Transfer of this Lease by Tenant: any dissolution, merger,
consolidation or other reorganization of Tenant; the sale or other transfer
(in one transaction, or cumulatively) of a controlling percentage of the
capital stock of Tenant; and/or the sale of fifty percent (50%) or more
(measured by value) of the assets of Tenant. The phrase "controlling
percentage" shall mean the ownership of and the right to vote stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of Tenant's capital stock issued, outstanding, and entitled to
vote for the
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election of directors. The preceding two sentences of this Section shall not,
however, apply to corporation, the stock of which is traded through a
recognized national stock exchange or "over the counter." If Tenant is a
partnership, each of the following shall be deemed a voluntary assignment of
this Lease by Tenant: a transfer (in one transaction, or cumulatively)
whether voluntary, involuntary, or by operation of law, of fifty percent
(50%) or more of the partnership interests; or the dissolution of the
partnership. If Tenant consists of more than one person, a purported or
attempted assignment (whether voluntary, involuntary, or by operation of law)
by one or more of the persons constituting Tenant shall be deemed a Transfer
of this Lease by Tenant.
14.2 PROCEDURE FOR OBTAINING CONSENT.
(a) If Tenant complies with the following conditions,
Landlord shall not unreasonably withhold its consent to the subletting of the
Premises or any portion thereof or to the assignment of this Lease. At least
thirty (30) days, but not more than one hundred twenty (120) days prior to
that date (the "TRANSFER DATE") on which Tenant desires the Transfer to be
effective, Tenant shall submit in writing to Landlord (i) the name, address
and legal composition of the proposed assignee, subtenant, user or other
transferee (each a "TRANSFEREE"); (ii) the nature of the business proposed to
be carried on in the Premises; (iii) a current balance sheet, income
statements for the last two years and such other financial and other
information concerning the proposed Transferee as Landlord may request; and
(iv) a copy of the proposed assignment, sublease or other agreement governing
the proposed Transfer. Within twenty-five (25) Business Days after Landlord
receives all such information it shall notify Tenant whether it approves or
disapproves such Transfer or if it elects to proceed under Section 14.7.
(b) The parties hereto agree and acknowledge that, among
other circumstances for which Landlord could reasonably withhold consent to a
proposed Transfer, it shall be reasonable for Landlord to withhold consent
where (i) the proposed Transferee does not intend itself to occupy the entire
portion of the Premises assigned or sublet, (ii) Landlord reasonably
disapproves of the Transferee's business operating ability or history,
reputation or creditworthiness or the character of the business to be
conducted by the Transferee at the Premises, (iii) the Transferee is a
governmental agency or unit or an existing tenant in the Building (iv) the
proposed Transfer would violate any "exclusive" rights of any tenants in the
Project, (v) the rental and other consideration payable by the Transferee is
less than that currently being paid by tenants under new leases of comparable
space in the Building, or (vi) Landlord otherwise determines that the
proposed Transfer would have the effect of decreasing the value of the
Building or the Project or increasing the expenses associated with operating,
maintaining and repairing the Project. In no event may Tenant publicly offer
or advertise all or any portion of the Premises for assignment or sublease at
a rental less than that then sought by Landlord for a direct lease
(non-sublease) of comparable space in the Building.
14.3 EXCESS CONSIDERATION. If Landlord consents to the proposed
assignment or sublease, Landlord shall be entitled to receive as Additional
Rent hereunder, one hundred percent (100%) of all Sublease Profits. "SUBLEASE
PROFITS" shall mean any consideration paid by the Transferee for the
assignment or sublease and, in the case of a sublease, the excess of the rent
and other consideration payable by the subtenant over the amount of Base Rent
and Additional Rent payable hereunder applicable to the subleased space.
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14.4 NO RELEASE OF TENANT. No consent by Landlord to any Transfer
shall relieve Tenant of any obligation to be performed by Tenant under this
Lease, whether occurring before or after such consent, assignment, subletting
or other Transfer. Each Transferee shall be jointly and severally liable with
Tenant (and Tenant shall be jointly and severally liable with each
Transferee) for the payment of rent (or, in the case of a sublease, rent in
the amount set forth in the sublease) and for the performance of all other
terms and provisions of this Lease. The consent by Landlord to any Transfer
shall not relieve Tenant or any such Transferee from the obligation to obtain
Landlord's express prior written consent to any subsequent Transfer by Tenant
or any Transferee. The acceptance of rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision of this Lease
or to be a consent to any Transfer.
14.5 EXPENSES AND ATTORNEY'S FEES. Tenant shall pay to Landlord on
demand all costs and expenses (including reasonable attorneys' fees) incurred
by Landlord which exceeds Five Hundred and 00/100 Dollars ($500.00) in
connection with reviewing or consenting to any proposed Transfer (including
any request for consent to, or any waiver of Landlord's rights in connection
with, any security interest in any of Tenant's property at the Premises).
14.6 EFFECTIVENESS OF TRANSFER. Prior to the Transfer Date on which
any permitted Transfer (whether or not requiring Landlord's consent) becomes
effective, Tenant shall deliver to Landlord a counterpart of the full,
executed Transfer document and Landlord's standard from of Consent to
Assignment or Consent to Sublease executed by Tenant and the Transferee in
which each of Tenant and the Transferee confirms its obligations pursuant to
this Lease. Failure or refusal of a Transferee to execute any such instrument
shall not release or discharge the Transferee from liability as provided
herein. The voluntary, involuntary or other surrender of this Lease by
Tenant, or a mutual cancellation by Landlord and Tenant, shall not work a
merger, and any such surrender or cancellation shall, at the option of
Landlord, either terminate all or any existing subleases or operate as an
assignment to Landlord of any or all of such subleases.
14.7 LANDLORD'S RIGHT TO SPACE. Notwithstanding any of the above
provisions of this Section to the contrary, if Tenant notifies Landlord that
it desires to enter into a Transfer, Landlord, in lieu of consenting to such
Transfer, may elect (x) in the case of an assignment or a sublease of the
entire Premises, to terminate this Lease, or (y) in the case of a sublease of
less than the entire Premises, to terminate this Lease as it relates to the
space proposed to be subleased by Tenant only in the event that (i) the
proposed Transferee is not a wholly owned entity of Tenant, or (ii) the
proposed term of the Sublease is equal to the Term of this Lease. In such
event, this Lease will terminate (or the space proposed to be subleased will
be removed from the Premises subject to this Lease and the Base Rent,
Additional Rent and Tenant's Share under this Lease shall be proportionately
reduced) on the Transfer Date, and Landlord may lease such space to any
party, including the prospective Transferee identified by Tenant on any terms
and conditions desired by Landlord.
14.8 ASSIGNMENT OF SUBLEASE RENTS. Tenant hereby absolutely and
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant
appointed on Landlord's application may (but shall not be obligated to)
collect such rents and other consideration and apply the same toward Tenant's
obligations to Landlord under this Lease; provided, however, that Landlord
grants to Tenant at all times prior to occurrence of any breach or default by
Tenant a revocable license to collect such rents (which license shall
automatically and without notice
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be and be deemed to have been revoked and terminated immediately upon any
Event of Default).
14.9 ASSIGNMENT AND SUBLETTING OF PARKING SPACES. Notwithstanding
the provisions of Section 14 of the Lease, Tenant shall not separately assign
its rights to the parking spaces or any interest therein, or sublease the
parking spaces to any other person, except with Landlord's prior written
consent which may be granted or withheld by Landlord at its sole discretion.
In the event of any separate assignment or sublease of parking space rights
that is approved by Landlord, Landlord shall be entitled to receive, as
Additional Rent hereunder, one hundred percent (100%) of any profit received
by Tenant in connection with such assignment or sublease.
15. DEFAULT AND REMEDIES.
15.1 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "EVENT OF DEFAULT" by Tenant:
(a) Tenant fails to make any payment of Rent when due, or any
amount required to replenish the Security Deposit as provided in Section 4 if
payment in full is not received by Landlord within three (3) days after
written notice that it is due.
(b) Tenant abandons the Premises and fails timely to pay Rent.
(c) Tenant fails timely to deliver any subordination
agreement provided for in Section 20.1, Lease modification provided for in
Section 20.3 or any estoppel certificate provided for in Section 21.1.
(d) Tenant fails timely to deliver any certificate of
insurance as required in Section 11.1(i).
(e) Tenant violates any of the restrictions on Transfer and
any other provision set forth in Section 14.
(f) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors, is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a
petition) seeking relief under any under any state or federal bankruptcy or
other statute, law or regulation affecting creditors' rights; all or
substantially all of Tenant's assets are subject to judicial seizure or
attachment and are not released within thirty (30) days, or Tenant consents
to or acquiesces in the appointment of a trustee, receiver or liquidator for
Tenant or for all or any substantial part of Tenant's assets.
(g) Tenant fails, within ninety (90) days after the
commencement of any proceedings against Tenant seeking relief under any state
or federal bankruptcy or other statute, law or regulation affecting
creditors' rights, to have such proceedings dismissed, or Tenant fails,
within ninety (90) days after an appointment, without Tenant's consent or
acquiescence, of any trustee, receiver or liquidator for Tenant or for all or
any substantial part of Tenant's assets, to have such appointment vacated.
(h) Tenant fails to perform or comply with any provision of
this Lease other than those
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described in (a) through (g) above, and does not fully cure such failure
within ten (10) days after notice to Tenant or, if such failure cannot be
cured within such ten (10)-day period, Tenant fails within such ten (10)-day
period to commence, and thereafter diligently proceed with, all actions
necessary to cure such failure as soon as reasonably possible but in all
events within thirty (30) days of such notice; provided, however, that if
Landlord, in Landlord's reasonable judgment, determines that such failure
cannot or will not be cured by Tenant within such thirty (30) days, then such
failure shall constitute an Event of Default immediately upon such notice to
Tenant.
15.2 REMEDIES. Upon the occurrence of an Event of Default, Landlord
shall have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of
the Premises at any time by written notice to Tenant. Tenant expressly
acknowledges that in the absence of such written notice from Landlord, no
other act of Landlord, including re-entry into the Premises, efforts to relet
the Premises, reletting of the Premises for Tenant's account, storage of
Tenant's personal property and Trade Fixtures, acceptance of keys to the
Premises from Tenant or exercise of any other rights and remedies under this
Section, shall constitute an acceptance of Tenant's surrender of the Premises
or constitute a termination of this Lease or of Tenant's right to possession
of the Premises. Upon such termination in writing of Tenant's right to
possession of the Premises, as herein provided, this Lease shall terminate
and Landlord shall be entitled to recover damages from Tenant as provided in
California Civil Code Section 1951.2 and any other applicable existing or
future Law providing for recovery of damages for such breach, including the
worth at the time of award of the amount by which the rent which would be
payable by Tenant hereunder for the remainder of the Term after the date of
the award of damages, including Additional Rent as reasonably estimated by
Landlord, exceeds the amount of such rental loss as Tenant proves could have
been reasonably avoided, discounted at the discount rate published by the
Federal Reserve Bank of San Francisco for member banks at the time of the
award plus one percent (1%).
(b) Landlord shall have the remedy described in California
Civil Code Section 1951.4 (Landlord may continue this Lease in effect after
Tenant's breach and abandonment and recover rent as it becomes due, if Tenant
has the right to sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's
expense. If Landlord pays any sum or incurs any expense in curing the Event
of Default, Tenant shall reimburse Landlord upon demand for the amount of
such payment or expense with interest at the Interest Rate from the date the
sum is paid or the expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all of Tenant's property from the
Premises, and such property may be stored by Landlord in a public warehouse
or elsewhere at the sole cost and for the account of Tenant. If Landlord does
not elect to store any or all of Tenant's property left in the Premises,
Landlord may consider such property to be abandoned by Tenant, and Landlord
may thereupon dispose of such property in the manner and as prescribed by
California Civil Code Section 1980 et seq. Any proceeds realized by Landlord
on the disposal of any such property shall be applied first to offset all
expenses of storage and sale, then credited against Tenant's outstanding
obligations to
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Landlord under this Lease, and any balance remaining after satisfaction of
all obligations of Tenant under this Lease shall be delivered to Tenant.
16. LATE CHARGE AND INTEREST.
16.1 LATE CHARGE. If any payment of Rent is not received by
Landlord within five (5) days of the date when due, Tenant shall pay to
Landlord on demand an additional amount equal to ten percent (10%) of the
overdue payment as a late charge for every month or portion thereof that the
Rent remains unpaid. Imposition of a late charge on any payment not made when
due does not eliminate or supersede late charges imposed on other (prior)
payments not made when due or preclude imposition of a late charge on other
installments or payments not made when due. Tenant acknowledges that late
payment by Tenant to Landlord of Rent due and provided for under this Lease
will cause Landlord to incur costs and expenses not contemplated by this
Lease, the exact amount of such costs and expenses being extremely
impractical or difficult to fix. The parties therefore agree that the late
charge provided for herein represents a fair and reasonable estimate of the
costs and expenses Landlord will incur by reason of any late payment by the
Tenant. In addition, any returned checks will be subject to a $55.00 handling
charge.
16.2 INTEREST. In addition to the late charges referred to above,
which are intended to defray Landlord's costs resulting from late payments,
any payment from Tenant to Landlord not paid when due shall, at Landlord's
option, bear interest from the date due until paid to Landlord by Tenant at
the rate of fifteen percent (15%) per annum or the maximum lawful rate that
Landlord may charge to Tenant under applicable laws, whichever is less (the
"INTEREST RATE"). Acceptance of any late charge and/or interest shall not
constitute a waiver of Tenant's default with respect to the overdue sum or
prevent Landlord from exercising any of its other rights and remedies under
this Lease.
17. WAIVER.
No provisions of this Lease shall be deemed waived by Landlord
unless such waiver is in a writing signed by Landlord. The waiver by Landlord
of any breach of any provision of this Lease shall not be deemed a waiver of
such provision or of any subsequent breach of the same or any other provision
of this Lease. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver. Landlord's acceptance of any payments of Rent due
under this Lease shall not be deemed a waiver of any default by Tenant under
this Lease (including Tenant's recurrent failure to timely pay rent) other
than Tenant's nonpayment of the accepted sums, and no endorsement or
statement on any check or accompanying any check or payment shall be deemed
an accord and satisfaction. Landlord's consent to or approval of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to waive
or render unnecessary Landlord's consent to or approval of any subsequent act
by Tenant.
