<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
RATIONAL SOFTWARE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 54-1217099
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2800 San Tomas Expressway
Santa Clara, California 95051-0951
(408) 496-3600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
PAUL D. LEVY
PRESIDENT
RATIONAL SOFTWARE CORPORATION
2800 SAN TOMAS EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051-0951
(408) 496-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
FRANCIS S. CURRIE, ESQ.
CRAIG H. FACTOR, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(415) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Each Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered(1) Offering Price Aggregate Offering Registration Fee
Per Share(1) Price(1)
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock 476,272 shares $42.0625 $20,033,191 $6,908
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act, based on the
average of the high and low prices of the Common Stock on the Nasdaq National
Market on July 24, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
PROSPECTUS
476,272 SHARES
RATIONAL SOFTWARE CORPORATION
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by a selling
stockholder, Ivar Jacobson (the "Selling Stockholder"). Such shares are being
offered on a continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended. No underwriting discounts, commissions or expenses are payable
or applicable in connection with the sale of such shares. The Common Stock of
Rational Software Corporation (the "Company") is quoted on the National
Association of Securities Dealers' Automated Quotation System ("Nasdaq")
National Market System ("NMS") under the symbol "RATL." The shares of Common
Stock offered hereby will be sold from time to time at then prevailing market
prices, at prices relating to prevailing market prices or at negotiated prices.
On July 29, 1996, the closing price of the Common Stock on the Nasdaq NMS was
$46 5/8.
The shares of Common Stock offered hereby were issued by the Company in
connection with its acquisition of Objectory AB ("Objectory"). The shares of
Common Stock offered hereby represent approximately 2.8 percent of the Company's
currently outstanding Common Stock.
SEE "RISK FACTORS" COMMENCING ON PAGE
4 HEREOF FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _______, 1996.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, and exhibits, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. Statements in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and in each instance in which a copy of
such contract is filed as an exhibit to the Registration Statement, reference is
made to such copy, and each such statement shall be deemed qualified in all
respects by such reference. Copies of the Registration Statement may be
inspected, without charge, at the offices of the Commission, or obtained at
prescribed rates from the Public Reference Section of the Commission at the
address set forth below.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed by
the Company can be inspected and copied at the public reference facilities of
the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street. N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048; and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Company's Common Stock is quoted for trading on the Nasdaq National
Market and reports, proxy statements and other information concerning the
Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFER OR SOLICITATION.
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<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-K filed with the Commission
for the fiscal year ended March 31, 1996, as amended by Amendment
No. 1 on Form 10-K/A filed with the Commission on July 23, 1996.
(b) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed with the
Commission on May 14, 1984, as amended by Amendment No. 1 on Form
8-A/A filed with the Commission on May 25, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act following the date of this Prospectus and prior
to the termination of the offering contemplated hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. The Company will provide without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered, a
copy of any and all of the information that has been incorporated by reference
in this Prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates), upon written
or oral request to Robert T. Bond, Senior Vice President, Chief Operating
Officer, Chief Financial Officer and Secretary, Rational Software Corporation,
2800 San Tomas Expressway, Santa Clara, California 95051-0951; telephone number
(408) 496-3600.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Rational(R), Rational Rose(R), Verdix(R), VADS(R), Rational Rose/C++
and Rational Apex are trademarks of the Company. This Prospectus also includes
other trademarks of companies other than the Company.
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THE COMPANY
The principal executive offices of the Company are located at 2800 San
Tomas Expressway, Santa Clara, California 95051-0951 and its telephone number is
(408) 496-3600. In this Prospectus, the term "Rational" or the "Company" refers
to Rational Software Corporation, a Delaware corporation, its predecessors and
its subsidiaries, unless the context otherwise requires.
