<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
RATIONAL SOFTWARE CORPORATION
(FORMERLY VERDIX CORPORATION)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1217099
(STATE OF INCORPORATION) (I.R.S. EMPLOYER (IDENTIFICATION NUMBER)
2800 SAN TOMAS EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
---------------
RATIONAL SOFTWARE CORPORATION 1994 STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
---------------
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
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(408) 496-3600
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
Copies to:
CRAIG H. FACTOR, ESQ.
WILSON, SONSINI, GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
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<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
===================================================================================================================
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value: 2,000,000 $38.50 $77.000.000 $23,333.33
--------- ---------- ----------- -----------
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</TABLE>
(1) The proposed maximum offering price per share was estimated pursuant to
Rule 457(c) and 457(h) under the Securities Act. The Proposed Maximum
Offering Price Per Share was determined by reference to 100% of the
average of the high and the low prices reported in The Nasdaq Stock
Market on October 22, 1996, which average was $38.50.
<PAGE> 3
This Registration Statement on Form S-8 is being filed in order to
register 2,000,000 additional shares which have been reserved for the 1994 Stock
Option Plan. In addition, Exhibit 4.6, as previously filed with the Rational
Software Corporation Form S-8 (Registration No. 33-97044), has been replaced
with an updated version of the 1994 Stock Option Plan attached hereto as Exhibit
4.6. The Registration Statements on Form S-8 (Registration No. 33-77382 and
33-97044) are hereby incorporated by reference.
INDEX TO EXHIBITS
Exhibit Number
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4.6 Rational Software Corporation 1994 Stock Option Plan.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati as to legality of
securities being registered.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (contained on page II-1).
<PAGE> 4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 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
October 29, 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 THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Paul D. Levy and Robert T. Bond
and each of them, jointly and severally, his attorneys-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement on Form S-8 and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact or his substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C>
Date: October 29, 1996 /s/ Michael T. Devlin
------------------ -----------------------------------
Michael T. Devlin, President and Director
Date: October 29, 1996 /s/ Paul D. Levy
----------------- -----------------------------------
Paul D. Levy, Chairman of the Board and Chief Executive Officer
Date: October 29, 1996 /s/ Robert T. Bond
----------------- -----------------------------------
Robert T. Bond, Senior Vice President
Chief Operating Officer, Chief Financial Officer, and Secretary
Date: October 29, 1996 /s/ James S. Campbell
----------------- -----------------------------------
James S. Campbell, Director
Date:
----------------- -----------------------------------
Daniel H. Case III, Director
Date: October 29, 1996 /s/ Leslie G. Denend
----------------- -----------------------------------
Leslie G. Denend, Director
Date: October 29, 1996 /s/ John E. Montague
----------------- -----------------------------------
John E. Montague, Director
Date: October 29, 1996 /s/ Allison R. Schleicher
----------------- -----------------------------------
Allison R. Schleicher, Director
Date: October 29, 1996 /s/ Timothy A. Brennan
----------------- -----------------------------------
Timothy A. Brennan, Vice President,
Finance and Administration
(Principal Accounting Officer)
</TABLE>
II-1
<PAGE> 1
Exhibit 4.6
<PAGE> 2
RATIONAL SOFTWARE CORPORATION
1994 STOCK OPTION PLAN
Rational Software Corporation (the "Corporation") sets forth herein the
terms of this 1994 Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the
Corporation by providing eligible individuals (as designated pursuant to Section
4 below) with an opportunity to acquire or increase a proprietary interest in
the Corporation, which thereby will create a stronger incentive to expend
maximum effort for the growth and success of the Corporation and its
subsidiaries, and will encourage such eligible individuals to remain in the
employ or service of the Corporation or that of one or more of its subsidiaries.
Each stock option granted under the Plan (an "Option") is intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, or the corresponding provision of any subsequently-enacted
tax statute, as amended from time to time (the "Code") ("Incentive Stock
Option"), except (i) to the extent that any such Option would exceed the
limitations set forth in Section 7 below and (ii) for Options specifically
designated at the time of grant as not being "incentive stock options."