18. ENTRY, INSPECTION AND CLOSURE.
Upon reasonable oral or written notice to Tenant (and without
notice in emergencies), Landlord and its authorized representatives may enter
the Premises at all reasonable times to determine whether the Premises are in
good condition, to determine whether Tenant is complying with its obligations
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under this Lease, to perform any maintenance or repair of the Premises or the
Building that Landlord has the right or obligation to perform, to install or
repair improvements for other tenants where access to the Premises is
required for such installation or repair, to serve, post or keep posted any
notices required or allowed under the provisions of this Lease, to show the
Premises to prospective brokers, agents, buyers, transferees, Mortgagees or
tenants, or to do any other act or thing necessary for the safety or
preservation of the Premises or the Building. When reasonably necessary,
Landlord may temporarily close entrances, doors, corridors, elevators or
other facilities in the Building without liability to Tenant by reason of
such closure. Landlord shall conduct its activities under this Section in a
manner that will minimize inconvenience to Tenant without incurring
additional expense to Landlord. In no event shall Tenant be entitled to an
abatement of rent on account of any entry by Landlord, and Landlord shall not
be liable in any manner for any inconvenience, loss of business or other
damage to Tenant or other persons arising out of Landlord's entry on the
Premises in accordance with this Section. No action by Landlord pursuant to
this paragraph shall constitute an eviction of Tenant, constructive or
otherwise, entitle Tenant to an abatement of rent or to terminate this Lease
or otherwise release Tenant from any of Tenant's obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 SURRENDER. Upon the expiration or termination of this Lease,
Tenant shall surrender the Premises and all Tenant Improvements and
Alterations to Landlord broom-clean and in their original condition, except
for reasonable wear and tear, damage from casualty or condemnation and any
changes resulting from approved Alterations; provided, however, that prior to
the expiration or termination of this Lease, Tenant shall remove all
telephone and other cabling installed in the Building by Tenant and remove
from the Premises all of Tenant's personal property, Trade Fixtures and
Alterations that Tenant has the right or is required by Landlord to remove
under the provisions of this Lease, and repair any damage caused by such
removal. If such removal is not completed before the expiration or
termination of the Term, Landlord shall have all rights and remedies provided
under California Civil Code Section 1980 et seq. or any successor statute.
Tenant waives all Claims against Landlord for any damage or loss to Tenant
resulting from Landlord's removal, storage, retention, or disposition of any
such property. Upon expiration or termination of this Lease or of Tenant's
possession, whichever is earliest, Tenant shall surrender all keys to the
Premises or any other part of the Building, and shall deliver to Landlord all
keys for or make known to Landlord the combination of locks on all safes,
cabinets and vaults that may be located in the Premises. Tenant's obligations
under this Section shall survive the expiration or termination of this Lease.
19.2 HOLDING OVER. If Tenant (directly or through any Transferee or
other successor-in-interest of Tenant) remains in possession of the Premises
after the expiration or termination of this Lease, Tenant's continued
possession shall be on the basis of a tenancy at the sufferance of Landlord.
In such event, Tenant shall continue to comply with or perform all the terms
and obligations of Tenant under this Lease, except that the monthly Base Rent
during Tenant's holding over shall be twice the Base Rent payable in the last
full month prior to the termination hereof. Acceptance by Landlord of Rent
after such termination shall not constitute a renewal of this Lease, and
nothing contained in this provision shall be deemed to waive Landlord's right
of re-entry or any other right hereunder or at law. Tenant shall indemnify,
defend and hold Landlord harmless from and against all Claims arising or
resulting directly or indirectly from Tenant's failure to timely surrender the
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Premises, including (i) any rent payable by or any loss, cost, or damages
claimed by any prospective tenant of the Premises, and (ii) Landlords damages
as a result of such prospective tenant rescinding or refusing to enter into
the prospective lease of the Premises by reason of such failure to timely
surrender the Premises.
20. ENCUMBRANCES.
20.1 SUBORDINATION. This Lease is expressly made subject and
subordinate to any mortgage, deed of trust, ground lease, underlying lease or
like encumbrance affecting any part of the Property or any interest of
Landlord therein which is now existing or hereafter executed or recorded
("ENCUMBRANCE"); provided, however, that such subordination shall only be
effective, as to future Encumbrances, if the holder of the Encumbrance agrees
that this Lease shall survive the termination of the Encumbrance by lapse of
time, foreclosure or otherwise so long as Tenant is not in default under this
Lease. Provided the conditions of the preceding sentence are satisfied,
Tenant shall execute and deliver to Landlord, within ten (10) days after
written request therefor by Landlord and in a form reasonably requested by
Landlord, any additional documents evidencing the subordination of this Lease
with respect to any such Encumbrance and the non-disturbance agreement of the
holder of any such Encumbrance. If the interest of Landlord in the Property
is transferred pursuant to or in lieu of proceedings for enforcement of any
Encumbrance, Tenant shall immediately and automatically attorn to the new
owner, and this Lease shall continue in full force and effect as a direct
lease between the Purchaser and Tenant on the terms and conditions set forth
in this Lease.
20.2 MORTGAGEE PROTECTION. Tenant agrees to give any holder of any
Encumbrance covering any part of the Property ("MORTGAGEE"), by registered or
certified mail, a copy of any notice of default served upon Landlord,
provided that prior to such notice Tenant has been notified in writing (by
way of notice of assignment of rents and leases, or otherwise) of the address
of such Mortgagee. If Landlord shall have failed to cure such default within
thirty (30) days from the effective date of such notice of default, then the
Mortgagee shall have an additional thirty (30) days within which to cure such
default or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default (including the time
necessary to foreclose or otherwise terminate its Encumbrance, if necessary
to effect such cure), and this Lease shall not be terminated so long as such
remedies are being diligently pursued.
20.3 LEASE MODIFICATIONS. If, in connection with the financing or
refinancing of the Property or any portion thereof, any Mortgagee or proposed
Mortgagee shall request reasonable modifications to this Lease as a condition
to financing or refinancing, Tenant shall not withhold, delay or defer its
consent thereto, provided such modifications do not have a material adverse
effect on Tenant's rights hereunder.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 ESTOPPEL CERTIFICATES. From time to time during the Lease
Term, in each case no later than ten (10) days after being given a written
demand by Landlord, Tenant shall execute, acknowledge and deliver to the
Landlord, promptly upon request, a certificate (the "ESTOPPEL CERTIFICATE")
certifying to Landlord and/or any then current or proposed Mortgagee, ground
lessor
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("GROUND LESSOR") or purchaser of all or any part of the Property
("PROSPECTIVE PURCHASER") the following:
(a) that Tenant has accepted possession of the Premises (or, if
Tenant has not done so, that Tenant has not accepted possession of the
Premises, and specifying the reasons therefor);
(b) the Commencement Date, the date payment of Base Rent and
Additional Rent began or is scheduled to begin, including any periods of free
or deferred Base Rent or Additional Rent ("RENT COMMENCEMENT DATE"), and
Lease Term;
(c) whether there are then existing any Events of Default by
Landlord in the performance of its obligations under this Lease (and, if so,
specifying the same);
(d) that this Lease is unmodified and in full force an effect (or,
if there have been modifications, that this Lease is in full force and effect
as modified, stating the date and nature of each modification);
(e) the capacity of the person executing such certificate, and
that such person is duly authorized to execute the same on behalf of the
Tenant;
(f) the date, if any, to which Base Rent and Additional Rent due
under this Lease has been paid;
(g) that no notice has been received by Tenant of any Event of
Default which has not been cured, except as to any Event of Default specified
in the certificate;
(h) that Tenant's rights under this Lease are subordinated in the
manner described in this Lease; and
(i) such other matters as Landlord, the Mortgagee, Ground Lessor
or Prospective Purchaser may reasonably request.
Any such Estoppel Certificate may be relied upon by Landlord, as well as any
Prospective Purchaser, Mortgagee or Ground Lessor. Failure by Tenant to
deliver such certificate shall be an Event of Default under this Lease, and
Tenant shall be liable to Landlord for, among other things, any damages
suffered by Landlord, including any profits or other benefits from the sale,
ground leasing or financing of the Property, or any interest therein, which
are lost or made unavailable as a result, directly or indirectly, of Tenant's
failure or refusal to timely execute or deliver such Estoppel Certificate.
21.2 FINANCIAL STATEMENTS. Upon request by Landlord, Tenant shall
deliver to Landlord a copy of Tenant's financial statements (including at
least a year end balance sheet and a statement of profit and loss) for each
of the three (3) most recently completed years, prepared in accordance with
generally accepted accounting principles (and, if such is Tenant's normal
practice, audited by an independent certified public accountant), all then
available subsequent interim statements, and such other financial information
as may reasonably be requested by Landlord or required by any Mortgagee.
Provided Tenant notifies Landlord in writing, Landlord shall: (i) keep such
financial information confidential except for disclosure to Mortgagee, and
(ii) advise Mortgagee of the nature of such confidentiality as indicated by
Tenant in writing.
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22. NOTICES.
Any notice, demand, request, consent or approval that either party
desires or is required to give to the other party under this Lease shall be
in writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. registered or certified mail, return receipt
requested, postage prepaid, addressed to the other party at the party's
address for notices set forth in the Basic Lease Information. Notices
delivered personally shall be effective immediately upon receipt (or refusal
of delivery or receipt); notices sent by independent messenger or courier
service will be effective one (1) day after acceptance by the independent
service for delivery; notices sent by mail in accordance with this Section
shall be effective two (2) days after mailing. Either party may change its
address for notices hereunder by a notice to the other party complying with
this Section. If Tenant sublets the Premises, notices from Landlord shall be
effective on the subtenant when given to Tenant pursuant to this Section.
23. ATTORNEYS' FEES.
23.1 DISPUTES BETWEEN LANDLORD AND TENANT. In the event of any
litigation or arbitration regarding any rights and obligations under this
Lease, the prevailing party shall be entitled to recover reasonable
attorneys' fees and court costs in addition to any other relief which may be
granted. The "prevailing party" shall mean the party receiving substantially
the relief desired, whether by settlement, dismissal, summary or otherwise.
23.2 OTHER LITIGATION. If Landlord, without fault on Landlord's
part, is made a party to any litigation instituted by Tenant or by any third
party against Tenant, or by or against any Transferee or other occupant of
the Premises or otherwise arising out of or resulting from any act or
transaction of Tenant or of any such Transferee or occupant, Tenant shall
hold Landlord harmless from any judgment rendered against Landlord or the
Property or any part thereof, and reimburse Landlord upon demand for all
costs and expenses, including reasonable attorneys' fees, incurred by
Landlord in or in connection with such litigation.
24. QUIET POSSESSION.
Subject to Tenant's full and timely performance of all of Tenant's
obligations under this Lease and subject to all of the terms of this Lease,
Tenant shall have the quiet possession of the Premises throughout the Term as
against any persons or entities lawfully claiming by, through or under
Landlord.
25. SECURITY MEASURES.
Landlord may, but shall be under no obligation to implement
security measures for the Property, such as the registration or search of all
persons entering or leaving the Building, requiring identification for access
to the Building, evacuation of the Building for cause, suspected cause, or
for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury
or business interruption; provided, however, that such measures shall be
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implemented in a way as not to unreasonably inconvenience tenants of the
Building. Landlord shall at all times have the right to change, alter or
reduce any such security services or measures. Tenant shall cooperate and
comply with, and cause Tenant's Representatives and Visitors to cooperate and
comply with, such security measures. Landlord, its agents and employees shall
have no liability to Tenant or its Representatives or Visitors for the
implementation or exercise of, or the failure to implement or exercise, any
such security measures or for any resulting disturbance of Tenant's use or
enjoyment of the Premises.
26. FORCE MAJEURE.
If Landlord is delayed, interrupted or prevented from performing
any of its obligations under this Lease, including its obligations under the
Construction Rider (if any), and such delay, interruption or prevention is
due to fire, war, insurrection, act of God, governmental act or failure to
act, labor dispute, unavailability of materials or any cause outside the
reasonable control of Landlord, then the time for performance of the affected
obligations of Landlord shall be extended for a period equivalent to the
period of such delay, interruption or prevention.
27. RULES AND REGULATIONS.
Tenant shall be bound by and shall comply with the rules and
regulations attached to and made a part of this Lease as EXHIBIT D to the
extent those rules and regulations are not in conflict with the terms of this
Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "BUILDING RULES"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe,
the Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY.
The term "LANDLORD" as used in this Lease, shall mean only the
owner or owners of the Building at the time in question. In the event of any
conveyance of title to the Building, then from and after the date of such
conveyance, the transferor Landlord shall be relieved of all liability with
respect to Landlord's obligations to be performed under this Lease after the
date of such conveyance. Notwithstanding any other term or provision of this
Lease, the liability of Landlord for its obligations under this Lease is
limited solely to Landlord's interest in the Building as the same may from
time to time be encumbered, and no personal liability shall at any time be
asserted or enforceable against any other assets of Landlord or against
Landlord's partners, members or agents or its or their respective partners,
shareholders, members, directors, officers or managers on account of any of
Landlord's obligations or actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 DETERMINATION IN GOOD FAITH. Wherever the consent, approval,
judgment or determination of Landlord is required or permitted under this
Lease, Landlord may exercise its good faith business judgment in granting or
withholding such consent or approval or in making such judgment or
determination without reference to any extrinsic standard of reasonableness,
unless the
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provision providing for such consent, approval, judgment or determination
specifies that Landlord's consent or approval is not to be unreasonably
withheld, or that such judgment or determination is to be reasonable, or
otherwise specifies the standards under which Landlord may withhold its
consent. If it is determined that Landlord failed to give its consent where
it was required to do so under this Lease, Tenant shall be entitled to
injunctive relief but shall not be entitled to monetary damages or to
terminate this Lease for such failure.
29.2 NO LIABILITY IMPOSED ON LANDLORD. The review and/or approval
by Landlord of any item or matter to be reviewed or approved by Landlord
under the terms of this Lease or any Exhibits or Addenda hereto shall not
impose upon Landlord any liability for the accuracy or sufficiency of any
such item or matter or the quality or suitability of such item for its
intended use, any such review or approval is for the sole purpose of
protecting Landlord's interest in the Property, and no third parties,
including Tenant or the Representatives and Visitors of Tenant or any person
or entity claiming by, through or under Tenant, shall have any rights as a
consequence thereof.
30. BROKERS.
Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "BROKER") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant
warrants and represents to Landlord that in the negotiating or making of this
Lease neither Tenant nor anyone acting on Tenant's behalf has dealt with any
broker or finder who might be entitled to a fee or commission for this Lease
other than the Broker. Tenant shall indemnify and hold Landlord, harmless
from any claim or claims, including costs, expenses and attorney's fees
incurred by Landlord, asserted by any other broker or finder for a fee or
commission based upon any dealings with or statements made by Tenant or
Tenant's Representatives. In the event Tenant shall engage any broker, agent,
consultant, finder or representative to represent its interests or to
negotiate on its behalf with respect to any renewal, expansion or other
modification of this Lease, or the leasehold created thereby, then Tenant
shall be solely responsible for the payment of any fees, commissions or other
consideration charged by such broker, agent, consultant, finder or
representative with respect to such renewal, expansion or modification.