RISK FACTORS
Investors should consider carefully the following risk factors, in
addition to the other information contained in this Prospectus, before
purchasing the shares of Common Stock offered hereby. The information contained
herein and in documents incorporated by reference herein include forward-looking
statements within the meaning of Section 27A of the Securities Act, and Section
21E of the Exchange Act. Actual results of the Company could differ materially
from those projected in the forward-looking statements. Additional information
concerning factors which could cause actual results to differ materially
from those in the forward-looking statements are set forth below in "Risk
Factors."
NEED FOR MARKET ACCEPTANCE OF OBJECT-ORIENTED TECHNOLOGY
The Company's product lines are designed for use in object modeling of
business processes, business objects, and software systems and in the day-to-day
development of software by teams of developers. The Company's financial
performance will depend in part upon continued growth in the object-oriented
technology market and the development of industry standards that the Company's
products address.
RAPID TECHNOLOGICAL CHANGE
The software-engineering tools market is highly competitive and rapidly
changing. The Company believes that the increased level of competition it has
observed in fiscal 1996 will continue to increase. New competition is expected
to continue to enter the market. Competitors may be experienced either in the
development of software-engineering tools or in database and
software-development products. Competitors may have larger technical staffs,
more established distribution channels, and more financial resources than the
Company.
EXPANSION OF PRODUCT LINES
The Company believes that its continued success will depend in part on
its ability to provide an integrated line of software application development
tools that support software development for a number of application construction
technologies, including the enhancement of current products and development and
introduction of new products. The Company also believes its continued success
will become increasingly dependent on its ability to support the Microsoft
platform, including Windows NT. The Company believes that it will be
particularly important to successfully develop and market a broader line of
products for C++, Visual Basic, Java, and other application construction
technologies in order to be successful in its efforts to reach broader markets
and to further increase the value of its share in the aerospace/defense market
segment.
MANAGEMENT OF THE COMPANY
The Company is experiencing a period of aggressive product
introductions that has placed, and may continue to place, a significant strain
on its resources, including its personnel. Projects such as the expansion of the
Company's C++ product line, additional product development and product
introductions, or acquisitions of other technologies or companies, such as the
recent acquisition of Objectory AB, when added to the day-to-day activities of
the Company, will place a further strain on the Company's resources and
personnel. The Company believes that the hiring and retaining of qualified
individuals at all levels in the Company is essential to the Company's ability
to manage growth successfully.
COMPETITION
The marketplace for software engineering tools is intensely
competitive. Given the breadth of the Company's product lines, each element
faces competition from one or more sources. Rational faces competition from
software development tools and processes developed internally by customers,
including ad hoc integrations of numerous stand-alone development tools. The
Company faces competition from Platinum Technology, Intersolv Inc., Cayenne
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<PAGE> 6
Software, and numerous private companies offering CASE tools that compete with
the Rational Rose approach to object-oriented development.
Rational Apex C/C++ faces competition from major UNIX platform vendors,
such as Sun Microsystems, Incorporated, Hewlett-Packard Co., International
Business Machines Corporation ("IBM"), and Digital Equipment Corporation, which
have compilers and debuggers and, in some cases, limited programming
environments for their platforms. In addition, numerous privately-held companies
offer compilers, debuggers and programming environments which compete with
Rational Apex C/C++. Rational Apex Ada faces competition primarily from numerous
private companies offering compilers and debuggers coupled with configuration
management systems, and to a lesser extent from Sun Microsystems, Silicon
Graphics, and Digital Equipment Corporation, all of which offer Ada compilers
and debuggers for their platforms.
Rational's VADS product line faces competition from Wind River Systems,
ISI, Mentor Graphics' Microtec Research Incorporated, Green Hills Software, Inc.
and numerous private companies offering compilers, debuggers, embedded system
cross-compilers, and related tools for multiple languages.
