<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): September 24, 1996
RATIONAL SOFTWARE CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-12167 54-1217099
- ------------------------------- ---------------- ----------------------
(State or Other Jurisdiction of (Commission File (IRS Employer
Incorporation) Number) Identification Number)
2800 San Tomas Expressway, Santa Clara, CA 95051
- -------------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (408) 496-3600
<PAGE> 2
The undersigned Registrant hereby amends Exhibits 1 and 2 of its
Current Report on Form 8-K dated September 24, 1996, which was filed on October
3, 1996 as set forth below.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements.
Innapplicable.
b. Pro Forma Financial Information.
Inapplicable.
c. Exhibits
Exhibit Number 1, Agreement for Purchase and Sale of Assets
between Rational Software Corporation and Microsoft Corporation dated October 2,
1996, and Exhibit Number 2, Development and License Agreement between Rational
Software Corporation and Microsoft Corporation dated September 24, 1996, have
been amended to include certain previously redacted portions.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amended report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: October 16, 1996
RATIONAL SOFTWARE CORPORATION
By: /s/ Timothy A. Brennan
------------------------------------
Timothy A. Brennan
Vice President, Finance and Administration
-3-
<PAGE> 4
EXHIBIT LIST
Exhibit Number Exhibit
1 **Agreement for Purchase and Sale of Assets between
Rational Software Corporation and Microsoft
Corporation, dated October 2, 1996
2 **Development and License Agreement between
Rational Software Corporation and Microsoft
Corporation, dated September 24, 1996
- --------------------------
** The Company has requested confidential treatment for the redacted portions of
these exhibits.
-4-
<PAGE> 1
Exhibit 1
<PAGE> 2
EXHIBIT 1
CERTAIN CONFIDENTIAL INFORMATION IN
THIS EXHIBIT DENOTED BY ASTERISKS
HAS BEEN REDACTED PURSUANT TO
17 C.F.R. SUBSECTION 200.80(b)(4),
200.83 AND 240.24b-2
AGREEMENT FOR PURCHASE AND SALE
OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS ("Agreement") is made and
entered into this 2nd day of October, 1996 (the "Effective Date") by and
between Microsoft Corporation, a Washington corporation ("Microsoft"), and
Rational Software Corporation, a Delaware corporation ("Rational").
The parties hereby agree as follows:
1. DEFINITIONS
1.1 "Visual Test Product" means that certain computer software product
known as Microsoft Visual Test 4.0, as well as all prior versions thereof,
foreign language translations thereof, and any and all work-in-progress related
to updates or new versions thereof, in both machine readable and human readable
form, related Documentation, and all goodwill associated therewith.
1.2 "Derivative Work" means any translation (including any translation
into other computer languages), portation, modification, correction, addition,
extension, upgrade, improvement, compilation, abridgment or other form in which
the Visual Test Product has been recast, transformed, or adapted.
1.3 "Documentation" means the software and firmware listings, commented
source code, system build software and instructions related to the Visual Test
Product in the possession or under the control of Microsoft, and the user,
technical, and business documentation related to the Visual Test Product in the
possession or under the control of Microsoft in both machine readable and human
readable form.
1.4 "Competitive Product" means a Microsoft product that is designed and
marketed to compete directly with the Visual Test Product in the market for
software testing tools.
1.5 "Closing" means the consummation of the purchase of Assets (as defined
below) as contemplated under Section 2 of this Agreement. Closing shall occur
as soon as is reasonably practicable after satisfaction or written waiver of
the conditions set forth in Sections 15 and 16 hereof, provided that the
Closing shall not occur before October 1, 1996.
1.6 "IDE" means the object code form of the Microsoft Integrated
Development Environment which is described in Schedule 1.6 attached hereto.
1.7 "Non-Patent Intellectual Property" means copyright, trademark, trade
secret, and any other proprietary rights, excluding Patents (as defined below).
1.8 "Patents" mean any and all patents and applications worldwide
(including utility models, issued or issuing from applications) under which
either party or any of its subsidiaries now has or hereafter obtains the right
to license to, or grant immunity from suit to, the other party. The term
"Patent(s)" shall include all extensions, divisionals, continuations,
continuations-in-part,
<PAGE> 3
reexaminations and reissue patents as well as patent applications, to the extent
rights attach to such applications.
1.9 "Rational Updated Visual Test Products" means subsequent versions of
the product developed by Rational based on the currently-shipping Visual Test
4.0. These versions will include bug fixes, updates, and enhancements (both
minor and significant) reflecting new versions of the operating system,
integrated development environment, and new controls added to the Windows
environment. Entirely new functional areas in the product which are developed by
Rational are not included; however, Rational agrees to offer Microsoft
commercially favorable terms for site licenses covering such excluded
functionality .
2. PURCHASE OF ASSETS; MICROSOFT'S DISTRIBUTION
2.1 Purchase. Subject to the terms and conditions of this Agreement, at
the Closing, Microsoft agrees to sell, grant, and assign to Rational, and
Rational agrees to purchase and accept from Microsoft, all of Microsoft's right,
title, and interest in and to the following assets (the "Assets"):
(a) the Visual Test Product; and
(b) all Non-Patent Intellectual Property rights embodied in the
assets described in (a) above, including the name "Visual Test," and all
registrations, applications, and rights to apply for, register, and own any
copyrights embodied in the Visual Test Product.
2.2 Delivery. Microsoft will deliver the Assets to Rational in California
or will ship the Assets to Rational in California by means of facilities
operated by Microsoft or for delivery by Microsoft to a carrier (common or
contract) F.O.B. destination for shipment to Rational in California.
2.3 Inventory. Notwithstanding Section 2.1 of this Agreement, Microsoft
shall retain all right, title and interest in and to all copies of the retail
version of Visual Test Product that are in Microsoft's inventory as of the
Closing (the "Inventory"), provided that within five (5) days after the Closing,
Microsoft delivers all such Inventory to Rational for resale to end users
through Rational's usual distribution channels. Rational's right to resell such
Inventory shall terminate on the earlier of (i) ninety (90) days following the
Closing, or (ii) the date on which Rational first commercially distributes a
Visual Test Product under Rational's name. Such Inventory shall be deemed
accepted by Rational upon receipt from Microsoft unless it is damaged. Rational
shall return damaged product to Microsoft no later than fifteen (15) days after
receipt. As consideration for the rights described herein, Rational shall pay
Microsoft an amount equal to [ * ] multiplied by the total number of
copies of the Visual Test Product that are included in the Inventory, less any
credit for damaged product, no later than thirty (30) days after the date that
Rational receives such Inventory from Microsoft.
Rational shall have the obligation to provide support to end users of the
Inventory and notify end users that Rational shall provide such support instead
of Microsoft. Rational's efforts to notify end users regarding their support
shall include, but not necessarily be limited to, (a) placing a sticker in a
form reasonably satisfactory to Microsoft on each retail box with a brief
statement to the effect that Rational shall provide support for the product
included in the box, (b) identifying specific telephone numbers for customer
service and support calls, and (c) placing a notice on Rational's Worldwide Web
site with information about customer support for the product.
Microsoft also grants Rational a right to attach other stickers on the
outside of the retail boxes with information about Rational and future releases
of the Visual Test Product, provided that such stickers do not cover up any of
the text on the retail boxes and do not state or suggest that the product in the
retail box is a Rational product.
