Exhibit 10.20
EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“Agreement”) dated March 9, 2006, is made by and
between Serena Software, Inc., a Delaware corporation (the
“Company”), and Mark E. Woodward (the
“Executive”).
W HEREAS , the Company desires to employ the Executive,
and the Executive is willing to serve in the employ of the Company
upon the terms and conditions provided in this
Agreement;
W HEREAS , in contemplation of the merger of Spyglass
Merger Corp. with and into the Company, as detailed in that certain
Agreement and Plan of Merger dated November 11, 2005 (the
“Merger Agreement”), the Executive and the Company
desire to enter into this Agreement effective as of the
“Closing Date” (as defined in the Merger Agreement);
and
W HEREAS , in the event that the “Closing”
(as defined in the Merger Agreement) fails to occur, this agreement
shall be void ab initio .
N OW ,
T HEREFORE
, in consideration of the promises
and mutual covenants herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive agree as
follows:
1. Term of Employment .
Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company for the period
commencing on the Closing Date and continuing for an indefinite
term (such period, the “Employment Term”) on the terms
and subject to the conditions set forth in this
Agreement.
2. Position .
a. During the Employment Term,
Executive shall serve as the Company’s President and Chief
Executive Officer. In such position, Executive shall have such
duties and authority as shall be determined from time to time by
the Board of Directors of the Company (the “Board”).
Executive shall serve as a member of the Board without additional
compensation for so long as he remains the Chief Executive Officer
of the Company.
b. During the Employment Term,
Executive will devote Executive’s full business time and
commercially reasonable best efforts to the performance of
Executive’s duties hereunder and will not engage in any other
business, profession or occupation for compensation or otherwise
which would conflict or interfere with the rendition of such
services either directly or indirectly, without the prior written
consent of the Board; provided that nothing herein shall
preclude Executive (i) subject to the prior approval of the
Board, from accepting appointment to or from continuing to serve on
any board of directors or trustees of any business corporation or
any charitable organization, (ii) managing his personal
investments and affairs or (iii) continuing to serve in his
current capacity as a member of the board of directors of Clear
Technology; provided in each case, and in the aggregate,
that such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with
Section 9 of this Agreement.
3. Base Salary . During the
Employment Term, the Company shall pay Executive a base salary at
the annual rate of $400,000, payable in regular installments in
accordance with the Company’s usual payment practices.
Executive shall be entitled to such increases (but not decreases)
in Executive’s base salary, if any, as may be determined on
an annual basis in the sole discretion of the Board.
Executive’s annual base salary, as in effect from time to
time, is hereinafter referred to as the “Base
Salary.”
4. Bonus Opportunity . With
respect to each full fiscal year during the Employment Term,
Executive shall be eligible to earn an annual performance bonus of
up to 100% of Executive’s Base Salary (the “Target
Bonus”) based upon the achievement of performance targets
established by the Board. The Target Bonus, and the performance
targets, will be divided into quarterly targets and corresponding
quarterly performance awards. Each quarterly award shall be earned
only with respect to the corresponding quarter in which the target
was achieved. No quarterly bonus award will be earned for any
quarter in which the quarterly target is not achieved; however, any
quarterly award not earned in such quarter may be earned upon the
achievement of either cumulative quarterly performance targets for
that year to date, or that year’s annual performance target.
The Company and Executive intend that, in general, each quarterly
award that is earned hereunder will be paid promptly following the
determination as to whether (and to what extent) the applicable
quarterly performance targets were achieved, which it is currently
anticipated will occur approximately one month following the end of
the applicable calendar quarter. In all cases, any earned bonus
will be paid to Executive not later than two and one-half (2
1
/ 2 ) months after the end of the
applicable fiscal year in which it was earned.