The Company believes that the major competitive factors in its markets
are corporate and product reputation, breadth of coverage by an integrated
product line, product architecture, functionality and features, product quality,
performance, ease of use, quality of support, availability of technical
consulting services, and price. Rational believes that its combination of a
tightly integrated family of tools and its emphasis on controlled iterative
development, graphical object modeling, and an architectural approach to
software reuse, coupled with its extensive major-account sales and technical
consulting service organization, are effective selling tools. However, the
Company believes it must continue to introduce enhancements to its existing
products, new products, and new services in a timely manner in order to remain
competitive. Rational believes that it will be particularly important to
successfully develop and market a broader line of C++, Java, and Visual Basic
products to successfully reach broader markets and further reduce its dependence
on the aerospace and defense markets. Even if the Company introduces new and
enhanced products, it may not be able to compete effectively because of the
significantly larger resources available to many of its competitors. Rational
expects competition from existing and additional competitors to increase as the
use of advanced programming practices and tools that support them become more
widely accepted. There can be no assurance that any given programming language
or application construction tool for which the Company develops and markets
products will continue to be accepted or widely used. There can be no assurance
that the Company will be able to compete successfully or that competition will
not have a material adverse effect on the Company's business, operating results
and financial condition.
FLUCTUATIONS IN OPERATING RESULTS
Historically, the Company has operated with little backlog because
software products are generally shipped as orders are received. As a result,
revenue in any quarter is substantially dependent on orders booked and shipped
in that quarter.
Revenue is difficult to forecast due to the fact that the Company's
sales cycle, from initial evaluation to purchase, varies substantially from
customer to customer. Because the Company's staffing and operating expenses are
based on anticipated revenue levels and because a high percentage of the
Company's costs are fixed, small variations in the timing of the recognition of
specific revenues could cause significant variations in operating results from
quarter to quarter.
The Company's planned revenues for fiscal 1997 include sales of new
products that are scheduled to ship for the first time during the period. Delay
in the start of shipment of the Company's new products would have an adverse
effect on the Company's gross profit and operating income. The Company attempts
to make adequate allowances in its new product release schedules for both
internal and beta-site testing of product performance. Because of the complexity
of the Company's products, however, the release of new products may be postponed
should test results indicate the need for substantial redesign and retesting or
should the Company elect to add product enhancements in response to beta
customer feedback. The Company's sales remain sensitive to its existing and
prospective customers' budgeting practices, to the continuing Department of
Defense support of the Ada programming language, and to potential cutbacks in
defense spending in response to economic conditions.
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<PAGE> 7
The growth in revenues and operating income (exclusive of nonrecurring
operating and merger-related expenses) experienced by the Company in recent
quarters is not necessarily indicative of future results and period-to-period
comparisons of its financial results should not be relied upon as an indication
of future performance. Fluctuations in operating results may also result in
volatility in the price of the Company's common stock.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been, and is likely
to continue to be, volatile. Factors such as new product announcements or
changes in product pricing policies by the Company or its competitors, quarterly
fluctuations in the Company's operating results, announcements of technical
innovations, changes in earnings estimates by analysts and general conditions in
the object-oriented software market, among other factors, may have a significant
impact on the market price of the Company's Common Stock. In addition, in recent
years the stock market in general, and the shares of technology companies in
particular, have experienced extreme price fluctuations. This volatility has had
a substantial effect on the market prices of securities issued by many companies
for reasons unrelated to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of the
Company's Common Stock.
DEPENDENCE ON SALES FORCE AND HIGHLY TRAINED TECHNICAL PERSONNEL
The Company currently distributes its products primarily through field
sales personnel teamed with highly trained technical consulting and support
personnel. The Company believes that a high level of technical consulting,
training, and customer support is essential to maintaining its competitive
position, and it has found that the ability to deliver a high level of technical
consulting, training, and customer support is an important selling point with
respect to its products. While complementary to the Company's products, services
have historically yielded lower margins for the Company than its products
business. To the extent that services constitute a higher proportion of total
revenues in the future, the Company's margins will be adversely affected.