31. RELOCATION OF PREMISES.
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32. ENTIRE AGREEMENT.
This Lease, including the Exhibits and any Addenda attached hereto,
and the documents referred to herein, if any, constitute the entire agreement
between Landlord and Tenant with respect to the leasing of space by Tenant in
the Building, and supersede all prior or contemporaneous agreements,
understandings, proposals and other representations by or between Landlord
and Tenant, whether written or oral. Neither Landlord nor Landlord's
Representatives have made any representations or warranties with respect to
the Premises, the Building, the Project or this Lease except as expressly set
forth herein, and no rights, easements or licenses shall be acquired by
Tenant by implication or otherwise unless expressly set forth herein. The
submission of this Lease for examination does not constitute an option for
the Premises and this Lease shall become effective as a binding agreement
only upon execution and delivery thereof by Landlord to Tenant.
33. PARKING RULES
Tenant shall have the right to use the Parking Facility underneath,
if Tenant is paying Parking Rent for underneath parking, and outside the
Building in common with other tenants of the Building. Tenant's Parking
Facility shall be on and subject to the terms and conditions set forth in the
Parking Rules and Regulations attached as EXHIBIT E (the "PARKING RULES").
Landlord shall have the right in its sole discretion, upon thirty (30) days
prior written notice to Tenant, to reassign any parking stalls or spaces
previously assigned to Tenant.
34. GENERAL
34.1 CAPTIONS. The captions and headings used in this Lease are for
the purpose of convenience only and shall not be construed to limit or extend
the meaning of any part of this Lease.
34.2 EXECUTED COPY. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
34.3 TIME. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
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34.4 SEVERABILITY. If one or more of the provisions contained
herein, except for the payment of Rent, is for any reason held invalid,
illegal or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Lease, but this
Lease shall be construed as if such invalid, illegal or unenforceable
provision had not been contained herein.
34.5 CHOICE OF LAW. This Lease shall be construed and enforced in
accordance with the substantive laws of the State of California. The language
in all parts of this Lease shall in all cases be construed as a whole
according to its fair meaning and not strictly for or against either Landlord
or Tenant.
34.6 GENDER; SINGULAR; PLURAL. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural.
34.7 BINDING EFFECT. The covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their respective
successors and assigns to the extent this Lease is assignable.
34.8 WAIVER. The waiver by Landlord of any breach of any term,
condition or covenant of this Lease shall not be deemed to be a waiver of
such provision or any subsequent breach of the same or any other term,
condition or covenant of this Lease. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach at the time of acceptance of such payment. No covenant, term or
condition of this Lease shall be deemed to have been waived by Landlord
unless such waiver is in writing and signed by Landlord.
34.9 EXHIBITS. All exhibits, amendments, riders and addenda
attached hereto are hereby incorporated herein and made a part hereof.
35. AUTHORITY.
If Tenant is a corporation, partnership, limited liability company
or other form of entity, each of the persons executing this Lease on behalf
of Tenant warrants and represents that Tenant is a duly organized and validly
existing entity, that Tenant has full right and authority to enter into this
Lease and that the persons signing on behalf of Tenant are authorized to do
so and have the power to bind Tenant to this Lease. Tenant shall provide
Landlord upon request with evidence reasonably satisfactory to Landlord
confirming the foregoing representations.
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IN WITNESS WHEREOF, Landlord and Tenant have entered into this
Lease as of the Lease Date set forth in the Basic Lease Information.
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., SERENA SOFTWARE INTERNATIONAL, INC.,
A California limited partnership, A California corporation,
By: Peninsula Office Management, Inc., By: /s/ Richard A. Doerr
a California corporation, General --------------------
Partner Its: CEO; President
By: /s/ Angelo Orphan
-------------------------------
Angelo Orphan, President
THIS OFFER AS REPRESENTED BY THE LEASE STATED HEREIN SHALL EXPIRE ON JUNE 9,
1998 IF IT IS NOT EXECUTED BY BOTH THE LANDLORD AND TENANT AND RECEIVED BY
LANDLORD ON JUNE 10, 1998. UPON EXPIRATION THE TWO PARTIES SHALL HAVE NO
OBLIGATIONS TO EACH OTHER REGARDING THIS LEASE.
DATE OF EXECUTION OF THIS LEASE BY LANDLORD: 6/9/98
------
DATE OF EXECUTION OF THIS LEASE BY TENANT: 1998/06/09
----------
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EXHIBIT A
---------
PREMISES*
Third Floor: 3,360 rsf
Highlighted in Black
Outline
*Formerly Leased to
Sarrus Software
[IMAGES OMITTED]
37
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EXHIBIT B
---------
CONSTRUCTION RIDER
INTENTIONALLY OMITTED, PAGES 38-41 (NOT APPLICABLE)
38
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EXHIBIT C
---------
COMMENCEMENT DATE MEMORANDUM
LANDLORD: Waterfront Tower Partners, L.P.
TENANT: SERENA Software International, Inc.
LEASE DATE: May 18, 1998
------------
PREMISES: 500 Airport Boulevard, Suite 300
---
Burlingame, CA 94010
Pursuant to Section 2.1 of the above-referenced Lease, the
Commencement Date is hereby established as JUNE 8, 1998.
-------------
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., SERENA SOFTWARE INTERNATIONAL, INC.,
A California limited partnership, a California corporation,
/s/ Signature Illegible
By: Peninsula Office Management, Inc., By: -----------------------------
a California corporation, General Its: CEO & President
Partner
By: /s/ Signature Illegible
----------------------------
Angelo Orphan, President
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EXHIBIT C.1
-----------
COMMENCEMENT DATE MEMORANDUM FOR EXPANSION SPACE
LANDLORD: Waterfront Tower Partners, L.P.
TENANT: SERENA Software International, Inc.
LEASE DATE: ______________
PREMISES: 500 Airport Boulevard, Suite _____
Burlingame, CA 94010
Pursuant to Section 2.1 of the above-referenced Lease, the
Commencement Date is hereby established as _________________.
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., SERENA SOFTWARE INTERNATIONAL, INC.,
A California limited partnership, a California corporation,
By: Peninsula Office Management, Inc., By:
a California corporation, General -------------------
Partner Its:
-------------------
By: --------------------- By:
Angelo Orphan, President -------------------
Its:
-------------------
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EXHIBIT D
---------
BUILDING RULES
The following Building Rules are additional provisions of the
foregoing Lease to which they are attached. The capitalized terms used herein
have the same meanings as these terms are given in the Lease.
1. USE OF COMMON AREAS. Tenant will not obstruct the sidewalks,
halls, passages, exits, entrances, elevators or stairways of the Building
("COMMON AREAS"), and Tenant will not use the Common Areas for any purpose
other than ingress and egress to and from the Premises. The Common Areas,
except for the sidewalks, are not open to the general public and Landlord
reserves the right to control and prevent access to the Common Areas of any
person whose presence, in Landlord's opinion, would be prejudicial to the
safety, reputation and interests of the Building and its tenants.
2. NO ACCESS TO ROOF. Tenant has no right of access to the roof
of the Building and will not install, repair or replace any antenna, aerial,
aerial wires, fan, air-conditioner or other device on the roof of the
Building, without the prior written consent of Landlord. Any such device
installed without such written consent is subject to removal at Tenant's
expense without notice at any time. In any event Tenant will be liable for
any damages or repairs incurred or required as a result of its installation,
use, repair, maintenance or removal of such devices on the roof and agrees to
indemnify and hold harmless Landlord from any liability, loss, damage, cost
or expense, including reasonable attorneys' fees, arising from any activities
of Tenant or of Tenant's Representatives on the roof of the Building.
3. SIGNAGE. No sign, placard, picture, name, advertisement or
notice visible from the exterior of the Premises will be inscribed, painted,
affixed or otherwise displayed by Tenant on or in any part of the Building
without the prior written consent of Landlord. Landlord reserves the right to
adopt and furnish Tenant with general guidelines relating to signs in or on
the Building. All approved signage will be inscribed, painted or affixed at
Tenant's expense by a person approved by Landlord, which approval will not be
unreasonably withheld.
4. PROHIBITED USES. The Premises will not be used for
manufacturing, for the storage of merchandise held for sale to the general
public, for lodging or for the sale of goods to the general public. Tenant
will not permit any food preparation on the Premises except that Tenant may
use Underwriters' Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages or use of microwave ovens for employee use so
long as such use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations.
5. JANITORIAL SERVICES. Tenant will not employ any person for the
purpose of cleaning the Premises or permit any person to enter the Building
for such purpose other than Landlord's janitorial service, except with
Landlord's prior written consent. Tenant will not necessitate, and will be
liable for the cost of, any undue amount of janitorial labor by reason of
Tenant's carelessness in or
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indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises
on nights when such areas are occupied after 9:30 p.m., unless such service
is extended by written agreement to a later hour in specifically designated
areas of the Premises.
6. KEYS AND LOCKS. Landlord will furnish Tenant, free of charge,
two (2) keys to each door or lock in the Premises and may provide an access
code for each employee of Tenant for after hours access to the Building.
Landlord may make a reasonable charge for any additional or replacement keys.
Tenant will not duplicate any keys, alter any locks or install any new or
additional lock or bolt on any door of its Premises or on any other part of
the Building without the prior written consent of Landlord and, in any event,
Tenant will provide Landlord with a key for any such lock. On the termination
of the Lease, Tenant will deliver to Landlord all keys to any locks or doors
in the Building which have been obtained by Tenant.
7. FREIGHT. Upon not less than twenty-four (24) hours prior
notice to Landlord, which notice may be oral, an elevator will be made
available for Tenant's use for transportation of freight, subject to such
scheduling as Landlord in its discretion deems appropriate. Tenant shall not
transport freight in loads exceeding the weight limitations of such elevator.
Landlord reserves the right to prescribe the weight, size and position of all
equipment, materials, furniture or other property brought into the Building,
and no property will be received in the Building or carried up or down the
freight elevator or stairs except during such hours and along such routes and
by such persons as may be designated by Landlord. In addition, Landlord may
require Tenant to cover carpets and wall coverings to prevent damage,
injuries or scuff marks. Landlord reserves the right to require that heavy
objects will stand on wood strips of such length and thickness as is
necessary to properly distribute the weight. Landlord will not be responsible
for loss of or damage to any such property from any cause, and Tenant will be
liable for all damage or injuries caused by moving or maintaining such
property.
8. NUISANCES AND DANGEROUS SUBSTANCES. Tenant will not conduct
itself, or permit Tenant's Representatives or Visitors to conduct themselves,
in the Premises or anywhere on or in the Property in a manner which is
offensive or unduly annoying to any other Tenant or Landlord's Property
Managers. Landlord reserves the right to exclude or expel from the Building
or the Project any person who, in Landlord's sole judgment, is intoxicated or
under the influence of drugs or other substances or who is in violation of
any of the Building Rules. Tenant will not install or operate any phonograph,
radio receiver, musical instrument or television or other similar device in
any part of the Common Areas and shall not operate any such device installed
in the Premises in such manner as to disturb or annoy other tenants of the
Building. Tenant will not use or keep in the Premises or the Property any
kerosene, gasoline or other combustible fluid or material other than limited
quantities thereof reasonably necessary for the maintenance of office
equipment, or without Landlord's prior written approval, use any method of
heating or air conditioning other than that supplied by Landlord. Tenant will
not use or keep any foul or noxious gas or substance in the Premises or
permit or suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of
noise, odors or vibrations, or interfere in any way with other tenants or
those having business therein. Tenant will not bring or keep any animals in
or about the Premises or the Property.
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9. SMOKING PROHIBITION. In accordance with applicable law and
ordinances, no person, including Tenant, Tenant's Representatives or
Visitors, shall be permitted to smoke anywhere in the Premises or in the
Building. Landlord may designate an area in the Common Areas of the Project
outside of the Building where smoking may be permitted, and all smoking shall
only be done in such designated areas in accordance with directions issued
from time to time by Landlord.
10. BUILDING NAME AND ADDRESS. Without Landlord's prior written
consent, Tenant will not use the name of the Building in connection with or
in promoting or advertising Tenant's business except as Tenant's address.
11. BUILDING DIRECTORY. A directory for the Building will be
provided for the display of the name and location of tenants. Landlord
reserves the right to approve any additional names Tenant desires to place in
the directory and, if so approved, Landlord may assess a reasonable charge
for adding such additional names.
12. WINDOW COVERINGS. No curtains, draperies, blinds, shutters,
shades, awnings, screens or other coverings, window ventilators, hangings,
decorations or similar equipment shall be attached to, hung or placed in, or
used in or with any window of the Building without the prior written consent
of Landlord. Landlord shall have the right to control all lighting within the
Premises that may be visible from the exterior of the Building.
13. FLOOR COVERINGS. Tenant will not lay or otherwise affix
linoleum, tile, carpet or any other floor covering to the floor of the
Premises in any manner except as approved in writing by Landlord. Tenant will
be liable for the cost of repair of any damage resulting from the violation
of this rule or the removal of any floor covering by Tenant, its
Representatives, or contractors.
14. WIRING AND CABLING INSTALLATIONS. Landlord will direct
Tenant's electricians and other vendors as to where and how data, telephone,
and electrical wires and cables are to be installed. No boring or cutting for
wires or cables will be allowed without the prior written consent of
Landlord. The location of burglar alarms, smoke detectors, telephones, call
boxes and other office equipment affixed to the Premises shall be subject to
the written approval of Landlord.
15. OFFICE CLOSING PROCEDURES. Tenant shall see that the doors of
the Premises are closed and locked and that all water faucets, water
apparatus and utilities are shut off before Tenant or its employees leave the
Premises, so as to prevent waste or damage. Tenant will be liable for all
damage or injuries sustained by other tenants or occupants of the Building or
Landlord resulting from Tenant's carelessness in this regard or violation of
this rule. Tenant will keep the doors to the Building corridors closed at all
times except for ingress and egress.
16. PLUMBING FACILITIES. The toilet rooms, toilets, urinals, wash
bowls and other apparatus shall not be used for any purpose other than that
for which they were constructed and no foreign substance of any kind
whatsoever shall be disposed of therein. Tenant shall be liable for any
breakage, stoppage or damage resulting from the violation of this rule by
Tenant, its Representative or Visitors.
17. USE OF HAND TRUCKS. Tenant will not use or permit to be used
in the Premises or in the
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Common Areas any hand trucks, carts or dollies except those equipped with
rubber tires and side guards or such other equipment as Landlord may approve.