5. Equity Arrangements .
Effective as of the Closing Date, Executive will be granted a
non-statutory stock option to purchase 988,750 shares of the
Company’s common stock (the “Time Option”) and an
additional non-statutory stock option to purchase 1,836,250 shares
of the Company’s common stock (the “Performance
Option”) pursuant to the terms of the Company’s 2006
Stock Incentive Plan (the “Plan”), except as may
otherwise be provided herein, and the stock option award agreements
in the forms substantially similar to Exhibits A1 and A2 attached
hereto. Both the Time Option and the Performance Option shall have
a per share exercise price of $5.00 and a maximum term of ten
years. The Time Option will vest as to 25% of the total number of
shares subject to the Time Option on the 12 month anniversary of
the Closing Date, and as to 1/48 th of the total number of shares
subject to the Time Option each month thereafter, so that the award
is fully vested on the fourth anniversary of the Closing Date,
subject to Executive’s continuous service during that
time.
6. Employee Benefits . During
the Employment Term, Executive shall be entitled to participate in
the Company’s employee benefit plans as in effect from time
to time (collectively “Employee Benefits”), on the same
basis as those benefits are generally made available to other
senior executives of the Company. Executive shall be eligible to
accrue up to 20 days of paid vacation per calendar year, pro-rated
for partial years of service, in accordance with the
Company’s policy on accrual and use applicable to senior
executives.
7. Business Expenses . During
the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executive’s duties hereunder
shall be reimbursed by the Company in accordance with Company
policies and practices that are no less favorable in scope and
terms than those in existence immediately prior to the Closing
Date.
8. Termination . The
Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason.
Notwithstanding any other provision of this Agreement, the
provisions of this Section 8 shall exclusively govern
Executive’s rights upon termination of employment with the
Company and its affiliates.
a. By the Company For Cause, By
Executive’s Resignation Without Good Reason or Upon Death or
Disability .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) or as a result of
Executive’s Disability (as defined below), and shall
terminate automatically upon Executive’s death or his
resignation without Good Reason (as defined in
Section 8(b)).
(ii) For purposes of this Agreement,
“Cause” shall mean (A) Executive’s willful
and continued failure to perform his material duties with respect
to the Company or its affiliates, which continues beyond 10
business days after a written demand for substantial performance
specifying such failure(s) is received by Executive from the
Company (the “Cure Period”); (B) Executive’s
willful or intentional engaging in conduct that causes material and
demonstrable injury, monetarily or otherwise, to the Company or
Silver Lake Partners II, L.P. and Silver Lake Technology Investors
II, L.L.C. (collectively, “SLP”) (taking into account
their respective affiliates); (C) Executive’s conviction
for, or a plea of nolo contendre to, the commission of a felony; or
(D) Executive’s material breach (other than a breach
that is immaterial and non-recurring) of the covenants in this
Agreement that causes a demonstrable injury, monetarily or
otherwise, to the Company, SLP or their respective
affiliates.
(iii) For purposes of this
Agreement, “Disability” shall mean a disability under
Section 409A(a)(2)(C)(i) of the Internal Revenue Code of 1986,
as amended (the “Code”). Any question as to the
existence of the Disability of Executive as to which Executive and
the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive
and the Company. If Executive and the Company cannot agree as to a
qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall
make such determination in writing. The determination of Disability
made in writing in accordance with Section 409A of the Code to
the Company and Executive shall be final and conclusive for all
purposes of the Agreement.
(iv) If Executive’s employment
is terminated by the Company for Cause, or if Executive resigns
without Good Reason, Executive shall be entitled to
receive:
(A) the Base Salary through the date
of termination;
(B) an amount representing any
accrued, but unused vacation;
(C) any Target Bonus earned, but
unpaid, as of the date of termination for the immediately preceding
fiscal quarter, paid in accordance with Section 4;
(D) reimbursement, within 60 days
following submission by Executive to the Company of appropriate
supporting documentation, for any unreimbursed business expenses
properly incurred by Executive, in each case, in accordance
with
Company policy on or prior to the
date of Executive’s termination; provided claims for
such reimbursement (accompanied by appropriate supporting
documentation) are submitted to the Company within 90 days
following the date of Executive’s termination of employment;
and
(E) such Employee Benefits, if any,
as to which Executive may be entitled under the employee benefit
plans of the Company, including, but not limited to, the Plan (the
amounts described in clauses (A) through (E) hereof,
reduced by any amounts owed to the Company by Executive, being
referred to as the “Accrued Rights”).