FUTURE ACQUISITIONS
Future acquisitions by the Company may result in the diversion of
management's attention from day-to-day operations of the Company's business and
may include numerous other risks, including difficulties in the integration of
the operations, products, and personnel of the acquired companies. Although
there are currently no commitments with respect to any particular acquisition,
Company management frequently evaluates the strategic opportunities available to
it and may in the near-term or long-term future pursue acquisitions of products,
technologies, or businesses.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the efforts and abilities of a number of
key management, sales, product development, support, and technical personnel.
The success of the Company depends to a large extent upon its ability to retain
and continue to attract key employees. The rate at which the Company can attract
and retain highly trained technical personnel that are integral to its direct
sales teams may limit the rate at which the Company can increase sales.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales currently account for approximately one third of
the Company's revenues, and the Company expects that international sales will
continue to account for a significant portion of revenues in future periods.
International sales are subject to inherent risks, including unexpected changes
in regulatory requirements and tariffs, difficulties in staffing and managing
foreign operations, longer payment cycles, greater difficulty in accounts
receivable collection, potentially adverse tax consequences, price controls or
other restrictions on foreign currency, and difficulties in obtaining export and
import licenses. Any material adverse effect on the Company's international
business would be likely to materially and adversely affect the Company's
business, operating results, and financial condition as a whole. The Company's
international sales are generally denominated in foreign currencies. The Company
attempts to limit its exposure to fluctuations in foreign currencies from time
to time by utilizing a hedging strategy. Gains and losses on the conversion of
foreign payments into U.S. dollars may contribute to fluctuations in the
Company's results of operations. Although the Company has not experienced any
material adverse impact to date from the fluctuations in foreign currencies,
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<PAGE> 8
there can be no assurance that the Company will not experience a material
adverse impact on its financial condition and results of operations from
fluctuations in foreign currencies in the future.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards its software as proprietary and attempts to protect
it with a combination of copyright, trademark and trade secret laws, employee
and third-party nondisclosure agreements, and other methods of protection.
Despite these precautions, it may be possible for unauthorized third parties to
copy certain portions of the Company's products or reverse engineer or obtain
and use information the Company regards as proprietary. The Company's software
products are generally licensed to end users on a "right to use" basis pursuant
to a perpetual license. Certain license provisions protecting against
unauthorized use, copying, transfer, and disclosure of the licensed program may
be unenforceable under the laws of certain jurisdictions and foreign countries.
SHARES ELIGIBLE FOR FUTURE SALE
Substantially all of the Company's Common Stock outstanding is freely
tradable. Sales of substantial amounts of Common Stock in the public market
could adversely affect the prevailing market price of the Common Stock.
SELLING STOCKHOLDER
The Selling Stockholder acquired beneficial ownership of the shares of
Common Stock offered hereby (the "Shares") in connection with the Company's
acquisition of Objectory which concluded January 24, 1996, in which Usecase
Engineering S.A., a Luxembourg corporation beneficially owned by the Selling
Stockholder, ("Usecase") exchanged its Objectory securities, which constituted
46% of the outstanding stock of Objectory, for Common Stock of the Company. The
Shares were subsequently transferred from Usecase to the Selling Stockholder.
The Selling Stockholder was the Vice President of Technology of Objectory from
1991 to 1995 and has been Vice President, Business Engineering of the Company
since October 24, 1995.
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
July 30, 1996 by the Selling Stockholder (without regard to shares sold by such
person pursuant to this Prospectus). The following table assumes the Selling
Stockholder sells all of the shares offered hereby. The Company is unable to
determine the exact number of shares that will actually be sold.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES SHARES BENEFICIALLY
------------------------- BEING OWNED
NAME NUMBER PERCENT OFFERED AFTER OFFERING
- ---------------------------------------------- --------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Ivar Jacobson 476,272 2.8% 476,272 0
</TABLE>
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<PAGE> 9
PLAN OF DISTRIBUTION
In connection with the Company's acquisition of Objectory, the Company
entered into a Registration Rights Agreement with Usecase (the "Agreement").
