SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
SERENA SOFTWARE, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required.
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and 0-11.
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1999
2:00 P.M.
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SERENA
Software, Inc., a Delaware corporation ("SERENA"), will be held on Wednesday,
June 30, 1999, at 2:00 p.m., local time, at SERENA's principal executive offices
at 500 Airport Boulevard, 2nd Floor, Burlingame, California 94010 for the
following purposes:
1. To elect directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected;
2. To ratify the appointment of KPMG LLP as independent accountants for
SERENA for the fiscal year ending January 31, 2000; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on May 14, 1999, are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark, sign,
date, and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. YOU MAY REVOKE YOUR PROXY IN
THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT
HAS BEEN VOTED AT THE ANNUAL MEETING. ANY STOCKHOLDER ATTENDING THE ANNUAL
MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY.
For the Board of Directors
SERENA SOFTWARE, INC.
[LOGO]
Robert I. Pender, Jr.
SECRETARY
Burlingame, California
May 25, 1999
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
SERENA SOFTWARE, INC.
------------------
PROXY STATEMENT FOR THE
1999 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of
SERENA Software, Inc., a Delaware corporation ("SERENA"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on Wednesday, June 30,
1999, at 2:00 p.m., local time, or at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Stockholders. The Annual Meeting will be held at SERENA's principal
executive offices at 500 Airport Boulevard, 2nd Floor, Burlingame, California
94010. The telephone number at that location is (650) 696-1800. When proxies are
properly dated, executed, and returned, the shares they represent will be voted
at the Annual Meeting in accordance with the instructions of the stockholder. If
no specific instructions are given, the shares will be voted for the election of
the nominees for directors set forth herein, for the ratification of the
appointment of KPMG LLP as independent auditors as set forth herein and, at the
discretion of the proxy holders, upon such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders for
the year ended January 31, 1999, including financial statements, were first
mailed on or about May 28, 1999, to all stockholders entitled to vote at the
Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on May 14, 1999 (the "Record
Date") are entitled to notice of, and to vote at, the Annual Meeting. At the
Record Date, SERENA had issued and outstanding and entitled to vote 25,301,126
shares of Common Stock, $.001 par value.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of SERENA at or before the taking of the vote at the Annual
Meeting a written notice of revocation bearing a later date than the proxy, (ii)
duly executing a later dated proxy relating to the same shares and delivering it
to the Secretary of SERENA at or before the taking of the vote at the Annual
Meeting, or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be delivered to SERENA Software, Inc. at 500 Airport Boulevard, 2nd
Floor, Burlingame, California 94010, Attention: Secretary, or hand-delivered to
the Secretary of SERENA at or before the taking of the vote at the Annual
Meeting.
VOTING
Each share of Common Stock outstanding on the Record Date is entitled to one
vote. Stockholders' votes will be tabulated by persons appointed by the board of
directors to act as inspectors of election for the Annual Meeting. Abstentions
are considered shares present and entitled to vote and, therefore, have the same
legal effect as a vote against a matter presented at the Annual Meeting. Any
shares held in street name for which the broker or nominee receives no
instructions from the beneficial owner, and as to which such broker or nominee
does not have discretionary voting authority under applicable New York Stock
Exchange rules, will be considered as shares not entitled to vote and will
therefore not be considered in the tabulation of the votes but will be
considered for purposes of determining the presence of a quorum.
SOLICITATION OF PROXIES
The expense of soliciting proxies in the enclosed form will be borne by
SERENA. In addition, SERENA may reimburse banks, brokerage firms, and other
custodians, nominees, and fiduciaries representing beneficial owners of shares
for their expenses in forwarding soliciting materials to such beneficial owners.
Proxies may also be solicited by certain of SERENA's directors, officers, and
employees, personally or by telephone, telegram, facsimile, or other means of
communication. No additional compensation will be paid for such services.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR YEAR 2000 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission. Proposals of stockholders of SERENA
intended to be presented for consideration at SERENA's year 2000 Annual Meeting
of Stockholders must be received by SERENA no later than January 26, 2000, in
order that they may be included in the proxy statement and form of proxy related
to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, a board of four directors will be elected, each to
hold office until his or her successor is elected and qualified, or until his or
her death, resignation, or removal. Shares represented by the accompanying proxy
will be voted for the election of the four nominees (recommended by the board of
directors) who are named in the following table, unless the proxy is marked in
such a manner as to withhold authority so to vote. SERENA has no reason to
believe that the nominees for election will not be available to serve their
prescribed terms. If any nominee for any reason is unable to serve or will not
serve, however, the proxy may be voted for such substitute nominee as the
persons appointed in the proxy may in their discretion determine.