Following such termination of
Executive’s employment by the Company for Cause, or on
account of Executive’s Disability, upon Executive’s
death, or by Executive without Good Reason, Executive shall have no
further rights to any compensation or any other benefits under this
Agreement except as set forth in this
Section 8(a)(iv).
b. By the Company Without Cause
or Resignation by Executive for Good Reason .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company without Cause or by Executive’s resignation for Good
Reason.
(ii) For purposes of this Agreement,
“Good Reason” shall mean (A) any reduction in
Executive’s Base Salary or the Executive’s Target Bonus
(other than a general reduction, not to exceed 10%, in Base Salary
or Target Bonus that affects all members of senior management
equally); (B) any of (X) a substantial reduction in
Executive’s duties, responsibilities or title of either
President and Chief Executive Officer or member of the Board during
the Employment Term, or (Y) the assignment of any duties or
responsibilities that are materially inconsistent with
Executive’s position as President and Chief Executive Officer
(provided, however, that neither of (I) a change in
Executive’s title or reporting relationships, nor (II) an
adjustment in the nature of Executive’s duties and
responsibilities that in either case does not remove from him the
authority to manage substantially all of the products and services
offered by the Company immediately prior to such change or
adjustment, and, in either case following a merger, consolidation,
tender offer, or other purchase or sale of a business that involves
the Company, shall constitute “Good Reason”);
(C) a transfer of Executive’s primary workplace by more
than thirty-five (35) miles from his primary workplace as of
the Closing Date; or (D) the failure of any successor to the
business of the Company to assume the Company’s obligations
under this Agreement or any other employment agreement with
Executive; provided , however , that
Executive’s written agreement to any of the above shall cause
the event not to constitute “Good Reason”;
provided , further , that “Good Reason”
shall cease to exist for an event on the 90
th
day following the later
of its occurrence or Executive’s knowledge thereof, unless
Executive has given the Company written notice thereof prior to
such date.
(iii) If Executive’s
employment is terminated by the Company without Cause (and other
than by reason of death or Disability) or if Executive resigns for
Good Reason, in
either case other than in the one month period
prior to, or the 13 month period following a Change in Control (as
defined below), Executive shall be entitled to receive:
(A) the Accrued Rights;
and
(B) subject to Executive’s
(i) delivery of a valid and irrevocable general release of all
claims against the Company, SLP and their respective affiliates (to
the extent SLP or its affiliates remain stockholders of the Company
at such time) (collectively, the “Company Group”), in
the form attached hereto as Exhibit B (the “General
Release”), and (ii) continued compliance, in all
material respects, with the restrictive covenants set forth in
Sections 9 and 10 below):
(1) continued payment of the Base
Salary in accordance with the Company’s normal payroll
practices for a period of 24 months following the date of such
termination;
(2) subject to
(I) Executive’s timely election of continuation coverage
under the Consolidated Budget Omnibus Reconciliation Act of 1985,
as amended (“COBRA”) and any state or local law of
similar effect, and (II) Executive’s continued
co-payment of premiums in the same amount as Executive paid
immediately prior to termination, continued participation (to the
extent permitted under applicable law and the terms of such plan)
for Executive and his then-eligible dependents in the
Company’s group health plan in which they were participating
at the time of termination for the first 24 months following
termination at the Company’s expense. The parties understand
and agree that if continued health care coverage cannot be provided
under COBRA or state or local laws of similar effect beyond the end
of the 18 th month following the termination of
Executive’s employment, then such health care coverage will
be provided on the terms described in this subsection
(2) under a comparable health plan; and
(3) the vesting of the Time Option
shall be accelerated such that Executive will be vested in, and the
Time Option will be exercisable as to, that number of shares that
would have been vested and exercisable on the six (6) month
anniversary of the termination of Executive’s
employment.