18. REFUSE. Tenant shall store all of Tenant's trash and garbage
within the Premises or in other facilities designated by Landlord for such
purpose. Tenant shall not place in any trash box or receptacle any material
which cannot be disposed of in the ordinary and customary manner of removing
and disposing of trash and garbage in the City of Burlingame without being in
violation of any law or ordinance governing such disposal. All trash and
garbage removal shall be made in accordance with directions issued from time
to time by Landlord, only through such Common Areas provided for such
purposes and at such times as Landlord may designate. Tenant shall comply
with the requirements of any recycling program adopted by Landlord for the
Building.
19. SOLICITING. Canvassing, peddling, soliciting and distribution
of handbills or any other written materials in the Building are prohibited,
and Tenant will cooperate to prevent the same.
20. PARKING. Tenant will use, and cause Tenant's Representatives
and Visitors to use, the parking spaces to which Tenant is entitled under the
Lease in a manner consistent with Landlord's directional signs and markings
in the Parking Facility and in accordance with the Parking Rules and
Regulations attached as EXHIBIT E to the Lease. Specifically, but without
limitation, Tenant will not park, or permit Tenant's Representatives or
Visitors to park, in a manner that impedes access to and from the Building or
the Parking Facility or that violates space reservations for handicapped
drivers registered as such with the California Department of Motor Vehicles.
Landlord may use such reasonable means as may be necessary to enforce the
directional signs and markings in the Parking Facility, including but not
limited to towing services, and Landlord will not be liable for any damage to
vehicles towed as a result of noncompliance with such Parking Rules.
21. FIRE, SECURITY AND SAFETY REGULATIONS. Tenant shall comply
with all safety, security, fire protection and evacuation measures and
procedures established by Landlord or any governmental agency.
22. RESPONSIBILITY FOR THEFT. Tenant assumes any and all
responsibility for protecting the Premises from theft, robbery and pilferage,
which includes keeping doors locked and other means of entry to the Premises
closed.
23. SALES AND AUCTIONS. Tenant shall not conduct or permit to be
conducted any sale by auction in, upon or from the Premises or elsewhere on
or in the Property, whether said auction be voluntary, involuntary, pursuant
to any assignment for the payment of creditors or pursuant to any bankruptcy
or other insolvency proceeding.
24. DEFACING OF WALLS. Tenant and Tenant's Representative shall
not mark, drive nails, screw or drill into the partitions, plasterboard,
woodwork or plaster of the interior walls or in any way deface the Premises
or any part thereof except in accordance with the terms and conditions of the
Lease regarding Alterations. Tenant shall repair any damage resulting from
noncompliance with this Rule.
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25. WAIVER OF RULES. Landlord may waive any one or more of these
Building Rules for the benefit of any particular tenant or tenants, but no
such waiver by Landlord will be construed as a waiver of such Building Rules
in favor of any other tenant or tenants or prevent Landlord from thereafter
enforcing these Building Rules against any or all of the tenants of the
Building.
26. EFFECT ON LEASE. These Building Rules are in addition to, and
shall not be construed to in any way modify or amend, in whole or in part,
the terms, covenants, agreements and conditions of the Lease. In the event of
any conflict between the terms and conditions of the Lease and these Building
Rules, the terms and conditions of the Lease shall control. Violation of
these Building Rules shall constitute an Event of Default under the Lease.
27. NON-DISCRIMINATORY ENFORCEMENT. Subject to the provisions of
the Lease (and the provisions of other leases with respect to other tenants),
Landlord shall use reasonable efforts to enforce these Building Rules in a
non-discriminatory manner, but in no event shall Landlord have any liability
for any failure or refusal to do so (and Tenant's sole and exclusive remedy
for any such failure or refusal shall be injunctive relief preventing
Landlord from enforcing any of the Building Rules against Tenant in a manner
that discriminates against Tenant).
28. ADDITIONAL AND AMENDED RULES. Landlord reserves the right to
rescind or amend these Building Rules and/or adopt any other and reasonable
rules and regulations as in its judgment may from time to time be needed for
the safety, care and cleanliness of the Building and for the preservation of
good order therein.
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EXHIBIT E
---------
PARKING RULES AND REGULATIONS
The following rules and regulations (the "PARKING RULES") shall
govern use of the Parking Facility which is under, outside and appurtenant to
the Building:
1. PARKING AREAS. Tenant shall not park or permit the parking of
any vehicle under its control in any parking space or spaces designated by
Landlord as areas for parking by visitors to the Building. Tenant shall not
leave vehicles in the parking areas overnight nor park any vehicles in the
parking area other than automobiles, motorcycles, motor driven or non-motor
driven bicycles or four-wheeled trucks.
Landlord shall take reasonable actions to ensure the availability of the
parking spaces leased by or provided to Tenant, but Landlord does not
guarantee the availability of those spaces at all times against the actions
of other tenants of the Building and users of the Parking Facility. Access to
monthly parking spaces requiring the payment of Parking Rent shall, at
Landlord's option, be by card, pass, bumper sticker, decal or other
appropriate identification issued by Landlord.
2. PARKING IDENTIFICATION. Parking stickers or any other device
or form of identification supplied by Landlord as a condition of use of the
Parking Facility shall remain the property of Landlord. Such parking
identification device must be displayed as requested and may not be mutilated
in any manner. The serial number of the parking identification device may not
be obliterated. Devices are not transferable and any device in the possession
of an unauthorized holder will be void.
3. OVERNIGHT PARKING AND STORAGE. No overnight or extended term
storage of vehicles shall be permitted.
4. PARKING STALLS. Vehicles must be parked entirely within the
painted stall lines of a single parking stall.
5. DIRECTIONAL SIGNS. All directional signs and arrows must be
observed.
6. SPEED LIMIT. The speed limit within all parking areas shall be
five (5) miles per hour.
7. PROHIBITED PARKING. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord.
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8. LANDLORD NOT RESPONSIBLE. Every operator of vehicle is
required to park and lock his own vehicle. All responsibility for damage to
vehicles is assumed by the owner thereof.
9. LOSS OR THEFT. Loss or theft of parking identification devices
from automobiles must be reported immediately, and a lost or stolen report
must be filed by the holder at that time. Landlord has the right to exclude
any car from the Parking Facility that does not have an identification device.
10. CLEANING OF VEHICLES PROHIBITED. Washing, waxing, cleaning or
servicing of any vehicle in any area not specifically reserved for such
purpose is prohibited.
11. LANDLORD'S RIGHT TO CHANGE RULES. Landlord reserves the right
to modify or change these Parking Rules and/or adopt such other reasonable
and non-disciplinary rules and regulations for the Parking Facility as it
deems necessary for the operation of the Parking Facility. Landlord may
refuse to permit any person who violates these Parking Rules to park in the
Parking Facility, and any violation of the Parking Rules shall subject the
vehicle to removal.
12. PARKING CHARGES - RIGHT RESERVED. Landlord reserves the right
to charge for parking in the Parking Facility on a non-discriminatory basis.
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EXHIBIT F
---------
ADDITIONAL PROVISIONS RIDER
36. OPTION FOR EXTENSION (RENEWAL) OF LEASE TERM.
Tenant shall have the option ("OPTION") to extend the Lease Term for one (1)
period of 60 months (the "EXTENSION TERM"), which Option shall be exercised
(if at all) by written notice to Landlord of such exercise (the "EXTENSION
NOTICE") given no earlier than Three Hundred Sixty (360) days prior to the
date on which the Extension Term would commence (the "EXTENSION COMMENCEMENT
DATE") and no later than Two Hundred Seventy (270) days prior to the
Extension Commencement Date. No Extension Notice shall, however, be of any
force and effect, and Tenant shall have no right to extend the Lease Term for
the subject Extension Term, if: (a) Tenant has not already given timely,
effective Extension Notice with respect to the Extension Term or (b) either
on the date of giving of the Extension Notice, or on what would be the
applicable Extension Commencement Date, Tenant is in default under this
Lease, or there exists a set of facts or circumstances which subject to the
giving of notice, would constitute an Event of Default by Tenant under the
Lease.
No later than thirty (30) days after Landlord's receipt of the Extension
Notice, the Landlord shall give written notice to the Tenant ("RENT NOTICE")
that the Fair Market Value for the Base Rent during the Extension Term ("FAIR
MARKET RENT"), at Landlord's option, shall be fair market rent as determined
by the Landlord on the applicable Extension Commencement Date for comparable
space to the Premises in the Building or in other comparable office buildings
located in the vicinity of the Premises, adjusting to account for floor
level, the proposed term of lease, the extent of services provided (or to be
provided), the time the particular rent under consideration became (or is to
become) effective, provisions for future rent increases; whether (and to what
extent) any part of the operating insurance, taxes, and other costs are paid
by the Tenant, and any similar relevant terms and conditions.
If Tenant disputes Landlord's Fair Market Rent for the Extension Term, it
shall give Landlord written notice of such dispute no later than thirty (30)
days after the Landlord has sent the Rent Notice to the Tenant. In the event
that Tenant does not give such written notice within such stated time, Tenant
shall be deemed to have conclusively accepted and approved Landlord's Fair
Market Rent, and thereafter Tenant shall immediately execute a Memorandum
which may be requested by Landlord to affirm the Base Rent for the Extension
Term.
If the Landlord and Tenant cannot agree on the Fair Market Value for the Base
Rent of the Extension Term by no later than one hundred twenty (120) days
prior to the Extension Commencement Date, then the Fair Market Rent shall be
determined by appraisal. If it becomes necessary to determine the Fair Market
Rent for the Premises by appraisal, real estate appraiser(s), all of whom
shall be members of the American Institute of Real Estate Appraisers and who
have at least five (5) year of experience in appraising office space located
in the vicinity of the Premises shall be appointed and shall act in
accordance with the following procedures:
(i) If the parties are unable to agree on the Fair Market Rent within the
allowed time, either party
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may demand an appraisal by giving written notice to the other party, which
demand to be effective must state the name, address and qualifications of an
appraiser selected by the party demanding an appraisal (the "NOTIFYING
PARTY"). Within ten (10) days following the Notifying Party's's appraisal
demand, the other party (the "NON-NOTIFYING PARTY") shall either approve the
appraiser selected by the Notifying Party or select a second properly
qualified appraiser by giving written notice of the name, address and
qualifications of said appraiser to the Notifying Party. If the Non-Notifying
Party fails to select an appraiser within the ten (10) day period, the
appraiser selected by the Notifying Party's shall be deemed selected by both
parties and no other appraiser shall be selected. If two appraisers are
selected, they shall select a third appropriately qualified appraiser within
fifteen (15) days after the selection of the second appraiser. If two
appraisers fail to select a third qualified appraiser within such time
period, the third appraiser shall be appointed by the then presiding judge of
the county where the Premises are located upon application by either party.
(ii) If only one appraiser is selected, that appraiser shall notify the
parties in simple letter form of its determination of the Fair Market Rent
for the Premises within fifteen (15) days following his selection, which
appraisal shall be conclusively determinative and binding on the parties as
the appraised Fair Market Rent.
(iii) If multiple appraisers are selected, the appraisers shall meet not
later than (10) days following the selection of the last appraiser. At such
meeting the appraisers shall attempt to determine the Fair Market Rent for
the Premises as of the Extension Commencement Date by the agreement of at
least two (2) of the appraisers.
(iv) If two (2) or more of the appraisers agree on the Fair Market Rent for
the Premises at the initial meeting, such agreement shall be determinative
and binding upon the parties hereto and the agreeing appraisers shall, in
simple letter form executed by the agreeing appraiser, forthwith notifying
both Landlord and Tenant of the amount set by such agreement. If multiple
appraisers are selected and two (2) appraisers are unable to agree on the
Fair Market Rent for the Premises, all appraisers shall submit to Landlord
and Tenant an independent appraisal of the Fair Market Rent for the Premises
in simple letter form within twenty (20) days following appointment of the
final appraiser. The parties shall then determine the Fair Market Rent for
the Premises by averaging the appraisals; provided that any high or low
appraisal, differing from the middle appraisal by more than ten percent (10%)
of the middle appraisal, shall be disregarded in calculating the average
("AVERAGE"). The Average shall be conclusively determinative and binding on
the parties as the appraised Fair Market Rent.
(v) The appraisers' determination of Fair Market Rent shall be based on
rental of space of comparable age, construction, size and location as the
Premises with any comparable tenant improvement installed therein, if any, at
Landlord's expense and shall take into account Tenant's obligation to pay
Additional Rent under this Lease.
(vi) If only one appraiser is selected, then each party shall pay one-half of
the fees and expenses of that appraiser. If three appraisers are selected,
each party shall bear the fees and expenses of the appraiser it selects and
one-half of the fees and expenses related to the third appraiser.
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If the herein stated procedures have not determined the Fair Market Rent by
the Extension Commencement Date, Tenant shall commence paying Base Rent on
such date in accordance with the Rent Notice, and shall continue paying such
Base Rent until the Fair Market Rent is so determined, at which time an
appropriate adjustment shall be made between the Landlord and Tenant to
reflect any difference between the Fair Market Rent as determined by the
herein procedures and the amount which Tenant has theretofore paid.
All other terms and conditions contained in the Lease shall remain in full
force and effect and shall apply during the Extension Term.
During the Extension Term, the Base Year shall mean the calendar year of the
Extension Commencement Date.