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE> 4
2.4 Scope of Rights. Except as described in Section 2.3, all of
Microsoft's right, title, and interest in and to the Assets shall be delivered
to Rational by Microsoft at the Closing.
3. FURTHER ASSURANCES
At Rational's request, whether at or after the Closing, Microsoft shall execute
and deliver such instruments and take such other action as may be requested by
Rational to perfect or protect Rational's rights in the Assets. In this regard,
Microsoft agrees to cooperate with Rational in the assignment, filing, or
prosecution of any copyright registrations or other documentation necessary to
perfect the Non-Patent Intellectual Property rights that Microsoft has filed
prior to the Closing, or that Rational may elect to file following the Closing,
with respect to the Assets.
4. LIABILITIES NOT ASSUMED
Rational does not assume any liabilities or obligations of Microsoft pursuant to
this Agreement or otherwise, whether such liabilities or obligations are known
or unknown, actual or contingent, asserted or not, and Microsoft shall indemnify
Rational pursuant to Section 19 hereof for any claims against Rational related
to the ownership or use of the Assets prior to Closing.
5. PURCHASE PRICE
As the consideration for the sale of the Assets, Rational shall at the Closing
pay to Microsoft Twenty-Three Million Dollars ($23,000,000) (the "Purchase
Price") payable by cashier's check or by wire transfer of immediately available
funds to an account designated in writing by Microsoft on or before the second
business day prior to the date of the Closing.
6. REPRESENTATIONS AND WARRANTIES OF MICROSOFT
Microsoft hereby makes the following representations and warranties to Rational
(subject to such exceptions as are listed on the attached Microsoft's Schedule
of Exceptions), which representations and warranties are made for the express
purpose of inducing Rational to enter into this Agreement.
6.1 Organization, Good Standing, and Authority. Microsoft is a corporation
duly organized, validly existing, and in good standing under the laws of
Washington, has all requisite power and authority to own, lease, and operate its
properties and to carry on its businesses as now being conducted and to enter
into this Agreement and consummate the transactions contemplated thereby, and is
duly qualified and in good standing to do business in each jurisdiction in which
a failure to so qualify would have a material adverse effect on the Business
Condition of Microsoft. The execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of Microsoft. This Agreement has
been duly executed and delivered by Microsoft and constitutes a valid and
binding agreement of Microsoft enforceable in accordance with its terms. Neither
the execution and delivery of this Agreement nor the consummation by Microsoft
of the transactions contemplated hereby, nor compliance by Microsoft with any of
the provisions hereof, will (i) constitute a violation of or default under
Microsoft's Articles of Incorporation or Bylaws, or, any contract, instrument,
commitment, agreement, understanding, arrangement, or restriction of any kind to
which Microsoft is a party, or by which Microsoft or any of the Assets may be
bound, or (ii) violate any rule, regulation, law, statute, ordinance, judgment,
order, writ, injunction, or decree of any court, administrative agency, or
governmental body applicable to Microsoft or any of
3
<PAGE> 5
the Assets. As used in this Agreement, "Business Condition" with respect to any
entity shall mean the business, financial condition, results of operations,
assets, or prospects (without giving effect to the consequences of the
transactions contemplated by this Agreement) of such entity.
6.2 Title to Assets. Microsoft holds good and marketable title to, and
owns all right, title and interest in, the Assets, and the Assets are not
subject to any mortgage, pledge, lien, assignment for security, conditional
sale, or other title retention agreement, lease, encumbrance, charge, security
interest, or other interest or claim of any kind or character. The Visual Test
Product does not infringe upon any copyrights, trade secret rights, or other
Non-Patent Intellectual Property, and to the best knowledge of Microsoft, any
patent rights, of any third party, and no claim of any such infringement has
been made, or to the best knowledge of Microsoft, is threatened against
Microsoft. To the best knowledge of Microsoft, Microsoft's employees,
consultants, contractors, partners, or agents who have been involved in the
development of the Assets have signed an agreement with Microsoft conveying or
agreeing to convey all proprietary rights in the Assets to Microsoft and
agreeing to maintain in confidence all trade secrets embodied in the Assets.
With respect to all subject matter, including ideas, inventions, creations,
works, processes, designs, and methods that Microsoft will disclose or convey to
Rational in connection with the sale of the Assets, Microsoft warrants that to
the best of its knowledge, it either owns such subject matter or has the right
to make such disclosure or conveyance without liability to others.
6.3 Business Relations. There are no pending, or to the best of
Microsoft's knowledge, threatened disputes or controversies relating to the
Assets with manufacturers, suppliers, customers, or others having business
relations with Microsoft.
6.4 Litigation. No litigation proceeding (administrative or otherwise),
investigation, or controversy arising out of the business or activities of
Microsoft is pending before any court or governmental agency which would
jeopardize Rational's title to the Assets. To the best of Microsoft's knowledge,
no such litigation, proceeding, investigation, or controversy is threatened or
anticipated. Microsoft is not in default with respect to any judgment, order,
writ, injunction, or decree of any court or governmental agency related to the
Assets, and there are no unsatisfied judgments against Microsoft which relate to
or affect the Assets.
6.5 "Visual Test" Name. Notwithstanding anything herein to the contrary,
Microsoft makes no representations regarding its right to the name "Visual
Test," and its sale of such name to Rational is in the nature of a quit claim
sale. Microsoft will not object to Rational's use of the name "Visual Test."
6.6 Disclosure. The information that has been furnished by Microsoft to
Rational in connection with the transactions contemplated hereby does not
include any untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements contained therein no misleading.
7. REPRESENTATIONS AND WARRANTIES OF RATIONAL
Rational hereby makes the following representations and warranties to Microsoft
(subject to such exceptions as are listed on the attached Rational's Schedule of
Exceptions), which representations and warranties are made for the express
purpose of inducing Microsoft to enter into this Agreement.
4
<PAGE> 6
7.1 Organization, Good Standing, and Authority. Rational is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted and
to enter into this Agreement and consummate the transactions contemplated
thereby, and is duly qualified and in good standing to do business in each
jurisdiction in which a failure to so qualify would have a material adverse
effect on the Business Condition of Rational. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Rational. This
Agreement has been duly executed and delivered by Rational and constitutes a
valid and binding agreement of Rational enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement nor the consummation
by Rational of the transactions contemplated hereby, nor compliance by Rational
with any of the provisions hereof, will (i) constitute a violation of or default
under, any contract, instrument, commitment, agreement, understanding,
arrangement, or restriction of any kind to which Rational is a party, or by
which Rational may be bound, or (ii) violate any rule, regulation, law, statute,
ordinance, judgment, order, writ, injunction, or decree of any court,
administrative agency, or governmental body applicable to Rational.
7.2 Disclosure. The information that has been furnished by Rational to
Microsoft in connection with the transactions contemplated hereby does not
include any untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements contained therein no misleading
7.3 Title to Rational Updated Visual Test Products. Upon Closing and
partly in reliance on the representations and warranties of Microsoft in Section
6.2 above, Rational will hold good and marketable title to the Rational Updated
Visual Test Products licensed to Microsoft pursuant to Section 10 below, and
Rational Updated Visual Test Products will not (i) be subject to any mortgage,
pledge, lien, assignment for security, conditional sale, or other title
retention agreement, lease, encumbrance, charge, security interest, or other
interest or claim of any kind or character, or (ii) infringe upon any patent
rights, copyrights, trade secret rights, or other proprietary rights of others.