The following table sets forth certain information concerning the nominees,
which information is based on data furnished to SERENA by the nominees:
DIRECTOR
NAME AGE POSITION(S) WITH SERENA SINCE
- ------------------------------------- --- ----------------------------------------------------------- ---------
Douglas D. Troxel.................... 54 Chairman of the Board and Chief Technology Officer 1980
Richard A. Doerr..................... 56 President, Chief Executive Officer and Director 1997
Alan H. Hunt(1)(2)................... 57 Director 1998
Jerry T. Ungerman(1)(2).............. 54 Director 1998
- ------------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
There is no family relationship among any of the directors and executives of
SERENA.
DOUGLAS D. TROXEL is the founder of SERENA and has served as the Chairman of
SERENA's board of directors since April 1980 and SERENA's Chief Technology
Officer since April 1997. From June 1980 to April 1997, Mr. Troxel served as the
President and Chief Executive Officer of SERENA. Mr. Troxel holds a B.S. in
mathematics from Iowa State University.
2
RICHARD A. DOERR has served as SERENA's President, Chief Executive Officer
and as a member of SERENA's 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.
ALAN H. HUNT has served as a member of SERENA'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 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.
JERRY T. UNGERMAN has served as a member of SERENA's board of directors
since December 1998. Since October 1998, Mr. Ungerman has served as an Executive
Vice President of Check Point Software Technologies Ltd., a developer of
computer network security access software. From July 1971 to October 1998, Mr.
Ungerman was the Executive Vice President of Operations of Hitachi Data Systems
Corp., a provider of computer networking and data storage solutions for
computing environments. Mr. Ungerman holds a B.S.B. in business from the
University of Minnesota.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Directors will be elected by a plurality of the votes of the shares present
and entitled to vote at the Annual Meeting and entitled to vote on the election
of directors. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE FOREGOING
SLATE OF NOMINEES AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES LISTED ABOVE.
BOARD AND COMMITTEE MEETINGS
SERENA's board of directors held seven meetings during the fiscal year ended
January 31, 1999. No incumbent director during fiscal 1999 attended fewer than
seventy-five percent (75%) of the aggregate of (i) the total number of meetings
of the board of directors held during the period for which such person was a
director and (ii) the total number of meetings held by all committees of the
board of directors on which such person served (during the period such person
served) of the meetings of the board of directors held during fiscal 1999. The
board of directors has standing Audit and Compensation Committees. The board of
directors does not have a Nominating Committee.
The Audit Committee, comprised of Alan H. Hunt and Jerry T. Ungerman, was
formed in January 1999 in connection to SERENA's initial public offering. The
purposes of the Audit Committee are to review with SERENA's management and
independent accountants such matters as internal accounting controls and
procedures, the plan and results of the annual audit, and suggestions of the
accountants for improvements in accounting procedures; to nominate independent
accountants; and to provide such additional information as the committee may
deem necessary to make the board of directors aware of significant financial
matters which require the board's attention.
The members of the Compensation Committee, comprised of Alan H. Hunt and
Jerry T. Ungerman, was formed in January 1999 in connection to SERENA's initial
public offering. The purposes of the Compensation Committee are to review and
approve the compensation to be paid or provided to
3
SERENA's executive officers, the aggregate compensation of all employees of
SERENA, and the terms of compensation plans of all types and to administer
SERENA's 1997 Stock Option and Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of SERENA and administering various incentive compensation and benefit
plans. The Compensation Committee consists of Alan H. Hunt and Jerry T.
Ungerman. Richard A. Doerr, President, Chief Executive Officer and a director of
SERENA, participates in all discussions and decisions regarding salaries and
incentive compensation for all employees and consultants of SERENA, except that
he is excluded from discussions regarding his own salary and incentive
compensation. No interlocking relationship exists between any member of SERENA's
Compensation Committee and any member of any other company's board of directors
or compensation committee.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
On April 21, 1997, SERENA entered into an at-will employment agreement with
Richard A. Doerr, our President, Chief Executive Officer and a member of
SERENA's 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 SERENA entered into a restricted stock purchase agreement under which
Mr. Doerr purchased 1,334,250 shares of SERENA'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%. SERENA 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 Mr. Doerr's initial employment 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, SERENA's right to repurchase any unvested
shares will lapse.