37. EXPANSION SPACE.
After the execution date ("EXECUTION DATE") of this Lease as stated on the
signature page of this Lease, on any office rentable area in the Building
which is not leased to Tenant, and which at Landlord's discretion becomes
available to offer for re-leasing to prospective tenants in the marketplace,
("EXPANSION SPACE") within the first forty-eight months after the Execution
Date, Landlord shall first offer such Expansion Space to Tenant on the
following terms and conditions:
(a) in the event that the Expansion Space is available as defined
herein, Landlord shall make with written notice to Tenant up to four (4)
first offers with no more than five thousand (5,000) rentable office square
feet per offer for each consecutive twelve (12) month period after the
Execution Date, or up to a total of twenty thousand (20,000) square feet of
Expansion Space over a total of four (4) consecutive twelve month periods;
(b) the first twelve month period shall commence on the first day
after the Execution Date and end three hundred and sixty-five (365) days
after the Execution Date, and each successive twelve month period shall
commence on the first day following the last day of the immediately previous
twelve month period;
(c) in the event that such Expansion Space is not available in any
twelve period, then Landlord shall have absolutely no obligation to make such
offer to lease any Expansion Space to Tenant; and such offer for the related
twelve month period in which the offer was made shall automatically expire;
(d) in the event that Tenant accepts a first offer from the
Landlord to lease Expansion Space, then Tenant at Landlord's request with
written notice to Tenant shall properly and promptly execute and deliver
within five (5) business days after Landlord has provided such notice a new
lease form and/or Basic Lease Information and Commencement Date Memorandum
for Expansion Space;
(e) such new lease form, Basic Lease Information, and Commencement
Date Memorandum for Expansion Space shall be the same as and contain all the
same provisions of this Lease (Tenant's Lease for the 3,360 rsf in the
Building) except that it shall exclude only Sections 37. and 38. of this
Lease except for those specific terms of Section 37. which are included or
required to fully and accurately complete the Basic Lease Information and
Commencement Date Memorandum for the Expansion Space in the new lease related
to the each separate offer which has been accepted by Tenant, inclusive of
the Commencement Date for the Expansion Space shall be the second day after
Tenant has given written notice of its acceptance of Landlord's offer;
(f) Landlord's offers accepted by Tenant which result in total
Expansion Space of up to first
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ten thousand (10,000) square feet leased to Tenant shall have an Expiration
Date of December 31, 2003, and Landlord's offers accepted by Tenant which
shall result in Expansion Space of up to the second or next ten thousand
(10,000) square feet shall have an Expiration Date of December 31, 2004.;
(g) The additional Base Rent for the first twelve (12) months on
the Expansion Space for each offer accepted by Tenant as provided above shall
be the Rental Rate which is in effect under the Lease (Tenant's Lease for
3,360 rentable square feet in the Building) at the time Tenant accepts, as
provided herein, the Landlord's offer to lease the Expansion Space, and then
the Rental Rate for the Expansion Space on such accepted offer shall be
increased by $0.10 per rsf/month for the next twelve months and after every
12 months during the lease term of the Expansion Space;
(h) Upon Tenant's acceptance of each offer, it shall deposit with
Landlord a Security Deposit equal to the sum of the last month's rent under
the lease term for the related Expansion Space;
(i) In the event Tenant declines to accept a Landlord's first
offer during a twelve month period to lease Expansion Space to Tenant, Tenant
shall have no rights to lease such Expansion Space and Landlord shall have no
obligation to make a second offer to lease the same Expansion Space to
Tenant. However, Landlord may, in its sole discretion, make a second offer to
lease the same Expansion Space as specified in the first offer to Tenant
under the same terms and conditions as provided in the first offer and as
provided in SECTION 37. of this Lease, and in the event that Tenant accepts
such second offer, then the same terms and conditions of this SECTION 37.
which are applicable to the first offer shall also be entirely applicable to
such second offer.
(j) Within fifteen (15) calendar days during any twelve month
period after Landlord has given notice to Tenant of Landlord's offer to lease
the Expansion Space to Tenant, Tenant shall give written notice to Landlord
that it will has either accept or decline such offer. In the event that
Tenant fails to give such written notice to Landlord, such offer shall
automatically expire at the end of the above fifteen (15) calendar day
period. Upon Tenant's declination of such offer or upon the automatic
expiration of such offer, such offer shall forever expire with Tenant having
no right to lease such Expansion Space made under the related offer.
(k) The Commencement Date for each Expansion Space shall be two
(2) days after Tenant has given written notice to Landlord of Tenant's
acceptance of Landlord's offer to lease Expansion Space to Tenant.
(l) Provided Tenant's "Report on Audited Consolidated Financial
Statements" (prepared by its accountant, Coopers & Lybrand, LLP, or
comparable firm) for the fiscal year ending on same calendar year of Tenant's
acceptance of a first offer, or in the event there is a change from a fiscal
year to a calendar year for such report, then such report for the calendar
year immediately prior to the calendar year of Tenant's acceptance of a first
offer shall show at least Ten Million Dollars ($10,000,000) in income from
operations before provision for income taxes (Landlord at its sole discretion
may waive this condition).
(m) Provided Tenant is not in default under any lease between
Landlord and Tenant, or there exists no set of facts or circumstances which
subject to the giving of notice, would constitute an Event of Default by
Tenant under any lease between Landlord and Tenant.
(For example, during the first 12 month period after the Execution Date if
Landlord makes in writing a first offer on, say, May 1, 1999 to lease
Expansion Space of 3,500 rentable square feet to Tenant and Tenant accepts in
writing such offer on, say, May 12, 1999, the lease for such Expansion Space
shall include the following terms: Expiration Date shall be December 31,
2003; Commencement Date shall be May 14, 1999; Base Rent shall be
$2.90/rsf*/month in first 12 months, $3.00/rsf/month in
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second 12 months, $3.10/rsf/month in the third 12 months, and $0.10/rsf/month
increase after every 12 months during the lease term for the 3,500 square
foot Expansion Space. During the second 12 month twelve month period after
the Execution Date, if Landlord makes in writing a second offer on, say,
April 17, 2000 to lease Expansion Space of 5,000 rentable square feet to
Tenant and Tenant accepts in writing such second offer on, say, April 20,
2000, the lease for such Expansion Space shall include the following terms:
Expiration Date shall be December 31, 2003; Commencement Date shall be April
22, 2000; Base Rent shall be $3.00/rsf*/month in the first 12 months,
$3.10/rsf/month in the second 12 months, $3.20/rsf/month in the third 12
months, and $0.10/rsf/month increase after every 12 months during the lease
term for 5,000 square foot Expansion Space. During the third 12 month period
after the Execution Date, if Landlord makes no third first offer to lease
Expansion Space to Tenant as no Expansion Space is available, then Landlord
shall have no be obligation to make such third offer in the future and there
shall be only one first offer remaining for the Landlord to offer Expansion
Space to Tenant.)
*rentable square feet as defined in the Lease, beginning Rental Rate based on
Rental Rate in effect at such time on Tenant's Lease for 3,360 rentable
square feet in the Building.
38. VALIDITY OF THE LEASE.
This lease is valid only upon the execution by Landlord and Tenant of Exhibit
G, that certain FOURTH AMENDMENT to that certain Lease dated August 15, 1994
along with its Addendum, Second Addendum, First Amendment, Second Amendment,
and Third Amendment.
39. MODIFICATIONS.
1. At the top of page 12, at the end of Section 5.2(e), insert the
following language:
"(f) LANDLORD'S INDEMNIFICATION. Landlord agrees to indemnify,
defend and hold harmless Tenant and its affiliates from claims, actions,
losses, damages, liabilities, costs and expenses of every kind, including
reasonable attorneys', experts, and consultants' fees and costs, incurred at
any time and arising from or in connection with Landlord's failure to comply
in full with all Environmental Requirements solely within Landlord's direct
control for compliance with respect to the Premises."
2. Notwithstanding anything to the contrary in the Lease, the
following language is added as it relates to "Section 6. Alternations" in the
Lease:
"(a) In the event that Landlord does not notify Tenant in writing
of Landlord's approval or disapproval of Tenant's proposed Alternations
within fifteen (15) days following Tenant's submission to the Landlord of:
(i) the necessary information on the Alternations and, (ii) such Tenant
request for such approval or disapproval, then the Landlord shall be deemed
to have approved such proposed Alternations.
(b) For any Alternations made or to be made by Tenant or parties
engaged by the Tenant after June 8, 1998, upon Tenant's written request to
the Landlord, Landlord shall advise Tenant in writing whether it shall
require Tenant to remove such Alternations at the Expiration Date of the
Lease.
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(c) Except for Alternations which when removed by Tenant will
cause structural injury to the Property, at any time Tenant may remove its
Trade Fixtures from the Premises, provided Tenant shall expeditiously repair
at its own expense and pay for all costs related to all damage from the
removal of any Alternations which caused such structural injury.
(d) Landlord shall have no lien or other interest whatsoever in
any item of Tenant's Trade Fixtures, or any portion thereof or interest
therein located in the Premises or elsewhere, and Landlord hereby waives all
such liens and interests, except in the Event of Default. Within ten (10)
days following Tenant's written request to Landlord, Landlord shall execute
documents in a form reasonably acceptable to both parties to evidence
Landlord's waiver of any right, title, lien or interest in Tenant's Trade
Fixtures located in the Premises.
3. On page 31, at the end of "Section 23.2. OTHER LITIGATION", insert
the following language:
If Tenant, without fault on Tenant's part, is made a party to any
litigation instituted by Landlord or by any third party against Landlord, or
by or against any Transferee or other occupant of the Premises or otherwise
arising out of or resulting from any act or transaction of Landlord or of any
such Transferee or occupant, Landlord shall hold Tenant harmless from any
judgment rendered against Tenant, and reimburse Tenant upon demand for all
costs and expenses, including reasonable attorneys' fees, incurred by Tenant
in or in connection with such litigation.
40. TENANT REPRESENTATION REGARDING ALTERNATIONS.
Tenant represents that: (i) Tenant has secured the Landlord's
consent, where Landlord's consent is required under that certain lease dated
August 15, 1994 between the Landlord and Tenant, for all Alterations made to
the Premises up to June 7, 1998 by Tenant or by parties engaged by the
Tenant, (ii) between August 15, 1994 and June 7, 1998 Tenant has engaged
contractor(s) designated by Landlord to construct all Alterations to the
Premises as defined in such lease dated August 15, 1994, and (iii) all such
Alternations have been made in full compliance with the terms and provisions
of such lease dated August 15, 1994. Landlord shall not require Tenant to
remove such Alterations as provided in this Section 40. upon the Expiration
Date of the Lease.
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EXHIBIT G
---------
FOURTH AMENDMENT to that certain
Lease dated August 15, 1994 along with its Addendum, Second Addendum, First
Amendment, Second Amendment, and Third Amendment (herein collectively the
"LEASE") between Waterfront Tower Partners, L.P., a California limited
partnership, Landlord, and SERENA Software Consulting, Inc., a California
corporation, Tenant.
NOW thereof:
The above referenced Lease, its Addendums and Amendments are reaffirmed by
the Landlord and Tenant and thereto shall remain in full force and effect
without any modifications except as herein set forth in this Fourth Amendment:
1. The Expiration Date shall be extended from the original date
of July 31, 2001 to December 31, 2001 for 13,878 rentable square feet of
office, a portion of the Premises comprising of: a) 8,890 rentable square
feet on the second floor on the westerly side of the Building as part of the
Premises specified in the Lease, b) 4,546 rentable square feet on the third
floor of the Building as part of the Premises specified in the Second
Amendment to the Lease, and c) 442 rentable square feet on the third floor of
the Building specified as part of the Premises in the Third Amendment to the
Lease, all delineated in EXHIBIT H attached herein.
2. Within sixty (60) days of an Expiration Date for the 13,878
rentable square feet in which Tenant is required on such Expiration Date to
surrender the Premises to the Landlord in accordance with Section 19. of the
new lease form, in the event there is a disagreement between the Landlord and
Tenant on the floor layout of the rentable square feet of the Premises
required to be surrendered by the Tenant to the Landlord, Landlord shall
engage the services of an architect whose measurement of such floor layout
required to be surrendered shall conclusively resolve such disagreement.
3. The Expiration Date shall be extended from the original date
of July 31, 2001 to December 31, 2002 for 8,442 rentable square feet, a
portion of the Premises comprising of: a) 6,704 rentable square feet on the
second floor on the easterly side of the Building as part of the Premises
specified in the Lease and, b) 1,738 rentable square feet on the second floor
of the Building specified as part of the Premises in the First Amendment to
the Lease, all delineated in EXHIBIT H herein. In the event there is a
disagreement between the Landlord and the Tenant on the floor layout of the
rentable square feet to be included in the 8,442 rentable square feet, then
such disagreement shall be resolved in the same manner as stipulated in
condition "2." above.
4. Tenant at Landlord's request with written notice to Tenant
shall properly and promptly execute and deliver to Landlord, within five (5)
business days after Landlord has provided such notice:
(a) a new and separate lease form and/or Basic Lease Information
form for the 13,878 rentable square feet of the Premises expiring on July 31,
2001, and;
(b) a new and separate lease form and/or Basic Lease Information
form for the 8,442 rentable square feet of the Premises expiring on July 31,
2001.
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5. Such lease form shall be the same as and contain all the terms
and conditions of the lease which Tenant has executed for the 3,360 rentable
square feet on third floor, except for only the following modifications to
such new lease form:
(a) The Monthly Rent shall be increased to $2.75 per rentable
square foot per month or Thirty-Eight Thousand One
Hundred Sixty-Four and 50/100 Dollars ($38,164.50) per
month for five months from August 1, 2001 to the extended
Expiration Date of the Lease of December 31, 2001 for the
13,878 rentable square feet of the Premises;
(b) The Monthly Rent shall be increased to: (i) $2.75 per
rentable square foot per month or Twenty-Three Thousand
Two Hundred Fifteen and 50/100 Dollars ($23,215.50) per
month for the first twelve months of from August 1, 2001
to July 31, 2002, and (ii) $2.85 per rentable square foot
per month or Twenty-Four Thousand and Fifty-Nine and
70/100 Dollars ($24,059.70) per month for five months
from August 1, 2002 to the extended Expiration Date of
the Lease of December 31, 2002 for the 8,442 rentable
square feet of the Premises;
(c) On August 1, 2001, Tenant shall deposit with Landlord a
Security Deposit which shall increase the Security
Deposit to Thirty-Eight Thousand One Hundred Sixty-Four
and 00/100 Dollars ($38,164.00) deducted by the Security
Deposit prorated which Tenant has already deposit with
Landlord related to the 13,878 rentable square feet of
the Premises;
(d) On August 1, 2001, Tenant shall deposit with Landlord a
Security Deposit which shall increase the Security
Deposit to Twenty-Four Thousand Fifty-Nine and 00/100
Dollars ($24,059.00) deducted by the Security Deposit
prorated which Tenant has already deposit with Landlord
related to the 8,442 rentable square feet of the Premises;
(e) In the new lease form for the 13,878 rentable square feet
of the Premises; the Tenant's Share shall be 13.87%;
(f) In the new lease form for 8,442 rentable square feet of
the Premises, the Tenant's Share shall be 8.43%;
(g) In the new lease form for both the 13,878 rentable square
feet and 8,442 rentable square feet of the Premises, the
Base Year shall 2000;
(h) In the new lease form for the 13,878 rentable square
feet, in Section 36., Option for Extension (Renewal) of
Lease Term, on line three, "Three Hundred and Sixty (360)
days" is replaced with "Two Hundred and Ten (210) days",
and on line five of the same section, "Two Hundred and
Seventy (270) days" is replaced with "One Hundred and
Eighty (180) days".
6. Section 36. of the new lease form shall supersede in its
entirety the language in the old LEASE related to the option for the
extension of the lease term, and in the event of any conflict between the two
leases, Section 36. of the new lease form shall prevail.