8. BROKER'S AND FINDER'S FEES
Each party represents that it has not engaged any broker or finder in connection
with this transaction.
9. NON-EXCLUSIVE LICENSE TO IDE
9.1 Development License to IDE. Microsoft hereby grants to Rational a
[ * ] non-exclusive, non-transferable worldwide right and license for a
period of five (5) years following the Closing to make and use an unlimited
number of copies of the IDE solely for internal use at Rational in connection
with the integration of Rational products with the IDE.
9.2 Distribution License to IDE. Microsoft hereby grants to Rational a
[ * ] non-exclusive, non-transferable worldwide right and license for a
period of five (5) years following the Closing to reproduce, license and
distribute, and have reproduced, licensed and distributed, to and by third
parties, the IDE solely as part of Rational products.
9.3 Conditions to License. The license grants set forth in Section 9.1 and
Section 9.2 are specifically conditioned upon Rational's continued fulfillment
of the following conditions:
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE> 7
(a) Rational shall not reverse engineer, disassemble or
decompile the IDE;
(b) Rational shall only license the IDE as part of a Rational
product that adds significant and primary functionality to the IDE
and not on a stand alone basis;
(c) Rational shall not grant end users of Rational products a
right to further license or distribute the IDE;
(d) Microsoft is preparing a document tentatively entitled
"DevStudio Package Partner Release Criteria" and will provide a copy
of it to Rational when it is completed. Rational agrees that it will
follow all the requirements set forth therein. Rational acknowledges
that this document will be subject to modification by Microsoft from
time to time in order to respond to the reasonable business needs of
Microsoft;
(e) Rational shall only access documented function calls when
integrating the IDE into Rational products;
(f) Rational shall distribute every copy of Rational products
that include the IDE with an end-user license agreement that
protects Microsoft and its intellectual property rights in a manner
that is at least as restrictive and comprehensive as the most
current Microsoft end user license agreement for Microsoft Visual
Test 4.0.
10. RIGHTS GRANTED TO MICROSOFT
10.1 License to Microsoft. Effective upon the Closing, Rational grants to
Microsoft a [ * ] non-exclusive, perpetual, irrevocable right and
license to: (a) use, reproduce and modify the Visual Test Product in source code
form for the purpose of creating Derivative Works; and (b) reproduce and use an
unlimited number of copies of the Visual Test Product and Rational Updated
Visual Test Products in object code form for internal use at Microsoft.
10.2 Distribution License. Effective upon the Closing, Rational grants to
Microsoft a [ * ] non-exclusive, perpetual, irrevocable,
non-transferable right and license to use, reproduce, sublicense and distribute
portions of the Visual Test Product and Derivative Works created by Microsoft in
object code form as part of Microsoft products that are not Competitive
Products.
10.3 Rational Updated Visual Test Products. For the period commencing on
the Closing until (a) the date on which Microsoft begins commercial distribution
of a Competitive Product, or (b) five (5) years after Closing, whichever comes
first, Rational agrees to deliver to Microsoft at least five (5) copies of all
Rational Updated Visual Test Products in object code form for Microsoft's use
pursuant to Section 10.1 of this Agreement. Rational shall use its commercially
reasonable best efforts to provide Microsoft with early access to such Rational
Updated Visual Test Products.
10.4 Option to Distribute Tool Version. Microsoft shall have an option to
obtain a [ * ] worldwide right and license from Rational to license and
distribute a version of the Rational Visual Test Product to end users of one or
more Microsoft development tool products, including Microsoft Visual Basic,
Microsoft Visual J++ and Microsoft Visual C++. Such option shall be exercisable
by Microsoft for a period of five (5) years from the Closing by delivery of a
written
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
<PAGE> 8
notice to Rational. Within thirty (30) days after receiving such notice,
Rational shall deliver a proposal to Microsoft of a technical specification and
schedule for delivery for such testing product and thereafter the parties shall
negotiate the terms in good faith and enter into a definitive license agreement.
11. LICENSE GRANT TO RATIONAL
Effective as of the Closing, Microsoft grants to Rational a [ * ]
perpetual, irrevocable, and non-exclusive license under Microsoft Patent rights
that would be infringed by the manufacture, use, sale, offer for sale or
importation of the Visual Test Product, excluding new features that may be later
added by Rational, to use, reproduce, modify and distribute the Visual Test
Product and any Rational Updated Visual Test Products created by or for
Rational.
12. MAINTENANCE SERVICES
12.1 Maintenance. Following the Closing and until (a) the date on which
Microsoft begins commercial distribution of a Competitive Product, or (b) [
* ] after Closing, whichever comes first (the "Maintenance Period"),
Rational will provide Microsoft with internal feature support and maintenance of
the Visual Test Product ("Maintenance Services"). The Maintenance Services shall
include, but not necessarily be limited to, the following:
(a) Rational will provide end user support to Microsoft's internal
users of current and future versions of the Visual Test Product as created by or
for Rational;
(b) Rational will routinely collect feature requests from
designated contacts in Microsoft's organization;
(c) Rational will use its reasonable best efforts to incorporate
feature requests collected pursuant to (b) above into future versions of the
Visual Test Product as created by or for Rational, so long as, and only so long
as, in Rational's good faith judgment, the incorporation of such feature
requests is commercially reasonable for Rational taking into account the related
costs, anticipated market demand, and other similar factors deemed relevant by
Rational, and to provide Microsoft with early releases of such future versions;
and
(d) Rational will use its reasonable best efforts to commercially
release updated versions of the Visual Test Product that exploit new releases of
Microsoft's operating system software and tools technology within ninety (90)
days of the commercial release of such operating system and tools products and
future versions thereof, subject to the condition that in Rational's good faith
judgment, such an updated version of the Visual Test Product is commercially
reasonable for Rational taking into account the related costs, anticipated
market demand, and other similar factors deemed relevant by Rational.
12.2 Maintenance Fee. In consideration of the delivery of the Maintenance
Services by Rational as described in Section 12.1 above, Microsoft will pay
Rational an annual fee of [ * ] payable by
cashier's check or wire transfer within thirty (30) days following the Closing
and each anniversary of the Closing during the Maintenance Period.
12.3. Early Product Information. In order to assist Rational in providing
the Maintenance Services, Microsoft will use its reasonable best efforts to
provide Rational with early access to
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
7
<PAGE> 9
relevant information regarding new and updated software products to be
commercially released by Microsoft.
13. CONDUCT OF VISUAL TEST BUSINESS
From the Effective Date until the Closing, Microsoft will carry on its Visual
Test Product business in substantially the same manner as heretofore conducted
and shall not, except as otherwise contemplated under this Agreement, take any
action or fail to take any action which is inconsistent with such past practice
and the continuation of the Visual Test Product business as a going concern.