SERENA and Douglas D. Troxel, SERENA's founder, Chief Technology Officer and
the Chairman of the board of directors, are parties to an employment agreement
that automatically renews each June unless Mr. Troxel is terminated for cause.
In January 1998, Marianne M. Elkholy, our Vice President, Worldwide
Marketing and Robert I. Pender, Jr., our Vice President, Finance and
Administration, Chief Financial Officer and Secretary, each purchased 184,500
shares of common stock at a purchase price of $1.00 per share under restricted
stock purchase agreements. Both 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%. SERENA
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 shares vest ratably on a
monthly basis over the succeeding three years. In the event of a change in
control transaction, SERENA's right to repurchase unvested shares will lapse.
In February 1998, in connection with his initial employment with SERENA,
Roger A. Richardson, our Vice President, International Operations, was granted
an option to purchase 45,000 shares of SERENA common stock at an exercise price
per share of $1.44 under the 1997 Plan. The option shares vest over four
years with 25% of the shares vesting on the one year anniversary of the grant
and the remaining shares vesting ratably monthly thereafter. Under the 1997
Plan, in the event of a change of control transaction, vesting all options and
restricted stock issued under the 1997 Plan will automatically accelerate such
that
4
options will become fully exercisable, including with respect for such options
which would otherwise be unvested, and any outstanding repurchase options
relating to restricted stock will lapse.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of SERENA's Common Stock as of April 30, 1999 by (i) each person or
entity who is known by SERENA to own beneficially 5% or more of SERENA's
outstanding Common Stock; (ii) each director of SERENA; (iii) SERENA's Chief
Executive Officer and each of SERENA's four most highly compensated executive
officers who were serving as executive officers of SERENA as of January 31, 1999
(the "Named Executive Officers"); and (iv) all directors and executive officers
of SERENA as a group.
SHARES BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS(1) NUMBER PERCENT
- -------------------------------------------------------------------- ------------ -----------
Douglas D. Troxel(1)................................................ 13,886,125 54.9%
Richard A. Doerr(2)................................................. 1,334,250 5.3
Marianne M. Elkholy(3).............................................. 184,500 *
Robert I. Pender, Jr.(4)............................................ 184,500 *
Roger A. Richardson(5).............................................. -- *
Alan H. Hunt(6)..................................................... 56,250 *
Jerry T. Ungerman(7)................................................ -- --
All directors and executive officers as a group(12) persons......... 15,979,751 63.2
- ------------------------
* Less than 1%.
(1) 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 the board of
directors.
(2) Includes 1,334,250 shares of common stock subject to a restricted purchase
stock agreement, of which 444,750 shares were unvested and subject to
SERENA's repurchase option as of April 30, 1999 should Mr. Doerr's
employment with SERENA terminate. Mr. Doerr is SERENA's President and Chief
Executive Officer and a member of the board of directors. See "Employment
Agreements and Change in Control Arrangements."
(3) Includes 184,500 shares of common stock subject to a restricted stock
purchase agreement, of which 111,469 shares were unvested and subject to
SERENA's repurchase option as of April 30, 1999 should Ms. Elkholy's
employment with SERENA terminate. Ms. Elkholy is SERENA's Vice President,
Worldwide Marketing. See "Employment Agreements and Change in Control
Agreements."
(4) Includes 184,500 shares of common stock subject to a restricted stock
purchase agreement, of which 119,156 shares are unvested and subject to
SERENA's repurchase option as of April 30, 1999 should Mr. Pender's
employment with SERENA terminate. Mr. Pender is SERENA's Vice President,
Finance and Administration, Chief Financial Officer and Secretary. See
"Employment Agreements and Change in Control Arrangements."
(5) Mr. Richardson is SERENA's Vice President, International Operations. See
"Employment Agreements and Change in Control Arrangements."
(6) Includes 56,250 shares of common stock subject to a restricted purchase
stock agreement, of which 39,844 shares are unvested and subject to SERENA's
repurchase option as of April 30, 1999 should Mr. Hunt's membership on
SERENA's board of directors terminate. See "Employment Agreements and Change
in Control Arrangements" and "Certain Transactions".