7. Such new lease form for the 13,878 rentable square feet and
8,442 rentable square feet of the Premises containing the herein terms and
conditions which has been executed by Landlord and Tenant shall supersede in
its entirety the LEASE as referenced above.
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8. This Fourth Amendment is conditional and shall become
effective only upon the execution by the Landlord and Tenant of the May 18,
1998 lease for the 3,360 square feet of office rentable square feet in the
Building.
LANDLORD: TENANT:
WATERFRONT TOWER PARTNERS, L.P., A SERENA SOFTWARE INTERNATIONAL, INC.,
California limited partnership, a California corporation,
By: Peninsula Office Management, Inc., By: /s/ Richard A. Doerr
a California corporation, General -----------------------
Partner Its: President and Chief Executive
Officer
-------------------------------
By: /s/ Angelo Orphan
-----------------------
Angelo Orphan, President
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EXHIBIT H
---------
PREMISES
Schematic of leased property
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Third Floor: 4,546 rsf, Highlighted in Black Outline, Expiration Date
of December 31, 2001
Third Floor: 442rsf, Cross Hatched in Black, Expiration Date of
December 31, 2001
Schematic of leased property
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Schematic of leased property
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RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement ("Agreement") is entered into as
of ______________, 199__ between Serena Software International, a California
corporation (the "Company"), and __________________ ("Purchaser").
RECITALS
Pursuant to the Company's 1997 Stock Option and Incentive Plan (the
"Plan"), the committee established pursuant to the Plan (the "Committee") has
determined to issue and sell to Purchaser, and Purchaser has agreed to purchase
from the Company, shares of the Company's Common Stock (the "Shares") on the
terms and conditions set forth below. The Plan is available for review by
Purchaser at the Company's principal office.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the parties hereby agree as follows:
1. PURCHASE OF SHARES
The Company hereby agrees to sell to Purchaser, and Purchaser hereby agrees
to purchase from the Company, ___________ Shares at a price of $__________ per
Share (the "Initial Per Share Price"), for an aggregate purchase price of
$_______.
In payment of the purchase price for the Shares, Purchaser will execute and
deliver to the Company a recourse Promissory Note, in substantially the form of
Exhibit A attached hereto, in the principal amount of $_______ (the "Purchase
Note"). As security for its obligations under the Purchase Note, Purchaser will
execute and deliver to the Company a Pledge Agreement in substantially the form
of Exhibit B attached hereto (the "Pledge Agreement"). The Shares will be issued
to Purchaser upon receipt by the Company of the Purchase Note and the Pledge
Agreement, duly executed by Purchaser.
The Shares will be represented by certificate no. _________, issued in the
name of Purchaser and delivered to the Secretary of the Company pursuant to the
Pledge Agreement.
2. VESTING
The Shares are subject to a right and obligation of repurchase by the
Company at the Initial Per Share Price, which repurchase right for the Company
(and forfeiture risk for Purchaser) lapses over time as set forth below. As the
repurchase right lapses, the number of Shares which are then free of the
repurchase right are referred to herein as "Vested Shares." Thus, as used
herein, "Unvested Shares" means all Shares in which Purchaser has not acquired
such a vested interest (free of the right to repurchase at the Initial Per Share
Price) in accordance with the following provisions; and "Vested Shares" means
all Shares in which Purchaser has acquired such a vested interest.
One-fourth (25%) of the Shares (_______ Shares) shall become Vested Shares
at midnight on the last day of _________, 199__ (the "Initial Vesting Date") if
Purchaser is then employed by the Company; and the remaining three-fourths (75%)
of the Shares (______ Shares) shall become Vested Shares in thirty-six (36)
equal monthly installments, each occurring at midnight on
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the last day of each month commencing after the Initial Vesting Date if
Purchaser is then employed by the Company, so that, assuming continued
employment, all Shares will become Vested Shares at midnight on
_______________________ (the "Vesting Termination Date"). Notwithstanding the
foregoing, any Unvested Shares shall become Vested Shares immediately prior to
the occurrence of any of the following events: (i) the sale of all or
substantially all the assets of the Company; (ii) the occurrence of any one
transaction or any series of related transactions which results in the transfer
to any third party (or any affiliated group of third parties) of securities
representing more than 50% of the voting power of the Company; (iii) the merger
or other consolidation of the Company with any third party in which the Company
is not the surviving entity; or (iv) any dissolution, liquidation or other
termination of the Company.
Vested and Unvested Shares shall also include any additional Distributed
Securities, as set forth in Section 3.6.
If application of the vesting percentages results in a vested fractional
Share or a vested fractional Distributed Security, the entire Share or
Distributed Security of which the fraction is a part shall be deemed to be a
Vested Share or Vested Distributed Security.
As used in this Section and Section 3 below, Purchaser shall be considered
to be "employed" only so long as Purchaser qualifies as an employee for tax
purposes. If Purchaser's status with the Company should change from that of an
employee (whether full- or part-time) to that of an independent contractor, then
Purchaser shall not be considered to be "employed" for purposes of this Section
and Section 3 from and after the date of that change.
3. REPURCHASE AND FIRST REFUSAL RIGHTS
3.1. REPURCHASE OBLIGATION - UNVESTED SHARES
Upon the termination of Purchaser's employment by the Company, the Company
shall have the right and obligation (the "Repurchase Obligation") to purchase
and redeem from Purchaser or Purchaser's personal representative, as the case
may be, all of the Shares (including Distributed Securities) which, at the date
of such termination, were Unvested Shares.
The purchase price (the "Redemption Price") for each of the Unvested Shares
to be redeemed under the Repurchase Obligation shall be the Initial Per Share
Price for each Unvested Share (exclusive of any Unvested Distributed
Securities); provided that, upon the redemption of the Unvested Shares, any
Unvested Distributed Securities will then also be redeemed without the payment
of any additional consideration therefor. The Company will effect the redemption
of any Unvested Shares by delivering to Purchaser (or Purchaser's legal
representative), at the Company's option, either cash in the amount of the
Redemption Price or written notice of the forgiveness of a portion of the
principal balance of the Purchase Note equal to the Redemption Price, or a
combination thereof.
3.2. REPURCHASE OPTION - VESTED SHARES
Purchaser hereby grants the Company the right and option (the "Repurchase
Option"), exercisable (as set forth below) at any time during the 90-day period
following the date that Purchaser's employment by the Company is terminated, to
purchase and redeem from Purchaser or Purchaser's personal representative, as
the case may be, all or (at the discretion of the
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Company) any number of the Shares (including Distributed Securities) which, at
the date of such termination, were Vested Shares.
The Repurchase Option will be exercisable by written notice delivered to
Purchaser or Purchaser's personal representative, as the case may be, indicating
the number of Vested Shares to be purchased and redeemed.
The Redemption Price for any Vested Shares and/or any Vested Distributed
Securities to be redeemed under the Repurchase Option shall be the Fair Market
Value (as defined in the Plan) for such Shares and/or Distributed Securities as
of the date of termination of Purchaser's employment. The Company will effect
the redemption of any Vested Shares and/or Vested Distributed Securities by
delivering to Purchaser (or Purchaser's legal representative) cash (and/or
cancellation of indebtedness) in the amount of the Redemption Price.
3.3. RESTRICTIONS ON TRANSFER; RIGHT OF FIRST REFUSAL
Purchaser will have no right, and agrees to take no action, to sell or
otherwise transfer any Unvested Shares or Unvested Distributed Securities, and
any attempted transfer of Unvested Shares or Unvested Distributed Securities,
whether voluntarily, involuntarily, by operation of law or otherwise, shall
constitute a breach of this Agreement by Purchaser and shall be void and of no
force or effect. In addition, any Unvested Shares or Unvested Distributed
Securities as to which any third party asserts ownership by way of transfer from
Purchaser shall, in the hands of such third party (as successor to Purchaser),
be subject to the Repurchase Obligation, so that the Company shall have the
right and obligation to purchase and redeem all of such Unvested Shares and/or
Unvested Distributed Securities on the same terms as are set forth in Section
3.1 with respect to Shares and/or Distributed Securities which were Unvested
Shares or Unvested Distributed Securities on the date that Purchaser's
employment by the Company is terminated.
In addition to the Repurchase Obligation and the Repurchase Option,
Purchaser hereby agrees that, if he shall make an offer to sell any Shares, or
shall receive an offer to purchase any such Shares which he intends to accept,
he shall give the Company notice of the intended sale (including the name of and
other reasonably descriptive information about the prospective purchaser and the
proposed price, terms and conditions of the proposed sale, including copies of
any documents relating thereto) at least 60 days prior to the proposed closing
of the sale. Upon receipt of the notice, the Company shall have a right of first
refusal (the "First Refusal Right"), exercisable by notice delivered to
Purchaser at any time during the 30-day period following receipt of such notice
from Purchaser, to purchase and redeem the Shares subject to the proposed sale
at the price (the "RFR Price") and on the terms and conditions of the proposed
sale. If the Company shall fail to exercise the First Refusal Right, Purchaser
will be free for a period of 90 days thereafter to sell any Vested Shares and/or
Vested Distributed Securities described in the notice to the person identified
in the notice (but to no other person), without further compliance with the
First Refusal Right hereunder, at the RFR Price and on the terms and conditions
set forth in the notice or at such other price or on such other terms and
conditions no more favorable to the proposed purchaser than those set forth in
the notice; provided that Purchaser may not effect any sale after such 90-day
period to any person on any terms without again complying with the First Refusal
Right provisions. Any purported sale of Shares covered by this subsection that
is effected without compliance with the Company's First Refusal Right will be
void and ineffective.
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Notwithstanding the foregoing, Purchaser shall have the right to transfer,
by gift, free of the Company's First Refusal Right and the other restrictions of
this Section 3.3, all or any portion of the Shares (i) directly or indirectly
(through trust or otherwise) to, or for the benefit of, Purchaser's spouse or
children, or (ii) to Purchaser's heirs, executors, personal representatives or
other assigns as a result of Purchaser's death or incapacity; provided that a
condition to any such transfer shall be that, prior to becoming the record owner
of the transferred Shares, the transferee shall become a party to this Agreement
(and the transferee's spouse, if any, shall execute a Spousal Consent in the
form attached hereto as Exhibit D), so that the Shares in the hands of the such
transferee shall remain subject to the Repurchase Obligation and the Repurchase
Option and, with respect to any subsequent transfer, the First Refusal Right,.
3.4. CLOSING
The closing of the redemption of Shares pursuant to the Repurchase
Obligation, the Repurchase Option or the First Refusal Right (the "Closing")
will be held at the offices of the Company or such other place mutually agreed
upon by the parties, at a date mutually acceptable to the parties. In no event,
however, will the Closing be set later than thirty (30) days following (i) the
date of termination of employment (with respect to the Repurchase Obligation) or
(ii) the exercise of the Option or First Refusal Right, unless the parties
mutually agree to a later date for the Closing.
In consideration for payment of the Redemption Price or the RFR Price, as
applicable, Purchaser or Purchaser's personal representative, as the case may
be, shall deliver, or cause to be delivered, to the Company (or its assignees)
the stock certificates evidencing the Shares being redeemed, together with a
duly executed assignment separate from certificate and such other documents as
are necessary to close the transaction. If such certificate(s) evidence both
Shares being redeemed and Shares not being redeemed, the Company shall, at the
Closing, issue and deliver a new certificate to Purchaser or his personal
representative to evidence the Shares not being redeemed. Purchaser irrevocably
appoints the Company as his attorney-in-fact, authorized at any time during the
term of this Agreement to take any actions on behalf of Purchaser with respect
to the purchase and redemption of Shares in compliance with the foregoing terms.
3.5. TERMINATION UPON IPO OR MERGER
The First Refusal Right and the Repurchase Option shall terminate upon the
closing of (i) an underwritten public offering of the Company's Common Stock
made pursuant to an effective registration statement under the federal
Securities Act of 1933 (the "1933 Act"), other than a registration relating
solely to either a transaction under Rule 145 of the Securities and Exchange
Commission or an employee benefit plan, or (ii) any merger or other transaction
by which the Shares are exchanged for or converted into securities which are
part of a class of securities which are listed for trading on an established
securities exchange or otherwise participate in an active public securities
market.
3.6. ADJUSTMENTS FOR CAPITAL CHANGES
In the event the Company undertakes, without receipt of consideration, any
stock dividend, stock split, recapitalization or other change affecting as a
class the Company's outstanding stock of the same class as the Shares, then (i)
any new, substituted or additional securities or other property which are, by
reason of any such transaction, distributed with respect
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to the Shares (collectively, "Distributed Securities") shall be subject to the
Repurchase Obligation, the Repurchase Option and the First Refusal Right, with
any such Distributed Securities distributed with respect to Shares that are then
Vested Shares being treated, for purposes of this Agreement, the same as Vested
Shares, and any such Distributed Securities distributed with respect to Shares
that are then Unvested Shares being treated, for purposes of this Agreement, the
same as Unvested Shares, and (ii) Purchaser's ownership of such Distributed
Securities which are to be treated the same as Unvested Shares will vest in
accordance with the terms and conditions set forth in Section 2 at such rate as
to permit full vesting by the Vesting Termination Date. All certificates
representing any Distributed Securities shall be delivered to the Secretary of
the Company to be held in accordance with the provisions of the Pledge
Agreement. Distributed Securities which, under the foregoing provisions, are
unvested or vested are sometimes referred to herein, respectively, as "Unvested
Distributed Securities" and "Vested Distributed Securities"; and, when indicated
by context, the terms "Shares," "Unvested Shares" and "Vested Shares" as used
herein will include Distributed Securities as well as Shares.
3.7. CANCELLATION OF SHARES
If the Company (or its assignees) shall make available, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Shares to be redeemed in accordance with the provisions of this Section
3, then from and after such time, Purchaser shall no longer have any rights as a
holder of such Shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such Shares shall be
deemed purchased in accordance with the applicable provisions hereof and the
Company (or its assignees) shall be deemed the owner and holder of such shares,
whether or not the certificates therefor have been delivered as required by this
Agreement.
4. SECURITIES LAW COMPLIANCE
4.1. INVESTMENT REPRESENTATIONS
Purchaser hereby represents and warrants that:
(a) He is aware of and familiar with the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach a knowledgeable and informed decision to acquire the Shares;
(b) He and his representatives, if any, have such knowledge and experience
in financial and business matters as may be necessary for him to evaluate the
merits and risks of investment in the Shares;
(c) He and his representatives, if any, have received all information and
data with respect to the Company which he or his representatives have requested
and deemed relevant in connection with the merits and risks of the investment in
the Shares;
(d) He understands that an investment in the Shares is speculative and
that any possible profits therefrom are uncertain;
(e) He is able to bear the economic risks of the investment in the Shares
for an indefinite period of time; and
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(f) He is acquiring the Shares for his own account and not with a view to
their resale or distribution.