14. MICROSOFT MARKETING SUPPORT.
For a period of [ * ] following the Closing, Microsoft will:
(a) Maintain a pointer on the Microsoft Worldwide Web site
directing persons seeking information on the Visual Test Product to Rational's
Worldwide Web site;
(b) Maintain a pointer to the Rational Worldwide Web site from the
Microsoft internal sales and product support databases for the Visual Test
Product; and
(c) For as long as Microsoft uses the Visual Test Product as its
primary, but not exclusive, tool for internal testing, Rational may, subject to
Microsoft's pre-approval, use quotes from internal Microsoft users of the Visual
Test Product, and use Microsoft as a customer reference in advertising or other
marketing materials.
15. CONDITIONS PRECEDENT TO OBLIGATIONS OF RATIONAL
Each and every obligation of Rational under this Agreement to be performed on or
before the Closing shall be subject to the satisfaction, at or before the
Closing, of each of the following conditions precedent, except to the extent
that Rational shall have waived in writing such satisfaction:
(a) Each of the representations and warranties made by Microsoft
herein shall be true and correct in all material respects at the Closing with
the same effect as though made on and as of the Closing;
(b) Microsoft shall have delivered to Rational such bills of sale
and other instruments of conveyance and transfer in form reasonably satisfactory
to Rational and its counsel, to vest in Rational all of Microsoft's right, title
and interest in and to the Assets, free and clear of all liens, security
interests or encumbrances of any nature;
(c) There shall be no pending or threatened governmental or third
party action, suit, proceeding or investigation seeking to restrain or
questioning the validity or legality of the transactions contemplated hereby;
and
(d) The waiting period required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, shall have elapsed and the Federal Trade
Commission shall have taken no action to prevent or delay the consummation of
the transactions contemplated hereby.
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
<PAGE> 10
16. CONDITIONS PRECEDENT TO OBLIGATIONS OF MICROSOFT
Each and every obligation of Microsoft under this Agreement to be performed on
or before the Closing shall be subject to the satisfaction, at or before the
Closing, of each of the following conditions precedent, except to the extent
that Microsoft shall have waived in writing such satisfaction:
(a) Each of the representations and warranties made by Rational
herein shall be true and correct in all material respects at the Closing with
the same effect as though made on and as of the Closing;
(b) Rational shall have delivered to Microsoft the Purchase Price
in accordance with Section 5 hereof;
(c) There shall be no pending or threatened governmental or third
party action, suit, proceeding or investigation seeking to restrain or
questioning the validity or legality of the transactions contemplated hereby;
and
(d) The waiting period required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, shall have elapsed and the Federal Trade
Commission shall have taken no action to prevent or delay the consummation of
the transactions contemplated hereby.
17. NONCOMPETITION
Microsoft agrees that except as otherwise provided in Sections 2.3 and 10 above,
for a period of two (2) years after the Closing, Microsoft will refrain from,
directly or indirectly, developing, marketing, or distributing any Competitive
Product.
18. TRANSITION
18.1 Microsoft Obligations. Microsoft will use its reasonable best efforts
to assist Rational in the orderly transition of ownership of the Assets, such
assistance to include, without limitation, the following:
(a) Microsoft will notify Rational of any orders for the Visual
Test Product received by Microsoft after the Closing and will notify the persons
who place such orders to contact Rational.. Orders received prior to Closing
will be filled by Microsoft and Microsoft will have the right to retain any
associated revenues;
(b) Microsoft will provide Rational with information in its
possession regarding dealers of the Visual Test Product and the purchase history
of such dealers over the two (2) years prior to the Closing, and will assist
Rational in communicating the transfer of ownership of the Visual Test Product
to this sales channel;
(c) As promptly as practicable following the Closing, Microsoft
will deliver to Rational the information in Microsoft's registered user base for
the Visual Test Product covering users in North America, Japan, and portions of
Europe, to permit Rational to conduct promotional mailings or telemarketing
promotions. Microsoft will also identify Rational as its preferred provider of
testing solutions to such registered user base.
9
<PAGE> 11
(d) Microsoft will participate in joint press announcements with
Rational regarding the purchase and sale of the Visual Test Product as mutually
agreed by the parties;
(e) Prior to the Closing, Microsoft will give Rational access to
the problem tracking and reporting databases maintained by Microsoft for the
Visual Test Product, and as promptly as practicable following the Closing,
Microsoft will transfer such databases to Rational; and
(f) During the period commencing on the day of Closing and ending
one hundred eight (180) days thereafter, Microsoft will provide Rational with up
to sixty (60) hours of on-site or telephone access to certain of Microsoft's
software engineers with extensive knowledge of the Visual Test Product, and will
designate a Visual Test Program Manager to be Rational's point of contact for
all support issues related to the Visual Test Product for twelve (12) months
following the Closing.
(g) Microsoft will forward any customer registration information it
receives from customers who acquire copies of the Visual Test Product following
the Closing, and will refer any support calls received from such customers to
Rational.
18.2 Rational Obligations. During the two (2) years following the Closing,
Rational shall grant a non-exclusive, [ * ] license to any improvements,
updates, or new versions of the Visual Test Product commercially released by
Rational (collectively, "Improvements') to up to twelve (12) Microsoft customers
who have licensed the Visual Test Product under Microsoft's large-volume
customer licensing program known as "Select;" provided that Rational's
obligation under this Section 18.2 shall apply only to those Select licensees
whose identity is provided to Rational within sixty (60) days following the
Closing, and as to each such licensee, Rational's obligation shall extend only
until such time as such licensee's Select agreement with Microsoft expires. Each
such former Microsoft customer shall be entitled to receive a license to that
number of copies of any given Improvement equal to the number of copies of the
Visual Test Product that such customer originally licensed from Microsoft.
19. INDEMNIFICATION
(a) Each party (an "Indemnifying Party") shall indemnify and hold harmless
the other and its affiliates and the respective agents, employees, officers,
directors, and shareholders of such party and its affiliates (collectively, an
"Indemnified Party"), from and against any and all losses, claims, damages,
liabilities, and expenses, including, without limitation, and as incurred,
out-of-pocket costs of investigating, preparing, or defending any claim
(collectively, "Losses") based upon, arising out of, or otherwise due to any
breach or violation of any of the representations, warranties, covenants, or
agreements of the Indemnifying Party contained in this Agreement.
(b) The Indemnified Party shall notify the Indemnifying Party of any claim
to be asserted under this Agreement against the Indemnifying Party as soon as
practicable after the Indemnified Party receives notice of or otherwise has
actual knowledge of such claim, and shall provide to the Indemnifying Party as
soon as practicable thereafter all information and documentation necessary to
support and verify the claim being asserted, and the Indemnifying Party shall be
given access to all books and records in the possession or control of the
Indemnified Party which the Indemnifying Party reasonably determines to be
related to such claim; provided that the Indemnifying Party shall treat all such
information, if not in the public domain, as confidential, exercising the same
degree of care with respect thereto as exercised with respect to such
Indemnifying Party's own confidential information.