(7) Mr. Ungerman became a member of SERENA's board of directors in December
1998.
5
DIRECTOR COMPENSATION
SERENA reimburses each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. No member of our
board of directors currently receives additional cash compensation. At the time
Mr. Hunt became a member of the board of directors, SERENA 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,
SERENA 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 1/36 of the remaining shares will vest monthly thereafter. At the
time Mr. Ungerman became a member of our board of directors, SERENA granted Mr.
Ungerman an option to purchase up to 25,000 shares of common stock at a purchase
price of $9.00 per share under the 1997 Plan. One quarter of Mr. Ungerman's
options will vest upon the first anniversary of his membership on the board of
directors, and 1/36 of his remaining options vest monthly thereafter.
SERENA's Director Plan provides that options will be granted to non-employee
directors 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 ratably in
monthly installments thereafter.
6
EXECUTIVE COMPENSATION
The table below and footnotes thereto set forth in summary from information
concerning the compensation awarded to, earned by, or paid for services rendered
to SERENA in all capacities during the fiscal years ended January 31, 1998 and
1999 by our President and Chief Executive Officer and our next four most highly
compensated executive officers whose salary and bonus for fiscal 1999 exceeded
$100,000. Other than the salary and bonus described in the table below, we did
not pay any executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such executive
officer's salary and bonus during fiscal 1999. Bonus figures for fiscal 2000
represent bonus and commissions earned in fiscal 1999 and paid in fiscal 2000.
Bonus and commission figures for fiscal 1999 represent bonus and commissions
earned and paid in fiscal 1999. Bonus and commission figures for fiscal 1998
include bonuses and commissions earned and paid in fiscal 1998 as well as
bonuses and commissions earned in fiscal 1998 but paid in fiscal 1999.
SUMMARY COMPENSATION TABLE
ALL OTHER COMPENSATION
LONG-TERM COMPENSATION AWARDS ----------------------------
ANNUAL COMPENSATION --------------------------------------- GROUP
RESTRICTED RESTRICTED SECURITIES MATCHING LIFE
NAME AND PRINCIPAL FISCAL -------------------- STOCK STOCK UNDERLYING 401(K) INSURANCE
POSITION YEAR SALARY BONUS AWARDS($) AWARDS($) OPTIONS(#) CONTRIBUTIONS PREMIUMS
- -------------------------- ----------- --------- --------- ----------- ----------- ------------- --------------- -----------
Richard A. Doerr.......... 2000 -- $ 104,700
President and Chief 1999 $ 200,000 274,500 -- -- -- $ 6,400 $ 2,400
Executive Officer 1998 156,154 429,620 1,334,250 1,334,250(2) -- 1,333 1,013
Douglas D. Troxel......... 2000 -- 52,250
Chief Technology Officer 1999 324,000 126,750 -- -- -- 5,940 1,536
1998 324,000 1,063,500 -- -- -- 5,190 1,578
Marianne M. Elkholy....... 2000 -- 29,455
Vice President,
Worldwide 1999 150,000 34,065 -- -- -- 6,400 653
Marketing 1998 50,000(1) 42,500 184,500 184,500(2) -- 1,500 192
Robert I. Pender, Jr...... 2000 -- 44,100
Vice President, Finance
and 1999 150,000 115,500 -- -- -- 6,400 383
Administration, Chief 1998 25,000(1) 15,000 184,500 184,500(2) -- 500 34
Financial Officer and
Secretary
Roger A. Richardson....... 2000 -- 36,548
Vice President,
International 1999 120,030 100,563 -- -- 45,000 -- --
Operations 1998 3,495(1) -- -- -- -- -- --
NAME AND PRINCIPAL
POSITION MISC.
- -------------------------- ---------
Richard A. Doerr..........
President and Chief $ --
Executive Officer --
Douglas D. Troxel.........
Chief Technology Officer 24,175(3)
24,851
Marianne M. Elkholy.......
Vice President,
Worldwide --
Marketing --
Robert I. Pender, Jr......
Vice President, Finance
and --
Administration, Chief --
Financial Officer and
Secretary
Roger A. Richardson.......
Vice President,
International --
Operations --
- ------------------------------
(1) Represents salary paid in fiscal 1998 when Ms. Elkholy, Mr. Pender and Mr.