4.2. EXEMPTION FROM REGISTRATION
Purchaser acknowledges that the Shares have not been registered under the
1933 Act or qualified under any applicable state securities laws and are being
issued to Purchaser in reliance upon the exemption from such registration and
qualification provided by Rule 701 of the Securities and Exchange Commission for
stock issuances under compensatory benefit contracts such as this Agreement and
corresponding exemptions under applicable state securities laws.
4.3. RESTRICTED SECURITIES
Purchaser hereby confirms that he has been informed that the Shares
constitute restricted securities under the 1933 Act and may not be resold or
transferred unless the Shares are first registered under the Federal securities
laws and qualified under applicable state securities laws or unless an exemption
from such registration and qualification is available. Accordingly, Purchaser
hereby acknowledges that he is prepared to hold the Shares for an indefinite
period and that he is aware that Rule 144 of the Securities and Exchange
Commission issued under the 1933 Act is not presently available to exempt the
sale of the Shares from the registration requirements of the 1933 Act.
4.4. DISPOSITION OF SHARES
Purchaser hereby agrees to make no disposition of the Shares unless and
until he (i) has notified the Company of the proposed disposition and provided a
written summary of the terms and conditions of the proposed disposition; (ii)
has complied with all requirements of this Agreement applicable to the
disposition of the Shares; and (iii) has provided the Company with an opinion of
counsel, in form and substance satisfactory to the Company, that (A) the
proposed disposition does not require registration of the Shares under the 1933
Act or qualification under applicable state securities laws, or (B) all
appropriate action necessary for compliance with such registration and/or
qualification requirements, or for exemption from such requirements, has been
taken.
4.5. RESTRICTIVE LEGENDS
In order to reflect the restrictions on disposition of the Shares, the
stock certificates for the Shares (including Distributed Securities) will be
endorsed with restrictive legends substantially in the form of the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE RIGHTS HELD BY THE COMPANY OR ITS
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ASSIGNEE(S), AS SET FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN
THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, ALL OF WHICH RIGHTS
AND RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES. A COPY OF THE
RESTRICTED STOCK PURCHASE AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE COMPANY."
4.6. LOCK-UP AGREEMENT
If, in connection with an underwritten public offering of the Company's
Common Stock made pursuant to an effective registration statement under the 1933
Act, the underwriter requires the Company's officers and directors to refrain
from selling any of the Company's Common Stock for a designated period of time
following the closing of the offering pursuant to reasonably standard "lock-up"
provisions, Purchaser will agree to abide by the same lock-up provisions unless
exempted therefrom by the underwriter at its discretion.
5. SECTION 83(B) ELECTION
Purchaser understands that under Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), the excess of the fair market value of the
Shares on the date any forfeiture restrictions applicable to such shares
lapse over the purchase price paid for such shares will be reportable as
ordinary income at that time. For this purpose, the term "forfeiture
restrictions" includes the right and obligation of the Company to redeem the
Shares pursuant to the Repurchase Obligation provided under Section 3.1 of
this Agreement. Purchaser understands, however, that Purchaser may elect to
be taxed at the time the Shares are acquired hereunder, rather than when and
as such Shares cease to be subject to such forfeiture restrictions, by filing
an election under Section 83(b) of the Code with the Internal Revenue Service
within thirty (30) days after the date of this Agreement. Even if the fair
market value of the Shares at the date of this Agreement equals the purchase
price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The form for making this election is
attached as Exhibit C hereto. Purchaser understands that failure to make this
filing within the 30-day period may result in the recognition of ordinary
income by Purchaser as the forfeiture restrictions lapse. Purchaser
acknowledges that he will reach his own determination with respect to all tax
aspects of purchasing the Shares under the terms of this Agreement; that he
has been advised by the Company to seek advice on the matter from his own tax
advisors; and that he is not relying on the statements made above or any
other information provided by the Company in deciding whether or not to file
the election permitted under Section 83(b). PURCHASER ALSO ACKNOWLEDGES THAT
IT IS PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S. TO FILE A
TIMELY ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON PURCHASER'S BEHALF.
6. GENERAL PROVISIONS
6.1. ASSIGNMENT
If the Company does not wish or is not legally permitted to exercise the
Repurchase Obligation, the Repurchase Option or the First Refusal Right, it may
assign the right or obligation
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to any person or entity selected by the Company's Board of Directors, including,
without limitation, one or more shareholders of the Company.
6.2. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes any and all prior agreements
between the parties relating to such subject matter.
6.3. MODIFICATIONS
This Agreement may be changed or modified only by an agreement in writing
signed by both parties hereto.
6.4. SUCCESSORS AND ASSIGNS
The provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Company and its successors and assigns and Purchaser and his
legal representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and shall have agreed in writing to join and be bound by the
terms and conditions hereof.
6.5. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California as such laws are applied to agreements among
California residents entered into and performed entirely within California.
6.6. SEVERABILITY
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect.
6.7. FURTHER ASSURANCES
The parties will execute such further instruments and take such further
action as may be reasonably necessary to carry out the intent of this Agreement.
6.8. NOTICES
Any notices or other communications required or permitted hereunder shall
be in writing and shall be deemed received by the recipient when delivered
personally or, if mailed, five (5) days after the date of deposit in the United
States mail, certified or registered, postage prepaid and addressed, in the case
of the Company, to 500 Airport Boulevard, Suite 200, Burlingame, California
94010-1904, and in the case of Purchaser, to the address shown for Purchaser on
the signature page hereof, or to such other address as either party may later
specify by at least ten (10) days advance written notice delivered to the other
party in accordance herewith.
6.9. CAPTIONS
Section headings used in this Agreement are for convenience of reference
only and shall not be considered a part of this Agreement.
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6.10. NO WAIVER
The failure of any party to enforce any provision of this Agreement shall
not be construed as a waiver of that provision, nor prevent that party
thereafter from enforcing that provision or any other provision of this
Agreement.
6.11. INJUNCTIVE RELIEF
Purchaser acknowledges that damages would be an inadequate remedy for
breach of this Agreement and that the obligations of Purchaser hereunder may be
enforced by the remedies of specific enforcement and injunctive relief.
6.12. ENFORCEMENT
If any action at law or in equity or any arbitration is brought to enforce
or interpret the terms of this Agreement or to protect the rights obtained
hereunder, the prevailing party shall be entitled to recover its reasonable
attorneys' fees, costs and other expenses in addition to any other relief to
which it may be entitled.
6.13. SPOUSAL CONSENT
Purchaser, if married, shall cause his spouse to execute a spousal consent
to the provisions of this Agreement in substantially the form of Exhibit D
hereto.
6.14. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
6.15. NO EMPLOYMENT OR SERVICE CONTRACT
Nothing in this Agreement shall confer upon Purchaser any right to continue
in the service of the Company for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Company or Purchaser to
terminate the employment of Purchaser at any time, with or without cause.
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IN WITNESS WHEREOF, the Company and Purchaser have executed this Agreement,
effective as of the day and year first above written.
COMPANY: PURCHASER:
Serena Software International,
a California corporation -------------------------
(Signature)
By: Address:
-----------------------------
Richard A. Doerr, President
-------------------------
-------------------------
-------------------------
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EXHIBIT A
PROMISSORY NOTE
(PURCHASE NOTE)
$_____________________ __________, 19__
FOR VALUE RECEIVED, ___________________________ (the "Maker") promises to
pay to the order of Serena Software International, a California corporation (the
"Holder"), at the address set forth for the Holder on the signature page hereof,
or such other place as the Holder may from time to time designate, in lawful
money of the United States, the principal sum of _________________________
dollars ($_______________) plus interest thereon, as set forth below.
This Note is delivered in consideration for the purchase by the Maker of
certain shares (the "Shares") of the Common Stock of the Holder (the "Common
Stock") pursuant to a Restricted Stock Purchase Agreement between the Maker and
the Holder (the "Restricted Stock Purchase Agreement").
1. INTEREST
Interest on the principal balance of this Note outstanding from time to
time shall accrue at a simple annual rate equal to the lesser of ____% [INSERT
APPLICABLE FEDERAL RATE] or the highest nonusurious rate then permitted by
applicable law.
2. PAYMENT AT MATURITY
This Note shall mature, and the entire outstanding principal balance of
this Note and all accrued unpaid interest shall become due and payable, on the
first to occur of the following: (i) the seventh (7th) anniversary of the date
of this Note, (ii) at the option of the Holder, the first (1st) anniversary of
the closing of (A) an underwritten public offering of the Common Stock made
pursuant to an effective registration statement under the federal Securities Act
of 1933, other than a registration relating solely to either a transaction under
Rule 145 of the Securities and Exchange Commission or an employee benefit plan,
or (B) any merger or other transaction by which the Shares are exchanged for or
converted into securities which are part of a class of securities which are
listed for trading on an established securities exchange or otherwise
participate in an active public securities market, or (iii) the ninetieth (90th)
day following the day that the Maker voluntarily terminates his employment (as
defined in the Restricted Stock Purchase Agreement) with the Holder.
3. PREPAYMENTS
The Maker may prepay all or any portion of the principal sum and accrued
interest of this Note at any time, or from time to time, without penalty and
without first obtaining the consent of the Holder.
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4. APPLICATION OF PAYMENTS
All payments made hereunder, whether at maturity or as prepayments, shall
be applied first to any interest then accrued and unpaid, then to any other
charges due with respect to this Note, and then to the reduction of principal.
5. DEFAULT
The Maker shall be in default under this Note if:
(a) The Maker fails to make a payment of principal and/or interest
hereunder when due or breaches any covenant or condition contained herein, which
is not cured within ten (10) days after receipt of written notice thereof;
(b) The Maker voluntarily files for or is adjudicated as bankrupt or
insolvent, seeks or consents to the appointment of a receiver or trustee for
itself or for all or any part of its property, files a petition seeking relief
under the bankruptcy or similar laws of the United States or any state or any
other competent jurisdiction, makes a general assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as they become
due; or
(c) A court of competent jurisdiction enters an order, judgment or decree
appointing, without the consent of the Maker, a receiver or trustee for all or
any part of its property or enters an order for relief or approves a petition
filed against the Maker under the bankruptcy or similar laws of the United
States or any state or other competent jurisdiction, and such order, judgment or
decree remains in force undischarged or unstayed for a period of ninety (90)
days.
6. REMEDIES
Upon the Maker's default, the Holder may (i) upon written notice to the
Maker, declare the entire principal sum and all accrued and unpaid interest
hereunder immediately due and payable, and (ii) exercise any and all of the
remedies provided under applicable law. Failure to exercise the foregoing
remedies upon any default by the Maker shall not constitute a waiver of the
right to exercise the same or any other remedies at any subsequent time with
respect to the same event or any other default.
7. WAIVERS
The Maker, and any endorsers or guarantors hereof, severally waive
diligence, presentment, protest and demand and also notice of protest, demand,
dishonor, acceleration, intent to accelerate and nonpayment of this Note, and
expressly agree that this Note, or any payment hereunder, may be extended from
time to time without notice, all without in any way affecting the liability of
the Maker or any endorsers or guarantors hereof. The Holder may waive its right
to require performance of or compliance with any term, covenant or condition of
this Note only by express written waiver.
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8. NOTICES
All notices hereunder must be in writing and shall be effective (i) if
delivered by hand, upon delivery; or (ii) if sent by mail, upon the earlier of
the date of receipt or five (5) business days after deposit in the mail,
certified or registered, postage prepaid.
9. TIME OF ESSENCE
Time is of the essence with respect to all matters set forth in this Note.
10. REPLACEMENT NOTE
If this Note is destroyed, lost or stolen, the Maker will deliver a new
note to the Holder on the same terms and conditions as this Note with a notation
of the unpaid principal and accrued and unpaid interest in substitution of the
prior Note. The Holder shall furnish to the Maker reasonable evidence that the
Note was destroyed, lost or stolen and any indemnity that may be reasonably
required by the Maker in connection with the replacement of this Note.
11. ENFORCEMENT
The Maker shall pay all costs, including, without limitation, reasonable
attorneys' fees and costs, incurred by the Holder in collecting the sums due
hereunder whether or not any legal action is actually filed, litigated or
prosecuted to judgment of award. In the event of any action or legal proceeding
concerning this Note or the enforcement of any rights hereunder, the Holder
shall be entitled to receive, in addition to any other relief to which the
Holder may be entitled, all legal and court costs and expenses, including
reasonable attorneys' fees, incurred by the Holder in connection with such
action.
12. GOVERNING LAW; SEVERABILITY
This Note shall be governed by and construed in accordance with the laws of
State of California as applied to contracts entered into and to be performed
entirely within that state. If any provision hereof is in conflict with any
statute or rule of California or otherwise is unenforceable for any reason, then
such provisions shall be deemed separable from and shall not invalidate any
other provision of this Note.
13. SUCCESSORS AND ASSIGNS
The Holder may not sell, assign, pledge or otherwise transfer this Note
without the prior written consent of the Maker, which will not be unreasonably
withheld. The terms of this Note shall inure to the benefit of and bind the
Maker and the Holder and their respective successors and permitted assigns.
14. SECURITY; RECOURSE TO THE MAKER
This Note is secured by a Pledge Agreement between the Maker, as pledgor,
and the Holder, as secured party, of even date herewith. Notwithstanding such
security, this Note constitutes a full recourse, personal obligation of the
Maker.
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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed.
MAKER:
-------------------------
(Signature)
Address for Holder:
500 Airport Boulevard, Suite 200
Burlingame, California 94010-1904
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EXHIBIT B
PLEDGE AGREEMENT
This Pledge Agreement is entered into as of __________, 19__, between
____________________ ("Pledgor") and Serena Software International, a California
corporation (the "Secured Party").
RECITALS
In consideration of Pledgor's Promissory Note dated of even date herewith
(the "Note"), the Secured Party has sold and issued to Pledgor __________ shares
of the Secured Party's Common Stock (the "Shares") pursuant to the terms and
conditions of a Restricted Stock Purchase Agreement between the Secured Party
and Pledgor. Pledgor has agreed that repayment of the Note will be secured by
the pledge of the Shares.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST
Pursuant to the provisions of the California Commercial Code, Pledgor
hereby grants to the Secured Party, and the Secured Party hereby accepts, a
present security interest in the Shares as collateral to secure the payment of
Pledgor's obligation to the Secured Party under the Note. Pledgor herewith
delivers to the Secretary of the Secured Party stock certificate no.______,
representing the Shares, issued in the name of Pledgor, to be held in pledge
pursuant to the terms of this Agreement. For purposes of this Agreement, the
Shares pledged hereby, together with any additional collateral pledged pursuant
to Section 5, shall hereinafter be collectively referred to as the "Collateral."