Usecase's registration rights pursuant to the Agreement were subsequently
transferred to the Selling Stockholder. The Registration Statement of which this
Prospectus forms a part has been filed pursuant to the Agreement. To the
Company's knowledge, the Selling Stockholder has not entered into any agreement,
arrangement or understanding with any particular broker or market maker with
respect to the shares offered hereby, nor does the Company know the identify of
the brokers or market makers which will participate in the offering.
The Selling Stockholder's shares of Common Stock covered hereby may be
offered and sold from time to time by the Selling Stockholder. The Selling
Stockholder will act independently of the Company in making decisions with
respect to the timing, manner and size of each sale. The Selling Stockholder
plans to sell the shares of Common Stock offered hereby only in brokers'
transactions, as defined in Rule 144 promulgated under the Securities Act. In
general, brokers' transactions are ones in which the broker merely executes the
sell order, receives no more than the customary commission and does not solicit
orders to buy the shares. No assurances can be given that the Selling
Stockholder will sell any of the shares that are subject to this Prospectus or
that the Selling Stockholder will not sell such shares in a private transaction
or other transaction that is exempt from the registration requirements of the
Securities Act. The Company has been advised by the Selling Stockholder that he
has not, as of the date hereof, entered into any arrangement with a
broker-dealer for the sale of shares. In effecting sales, broker-dealers engaged
by the Selling Stockholder may arrange for other broker-dealers to participate.
Broker-dealers will receive commissions or discounts from the Selling
Stockholder in amounts to be negotiated immediately prior to the sale.
In offering the shares, the Selling Stockholder and any broker-dealers
who execute sales for the Selling Stockholder may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales, and any
profits realized by the Selling Stockholder and the compensation of each
broker-dealer may be deemed to be underwriting discounts and commissions.
The Selling Stockholder has advised the Company that, during such time
as he may be engaged in a distribution of the shares of Common Stock included
herein, he will comply with Rules 10b-6 and 10b-7 under the Exchange Act and, in
connection therewith, the Selling Stockholder has agreed not to engage in any
stabilization activity in connection with any securities of the Company, to
furnish copies of this Prospectus to each broker-dealer through which the shares
of Common Stock included herein may be offered, and not to bid for or purchase
any securities of the Company or attempt to induce any person to purchase any
securities of the Company except as permitted under the Exchange Act. The
Selling Stockholder has also agreed to inform the Company and broker-dealers
through whom sales may be made hereunder when the distribution of the shares is
completed.
Rule 10b-6 under the Exchange Act prohibits participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 10b-7 under the Exchange Act governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
The Selling Stockholder may not sell any of the shares of Common Stock
offered hereby without first submitting a written notice to the Company (the
"Notice of Resale"). The Company must notify the Selling Stockholder as soon as
practicable, but in no event more than five business days after receipt of the
Notice of Resale whether it believes this Prospectus is current (with the
Company using the five business day period to supplement this Prospectus or make
an appropriate filing under the Exchange Act) or should be amended prior to use
in connection with such sale (with the Company amending the Registration
Statement as soon as practicable). Once the Company has notified the Selling
Stockholder that this Prospectus is available to use, the Selling Stockholder
will have up to 60 days within which to sell shares of Common Stock subject to
compliance with the Company's policies applicable to executive officers of the
Company, including recommended trading windows.
This offering will terminate as to the Selling Stockholder on the
earlier of ___________, 1996, which is sixty days after the commencement of this
offering, or the date on which all shares offered hereby have been sold by the
Selling Stockholder. There can be no assurance that the Selling Stockholder will
sell any or all of the shares of Common Stock offered hereby.
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LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
P.C., 650 Page Mill Road, Palo Alto, California 94304-1050. Those members of
Wilson Sonsini Goodrich & Rosati, P.C., who work with the Company own no shares
of the Company's Common Stock.