Richardson were not employed by SERENA for the entire fiscal year.
(2) Mr. Doerr, Ms. Elkholy and Mr. Pender purchased these shares in January 1998
under the 1997 Plan at a purchase price of $1.00 per share. 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 ratably 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 ratably monthly thereafter. See "Employment
Agreements and Change in Control Arrangements" and "Certain Transactions."
(3) Fiscal 1999 figure includes $18,950 in personal life insurance premiums,
$906 in legal fees related to estate planning and $4,319 in personal car
expenses paid by SERENA; fiscal 1998 figure includes $18,950 in personal
life insurance premiums and $5,901 in personal car expenses paid by SERENA.
7
OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during fiscal 1999,
including the potential realizable value over the 10 year term of the options
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These assumed rates of appreciation comply with the rules of the SEC and do not
represent SERENA's estimate of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of SERENA
common stock. In fiscal 1999, SERENA granted options to acquire up to an
aggregate of 1,324,525 shares to employees and directors, all under the 1997
Plan and all at an exercise price equal to not less than the fair market value
of SERENA's common stock on the date of grant as determined in good faith by the
board of directors. Optionees may pay the exercise price by cash, check,
promissory note, delivery of already-owned shares of SERENA's common stock or
pursuant to a cashless exercise procedure. Options under the 1997 Plan vest over
four years with 25% of the shares subject to option vesting on the first
anniversary of the grant date, and the remaining option shares vesting ratably
monthly thereafter. The Named Executive Officers other than Roger A. Richardson
all purchased restricted shares of SERENA common stock under the 1997 Plan in
fiscal 1998 and were not issued options to purchase SERENA common stock in
fiscal 1999. See "Employment Agreement and Change in Control Arrangements."
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUES AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
GRANTED FISCAL 1999 SHARE DATE 5% 10%
----------- ----------------- ----------- ----------- --------- ---------
Richard A. Doerr....................... -- --% $ -- -- $ -- $ --
Douglas D. Troxel...................... -- -- -- -- -- --
Marianne M. Elkholy.................... -- -- -- -- -- --
Robert I. Pender, Jr................... -- -- -- -- -- --
Roger A. Richardson.................... 45,000 3.4% 1.44 2/1/2008 40,752 103,275
AGGREGATE OPTION EXERCISES DURING THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
No named Named Executive Officer exercised any stock option during the
fiscal year ended January 31, 1999. The following table sets forth certain
information regarding stock options held as of January 31, 1999 by the Named
Executive Officers. The "Value of Unexercised In-the-Money Options at January
31, 1999" is based upon a value of $13.00 per share, the initial public offering
price, minus the per share exercise price, multiplied by the number of shares
underlying the option. The Named Executive Officers other than Roger A.
Richardson all purchased restricted shares of SERENA common stock under the 1997
Plan in fiscal 1998 and do not hold any options to purchase SERENA common stock.
See "Employment Agreement and Change in Control Arrangements."
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 31, 1999 JANUARY 31, 1999
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
Richard A. Doerr.......................................... -- -- $ -- $ --
Douglas D. Troxel......................................... -- -- -- --
Marianne M. Elkholy....................................... -- -- -- --
Robert I. Pender, Jr...................................... -- -- -- --
Roger A. Richardson....................................... 11,250 33,750 130,050 390,150
8
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY IN ANY OF SERENA'S PREVIOUS OR
FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, THIS REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS SHALL NOT HE DEEMED "FILED"
WITH THE COMMISSION AND SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
The Compensation Committee of the board of directors (the "Committee")
establishes the general compensation policies of SERENA and the compensation
plans and the specific compensation levels for senior executives, including
SERENA's Chief Executive Officer.
GENERAL COMPENSATION PHILOSOPHY
The primary objectives of SERENA's executive compensation policies include
the following:
- To attract, motivate, and retain a highly qualified executive management
team;
- To link executive compensation to SERENA's financial performance as well
as to defined individual management objectives established by the
Committee;
- To compensate competitively with the practices of similarly situated
technology companies; and
- To create management incentives designed to enhance stockholder value.