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
<PAGE> 12
(c) Promptly after receipt by the Indemnified Party of notice of the
commencement by any third party of any inquiry, examination, action, suit, or
proceeding ("Proceeding") which might result in the Indemnifying Party becoming
obligated to indemnify or make any other payment under this Agreement, the
Indemnified Party shall, if a claim in respect thereof is to be made against the
Indemnifying Party under this Agreement, notify the Indemnifying Party forthwith
in writing of the commencement thereof. The failure of the Indemnified Party to
so notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability which it may have on account of this indemnification or otherwise,
except to the extent that the Indemnifying Party is materially prejudiced
thereby. The Indemnifying Party shall have the right, within thirty (30) days
after being so notified, to assume the defense of such Proceeding with counsel
reasonably satisfactory to the Indemnified Party. In any such Proceeding, the
defense of which the Indemnifying Party shall have so assumed, the Indemnified
Party shall have the right to participate therein and retain its own counsel at
its own expense unless (i) the Indemnified Party and the Indemnifying Party
shall have mutually agreed to the retention of such counsel, or (ii) the named
parties to any such Proceeding (including impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and representation by both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them; in either case, such separate counsel may be retained by
the Indemnified Party at the Indemnifying Party's expense. To the extent that
the settlement of such Proceeding, the defense of which has been assumed by the
Indemnifying Party, involves the payment of money, the Indemnifying Party shall
have the right to settle those aspects of the Proceeding dealing only with the
payment of money. Notwithstanding the foregoing, in connection with any such
defense or settlement, the Indemnifying Party shall not enter into a consent
decree involving injunctive relief or consent to injunction without the
Indemnified Party's prior written consent, such consent not to be unreasonably
withheld. The Indemnified Party shall cooperate, and shall use its best efforts
to cause its employees and the employees of any of its respective affiliates to
cooperate, with the Indemnifying Party in the defense of any Proceeding assumed
by the Indemnifying Party.
20. TRANSFER AND OTHER TAXES
Rational shall reimburse Microsoft for any and all transfer, sales, use,
or similar tax assessed or otherwise imposed by any nation, state, county, city,
or political subdivision thereof arising out of or related to the transactions
contemplated by this Agreement, notwithstanding any legal requirement or
theory which would impose such tax on Microsoft. Rational further agrees to
indemnify, defend, and hold Microsoft harmless against any reasonable expenses
incurred by Microsoft as a result of Rational's failure to promptly discharge
its responsibilities under this section. Microsoft will cooperate with Rational
in discharging the aforementioned duties and will make its records and
employees available to the extent required by Rational to reasonably discharge
its duties pursuant to this section. Furthermore, Rational shall not be
responsible for any income, business, occupation, withholding, or similar tax
of Microsoft of any kind arising out of or related to the transactions
contemplated by this Agreement.
21. OTHER PROVISIONS
21.1 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Washington. The parties agree that the
venue of any suit or action between the parties will be in King County,
Washington.
21.2 Waiver. Any party may, at its option, waive only by written notice,
any and all of the conditions to which its obligations under this Agreement are
subject. No delay on the part of any party in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. All remedies provided herein or otherwise
available (including at law or in equity) shall be cumulative. The waiver or
non-enforcement of any breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach. No waiver shall be
legally operative unless in writing and signed by the party to be bound.
21.3 Attorneys' Fees. In any suit or action brought to enforce this
Agreement, the exhibits attached hereto or any other signed instrument referred
to herein, or to obtain an adjudication, declaratory or otherwise, of rights
hereunder or thereunder, the losing party shall pay to the prevailing party
reasonable attorneys' fees and all other costs and expenses which may be
incurred by the prevailing party in such action.
11
<PAGE> 13
21.4 Amendment and Modifications. The parties may amend, modify, or
supplement this Agreement in such manner as may be agreed upon but only in a
writing singed on behalf of each of the parties hereto.
21.5 Entire Agreement. This Agreement constitutes the entire agreement
among the undersigned and supersedes all prior agreements and understandings,
oral and written, among the undersigned with respect to the subject matter
hereof.
21.6 Expenses. Except as otherwise provided herein, the parties shall pay
their respective expenses incurred in connection with the preparation,
execution, and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
21.7 Survival of Representations and Warranties. All representations,
warranties, covenants, and agreements made by the parties in the Agreement shall
survive the execution and closing of the transactions contemplated hereby.
21.8 Notices, Etc. All notices, requests, demands, and other
communications hereunder shall be deemed to have been duly given on the day they
are (i) deposited in the U.S. mail, postage prepaid, certified or registered,
return receipt requested; or (ii) sent by air express courier, charges prepaid,
and addressed as follows:
If to Microsoft: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Keith Dolliver
Telephone No.: (206) 882-8080
Facsimile No.: (206) 869-1327
With a copy to: Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Law and Corporate Affairs
Telephone No.: (206) 882-8080
Facsimile No.: (206) 869-1327
If to Rational: Rational Software Corporation
2800 San Tomas Expressway
Santa Clara, CA 95051-0951
Attention: Joe Marasco
Telephone No.: 408 496 3679
Facsimile No.: 408 496 3974
21.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective subsidiaries, successors, and
assigns.
21.10 Invalidity. The invalidity or unenforceability of any term or
provision of this Agreement or the application of such term or provision to any
person or circumstance shall not impair or affect the remainder of this
Agreement or its application to other persons and circumstances, and the
remaining terms and provisions shall remain in full force and effect.
12
<PAGE> 14
21.11 Counterparts. This Agreement may be signed in counterparts, each of
which shall be deemed an original and all of which shall together constitute one
agreement. Facsimile signatures may be used on any counterpart with immediate
effectiveness, provided that the original counterpart is promptly delivered to
the other party.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date
first above written.
MICROSOFT CORPORATION RATIONAL SOFTWARE CORPORATION
- ------------------------------ ------------------------------
By By
- ------------------------------ ------------------------------
Name (Print) Name (Print)
- ------------------------------ ------------------------------
Title Title
13
<PAGE> 15
SCHEDULE 1.6
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
14
<PAGE> 16
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
15
<PAGE> 1
Exhibit 2
<PAGE> 2
CERTAIN CONFIDENTIAL INFORMATION IN THIS
EXHIBIT DENOTED BY ASTERISKS HAS BEEN
REDACTED PURSUANT TO 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 204.24b-2.
DEVELOPMENT AND LICENSE AGREEMENT
This Development & License Agreement (the "Agreement') is entered into
and effective as of September 24,1996 (the "Effective Date") by and between
Microsoft Corporation, a Washington corporation located at One Microsoft Way,
Redmond, WA 98052 ("Microsoft") and Company, Rational Software Corporation, a
Delaware corporation located at 2800 San Tomas Expressway, Santa Clara, CA
95051-0951 ("Company").
RECITALS
A. The Company has developed an object modeling technology for
development of component-based application programs.
B. Microsoft wishes to engage the Company to further development of such
technology to develop a product and associated documentation for end users of
its software tool products;
C. The Company is willing to grant Microsoft the rights described
herein, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS
1.1 "Confidential Information" shall mean: (i) any trade secrets
relating to either party's product plans, designs, costs, prices and names,
finances, marketing plans, business opportunities, personnel, research
development or know-how; and (ii) the terms, conditions and existence of this
Agreement. "Confidential Information" shall not include information that: (i) is
or becomes generally known or available by publication, commercial use or
otherwise through no fault of the receiving party; (ii) is known and has been
reduced to tangible form by the receiving party at the time of disclosure and is
not subject to restriction; (iii) is independently developed or learned by the
receiving party; (iv) is lawfully obtained from a third party that has the right
to make such disclosure; or (v) is made generally available by the disclosing
party without restriction on disclosure.