EXPERTS
The consolidated financial statements of Rational Software Corporation
incorporated by reference in Rational Software Corporation's Annual Report on
Form 10-K for the year ended March 31, 1996 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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RATIONAL SOFTWARE CORPORATION
476,272 SHARES OF
COMMON STOCK
PROSPECTUS
<PAGE> 12
PART 11
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Registrant in connection with
this offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ........ $6,908
Accounting fees and expenses ............................... 4,000
Legal fees and expenses .................................... 15,000
Miscellaneous .............................................. 2,500
_______
Total .............................................. $28,408
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Paragraph 7 of the Company's Amended
Certificate of Incorporation (Exhibits 4.01-4.06 hereto) and Article VI of the
Company's Bylaws (Exhibit 4.07 hereto) provide for indemnification of the
Company's directors and officers to the maximum extent permitted by the Delaware
General Corporation Law.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
herein:
EXHIBIT EXHIBIT TITLE
NUMBER -------------
-------
2.01 Reorganization Agreement among Verdix Corporation,
Rational Acquisition Corporation, and Rational, dated
December 15, 1993, is incorporated herein by reference
to Appendix A filed with the Company's Registration
Statement on Form S-4, dated February 25, 1994
(Registration No. 33-75724).
2.02 Share Purchase Agreement between Telefonaktiebolaget LM
Ericsson (publ.) and Rational Software Corporation,
dated September 26, 1995, is incorporated herein by
reference to Exhibit 2 filed with the Company's Form
8-K Current Report dated October 9, 1995 (File No.
0-12167) ("October 1995 8-K").
2.03 Share Option Agreement between Usecase Engineering S.A.
and Rational Software Corporation, dated October 9,
1995, is incorporated herein by reference to Exhibit 3
filed with the Company's October 1995 8-K.
4.01 Certificate of Incorporation of the Company, dated July
28, 1982, is incorporated herein by reference to
Exhibit 3.0 filed with the Company's Form 10-K Annual
Report for the fiscal year ended March 31, 1993 (File
No. 0-12167) ("1993 10-K").
4.02 Amendment to the Certificate of Incorporation of the
Company, dated March 25, 1987, is incorporated herein
by reference to Exhibit 3.0 filed with the 1993 10-K.
4.03 Amendment to the Certificate of Incorporation of the
Company, dated October 1, 1992, is incorporated herein
by reference to Exhibit 3.1 filed with the 1993 10-K.
4.04 Amendment to the Certificate of Incorporation of the
Company, dated March 30, 1994, is incorporated herein
by reference to Exhibit 3.3 filed with the Company's
Form 10-K Annual Report for the fiscal year ended March
31, 1994 (File No. 0-12167) ("1994 10-K").
II-1
<PAGE> 13
EXHIBIT EXHIBIT TITLE
NUMBER -------------
-------
4.05 Amendment to the Certificate of Incorporation of the
Company, dated August 24, 1994, is incorporated herein
by reference to Exhibit 3.4 filed with the Company's
Form 10-K Annual Report for the fiscal year ended March
31, 1996 (File No. 0-12167) ("1996 10-K").
4.06 Amendment to the Certificate of Incorporation of the
Company, dated May 22, 1995, is incorporated herein by
reference to Exhibit 3.5 filed with the 1996 10-K.
4.07 Bylaws of the Company as most recently amended are
incorporated herein by reference to Exhibit 3.9 filed
with the 1996 10-K.
4.08 Specimen of Common Stock Certificate is incorporated
herein by reference to Exhibit 4.06 filed with the
Company's Amendment No. 1 to Form S-3 Registration
Statement on May 31, 1995 (Registration No. 33-91740).
4.09 Rational 1983 Incentive Stock Option Plan, as amended,
dated March 24, 1992, is incorporated herein by
reference to Exhibit 4.7 filed with the Company's Form
S-8 Registration Statement on April 6, 1994
(Registration No. 33-77382).