SERENA competes in an aggressive and dynamic industry and, as a result,
believes that finding, motivating, and retaining quality employees, particularly
senior managers, sales personnel, and technical personnel, are key factors to
SERENA's future success. The Committee's compensation philosophy seeks to align
the interests of stockholders and management by tying compensation to SERENA's
financial performance, either directly in the form of salary and bonuses paid in
cash or indirectly in the form of appreciation of stock options granted to
employees through SERENA's equity incentive programs.
CASH COMPENSATION
SERENA seeks to provide cash compensation to its executive officers,
including base salary and an annual cash bonus, at levels that are commensurate
with cash compensation paid at similarly-situated technology companies. Annual
increases in base salary are determined on an individual basis based on market
data and a review of the officer's performance and contribution to various
individual, departmental, and corporate objectives. Cash bonuses are intended to
provide additional incentives to achieve such objectives.
The fiscal 1999 salaries and cash bonuses of each of the executive officers
of SERENA, other than the Chief Executive Officer, were determined by the board
of directors, upon the recommendation of the Chief Executive Officer. The Chief
Executive Officer's base salary was determined by the board of directors with no
increase from his annual base salary in the prior fiscal year. In addition, cash
bonuses for SERENA's President and Chief Executive Officer, Chief Technology
Officer and Chief Financial Officer were allocated from a bonus pool established
by the board of directors based on overall SERENA earnings. Cash bonuses were
also earned by operational vice presidents based on their divisional financial
performance and the overall financial performance of SERENA.
Based on a review of proxy data and other relevant market data, the
Compensation Committee believes that cash compensation paid to SERENA's
executive officers, including the Chief Executive Officer, was generally
consistent with amounts paid to officers with similar responsibilities at
similarly-situated pre-IPO software companies.
9
EQUITY-BASED COMPENSATION
RESTRICTED STOCK AND STOCK OPTIONS. In January 1998, SERENA granted Richard
A. Doerr, our President, Chief Executive Officer and a member of SERENA's board
of directors; Marianne M. Elkholy, our Vice President, Worldwide Marketing and
Robert I. Pender, Jr., our Vice President, Finance and Administration, Chief
Financial Officer and Secretary, 1,334,250 shares; 184,500 shares and 184,500
shares, respectively, of common stock pursuant to restricted stock purchase
agreements. All three executive officers paid the purchase price of their
respective restricted shares in the form of a full recourse promissory note
secured by the purchased common stock. These promissory notes bear interest at
an annual rate of 5.9%. SERENA holds a repurchase option on the unvested shares
should the individual executive officers terminate their employment with SERENA.
For Ms. Elkholy and Mr. Pender, 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 shares vest ratably on a monthly basis over
the succeeding three years. For Mr. Doerr, this repurchase right lapses with
respect to one third of the shares subject to the agreement on the first year
anniversary of his initial employment 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, SERENA's right to repurchase any unvested shares
for the individual executive officers will lapse. Stock options are periodically
granted to provide additional incentive to executives and other employees to
maximize long-term total return to SERENA's stockholders. Stock options are a
particularly strong incentive because they are valuable to employees only if the
fair market value of SERENA's common stock increases above the exercise price,
which is set at the fair market value of SERENA common stock on the date the
option is granted. In addition, employees must remain employed with SERENA for a
fixed period of time in order for the options to vest fully. Options generally
vest over a four year period to encourage option holders to continue in the
employ of SERENA.
All of the restricted stock purchases and stock options granted in the year
ended January 31, 1999 were approved by the full board of directors. Future
option grants to executive officers will be determined by the Compensation
Committee or the full board of directors. In making its determination. the
Compensation Committee intends to consider the executive's position at SERENA,
such executive's individual performance, the number of options held (if any) and
the extent to which such options are vested, and any other factors that the
Compensation Committee may deem relevant.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162 of the Code limits the federal income tax deductibility of
compensation paid to SERENA's Chief Executive Officer and to each of the other
four most highly-compensated executive officers. SERENA may deduct such
compensation only to the extent that during any fiscal year the compensation
paid to such individual does not exceed $1 million or meet certain specified
conditions (including stockholder approval). Based on SERENA's current
compensation plans and policies and proposed regulations interpreting this
provision of the Code, SERENA and the Committee believe that, for the near
future, there is little risk that SERENA will lose any significant tax deduction
for executive compensation.