2. ADMINISTRATION
a. Board. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board"), which shall have
the full power and authority to take all actions, and to make
all determinations required or provided for under the Plan or
any Option granted or Option Agreement (as defined in Section
8 below) entered into hereunder and all such other actions and
determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Board to be necessary or
appropriate to the administration of the Plan or any Option
granted or Option Agreement entered into hereunder. All such
actions and determinations shall be by the affirmative vote of
a majority of the members of the Board present at a meeting at
which any issue relating to the Plan is properly raised for
consideration or without a meeting by written consent of the
Board executed in accordance with the Corporation's
Certificate of Incorporation and By-Laws, and with applicable
law. The interpretation and construction by the Board of any
provision of the Plan or of any Option granted or Option
Agreement entered into hereunder shall be final and
conclusive.
b. Committee. The Board may from time to time appoint a
Committee (the "Committee") consisting of not less than two
members of the Board, none of whom shall be an officer or
other salaried employee of the Corporation or any of its
subsidiaries, and each of whom shall qualify in all respects
as a "disinterested person" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
The Board may designate the Compensation Committee of the
Board to serve as
<PAGE> 3
the Committee hereunder. The Board, in its sole discretion,
may provide that the role of the Committee shall be limited
to making recommendations to the Board concerning any
determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, or the Board
may delegate to the Committee such powers and authorities
related to the administration of the Plan, as set forth in
Section 2(a) above, as the Board shall determine, consistent
with the Certificate of Incorporation and By-Laws of the
Corporation and applicable law. The Board may remove members,
add members, and fill vacancies on the Committee from time to
time, all in accordance with the Corporation's Certificate of
Incorporation and By-Laws, and with applicable law. The
majority vote of the Committee, or acts reduced to or
approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
c. No Liability. No member of the Board or of the
Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted
or Option Agreement entered into hereunder.
d. Delegation to the Committee. In the event that the
Plan or any Option granted or Option Agreement entered into
hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be
taken by or such determination may be made by the Committee if
the power and authority to do so has been delegated to the
Committee by the Board as provided for in Section 2(b) above.
Unless otherwise expressly determined by the Board, any such
action or determination by the Committee shall be final and
conclusive.
e. Action by the Board. The Board may act under the Plan
with respect to any Option granted to or Option Agreement
entered into with an officer, director or shareholder of the
Corporation who is subject to Section 16 of the Exchange Act
other than by, or in accordance with the recommendations of,
the Committee, constituted as set forth in Section 2(b) above,
only if all of the members of the Board are "disinterested
persons" as defined in Rule 16b-3 of the Securities and
Exchange Commission under the Exchange Act.
3. STOCK
The stock that may be issued pursuant to Options granted under
the Plan shall be shares of Common Stock, par value $.01 per share, of the
Corporation (the "Stock"), which shares may be treasury shares or authorized but
unissued shares. The number of shares of Stock that may be issued pursuant to
Options granted under the Plan shall not exceed in the aggregate 5,000,000
shares. The numbers of shares specified in this Section and elsewhere in the
Plan are subject to adjustment as provided in Section 17 below. If any Option
expires, terminates, or is terminated or canceled for any reason prior to
exercise in full, the shares of Stock that were subject to the unexercised
portion of such Option shall be available for future Options granted under the
Plan.
<PAGE> 4
4. ELIGIBILITY
Options may be granted under the Plan to any employee
of the Corporation or any "subsidiary corporation" of the Corporation (a
"Subsidiary") thereof within the meaning of Section 424(f) of the Code
(including any such employee who is an officer or director of the Corporation or
any Subsidiary) as the Board shall determine and designate from time to time
prior to expiration or termination of the Plan. The maximum number of shares of
Stock subject to Options that may be granted under the Plan to any executive
officer or other employee of the Corporation or any Subsidiary is 200,000 shares
in any calendar year (subject to adjustment as provided in Section 17 hereof).