4.10 Form of Stock Option Agreements for the Rational 1983
Incentive Stock Option Plan is incorporated herein by
reference to Exhibit 4.8 filed with the Company's Form
S-8 Registration Statement on April 6, 1994
(Registration No. 33-77382).
4.11 1983 Incentive Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 4.3 filed
with Verdix's Form 10-K Annual Report for the fiscal
year ended March 31, 1989 (File No. 0-12167).
4.12 Form of Incentive Stock Option Agreement for the 1983
Incentive Stock Option Plan, as amended, is
incorporated herein by reference to Exhibit 4.4 filed
with Verdix's Form 10-K Annual Report for the fiscal
year ended March 31, 1989 (File No. 0-12167).
4.13 1986 Stock Option Plan, as amended, is incorporated
herein by reference to Exhibit 4.6 filed with Verdix's
Registration Statement on Form S-8 (Registration No.
33-20029).
4.14 Form of Stock Option Agreement for the 1986 Stock
Option Plan, as amended November 15, 1991, is
incorporated herein by reference to Exhibit 4.13 filed
with Verdix's Post Effective Amendment No. 1 to the
Registration Statement on Form S-3 (Registration No.
33-12469).
4.15 Rational Software Corporation Stock Option Plan for
Directors is incorporated herein by reference to
Exhibit 4.6 filed with the Company's Form S-8
Registration Statement on September 18, 1995
(Registration No. 33-97042).
4.16 Rational 1993 Incentive Stock Option Plan is
incorporated herein by reference to Exhibit 4.9 filed
with the Company's Form S-8 Registration Statement on
April 6, 1994 (Registration No. 33-77382).
4.17 Form of Stock Option Agreements for the Rational 1993
Stock Option Plan is incorporated herein by reference
to Exhibit 4.10 filed with the Company's Form S-8
Registration Statement on April 6, 1994 (Registration
No. 33-77382).
4.18 Rational Software Corporation 1994 Stock Option Plan is
incorporated herein by reference to Exhibit 4.6 filed
with the Company's Form S-8 Registration Statement on
September 18, 1995 (Registration No. 33-97044).
4.19 Rational Software Corporation 1994 Employee Stock
Purchase Plan is incorporated herein by reference to
Exhibit 4.8 filed with the Company's Form S-8
Registration Statement on October 31, 1994
(Registration No. 33-85906) and amended September 18,
1995.
4.20 Rational Software Corporation 1994 Employee Stock
Purchase Plan Subscription Agreement is incorporated
herein by reference to Exhibit 4.8 filed with the
Company's Form S-8 Registration Statement on October
31, 1994 (Registration No. 33-85906) and amended
September 18, 1995.
II-2
<PAGE> 14
EXHIBIT EXHIBIT TITLE
NUMBER -------------
-------
4.21 Agreement among the Company, Rational, and
International Business Machines Corporation ("IBM"),
dated December 15, 1993, executed in connection with
the Reorganization Agreement (Exhibit 2.01 above) is
incorporated by reference to Exhibit 4.17 filed with
the Company's Registration Statement on Form S-4, dated
February 25, 1994 (Registration No. 33-75724).
4.22 Preferred Stock Purchase Agreement between Rational and
IBM, dated as of November 29, 1989, is incorporated by
reference to Exhibit 4.18 filed with the Company's
Registration Statement on Form S-4, dated February 25,
1994 (Registration No. 33-75724).
4.23 Agreement among the Company, Rational, Martin Marietta
Investments, Inc., and Martin Marietta Technologies,
Inc., dated December 15, 1993, executed in connection
with the Reorganization Agreement (Exhibit 2.01 above)
is incorporated herein by reference to Exhibit 10.33
filed with the Company's Registration Statement on Form
S-4, dated February 25, 1994 (Registration No.
33-75724).
4.24 Stock Purchase Agreement between the Company and Martin
Marietta Corporation, dated March 8, 1985, is
incorporated herein by reference to Exhibit 4.1 filed
with the Company's Form 8-K Current Report dated March
8, 1985 (File No. 0-12167).