1.2 "Derivative Technology" shall mean: (i) for copyrightable or
copyrighted material, any translation (including translation into other computer
languages), portation, modification, correction, addition, extension, upgrade,
improvement, compilation, abridgment or other form in which an existing work may
be recast, transformed or adapted; (ii) for patentable or patented
<PAGE> 3
material, any improvement thereon; and (iii) for material which is protected by
trade secret, any new material derived from such existing trade secret material,
including new material which may be protected by copyright, patent and/or trade
secret.
1.3 "Documentation" means the Company-authored end user documentation
for the Product, which is described in the Specifications.
1.4 "IDE" means the Microsoft Integrated Development Environment for
certain of the MS Tool Products, which is further described on Exhibit B
attached hereto.
1.5 "MS Tool Products" shall mean Microsoft Visual Basic, Microsoft
Visual C++, Microsoft Visual J++, Microsoft Visual FoxPro, and all other future
Microsoft tool products, including all upgrades, versions and successors
thereof.
1.6 "Product" shall mean the computer software product that is described
in the Specifications, including all bug fixes, maintenance releases, upgrades,
versions, and successors thereof that the Company releases to Microsoft during
the term of this Agreement.
1.7 "Serious Error"' means a bug or programming error in the Product
that prevents or seriously impairs the performance of one or more major
functions.
1.8 "Specifications" shall mean the specifications for the Product,
which are attached to this Agreement as Exhibit A.
1.9 "Schedule" shall mean the schedule(s) for implementing the features
of the Product and Documentation described in the Specifications, which are set
forth in Exhibit A attached hereto.
1.10 "Win32 Platforms" means Microsoft Windows 95, Microsoft Windows NT,
and all upgrades, versions and successors to such products.
2. DEVELOPMENT OF PRODUCT AND DOCUMENTATION
2.1 SPECIFICATIONS AND SCHEDULE. Company shall develop and deliver the
Product and the Documentation to Microsoft in accordance with the Schedule and
the Specifications. A failure to deliver the Product or the Documentation in
accordance with the Schedule and/or the Specifications shall be deemed a
material breach for purposes of Section 9.2 of this Agreement.
2.2 DESIGN REVIEW & SPECIFICATIONS CHANGES. Company understands that
there may be additions, deletions or other changes which may affect the
Specifications at any time during the term of Agreement. Upon notice of any such
changes by Microsoft, Company and Microsoft shall work together to make any
necessary changes to the Specifications and Schedule.
<PAGE> 4
2.3 SOURCE CODE DROPS. The Company shall provide a complete and accurate
copy of the Product, including all updates and new versions, in source code form
on the dates that it is required to provide the same in object code form
pursuant to the terms of the Schedule and/or Sections 5.1.1 and 5.1.2. The
Company shall provide such source code copies of the Product on one or more
computer diskettes placed in sealed envelopes. Microsoft agrees that it shall
keep such envelopes in a secure facility and only break the seals to access the
source code to the Product upon the occurrence of one of the events described in
Section 3.4(a) or 3.4(b) of this Agreement or upon exercise of the Option
described in Section 5.2.
3. LICENSE TO PRODUCT AND DOCUMENTATION
3.1 OWNERSHIP. Except as expressly licensed to Microsoft in this
Agreement, Company retains all right, title and interest in and to the Product,
Documentation, and to any Derivative Technology of the Product created by or for
Microsoft.
3.2 OBJECT CODE LICENSE. Company hereby grants to Microsoft a perpetual,
nonexclusive, worldwide, irrevocable, [*] license: (i) to make, use, and copy
the Product in object code form only; (ii) to reproduce, license, sell, rent,
lease or otherwise distribute, and have reproduced, licensed, sold, rented,
leased or otherwise distributed, to and by third parties, copies of the Product
in object code form as part of any MS Tool Product; and (iii) to sublicense the
rights in the foregoing parts (i) and (ii) to third parties, including the right
to grant further sublicenses to third parties. Microsoft shall not license or
grant third parties the right to license the Product on a standalone basis.
The foregoing license grants include a license under any current and
future patents owned or licensable by Company to the extent necessary: (i) to
exercise any license right granted herein; and (ii) to combine the Product with
any hardware and software.
3.3 LICENSE TO DOCUMENTATION. Company hereby grants to Microsoft a
perpetual, nonexclusive, worldwide, irrevocable, [*] license: (i) to
make, use, and copy the Documentation; (ii) to reproduce, license, sell, rent,
lease or otherwise distribute, and have reproduced, licensed, sold, rented,
leased or otherwise distributed, to and by third parties, copies of the
Documentation; and (iii) to sublicense the rights in the foregoing parts (i) and
(ii) to third parties, including the right to grant further sublicenses to third
parties.
3.4 RESTRICTED SOURCE CODE LICENSE. Company hereby grants to Microsoft a
nonexclusive, perpetual, irrevocable, [*], worldwide right and license to (i)
make, use, copy, edit, format, modify, translate and create Derivative
Technology of the source code version of the Product; (ii) license, rent, lease
or otherwise distribute, and have reproduced, licensed, rented, leased or
otherwise distributed to and by third parties, object code versions of the
Product, and any Derivative Technology thereof, as part of an MS Tool; and (iii)
grant the rights set forth in this Section 3.4 to third parties, including the
right to license such rights to further third parties. The foregoing license
grant is subject to the following restrictions:
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 5
(a) Microsoft may only obtain access to the source code version
of the Product, as delivered by the Company pursuant to Section 2.3, upon the
occurrence of one of the following events: (i) Company fails to correct a
Serious Error within fifteen (15) days after receiving written notice thereof
from Microsoft; or (ii) the Company fails to update the Product to incorporate
changes in Win32 Platforms, as required by Section 5.1.3, within thirty (30)
days after receiving written notice from Microsoft.
(b) Upon obtaining access to the source code version of the
Product for a reason described in sub-section (a) above, Microsoft shall only
use and/or modify the source code of the Product to the extent necessary either
to correct the Serious Error or update the Product for Win32 Platforms, as the
case may be.
(c) Microsoft shall not license the Product or any Derivative
Technology thereof on a standalone basis.
The foregoing license grants include a license under any current and
future patents owned or licensable by Company to the extent necessary: (i) to
exercise any license right granted herein; and (ii) to combine the Product or
Derivative Technology thereof with any hardware and software.
4. LICENSE TO [ * ]
The parties agree that within a reasonable period of time after the
Effective Date not to exceed ninety (90) days, they shall commence good faith
negotiations for Microsoft to grant the Company a non-exclusive, perpetual,
royalty free license to distribute copies of the Microsoft [ * ]
which is described in Exhibit C attached hereto, to end users of the Company's
development tool products.
5. OTHER OBLIGATIONS OF THE PARTIES
5.1 MAINTENANCE RELEASES AND UPDATES
5.1.1 MAINTENANCE RELEASES. During the term of the Agreement, the
Company shall provide Microsoft with all bug fixes and maintenance
releases for the Product no later than the date it provides the same to
any third party. In addition, the Company shall use reasonable efforts
to promptly correct any programming errors in the Product identified by
Microsoft and end users and to promptly provide Microsoft with such
corrections.