The aggregate amount described in
this Section 8(b)(iii)(B) shall be reduced by the present
value of any other severance or termination benefits payable to
Executive under any other plans, programs or arrangements of the
Company or its affiliates. Following Executive’s termination
of employment by the Company without Cause (other than by reason of
Executive’s death or Disability) or by Executive’s
resignation for Good Reason, except as set forth in this
Section 8(b)(iii), Executive shall have no further rights to
any compensation or any other benefits under this
Agreement.
c. By the Company Without Cause
or Resignation by Executive for Good Reason in Connection With a
Change in Control .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company without Cause or by Executive’s resignation for Good
Reason, in either case within one month prior to, or within 13
months following, the consummation of a Change in
Control.
(ii) For purposes of this Agreement,
“Change in Control” shall mean (A) the sale,
exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the
Company to any “person” or “group” (as such
terms are used in the Securities Exchange Act of 1934, as amended),
other than Silver Lake Partners II, LP (“SLP II”), any
investment fund that is an affiliate (as defined under the rules
promulgated under the Securities Act of 1933, as amended) of SLP II
(collectively with SLP II, the “SLP Funds”) or a
controlled affiliate of the SLP Funds; (B) any person or
group, other than the SLP Funds or a controlled affiliate of the
SLP Funds, is or becomes the beneficial owner, directly or
indirectly, of more than 50% of the total voting power of the
voting stock of the Company (or any entity which controls the
Company or which is a successor to all or substantially all of the
assets of the Company), including by way of merger, consolidation,
tender or exchange offer or otherwise; or (C) a merger,
consolidation or similar transaction involving the Company with
another person which is not the SLP Funds or a controlled affiliate
of the SLP Funds, if the stockholders of the common stock of the
Company immediately prior to such transaction do not own a majority
of the outstanding common stock of the surviving company or its
parent immediately after the transaction in substantially the same
proportions relative to each other as immediately prior to such
transaction; if and only if any such event listed in (A)-(C)
above results in the inability of SLP to elect a majority of the
Board of the Company or the resulting successor or controlling
entity.
(iii) If Executive’s
employment is terminated by the Company without Cause (and other
than by reason of death or Disability) or if Executive resigns for
Good Reason, in either case in the one month period prior to or the
13 month period following the consummation of a Change in Control,
Executive shall be entitled to receive:
(A) the Accrued Rights;
and
(B) subject to Executive’s
(i) delivery of a valid and irrevocable General Release, and
(ii) continued compliance, in all material respects, with the
restrictive covenants set forth in Sections 9 and 10
below:
(1) continued payment of the Base
Salary in accordance with the Company’s normal payroll
practices for a period of 24 months following the date of such
termination;
(2) continued payment of quarterly
installments of the Target Bonus in accordance with the
Company’s normal payroll practices for a period of 24 months
following the date of such termination;
(3) a pro-rata payment of any Target
Bonus that would have been earned in the quarter or year in which
the termination of employment occurs, determined based on actual
satisfaction of performance goals for such performance period, and
pro-rated based on days served in that quarter or year (as
applicable), with payment of such amounts made at the time that the
Company would ordinarily have paid out such bonus payments for the
applicable performance period; and
(4) subject to
(I) Executive’s timely election of continuation coverage
under COBRA and any state or local law of similar effect, and
(II) Executive’s continued co-payment of premiums in the
same amount as Executive paid immediately prior to termination,
continued participation (to the extent permitted under applicable
law and the terms of such plan) for Executive and his then-eligible
dependents in the Company’s group health plan in which they
were participating at the time of termination for the first 24
months following termination at the Company’s expense. The
parties understand and agree that