An individual may hold more than one Option, subject
to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
a. Effective Date. The Plan shall be effective as of the
date of adoption by the Board, which date is set forth below
(the "Effective Date"), subject to approval of the Plan within
one year of the Effective Date by a majority of the
outstanding shares of the Corporation's voting stock;
provided, however, that upon approval of the Plan by the
shareholders of the Corporation as set forth above, all
Options granted under the Plan on or after the Effective Date
shall be fully effective as if the shareholders of the
Corporation had approved the Plan on the effective date. If
the shareholders fail to approve the Plan within one year of
the Effective Date, any options and granted hereunder shall be
null and void and of no effect.
b. Term. The Plan shall terminate on the date ten
years from the Effective Date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board
may, at any time and from time to time, prior to the date of termination of the
Plan, grant to such eligible individuals as the Board may determine
("Optionees"), Options to purchase such number of shares of the Stock on such
terms and conditions as the Board may determine, including any terms or
conditions that may be necessary to qualify such Options as Incentive Stock
Options. The date on which the Board approves the grant of an Option (or such
later date as is specified by the Board) shall be considered the date on which
such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) of
Section 1) shall constitute an Incentive Stock Option to the extent that the
aggregate fair market value (determined at the time the option is granted) of
the Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the
<PAGE> 5
meaning of Section 422(d) of the Code) does not exceed $100,000. This limitation
shall be applied by taking Options into account in the order in which they were
granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Corporation and
by the Optionee, in such form or forms as the Board shall from time to time
determine. Option Agreements covering Options granted from time to time or at
the same time need not contain similar provisions; provided, however, that all
such Option Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an
Option (the "Option Price") shall be fixed by the Board and stated in each
Option Agreement, and shall be not less than the greater of par value or 100
percent of the fair market value of a share of the Stock on the date the Option
is granted (as determined in good faith by the Board); provided, however, that
in the event the Optionee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the
Code (relating to stock ownership of more than ten percent), the Option Price of
an Option that is intended to be an Incentive Stock Option shall be not less
than the greater of par value or 110 percent of the fair market value of a share
of Stock at the time such Option is granted. In the event that the Stock is
listed on an established national or regional stock exchange, is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System, or is publicly traded on an established securities market, in
determining the fair market value of the Stock, the Board shall use the closing
price of the Stock on such exchange or System or in such market (the highest
such closing price if there is more that one such exchange or market) on the
trading date immediately before the Option is granted (or, if there is no such
closing price, then the Board shall use the mean between the high and low prices
on such date), or, if no sale of the Stock had been made on such day, on the
next preceding day on which any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
a. Term. Each Option granted under the Plan shall
terminate and all rights to purchase shares thereunder shall
cease upon the expiration of ten years from the date such
Option is granted or on such date prior thereto as may be
fixed by the Board and stated in the Option Agreement relating
to such Option; provided, however, that in the event the
Optionee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6)
and 424(d) of the Code (relating to stock ownership of more
than ten percent), an Option granted to such Optionee that is
intended to be an Incentive Stock Option shall in no event be
exercisable after the expiration of five years from the date
it is granted.
b. Option Period and Limitations on Exercise. Each
Option shall be exercisable, in whole or in part, at any time
and from time to time, over a period
<PAGE> 6
commencing on or after the date of grant and ending upon the
expiration or termination of the Option, as the Board shall
determine and set forth in the Option Agreement relating to
such Option. Without limiting the foregoing, the Board,
subject to the terms and conditions of the Plan, may in its
sole discretion provide that an Option may not be exercised in
whole or in part for any period or periods of time during
which such Option is outstanding; provided, however, that any
such limitation on the exercise of an Option contained in any
Option Agreement may be rescinded, modified or waived by the
Board, in its sole discretion, at any time and from time to
time after the date of grant of such Option, so as to
accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option
granted to an Optionee under the 'Plan shall be exercisable in
whole or in part prior to the date the Plan is approved by the
shareholders of the Corporation as provided in Section 5
above.