5.1.2 UPDATES. During the term of the Agreement, the Company
shall provide Microsoft with all updates and new versions of the Product
and the Documentation, including beta software releases, no later than
the date that it provides such updates and new versions to any other
third party.
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 6
5.1.3 PLATFORM FEATURES. The Company agrees that the Product
shall execute exclusively on the Win32 Platforms and the Intel, MIPS,
Alpha and Power PC microprocessor platforms. The Company shall use
reasonable efforts to localize the Product and the Documentation for
such languages as Microsoft may request from time to time during the
term of this Agreement. The Company also shall use reasonable efforts to
implement enhancements to the Product as requested by Microsoft, such
enhancements to include, but not necessarily be limited to, changes
resulting from enhancements to the Win32 Platforms, new diagramming
features, usability improvements, code generation, repository
integration, and development environment enhancements.
5.2 OPTION TO OBTAIN FULL SOURCE CODE LICENSE.
5.2.1 SCOPE. The Company hereby grants Microsoft an option (the
"Option") to obtain a nonexclusive, perpetual, irrevocable, [*]
worldwide right and license to (i) make, use, copy, edit, format,
modify, translate and create Derivative Technology of the source code
version of the Product; (ii) license, rent, lease or otherwise
distribute, and have reproduced, licensed, rented, leased or otherwise
distributed, to and by third parties, object code versions of the
Product, and any Derivative Technology thereof, as part of an MS Tool
Product; and (iii) grant the rights set forth in Section 3.4 to third
parties, including the right to license such rights to other third
parties. Microsoft agrees to include a reference to the Company in the
"About Box" for the Product, as modified by Microsoft pursuant to this
Section . Microsoft further agrees not to license the Product or any
Derivative Technology thereof on a standalone basis.
5.2.2 OPTION PERIOD AND PRICE. The Option shall be exercisable
for a period of 180 days after the expiration or termination of this
Agreement pursuant to Section 9. Within 45 days after the exercise, if
ever, of the Option, Microsoft shall pay the Company a flat fee equal to
[*].
5.2.3 LICENSE BACK TO COMPANY. For a period of one (1) year after
the date that Microsoft exercises the Option, it shall provide the
Company with updates to all Microsoft- authored Derivative Technology of
the Product (the "MS Derivatives") on a quarterly basis in source code
form. The Company shall have a nonexclusive, perpetual, irrevocable,
[*] worldwide right and license to (i) make, use, copy, edit, format,
modify, translate and create Derivative Technology of the source code
version of the MS Derivatives; (ii) license, rent, lease or otherwise
distribute, and have reproduced, licensed, rented, leased or otherwise
distributed, to and by third parties, object code versions of the MS
Derivatives; and (iii) grant the rights set forth in Section 3.4 to
third parties, including the right to license such rights to further
third parties.
5.2.4 LICENSE TO IDE. For a period of [*] after the date that
Microsoft exercises the Option, the Company shall have the right to
obtain a license to integrate the IDE into the Product upon the then
standard terms and conditions and Microsoft shall
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 7
waive any license fees due for the initial [*] of such license
agreement. The parties shall negotiate such an agreement in good faith.
5.3 PRESS RELEASES; MARKETING. Microsoft shall include information about
this Agreement (except financial terms and conditions), the Company and the
Product in future press releases for any MS Tool Products that include the
Product. Financial terms and conditions of this Agreement shall not be disclosed
without the mutual written consent of both parties. The Company may issue its
own press release announcing the basic terms of this Agreement at the same time
that Microsoft issues its first press release concerning the Product. Microsoft
and the Company shall consult with one another concerning the form and contents
of any press release concerning the Product and the terms of this Agreement
prior to the issuance of any such press release. The parties shall undertake
reasonable efforts during the term of this Agreement to market and promote the
Product and the MS Tool Products.
5.4 TECHNICAL SUPPORT. The parties understand and agree that the Company
shall have sole responsibility for developing the Product in accordance with the
Specifications and the Schedule. Microsoft shall assist the Company in its
efforts to integrate the Product with future upgrades and versions of MS Tool
Products (if, and to the extent that such MS Tool Products include the Product)
by providing the Company with early access to object and, if necessary, source
code for such MS Tool Products if the parties determine that access to such code
is reasonably necessary to provide for integration of the Product into such MS
Tool Products. Prior to obtaining access to such software code, the Company
shall execute an agreement (e.g., a beta test agreement) in standard form to be
provided by Microsoft.
5.5 END USER SUPPORT. At least thirty (30) days prior to the date that
Microsoft makes the Product commercially available to the public as part of any
MS Tool Product, the Company shall provide complete and accurate technical
documentation and training to designated Microsoft product support engineers, at
no cost to Microsoft, to enable such product support engineers to provide
front-line support to end users about the features and functions of the Product.
The Company also shall update such technical documentation and provide
additional training, as reasonably necessary, at no cost to Microsoft.
Subject to the Company's satisfaction of the foregoing obligations,
Microsoft shall provide front-line support and shall accept and make reasonable
efforts to answer all product support calls from end user customers who have
licensed the Product as part of an MS Tool Product; provided, that Microsoft
product support engineers shall direct to the Company all calls for which they
have no answer or which have arisen from a programming error in the Product. The
Company shall provide Microsoft with the name, telephone number, fax number and
Internet e-mail address of a person at the Company who will accept all end user
customer support calls.
From time to time during the term of this Agreement, the Company shall
provide technical articles concerning the Product at no cost for distribution by
Microsoft through the Microsoft Developer Network, Microsoft Web Site, and other
distribution channels and media selected by
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 8
Microsoft in its reasonable discretion. The Company may include a link to its
Web Site in any such documentation.
5.6 LIMITED EXCLUSIVITY. The Company agrees that to maintain the
uniqueness of the Product included within the MS Tool Products, it shall not
license the particular set of functions and features that are included in
Product to any third party without the consent of Microsoft, for a period of [*]
after the date the Company delivers Microsoft each new version of the Product
and for [*] after the date that the Company delivers Microsoft each new
upgrade to the Product.
5.7 MUTUAL COOPERATION. The parties agree to work together in good faith
on future marketing and distribution opportunities for the Product.
6. CONFIDENTIALITY; INDEPENDENT DEVELOPMENT
6.1 Each party shall protect the other's Confidential Information from
unauthorized dissemination and use with the same degree of care that such party
uses to protect its own like information. Neither party will use the other's
Confidential Information for purposes other than those necessary to directly
further the purposes of this Agreement. Neither party will disclose to third
parties the other's Confidential Information without the prior written consent
of the other party. Except as expressly provided in this Agreement, no ownership
or license rights is granted in any Confidential Information.
6.2 The parties' obligations of confidentiality under this Agreement
shall not be construed to limit Microsoft's ability to acquire, license,
develop, manufacture or distribute for itself, or have others acquire, license,
develop, manufacture or distribute for Microsoft, similar technology performing
the same or similar functions as the technology contemplated by this Agreement,
or to market and distribute such similar technology in addition to, or in lieu
of, the technology contemplated by this Agreement. Further, either party shall
be free to use for any purpose the residuals resulting from access to or work
with such Confidential Information, provided that such party shall maintain the
confidentiality of the Confidential Information as provided herein. The term
"residuals" means information in non-tangible form, which may be retained by
persons who have had access to the Confidential Information, including ideas,
concepts, know-how or techniques contained therein. Neither party shall have any
obligation to limit or restrict the assignment of such persons or to pay
royalties for any work resulting from the use of residuals. However, the
foregoing shall not be deemed to grant to either party a license under the other
party's copyrights or patents.