4.25 Letter Agreement among the Company, Martin Marietta
Corporation, and Martin Marietta Investments, Inc.,
dated June 2, 1987, is incorporated herein by reference
to Exhibit 4.1 filed with the June 1987 8-K.
5.01 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.,
regarding the legality of securities being registered.
23.01 Consent of Ernst & Young LLP is contained in Part II of
this Registration Statement.
23.02 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (see
Exhibit 5.01 above).
24.01 Power of Attorney (see p. II-5).
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective Registration
II-3
<PAGE> 15
Statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement; provided,
however, that (i) and (ii) do not apply if the information required to be
included in a post-effective amendment thereby is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Exchange Act that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Clara, State of California, on the 29th day of
July, 1996.
RATIONAL SOFTWARE CORPORATION
By: /s/ Robert T. Bond
------------------------
Robert T. Bond
Senior Vice President,
Chief Operating Officer,
Chief Financial Officer and Secretary
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Paul D. Levy and Robert T. Bond, and each of
them, his attorneys-in-fact, and agents, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Date: July 29,1996 /s/ Michael T. Devlin
------------ ----------------------
Michael T. Devlin,
Chairman of the Board
Date: July 29, 1996 /s/ Paul D. Levy
------------------- -----------------
Paul D. Levy, President and
Chief Executive Officer,
Director
Date: July 29, 1996 /s/ Robert T. Bond
------------------- -------------------
Robert T. Bond, Senior Vice President
Chief Operating Officer and
Chief Financial Officer
Date: July 29, 1996 /s/ James S. Campbell
------------------- ----------------------
James S. Campbell, Director
Date: July 29, 1996 /s/ Daniel H. Case
------------------- -------------------
Daniel H. Case III, Director
Date: July 29, 1996 /s/ Leslie G. Denend
------------------- ---------------------
Leslie G. Denend, Director
Date: July 29, 1996 /s/ John E. Montague
------------------- ---------------------
John E. Montague, Director
Date: July 29, 1996 /s/ Allison R. Schleicher
------------------- --------------------------
Allison R. Schleicher, Director
II-5
<PAGE> 17
Date: July 29, 1996 /s/ Timothy A. Brennan
------------------- -----------------------
Timothy A. Brennan, Vice President,
Finance and Administration
(Principal Accounting Officer)
II-6
<PAGE> 18
EXHIBIT INDEX
Exhibit Exhibit Title Page
Number ------------- ----
-------
5.01 -- Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
23.01 -- Consent of Ernst & Young LLP
23.02 -- Consent of Wilson Sonsini Goodrich & Rosati, P.C.
(see Exhibit 5.01)
25.01 -- Power of Attorney (see p. II-5)
II-7
<PAGE> 1
Exhibit 5.01
July 30, 1996
Rational Software Corporation
2800 San Tomas Expressway
Santa Clara, CA 95051
RE: REGISTRATION STATEMENT ON FORM S-3
Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you
with the Securities and Exchange Commission on or about July 30, 1996 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of up to 476,272 shares of your Common Stock
(the "Shares"), all of which are issued, outstanding and held by a certain
stockholder named in the Registration Statement (the "Selling Stockholder"). The
Shares are to be sold by the Selling Stockholder as described in the
Registration Statement.
As your counsel, we have examined the proceedings taken by you in connection
with the issuance of the Shares. It is our opinion that the Shares are legally
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the Prospectus constituting a part thereof and any amendments thereto
which have been approved by us.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE> 1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (From S-3) and related Prospectus of Rational Software
Corporation for the registration of 476,272 shares of its common stock and to
the incorporation by reference therein of our reports dated April 22, 1996, with
respect to the consolidated financial statements of Rational Software
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended March 31, 1996 and the related financial statement schedule included
therein, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
July 26, 1996