THE COMPENSATION COMMITTEE
Alan H. Hunt
Jerry T. Ungerman
10
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
SERENA's officers and directors and persons who own more than 10% of a
registered class of SERENA's equity securities to file reports of ownership on
Form 3 and changes in ownership on Forms 4 or 5 with the Securities and Exchange
Commission (the "SEC"). Such officers, directors, and 10% stockholders are also
required by SEC rules to furnish SERENA with copies of all Section 16(a) reports
they file. SERENA's officers, directors, and 10% stockholders did not become
reporting persons under Section 16(a) until SERENA's initial public offering in
February 1999. As a result, no filings were made during the year ended January
31, 1999.
CERTAIN TRANSACTIONS
Pursuant to an Agreement and Plan of Reorganization dated as of September
23, 1998, SERENA acquired Optima Software, Inc. ("Optima"). In connection with
the acquisition, SERENA issued 3,187,500 shares of common stock, for an
aggregate consideration of $21,420,000, in exchange for all of Optima's issued
and outstanding common stock. The terms of our acquisition of Optima, including
the aggregate consideration paid, were determined by negotiations among the
Chief Executive and Chief Financial Officers of SERENA and the Chief Executive
Officer and Chief Financial Officer of Optima, with the companies' respective
financial and accounting advisors. The Chief Executive and Chief Financial
Officer of Optima collectively held 85% of the outstanding shares of Optima
common stock prior to the acquisition. The number of shares issued in connection
with the Optima acquisition was determined based upon the current and
anticipated financial performance of Optima and its perceived value relative to
SERENA's business. The number of shares of SERENA common stock issued in the
acquisition was based on the percentage ownership of SERENA common stock issued
in the acquisition by the former Optima shareholders on a post-acquisition
basis, and was not based on a specific dollar value. After the principal terms
of the acquisition were agreed to, including the number of shares to be issued
in the transaction, our board of directors determined a fair market value for
the shares of SERENA common stock mainly for accounting purposes. In connection
with such valuation, SERENA retained an independent appraiser. The per share
"fair market" valuation for SERENA common stock issued in the acquisition was
determined to be $6.72. Douglas D. Troxel, SERENA's founder, Chief Technology
Officer and the Chairman of SERENA's board of directors, held 15% of the
outstanding shares of Optima prior to the acquisition. Mr. Troxel did not
participate at all in the negotiations regarding the Optima acquisition.
Pursuant to the acquisition, Mr. Troxel was issued 478,125 shares of SERENA
common stock for an aggregate consideration of $3,213,000. 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 $14,994,000. 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 shares are subject to an escrow arrangement
in favor of SERENA to satisfy any breaches of representations and warranties
made by Optima or certain of its shareholders under the acquisition agreement.
The escrow terminates in March 2000.
Prior to our acquisition of Optima in September 1998, Optima was the primary
distributor of our flagship CHANGE MAN product for over ten years. Pursuant to a
distribution agreement between Optima and SERENA, 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 June
30, 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. We were entitled to sublicense fees 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 $8,972,882, respectively.
11
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, SERENA made an unsecured loan in the principal amount of
$250,000 to Mr. Troxel. The loan accrued interest at the rate of 10.0% per year
and was repaid in full in October 1998. In November 1996, SERENA 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, SERENA made an
additional loan to Mr. Troxel in the principal amount of $600,000. The loan was
secured by shares of SERENA common stock held by Mr. Troxel. The loan accrued
interest at the rate of 5.56% per year. All outstanding principal and accrued
interest were paid in full in March 1999.
SERENA has entered into employment agreements with Richard A. Doerr,
SERENA's President and Chief Executive Officer and a member of SERENA's board of
directors, and Mr. Troxel. In addition, SERENA is a party to restricted stock
agreements with certain of its executive officers pursuant to which the officers
of SERENA purchased an aggregate of 1,840,500 shares of our common stock under
the 1997 Plan in consideration of the delivery of full recourse promissory notes
to SERENA by such officers which notes are secured by the purchased shares. See
"Employment Agreements and Change in Control Arrangements."
In connection with his appointment to our board of directors, Alan H. Hunt
entered into a restricted stock purchase agreement with SERENA in April 1998 to
purchase 56,250 shares of common stock at a per share purchase price of $1.44.
Mr. Hunt paid the purchase price of $81,000 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 5.9%. SERENA holds a repurchase
option on any unvested shares that becomes exercisable in the event Mr. Hunt
ceases to be a member of our 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, ratably monthly
thereafter. In the event of a change in control transaction, SERENA's right to
repurchase the unvested shares shall lapse.