c. Method of Exercise. An Option that is exercisable
hereunder may be exercised by delivery to the Corporation on
any business day, at its principal office, addressed to the
attention of the Corporate Secretary, of written notice of
exercise, which notice shall specify the number of shares with
respect to which the Option is being exercised. The minimum
number of shares of Stock with respect to which an Option may
be exercised, in whole or in part, at any time shall be the
lesser of 33 shares or the maximum number of shares available
for purchase under the Option at the time of exercise. Except
as provided in the next sentence, payment in full of the
Option Price of the shares for which the Option is being
exercised shall accompany the written notice of exercise of
the Option and shall be made either (i) in cash or in cash
equivalents; (ii) through the tender to the Corporation of
shares of Stock, which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid
thereby, at their fair market value (determined in the manner
described in Section 9 above) on the date of exercise; or
(iii) by a combination of the methods described in (i) and
(ii); provided, however, that the Board may in its discretion
impose and set forth in the Option Agreement such limitations
or prohibitions on the use of shares of Stock to exercise
Options as it deems appropriate. Unless the Board shall
provide otherwise in an Option Agreement, payment in full of
the Option Price need not accompany the written notice of
exercise provided such notice of exercise directs that the
Stock certificate or certificates for the shares for which the
Option is exercised be delivered to a licensed broker
acceptable to the Corporation as the agent for the individual
exercising the Option and, at the time such Stock certificate
or certificates are delivered, the broker tenders to the
Corporation cash (or cash equivalents acceptable to the
Corporation) equal to the Option Price for the shares of Stock
purchased pursuant to the exercise of the option plus the
amount (if any) of federal and other taxes which the
Corporation may, in its judgment, be required to withhold with
respect to the exercise of the Option. An attempt to exercise
any Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Promptly after
the exercise of an Option and the payment in full of the
Option Price of the shares of Stock covered thereby, the
individual exercising the Option shall be entitled to the
issuance of a Stock certificate or certificates
<PAGE> 7
evidencing his ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares
purchased pursuant to the exercise of an Option that is an
Incentive Stock Option, which certificate or certificates
shall not include any shares which were purchased pursuant to
the exercise of an Option which is not an Incentive Stock
Option. An individual holding or exercising an Option shall
have none of the rights of a shareholder until the shares of
Stock covered thereby are fully paid and issued to him and,
except as provided in Section 17 below, no adjustment shall be
made for dividends or other rights for which the record date
is prior to the date of such issuance.
d. Restrictions on Transfer of Stock. If an Option is
exercised prior to the date that is six months from the later
of (i) the date of grant of the Option or (ii) the date of
shareholder approval of the Plan and the individual exercising
the Option is a reporting person under Section 16(a) of the
Exchange Act, then such certificate or certificates shall bear
a legend restricting the transfer of the Stock covered thereby
until the expiration of six months from the later of the dates
specified in clauses (i) and (ii) above.
11. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incapacity or
incompetency, the Optionee's guardian or legal representative) may exercise the
Option. No Option shall be assignable or transferable by the Optionee to whom it
is granted, other than by will or the laws of descent and distribution.
12. TERMINATION OF SERVICE OR EMPLOYMENT
Upon the termination of the employment or service of an
Optionee with the Corporation or a Subsidiary, other than by reason of the
death, "permanent and total disability" (within the meaning of Section 22(e)(3)
of the Code), or "Retirement" (as defined in Section 13(B) below) of such
Optionee, any Option granted to an Optionee pursuant to the Plan shall
terminate, and such Optionee shall have no further right to purchase shares of
Stock pursuant to such Option; provided, however, that the Board may provide, by
inclusion of appropriate language in any Option Agreement, that the Optionee may
(subject to the general limitations on exercise set forth in Section 10(b)
above), in the event of termination of service or employment of the Optionee
with the Corporation or a Subsidiary, exercise an Option, in whole or in part,
at any time subsequent to such termination of service or employment and prior to
termination of the Option pursuant to Section 10(a) above, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 10(b) above. Whether a leave of absence or leave on military or
government service shall constitute a termination of service or employment for
purposes of the Plan shall be determined by the Board, which determination shall
be final and conclusive. For purposes of the Plan, a termination of employment
with the Corporation or a Subsidiary shall not be deemed to occur if the
Optionee is immediately thereafter employed with or in the service of the
Corporation or any Subsidiary.
<PAGE> 8
13. RIGHTS IN THE EVENT OF DEATH, DISABILITY OR RETIREMENT
a. Death. If an Optionee dies while in the employ or
service of the Corporation or a Subsidiary or within the
period following the termination of employment or service
during which the Option is exercisable under Section 12 above
or Section 13(b) below, the executors or administrators or
legatees or distributees of such Optionee's estate shall have
the right (subject to the general limitations on exercise set
forth in Section 10(b) above), at any time within one year
after the date of such Optionee's death and prior to
termination of the Option pursuant to Section 10(a) above, to
exercise any Option held by such Optionee at the date of such
Optionee's death, whether or not such Option was exercisable
immediately prior to such Optionee's death; provided, however,
that the Board may provide by inclusion of appropriate
language in any Option Agreement that, in the event of the
death of the Optionee, the executors or administrators or
legatees or distributees of such Optionee's estate may
exercise an Option (subject to the general limitations on
exercise set forth in Section 10(b) above), in whole or in
part, at any time subsequent to such Optionee's death and
prior to termination of the Option pursuant to Section 10(a)
above, either subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 10(b)
above.