7. WARRANTIES
7.1 COMPANY. Company warrants and represents that:
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 9
7.1.1 It has the full power to enter into this Agreement and to
grant the license rights set forth herein;
7.1.2 It has not previously and will not grant any rights to any
third party that are inconsistent with the rights granted to Microsoft
herein;
7.1.3 The Product is original to Company and does not infringe
any copyright, trade secret, or, to the knowledge of the Company, any
patent rights held by any third party;
7.2 Microsoft warrants and represents that it has taken the necessary
steps to enter into this Agreement.
8. INDEMNITY
8.1 INDEMNITY.
8.1.1 Company shall, at its expense and Microsoft's request,
defend any claim or action brought against Microsoft, and Microsoft's
subsidiaries, affiliates, directors, officers, employees, agents and
independent contractors, which, if true, would constitute a breach of a
warranty by Company in Section 7, and Company will indemnify and hold
Microsoft harmless from and against any costs, damages and fees
reasonably incurred by Microsoft, including but not limited to fees of
attorneys and other professionals, that are attributable to such claim.
Microsoft shall: (i) provide Company reasonably prompt notice in writing
of any such claim or action and permit Company, through counsel mutually
acceptable to Microsoft and Company, to answer and defend such claim or
action; and (ii) provide Company information, assistance and authority,
at Company's expense, to help Company to defend such claim or action.
Company will not be responsible for any settlement made by Microsoft
without Company's written permission, which permission will not be
unreasonably withheld.
8.1.2 Microsoft shall have the right to employ separate counsel,
at its expense, and participate in the defense of any claim or action.
Company shall reimburse Microsoft upon demand for any payments made or
loss suffered by it at any time after the date hereof, based upon the
judgment of any court of competent jurisdiction or pursuant to a bona
fide compromise or settlement of claims, demands, or actions, in respect
to any damages related to any claim or action under this Section 8.
8.1.3 Company may not settle any claim or action under this
Section 8 on Microsoft's behalf without first obtaining Microsoft's
written permission, which permission will not be unreasonably withheld.
In the event Microsoft and Company agree to settle a claim or action,
Company agrees not to publicize the settlement without first obtaining
Microsoft's written permission, which permission will not be
unreasonably withheld.
<PAGE> 10
8.2 DUTY TO CORRECT. Notwithstanding Section 8.1, should the Product or
portion thereof be held to constitute an infringement and use as contemplated by
this Agreement be enjoined or be threatened to be enjoined, Company shall notify
Microsoft and immediately, at Company's expense: (i) procure for Microsoft the
right to continue use the Product or portion thereof, as applicable, as licensed
in this Agreement; or (ii) replace or modify the Product or portion thereof with
a version that is non-infringing, provided that the replacement or modified
version meets the Specifications to Microsoft's satisfaction. If (i) or (ii) are
not available to Company, in addition to any damages or expenses reimbursed
under Section 8.1, Company shall refund to Microsoft all amounts paid to Company
by Microsoft under this Agreement.
9. TERMINATION
9.1 TERM. The term of this Agreement shall commence as of the Effective
Date and shall continue until two (2) years thereafter unless terminated earlier
as provided in this Section 9.
9.2 TERMINATION. Either party may suspend performance and/or terminate
this Agreement immediately upon written notice at any time if the other party is
in material breach of any material warranty, term, condition or covenant of this
Agreement and fails to cure such breach within thirty (30) days after written
notice thereof
9.3 EFFECT OF TERMINATION. Sections 3.2, 3.3, 3.4, 5.2, 5.5, 6, 7, 8, 10
and 11 shall survive any termination or expiration of this Agreement. Neither
party shall be liable to the other for damages of any sort resulting solely from
terminating this Agreement in accordance with its terms. Any licenses or
sublicenses already granted by Microsoft under this Agreement shall not be
affected by any termination of this Agreement and shall remain in full force and
effect.
10. LIMITATION OF LIABILITIES
10.1 NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES, EVEN IF SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 THIS PROVISION HAS NO APPLICATION TO SECTIONS 6 AND 8.
11. GENERAL
11.1 NOTICES. All notices and requests in connection with this Agreement
shall be deemed given as of the day they are received either by messenger,
delivery service, or in the United States of America mails, postage prepaid,
certified or registered, return receipt requested, and addressed as follows:
<PAGE> 11
To Company: To Microsoft:
Rational Software Corporation Microsoft Corporation
2800 San Tomas Expressway One Microsoft Way
Santa Clara, CA 95051-0951 Redmond, WA 98052-6399
Attention:___________________ Attention: V.P., Developer Tools
Phone:_______________________ Phone: (206) 882-8080
Fax:_________________________ Fax: (206) 936-7329
Copy to: Law & Corporate Affairs
Fax: (206) 936-7409
or to such other address as a party may designate pursuant to this notice
provision.
11.2 NO JOINT VENTURE. Nothing in this Agreement shall be construed as
creating an employer-employee relationship, a partnership, or a joint venture
between the parties.
11.3 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington as though entered into between Washington residents and to
be performed entirely within the State of Washington, and Company consents to
jurisdiction and venue in the state and federal courts sitting in the State of
Washington. In any action or suit to enforce any right or remedy under this
Agreement or to interpret any provision of this Agreement, the prevailing party
shall be entitled to recover its costs, including reasonable attorneys' fees.
11.4 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of each party's respective successors and lawful assigns; provided,
however, that Company may not assign this Agreement, in whole or in part,
without the prior written approval of Microsoft.
11.5 CONSTRUCTION. If for any reason a court of competent jurisdiction
finds any provision of this Agreement, or portion thereof, to be unenforceable,
that provision of the Agreement will be enforced to the maximum extent
permissible so as to effect the intent of the parties, and the remainder of this
Agreement will continue in full force and effect. Failure by either party to
enforce any provision of this Agreement will not be deemed a waiver of future
enforcement of that or any other provision. This Agreement has been negotiated
by the parties and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor of or
against either party.
11.6 ENTIRE AGREEMENT. This Agreement does not constitute an offer by
Microsoft and it shall not be effective until signed by both parties. This
Agreement constitutes the entire agreement between the parties with respect to
the Services and all other subject matter hereof and merges all prior and
contemporaneous communications. It shall not be modified except by a written
agreement dated subsequent to the date of this Agreement and signed on behalf of
Company and Microsoft by their respective duly authorized representatives.
<PAGE> 12
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the Effective Date written above.
MICROSOFT CORPORATION RATIONAL SOFTWARE
CORPORATION
________________________________ _____________________________
By (Sign) By (Sign)
________________________________ _____________________________
Name (Print) Name (Print)
________________________________ _____________________________
Title Title
<PAGE> 13
EXHIBIT A
SPECIFICATIONS FOR PRODUCT AND DOCUMENTATION
AND SCHEDULE FOR DELIVERY
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 14
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 15
EXHIBIT B
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 16
EXHIBIT C
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