In December 1998, in connection with his appointment to our board of
directors, SERENA granted Jerry T. Ungerman an option to purchase up to an
aggregate of 25,000 shares of common stock at a purchase price of $9.00 per
share under the 1997 Plan. One quarter of the option shares vest on the first
anniversary of Mr. Ungerman's membership on the board of directors and the
remaining option shares vest ratably in monthly installments thereafter.
In March 1997, in connection with Athena P. Troxel's resignation of her
position as SERENA's Chief Financial Officer and Corporate Secretary, SERENA
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
arms' length transaction and the parties relied, in part, on the advice of an
independent appraiser in establishing the repurchase price for the SERENA
shares. Prior to the completion of this offering, Ms. Troxel continued to hold
more than five percent of the outstanding shares of SERENA's common stock. Ms.
Troxel was formerly married to Douglas D. Troxel, SERENA's founder, Chief
Technology Officer and Chairman of the board of directors.
COMPANY PERFORMANCE
SERENA's registration statement covering SERENA's initial public offering
became effective February 11, 1999. Accordingly, no Company performance graph is
available for the fiscal year end.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The board of directors has selected KPMG LLP, independent accountants, to
audit the financial statements of SERENA for the current fiscal year ending
January 31, 2000. SERENA expects that a
12
representative of KPMG LLP will be present at the Annual Meeting, will have the
opportunity to make a statement if he or she desires to do so, and will be
available to answer any appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of Company
stock present or represented and voting at the Annual Meeting will be required
to approve this proposal. The board of directors has unanimously approved this
proposal and recommends that stockholders vote FOR the ratification of the
selection of KPMG LLP.
OTHER MATTERS
SERENA knows of no other matters to be submitted at the Annual Meeting. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the enclosed proxy card to vote the shares they
represent as the board of directors may recommend.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
mark, sign, date, and return the accompanying proxy card as promptly as possible
in the postage-prepaid envelope enclosed for that purpose.
For the Board of Directors
SERENA SOFTWARE, INC.
[LOGO]
Robert I. Pender, Jr.
SECRETARY
Dated: May 25, 1999
13
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PROXY SERENA SOFTWARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard A. Doerr and Robert I. Pender,
Jr., and either of them, as attorneys of the undersigned with full power of
substitution, to vote all shares of stock which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of SERENA Software, Inc., to be
held at SERENA's principal executive offices at 500 Airport Boulevard, 2nd
Floor, Burlingame, California, on June 30, 1999 at 2:00 p.m., local time, and
at any continuation or adjournment thereof, with all the powers which the
undersigned might have if personally present at the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement, dated May 25, 1999, and hereby expressly revokes
any and all proxies heretofore given or executed by the undersigned with
respect to the shares of stock represented by this Proxy and by filing this
Proxy with the Secretary of the Corporation, gives notice of such revocation.
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
SEE REVERSE CONTINUED AND TO BE SIGNED ON SEE REVERSE
SIDE REVERSE SIDE SIDE
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FOLD AND DETACH HERE
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PLEASE
MARK VOTES /X/
AS IN THIS
EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
1. ELECTION OF DIRECTORS NOMINEE: Douglas D. Troxel FOR WITHHELD
/ / / /
NOMINEE: Richard A. Doerr FOR WITHHELD
/ / / /
NOMINEE: Alan H. Hunt FOR WITHHELD
/ / / /
NOMINEE: Jerry T. Ungerman FOR WITHHELD
/ / / /
2. To ratify the appointment of KPMG LLP as the Corporation's independent
accountants for the 2000 fiscal year
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the proxies are authorized to vote upon such other
matter(s) which may properly come before the meeting and any adjournment(s)
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS AND FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT ACCOUNTANTS FOR
THE 2000 FISCAL YEAR.
Please date and sign exactly as your name or names appear hereon. Corporate
or partnership proxies should be signed in full corporate or partnership name
by an authorized person. Persons signing in a fiduciary capacity should
indicate their full titles in such capacity. If shares are held by joint
tenants or as community property, both should sign.
Signature: Date:
------------------------------------------- ----------------
Signature: Date:
------------------------------------------- ----------------
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FOLD AND DETACH HERE