b. Disability or Retirement. If an Optionee terminates
employment or service with the Corporation or a Subsidiary by
reason of (i) the "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code ("Disability") of such
Optionee or (ii) retirement of the Optionee under an approved
plan of retirement of the Corporation or a Subsidiary,
entitling such Optionee to receive payment of retirement
benefits thereunder immediately ("Retirement"), then such
Optionee shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), at
any time within three months after such termination of service
or employment and prior to termination of the Option pursuant
to Section 10(a) above, to exercise, in whole or in part, any
Option held by such Optionee at the date of such termination
of service or employment, whether or not such Option was
exercisable immediately prior to such termination of service
or employment; provided, however, that the Board may provide,
by inclusion of appropriate language in any Option Agreement,
that the Optionee may (subject to the general limitations on
exercise set forth in Section 10(b) above), in the event of
the termination of service or employment of the Optionee with
the Corporation or a Subsidiary by reason of the Disability or
Retirement of such Optionee, exercise an Option in whole or in
part, at any time subsequent to such termination of service or
employment and prior to termination of the Option pursuant to
Section 10(a) above, either subject to or without regard to
any installment limitation on exercise imposed pursuant to
Section 10(b) above. Whether a termination of service or
employment is to be considered by reason of Disability or
Retirement for purposes of this Plan shall be determined by
the Board, which determination shall be final and conclusive.
14. USE OF PROCEEDS
<PAGE> 9
The proceeds received by the Corporation from the sale of
Stock pursuant to Options granted under the Plan shall constitute general funds
of the Corporation.
15. REQUIREMENTS OF LAW
a. Violations of Law. The Corporation shall not be
required to sell or issue any shares of Stock under any Option
if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or the
Corporation of any provisions of any law or regulation of any
governmental authority, including without limitation any
federal or state securities laws or regulations. Specifically
in connection with the Securities Act of 1933 (as now in
effect or as hereafter amended, the "Act"), upon exercise of
any Option, unless a registration statement under the Act is
in effect with respect to the shares of Stock covered by such
Option, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence
satisfactory to it that the holder of such Option may acquire
such shares pursuant to an exemption from registration under
the Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may,
but shall in no event be obligated to, register any securities
covered hereby pursuant to the Act. The Corporation shall not
be obligated to take any affirmative action in order to cause
the exercise of an Option or the issuance of shares of stock
pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be
exercisable unless and until the shares of Stock covered by
such Option are registered or are subject to an available
exemption from registration, the exercise of such Option
(under circumstances in which the laws of such jurisdiction
apply) shall be deemed conditioned upon the effectiveness of
such registration or the availability of such an exemption.
b. Compliance with Rule 16b-3. The intent of this Plan
is to qualify for the exemption provided by Rule 16b-3 under
the Exchange Act. To the extent any provision of the Plan does
not comply with the requirements of Rule 16b-3, it shall be
deemed inoperative to the extent permitted by law and deemed
advisable by the Board and shall not affect the validity of
the Plan. In the event Rule 16b-3 is revised or replaced, the
Board, or the Committee acting on behalf of the Board, may
exercise discretion to modify this Plan in any respect
necessary to satisfy the requirements of the revised exemption
or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board shall,
without approval by a majority of the votes present and entitled to vote at a
duly held meeting of the shareholders of the Corporation at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the amendment, or by written consent in
accordance with applicable state law and the Certificate of Incorporation and
By-Laws of the Corporation, materially increase the benefits
<PAGE> 10
accruing to participants under the Plan, change the requirements as to
eligibility to receive Options or increase the maximum number of shares of Stock
in the aggregate that may be sold pursuant to Options granted under the Plan
(except as permitted under Section 17 hereof. Except as permitted under Section
17 hereof, no amendment, suspension or termination of the Plan shall, without
the consent of the holder of the Option, alter or impair rights or obligations
under any Option theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
a. Changes in Stock. If the outstanding shares of Stock
are increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the
Corporation by reason of any recapitalization,
reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or
decrease in such shares effected without receipt of
consideration by the Corporation, occurring after the
Effective Date, the number and kinds of shares for the
purchase of which Options may be granted under the Plan shall
be adjusted proportionately and accordingly by the
Corporation. In addition, the number and kind of shares for
which Options are outstanding shall be adjusted
proportionately and accordingly so that the proportionate
interest of the holder of the Option immediately following
such event shall, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in
outstanding Options shall not change the aggregate Option
Price payable with respect to shares subject to the
unexercised portion of the Option outstanding but shall
include a corresponding proportionate adjustment in the Option
Price per share.