2. REPRESENTATIONS AND WARRANTIES
Pledgor hereby represents and warrants to the Secured Party that Pledgor
has the right to pledge the Collateral as provided herein. Pledgor further
agrees not to grant or create, nor attempt to grant or create, any security
interest, claim, lien, pledge or other encumbrance with respect to the
Collateral until the entire principal sum and accrued interest due under the
Note has been paid in full.
3. RIGHTS ON DEFAULT
In the event of default by Pledgor under the Note, the Secured Party and
its assigns shall have full power to sell, assign and deliver the whole or any
part of the Collateral at any broker's exchange or elsewhere, at public or
private sale, at the option of the Secured Party or its assigns, in order to
satisfy any part of the obligations of Pledgor now existing or hereinafter
arising under the Note should payment of such obligations be in default. On any
such public sale, the Secured Party or its assigns may purchase all or any part
of the Collateral. In addition, at its sole option, the Secured Party may elect
to retain the Collateral in satisfaction of Pledgor's obligation under the Note,
in accordance with the provisions and procedures set forth in the California
Commercial Code.
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4. ADDITIONAL REMEDIES
The rights and remedies granted to the Secured Party herein upon default
shall be in addition to all the rights, powers and remedies of the Secured Party
under the California Commercial Code and applicable law, and such rights, powers
and remedies shall be exercisable by the Secured Party with respect to all of
the Collateral. The Secured Party's reasonable expenses of holding the
Collateral, preparing it for resale or other disposition, and selling or
otherwise disposing of the Collateral, including attorneys' fees and other legal
expenses, will be deducted from the proceeds of any sale or other disposition
and will be included in the amounts Pledgor must tender to redeem the
Collateral. All rights, powers and remedies of the Secured Party shall be
cumulative and not alternative. Any forbearance or failure or delay by the
Secured Party in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of any such right, power or remedy and any single or
partial exercise of any such right, power or remedy hereunder shall not preclude
the further exercise thereof.
5. DIVIDENDS; VOTING
All dividends hereinafter declared on or payable with respect to the
Collateral during the term of this pledge (excluding only ordinary cash
dividends, which shall be payable to Pledgor so long as Pledgor is not in
default under the Note) shall be immediately delivered to the Secured Party to
be held in pledge hereunder. Pledgor shall be entitled to receive cash dividends
so long as Pledgor is not in default under the Note. Notwithstanding this
Agreement, Pledgor shall be entitled to vote any shares comprising the
Collateral, subject to any proxies granted by Pledgor.
6. ADJUSTMENTS
In the event that during the term of this pledge, any stock dividend,
reclassification, readjustment, stock split or other change is declared or made
with respect to the Collateral, or if warrants or any other rights, options or
securities are issued in connection with the Collateral, all new, substituted
and/or additional shares or other securities issued by reason of such change or
by reason of the exercise of such warrants, rights, options or securities, shall
be immediately pledged to the Secured Party to be held under the terms of this
Agreement in the same manner as the Collateral is held hereunder.
7. REDELIVERY OF COLLATERAL
Upon payment in full of the entire principal sum and accrued interest due
under the Note, the Secured Party shall immediately redeliver the Collateral
pledged hereunder to Pledgor by release of the Collateral from the escrow, and
this Agreement shall terminate. Upon request, the Secured Party will release a
pro rata portion of the Collateral as set forth above if a partial payment of
principal (plus all accrued interest) has been made under the Note.
8. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of the respective heirs, personal
representatives, successors and assigns of the parties hereto.
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9. GOVERNING LAW; SEVERABILITY
This Agreement shall be governed by and construed in accordance with the
laws of State of California as applied to contracts entered into and to be
performed entirely within that state. If any provision hereof is in conflict
with any statute or rule of California or otherwise is unenforceable for any
reason, then such provisions shall be deemed separable from and shall not
invalidate any other provision of this Agreement.
10. MODIFICATION
This Agreement shall not be amended without the written consent of both
parties hereto.
11. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings related to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
PLEDGOR: SECURED PARTY:
Serena Software International,
a California corporation
- - - - -----------------------------
(Signature)
By:
-------------------------------
Richard A. Doerr, President
3
<PAGE>
EXHIBIT C
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treasury Regulations Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: ____________________________________________
Address: _____________________________________________________________
Taxpayer Identification. No.: _______________________
Taxable Year: Calendar Year 199__.
(2) The property with respect to which the election is being made is __________
shares of the common stock of Serena Software International, a California
corporation (the "Company").
(3) The property was issued on ____________________, 199__.
(4) The property is subject to a repurchase right pursuant to which the issuer
has the right, in the event that the taxpayer's employment with the issuer is
terminated for any reason, to acquire the property at its original purchase
price. The issuer's repurchase right lapses in installments over a period ending
_____________________________.
(5) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never lapse) is
$_____ per share for the common stock.
(6) The amount paid for such property is $_____ per share for the common stock.
(7) A copy of this statement was furnished to the Company, for whom taxpayer
rendered the services underlying the transfer of property.
(8) This statement is executed as o ____________________, 199__.
- - - - ----------------------------- -------------------------
Taxpayer Spouse (if any)
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Restricted Stock Purchase
Agreement.
1
<PAGE>
EXHIBIT D
SPOUSAL CONSENT
I, ______________________________________, am the spouse of the person
identified as "Purchaser" below, who signed the foregoing Restricted Stock
Purchase Agreement. I have read and approve of the provisions of the Restricted
Stock Purchase Agreement. I agree to be bound by and accept the provisions of
the Restricted Stock Purchase Agreement in lieu of all other interests I may
have in the shares subject thereto, whether the interest may be community
property or otherwise.
Executed on ____________________, 19__.
------------------------------
[Signature]
Purchaser's Name:
--------------------------
1
<PAGE>
SECURED PROMISSORY NOTE
July 22, 1998
$600,000.00
For value received, Douglas D. Troxel ("Obligor") promises to pay to the
order of SERENA Software International, a California corporation (the
"Company"), at its principal office the principal sum of Six Hundred Thousand
Dollars ($600,000.00), together with interest thereof at the rate of 5.56%
per annum, compounded annually, on the unpaid balance of the principal sum.
This Note shall be repaid as to principal and accrued interest in three equal
payments of $222,640.94, each such installment to be due and payable on each
anniversary of the date of this Note. Notwithstanding the foregoing, this
Note shall become due and payable with respect to all outstanding principal
and then accrued interest two hundred ten (210) days after the closing of an
underwritten initial public offering of the Company's Common Stock pursuant
to a registration statement filed with and declared effective by the
Securities and Exchange Commission; PROVIDED, HOWEVER, that this Note shall
become due and payable with respect to outstanding principal and then accrued
interest upon the closing of such offering to the extent of the net proceeds
received by Obligor as a selling shareholder therein (up to the aggregate
principal and interest owed hereunder).
Should Obligor fail to make full payment of principal or interest for a
period of 10 days or more after the due date thereof, the whole unpaid
balance on this Note of principal and interest shall become immediately due
at the option of the holder of this Note.
This Note is secured by a pledge of 175,000 shares of the Company's Common
Stock, owned by Obligor, under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.
The holder of this Note shall have full recourse against Obligor personally
for failure to pay the Note as and when due.
The principal is payable in lawful money of the United States of America.
The privilege is reserved to prepay any portion of the Note at any time.
If Obligor shall default in the payment of amounts hereunder when due, the
holder of this Note shall be entitled to payment by Obligor of all costs of
collection, including, without limitation, reasonable attorneys' fees and costs
incurred in connection with such collection efforts, whether or not suit on this
Note is filed. The maker waives presentment for payment, protest, notice of
protest and notice of non-payment of this Note. This Note shall be governed by
the laws of the State of California as they apply to contracts entered into and
wholly to be performed within such state.
/s/ Douglas D. Troxel
-----------------------
Douglas D. Troxel
<PAGE>
SECURITY AGREEMENT
This Security Agreement is made as of July 22, 1998 between SERENA
Software International, a California corporation ("Pledgee"), and Douglas D.
Troxel ("Pledgor").
RECITALS
1. Pursuant to a Secured Promissory Note (the "Secured Note") of even
date herewith with an aggregate principal amount of $600,000, Pledgee has loaned
such amount to Pledgor.
2. Pledgee has requested that Pledgor secure the payment of his
obligations to the Pledgee in the form of a pledge of 175,000 outstanding shares
of Pledgee's Common Stock registered in the name of Pledgor and represented by
certificate number ___ (the "Pledged Shares").
NOW, THEREFORE, it is agreed as follows:
1. CREATION AND DESCRIPTION OF SECURITY INTEREST. As security for
payment of Pledgor's obligations to Pledgee under the Secured Note, Pledgor,
pursuant to the California Commercial Code, hereby pledges all the Pledged
Shares (herein sometimes referred to as the "Collateral") and herewith delivers
the certificate representing the Pledged Shares and a blank, executed stock
assignment to the Secretary of Pledgee (the "Pledgeholder"), who shall hold said
certificate and stock power subject to the terms and conditions of this Security
Agreement as security for repayment of the Secured Note.
The certificate representing the Pledged Shares (together with the executed
blank stock assignment for use in transferring all or a portion of the Pledged
Shares to Pledgee if, as and when required pursuant to this Security Agreement)
shall be held by the Pledgeholder as security for the repayment of the Secured
Note, and any extensions or renewals thereof, and the Pledgeholder shall not
encumber or dispose of such Pledged Shares except in accordance with the
provisions of this Security Agreement.
2. PLEDGOR'S REPRESENTATIONS AND COVENANTS. To induce Pledgee to enter
into this Security Agreement and loan Pledgor the amounts indicated in the
Secured Note, Pledgor represents and covenants to Pledgee, its successors and
assigns, as follows:
(a) PAYMENT OF INDEBTEDNESS. Pledgor will pay the principal sum of
the Secured Note secured hereby, together with interest thereon, at the time and
in the manner provided in the Secured Note.
(b) OWNERSHIP; ENCUMBRANCES. Pledgor has good and valid title to the
Pledged Shares and full right, power, and authority to pledge the Pledged Shares
as provided herein. The Pledged Shares are free and clear of all other
encumbrances, defenses and liens (other than
<PAGE>
restrictions on transfer imposed by applicable securities laws), and Pledgor
will not further encumber the Pledged Shares without the prior written
consent of Pledgee.
(c) MARGIN REGULATIONS. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board, and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Secured Note or providing
any additional collateral as may be necessary to comply with such regulations.
3. CASH DIVIDENDS; VOTING RIGHTS. During the term of this pledge and so
long as all payments of principal and interest are made as they become due under
the terms of the Note, Pledgor shall have the right to vote all of the Pledged
Shares pledged hereunder, and any cash dividends paid on the Pledged Shares
shall be paid to the Pledgeholder to be held in an interest-bearing account as
security for payment of the Secured Notes.
4. STOCK ADJUSTMENTS. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgeholder on behalf of the Pledgee under the
terms of this Security Agreement in the same manner as the Pledged Shares
originally pledged hereunder. In the event of substitution of such securities,
Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as
are reasonable so as to provide for the substitution of such Collateral and,
upon such substitution, references to "Pledged Shares" in this Security
Agreement shall include the substituted shares of capital stock of Pledgor as a
result thereof.
5. OPTIONS AND RIGHTS. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the Pledged Shares, such rights and options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the Pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Pledged Shares.
6. DEFAULT. Pledgor shall be deemed to be in default of the Secured Note
and of this Security Agreement in the event:
(a) Payment of principal or interest on the Secured Note shall be
delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Secured Note or contained in this Security Agreement for a period of 10 days
after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to
<PAGE>
accelerate payment of the Secured Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. RELEASE OF COLLATERAL. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the Pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Secured Note. The number of the Pledged Shares which shall be released shall be
that number of full Pledged Shares which bears the same proportion to the
initial number of Pledged Shares pledged hereunder as the payment of principal
bears to the initial full principal amount of the Secured Note.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. TERM. The within pledge of the Pledged Shares shall continue until
the payment of all indebtedness secured hereby, at which time the remaining
pledged stock shall be promptly delivered to Pledgor, subject to the provisions
for prior release of a portion of the Collateral as provided in paragraph 7
above.
10. INSOLVENCY. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Secured Note shall become immediately
due and payable, and Pledgee may proceed as provided in the case of default.
11. PLEDGEHOLDER LIABILITY. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. INVALIDITY OF PARTICULAR PROVISIONS. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. SUCCESSORS OR ASSIGNS. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. GOVERNING LAW. This Security Agreement shall be interpreted and
governed under the laws of the State of California as applied to agreements
between California residents entered and to be performed entirely within
California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the day and year first above written.
"PLEDGOR" /s/ Douglas D. Troxel
----------------------------------
Douglas D. Troxel
Address: 400 Hurlington
-------------------------
-------------------------
San Mateo, CA 94402
-------------------------
"PLEDGEE" SERENA SOFTWARE INTERNATIONAL
a California corporation
By: Richard A. Doerr
-------------------------------
Name: Richard A. Doerr
----------------------------
Title: President & CEO
----------------------------
"PLEDGEHOLDER" /s/ Robert Pender, Jr.
------------------------------------------
Secretary of SERENA Software International
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign, and
transfer unto SERENA Software International____________________________________
______________ (__________) shares of the Common Stock of SERENA Software
International standing in my name of the books of said corporation represented
by Certificate No. _____ herewith and do hereby irrevocably constitute and
appoint _________________________________________________________ to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement between SERENA Software International and the undersigned dated July
__, 1998.
Dated: _______________, _____
Signature:
Douglas D. Troxel
INSTRUCTIONS: PLEASE SIGN THIS ASSIGNMENT SEPARATE FROM CERTIFICATE AS
INDICATED ABOVE, BUT DO NOT DATE THE ASSIGNMENT OR COMPLETE THE INFORMATION SET
FORTH IN THE RECITALS ABOVE. THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE
COMPANY TO EXERCISE ITS RIGHTS UNDER THE SECURITY AGREEMENT AND THE SECURED
NOTE, WITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART OF THE OBLIGOR UNDER
THE SECURED NOTE.
<PAGE>
Exhibit 16.1
November 20, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
SERENA SOFTWARE
We have read the section captioned Change in Auditors included in SERENA
Software's Form S-1 dated November 20, 1998 and are in agreement with the
statements contained in that section as they relate to our firm.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
<PAGE>
SUBSIDIARIES OF SERENA SOFTWARE, INC.
Optima Software, Inc. (a California corporation)
Serena International (UK) Limited (an English corporation)
Serena Software Canada Limited (a Canadian corporation)