b. Reorganization in Which the Corporation Is the
Surviving Corporation. Subject to Subsection (c) hereof, if
the Corporation shall be the surviving corporation in any
reorganization, merger, or consolidation of the Corporation
with one or more other corporations, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock
subject to such Option would have been entitled immediately
following such reorganization, merger, or consolidation, with
a corresponding proportionate adjustment of the Option Price
per share so that the aggregate Option Price thereafter shall
be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such
reorganization, merger, or consolidation.
c. Reorganization in Which the Corporation Is Not the
Surviving Corporation or Sale of Assets or Stock. Upon the
dissolution or liquidation of the Corporation, or upon a
merger, consolidation, reorganization or other business
combination of the Corporation with one or more other entities
in which the Corporation is not the surviving entity, or upon
a sale of all or substantially all of the assets of the
Corporation to another entity, or upon any transaction
(including, without limitation, a merger or reorganization in
which the Corporation is the surviving corporation) approved
by the Board which results in any person or entity (or
<PAGE> 11
persons or entities acting as a group or otherwise in concert)
owning 50 percent or more of the combined voting power of all
classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such
transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the
substitution for such Options of new options covering the
stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and
kinds of shares and exercise prices, in which event the Plan
and Options theretofore granted shall continue in the manner
and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option
shall have the right (subject to the general limitations on
exercise set forth in Section 10(b) above and except as
otherwise specifically provided in the Option Agreement
relating to such Option), immediately prior to the occurrence
of such termination and during such period occurring prior to
such termination as the Board in its sole discretion shall
determine and designate, to exercise such Option in whole or
in part, whether or not such Option was otherwise exercisable
at the time such termination occurs and without regard to any
installment limitation on exercise imposed pursuant to Section
10(b) above. The Board shall send written notice of an event
that will result in such a termination to all individuals who
hold Options not later than the time at which the Corporation
gives notice thereof to its shareholders.
d. Adjustments. Adjustments under this Section 17
related to stock or securities of the Corporation shall be
made by the Board, whose determination in that respect shall
be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to
any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
e. No Limitations on Corporation. The grant of an Option
pursuant to the Plan shall not affect or limit in any way the
right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its
business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of the Corporation
or any Subsidiary, or to interfere in any way with the right and authority of
the Corporation or any Subsidiary either to increase or decrease the
compensation of any individual at any time, or to terminate any employment or
other relationship between any individual and the Corporation or any Subsidiary.
<PAGE> 12
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the
Plan to the shareholders of the Corporation for approval shall be construed as
creating any limitations upon the right and authority of the Board to adopt such
other incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options or stock
appreciation rights otherwise than under the Plan.
<PAGE> 1
Exhibit 5.1
<PAGE> 2
October 29, 1996
Rational Software Corporation
2800 San Tomas Expressway
Santa Clara, CA 95051
Re: Registration Statement on Form S-8 - Rational Software
Corporation 1994 Stock Option Plan
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by
you with the Securities and Exchange Commission on or about October 29, 1996
(the "Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 2,000,000 shares of Rational Software
Corporation Common Stock (the "Plan Shares"), to be issued pursuant to the
Rational Software Corporation 1994 Stock Option Plan (the "Plan"). As your
counsel in connection with the transaction, we have examined the proceedings
taken and proposed to be taken in connection with the issuance and sale of the
Plan Shares.
It is our opinion that the Plan Shares, when issued and sold in the
manner described under the Plan, will be legally and validly issued, fully paid
and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Rational Software Corporation 1994 Stock Option
Plan of Rational Software Corporation 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
October 24, 1996
